At Rite Aid’s annual meeting of shareholders earlier today, 56.7% of investors supported a shareholder resolution calling for a board report describing how the company is monitoring and managing financial and reputational risks related to the opioid crisis.
Provisional estimates from the National Institute on Drug Abuse (NIDA) indicate opioid deaths rose to 49,000 in 2017 and a recent report pegged the cumulative economic toll of the opioid epidemic at over $1 trillion.
The resolution was filed by the UAW Retiree Benefits Trust as part of an ongoing campaign by Investors for Opioid Accountability (IOA), a coalition of institutional investors representing over $2.2 trillion in assets that have been engaging companies related to opioids to encourage governance reforms that will address the problem. An earlier engagement initiated by the Teamsters with McKesson resulted in the first board report on risks tied to opioids. Last year similar resolutions achieved the support of a majority of independent investors at manufacturers and distributors AmerisourceBergen and Depomed and were withdrawn in advance of a vote at Cardinal Health and Endo when they agreed to publish board risk reports.
Rite Aid is the first of three retail pharmacies that will receive board risk resolutions for their 2018-2019 proxy. Resolutions will also be filed at Walgreens and CVS.
“Retail pharmacies that are dispensing these drugs to patients on a daily basis can play an important role in preventing their misuse,” said Donna Meyer of Mercy Investment Services, and co-leader of the IOA. “It is critical that these companies have robust monitoring and management mechanisms in place to thwart potential fraud and to avoid the legal and financial liabilities associated with the improper distribution and misuse of these medicines.”
Rite Aid has already been the subject of numerous lawsuits related to opioid distribution. The company is a defendant in the Ohio multidistrict opioid litigation. Separately, a lawsuit by several municipalities in West Virginia alleging that Rite Aid's inadequate oversight of its distribution of opioids contributed to the epidemic in that state was also moved to federal court in April 2018. According to its annual report, Rite Aid also faces similar lawsuits in Tennessee and South Carolina.
Rite Aid has also come under fire recently from the Drug Enforcement Administration (DEA) for irresponsible dispensing and distribution of controlled substances. In 2017, Rite Aid settled claims, according to an announcement by the DEA, "to resolve allegations that certain Rite Aid pharmacies in Los Angeles dispensed and/or recorded controlled substances using a medical practitioner's incorrect or invalid DEA registration number". Rite Aid paid an $834,200 civil penalty.
A separate resolution calling on Rite Aid to produce a sustainability report detailing the company’s environmental, social and governance risk achieved 77% support, again a clear indication that shareholders believe a focus on ESG performance would greatly benefit investors.
Both resolutions secured the endorsement of proxy advisory services Glass Lewis and ISS.
“Beyond the misuse of opioids, Rite Aid is woefully behind its peers in addressing many environmental and social challenges,” said Tom McCaney of the Sisters of St. Francis of Philadelphia. “A glaring example of the conflict between its stated mission and day-to-day operations is Rite Aid’s continued sales of tobacco products. If your mission is ‘to improve the health and wellness of our communities…’ you have no business selling tobacco. A comprehensive sustainability report reflecting a company-wide policy would assist Rite Aid in eliminating these conflicts.”
The investors say they look forward to productive dialogues with management on these issues in the coming months.
About the Interfaith Center on Corporate Responsibility (ICCR)
Celebrating its 48th year, ICCR is the pioneer coalition of shareholder advocates who view the management of their investments as a catalyst for social change. Its 300 member organizations comprise faith communities, socially responsible asset managers, unions, pensions, NGOs and other socially responsible investors with combined assets of over $400 billion. ICCR members engage hundreds of corporations annually in an effort to foster greater corporate accountability. www.iccr.org