New York City Comptroller Scott Stringer on Wednesday submitted a letter to HIV drugmaker Gilead Science’s board of directors demanding a shareholder “clawback” policy. The shareholder proposal, if approved by the board, would empower the board to “recoup” some of the money paid to top Gilead executives, like CEO Daniel O’Day.
Stringer, as comptroller of America’s largest city, is responsible for administering New York City’s vast pension funds, estimated in June to comprise $208 billion in investments. Acting as a fiduciary for the funds’ exposure to stocks like Gilead’s, Stringer also represents a large number of the pharma giant's shareholders. New York City's pension funds pay the city's retired teachers, firefighters, police officers and other municipal workers.
The clawback, Stringer said, is in response to allegations — including those made in a class action lawsuit filed in May — that the company engaged in anti-competitive practices in order to charge “exorbitant prices” for its lifesaving HIV drugs. In particular, Gilead is accused of withholding a safer version of tenofovir from the market. Tenofovir is a family of drugs that comprises the backbone of Gilead’s multibillion-dollar suite of HIV treatment and prevention medicines, such as Stribild, Biktarvy and Truvada, which is commonly known as PrEP — or HIV pre-exposure prophylaxis.
“Ethics matter — and companies should hold their employees accountable when they commit misconduct,” Stringer said in a statement. “There is strong evidence that suggests Gilead purposefully raised drug prices to exorbitant levels — and that people living with HIV were denied the medicine they need to survive. It’s outrageous and now the company is facing long-term consequences.”
Gilead spokesman Ryan McKeel told NBC News, "We strongly disagree with the assertions of the New York City Comptroller's office."
"The class-action lawsuit that forms the basis for this proposal distorts and misstates Gilead’s history and its collaborations with partner companies to develop HIV medications," McKeel said in a statement. "Gilead believes this lawsuit and its antitrust allegations are without merit and we have filed a motion to dismiss."
New York City’s comptroller's office has proposed 18 clawbacks since 2014, and 11 were enacted. Stringer pointed to his office’s successful effort to recoup Wells Fargo executive pay after it was shown that the company defrauded customers by opening accounts without their knowledge.
Part of the proposed resolution sent to Gilead's board notes that the company "is the subject of U.S. congressional and other federal investigations alleging anti-competitive practices to prevent the entry of Human Immunodeficiency Virus (HIV) drugs into the market, and the U.S. government has sued Gilead alleging patent infringement relating to its HIV drugs.”
The proposal also alleges that Gilead worked with other companies to “unlawfully extend patent protection” and slow the entry of competitively priced generic HIV drugs to market.
“Such circumstances cause financial and reputational harm,” the proposal reads. “As long-term shareholders, we believe compensation policies should promote sustainable value creation.”
Activists with the PrEP4All Collaboration have for over a year argued that Gilead improperly claimed patent protection — and the right to set a high list price for Truvada tablets exclusively sold by Gilead — since PrEP was approved in 2012. A lawsuit filed this month against Gilead shows that the Department of Health and Human Services agrees with the PrEP4All position, and if Gilead’s patent protections are invalidated by a judge, the HIV-prevention treatment could potentially be made more widely available, a key goal of the Trump administration’s plan to end the HIV epidemic.
Peter Staley, a longtime HIV activist and a plaintiff named in the lawsuit Stringer cited in his letter to Gilead's board, predicted the clawback resolution would fail but said he “wholeheartedly” endorses the sentiment.
“O’Day lied multiple times to Congress, and his arrogance towards the American taxpayers’ contributions to ending AIDS will cost his company dearly,” Staley said in a statement to NBC News. “Institutional stockholders of Gilead are in for a shock as Staley v Gilead and United States v Gilead play out.”
In May, Rep. Alexandria Ocasio-Cortez, D-N.Y., grilled O’Day over the high price of Truvada.
“The list price is almost $2,000 in the United States. Why is it $8 in Australia?" Ocasio-Cortez asked, after noting the company made $3 billion in revenue off the once-a-day pill in 2018.
O'Day responded that "Truvada still has patent protection in the United States, and in the rest of the world it is generic." He noted that the drug is set to be generically available in the U.S. in September 2020.
“There’s no reason this should be $2,000 a month," said Ocasio-Cortez, who had pushed for the hearing before the House Committee on Oversight and Reform. "People are dying because of it, and there’s no enforceable reason for it.”