Eli Lilly Criticized For Not Disclosing Lobbying Expenses Ahead Of Shareholder Vote

This piece originally appeared in Inside Health Policy. You can view the original piece here.

As a handful of key Senate Democrats and consumer advocates engage in a broader effort to get companies to disclose lobbying expenses, Public Citizen on Friday (May 3, 2024) blasted drug maker Eli Lilly for not making all its expenditures public in the run-up to its annual meeting next week where shareholders are slated to hold a vote demanding transparency. The shareholders suggest Lilly’s public statements, including that it supports lowering drug prices, may clash with the lobbying data it has not disclosed.

Public Citizen has shared an analysis that shows Lilly has failed to disclose its state lobbying expenditures for half of the nation to shareholders.

Lawmakers have said without strong lobbying disclosure regulations, shareholders are left unaware of the policy initiatives they inadvertently back through their investments. Sens. Sherrod Brown (D-OH) and Elizabeth Warren (D-MA) are among those who have urged the Securities and Exchange Commission (SEC) to mandate companies disclose corporate lobbying expenditures to shareholders.

The Lilly shareholder proposal requests detailed lobbying activity reports, but the company criticized it, claiming that it already publicly discloses such information.

“Lilly already publicly discloses the information requested by the proposal regarding the company’s policies and procedures,” the company says.

Lilly’s shareholders will vote on the proposal on May 6 to increase the company’s lobbying disclosures.

Public Citizen’s analysis revealed that in 52% of the state lobbying disclosure documents provided by Lilly, covering 25 out of 48 states, the company omitted disclosing its expenditures on state lobbyists.

Moreover, in 73% of the lobbying disclosure documents from Lilly, representing 35 out of 48 states, the company failed to disclose the specific issues or bills it lobbied on in those states.

In November 2023, five U.S. senators including Warren and Brown sent a letter to SEC urging it to issue rules requiring full disclosure of corporate lobbying expenditures to shareholders.

The SEC can mandate registered companies publicly file financial statements containing information deemed necessary for shareholder protection and fair dealing in securities.

The proposal from Lilly shareholders is sponsored by the Service Employees International Union (SEIU) Pension Plans Master Trust, urging an annual report that outlines Lilly’s policies and procedures on lobbying; details all payments for direct or indirect lobbying, including, contributions to tax-exempt organizations endorsing model legislation; and elucidates the board and management’s decision-making process regarding lobbying expenditures.

Lilly shareholders say the information is necessary to fully understand whether Lilly’s lobbying aligns with its stated objectives and the interests of its shareholders.

Lilly invested $103,363,850 in federal lobbying from 2010 to 2022. Lilly’s shareholders say this amount excludes state lobbying, which Lilly conducted in all 50 states in 2022. Additionally, Lilly conducts lobbying internationally,

“Lilly fails to disclose its third-party payments to trade associations and social welfare groups (SWGs), or the amounts used for lobbying, to shareholders,” Lilly’s shareholders say. “Lilly belongs to the Chamber of Commerce, Business Roundtable, National Association of Manufacturers, and Pharmaceutical Research and Manufacturers of America (PhRMA), which together have spent over $2.9 billion on federal lobbying since 1998, and supports SWGs that lobby, like the Alliance for Patient Access (AfPA).”

Lilly’s shareholders allege the company’s failure to disclose its lobbying activities poses a risk to its reputation when its lobbying contradicts the company’s public stances.

For instance, while Lilly publicly supports making medicine more affordable, it financially supports organizations like PhRMA and AfPA, which oppose efforts to lower prescription drug prices.

The shareholders also say despite advocating for addressing climate change, Lilly’s affiliations with groups like the Business Roundtable (BRT), which lobbied against the Inflation Reduction Act (IRA), and the Chamber of Commerce, which has reportedly played a significant role in discouraging climate legislation for two decades, raise concerns.

Some groups have urged the company to sever ties with the American Legislative Exchange Council (ALEC), citing its involvement in voter restriction efforts. Lilly opposed voter restriction efforts in Indiana, where it is headquartered.

The shareholders say Lilly is represented at ALEC through its trade associations, with both the Chamber and PhRMA serving on its Private Enterprise Advisory Council.

But Lilly argues that it does not finance efforts to oppose reducing prescription drug prices.

The company also says it actively supported certain provisions of the IRA that are expected to benefit patients and foster innovation, such as implementing a $35 out-of-pocket cap on insulin costs for Medicare beneficiaries and eliminating the coverage gap in Medicare Part D plans, but opposed other aspects of the IRA that the company believes could hinder innovation without directly benefiting patients, such as Medicare price setting under the guise of negotiation.

Lilly claims a separate report on its lobbying information would place an undue administrative burden on the company and would not provide meaningful additional information to shareholders.

“Requiring Lilly to prepare a separate report with this information would place an undue administrative burden on the company and would not provide meaningful additional information to shareholders,” it says.

The Public Citizen analysis reviewed Lilly’s state lobbying activity disclosed on its website in a document titled “State Lobbyist Activity and Monitoring, 2023,” which includes links to mandatory state lobbying disclosure forms that Lilly seems to have complied with.

In many instances, these state disclosure requirements lacked details on lobbying expenditures, or the issues lobbied on, according to the drug price control group.

In only 23% of the documents provided by Lilly, for 11 out of 48 states, did the company disclose both its spending on state lobbyists and the issues or bills it lobbied on, according to Public Citizen’s analysis.

“While Lilly talks a big game on its lobbying transparency, a closer look at what they’re actually disclosing reveals that investors and the public are in the dark when it comes to Lilly’s state lobbying,” Jon Golinger, democracy advocate at Public Citizen says in a statement about the group’s analysis. “Misalignment between a company’s statements in public and its lobbying activities behind closed doors can create reputational risks that may damage investor value. The best protection against those risks is full disclosure of a company’s lobbying activities.”

— Maaisha Osman