Ethical Performance
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investment

New ranking may be unpopular, but it's here to stay

September 2008

Pharmaceutical companies are not happy, but a number of influential investors have expressed their support for the Access to Medicine Index. EP looks at a controversial new measure of performance

Blunt instrument or useful tool for investors and other stakeholders? The Access to Medicine Index is either or both, according to whom you listen to.

Developed by a Dutch charity called the Access to Medicine Foundation, with research by US-based Innovest, the index will appear annually, ranking 20 pharmaceutical companies on various aspects of their efforts to make it easier for people, particularly those living in developing countries, to get the medicines they need.

Each company is rated on dozens of indicators grouped under eight main criteria, which are:
active access to medicines management
public policy influence and advocacy
research and development into neglected diseases
patent and licensing policies
efforts to build local capacity
pricing
drug donations
other philanthropic activity.

Performance figures in each criteria, from the lowest (1) to the highest (5), are added up to give an overall mark, again out of five. Not all criteria are equally weighted: equitable pricing accounts for 15 per cent of the total mark, whereas patents and licensing account for ten per cent, for example. The overall ranking is shown below.

The compilers of the index, which was two years in the making, claim that it highlights differences in companies' efforts to provide affordable drugs, diagnostics and vaccines. Pfizer, for example, scores poorly overall, with GlaxoSmithKline and Novo Nordisk consistently good across the board. The findings also reveal inconsistent performance within some companies, indicating, for example, that Eli Lilly makes strenuous efforts to influence public policy, but is weaker in concrete actions in the areas of pricing, patents, and research and development.

A group of 12 institutional investors, including Schroders and SNS Asset Management, issued a supportive statement at the launch, with a stronger investor statement being drafted as EP went to press that states: 'Issue-specific frameworks such as this can be an extremely powerful way of highlighting areas of leadership and good practice, as well as gaps and challenges.'

My-Linh Ngo, associate director of SRI at Henderson, told EP: 'Further refinements are clearly needed. However, we do intend to use the index as one of a number of ESG resources we look at when assessing companies'. The index was also useful in raising awareness of environmental, social and governance issues among investors in the sector, she added.

Morley, another large institutional investor, also told EP that it was planning to take account of the index findings in its SRI investment analysis.

The Foundation claims the index will give organizations that work to increase access to healthcare 'the opportunity to find suitable industry partners'.

The industry response has been more negative. The methodology has been challenged, particularly what is seen as an unsophisticated league table approach. Pfizer believes that the methodology is 'deeply flawed ... The index seeks to evaluate ... diverse approaches through a set of common criteria, while ignoring some of the initiatives that are having the most profound impact on access to medicines and health in developing countries'. Pfizer's total giving last year was a hefty $1.7billion (£944million) in cash and medicines, so its frustration is understandable. GSK, which heads the ranking, is also critical (see Guest Column this issue).

But this index is not alone in receiving flak: Business in the Community's CR Index, among others, is routinely challenged on much the same grounds. Such criticism goes with the territory.




Ethical Performance | Global | Indices

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http://www.atmindex.org
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