State employees own pieces of opioid companies and probably don't know it

Police officers, prosecutors, teachers and legislators across Tennessee own tiny pieces of pharmaceutical companies accused of contributing to the opioid crisis gripping the region.Within the holdings of the Tennessee Consolidated Retirement System, into which state employees invest their pay to bolster their pensions, are hundreds of millions of dollars worth of stocks of companies that have been sued by state attorneys general or local district attorneys or are under investigation for misleading marketing practices of addictive painkillers.Some, like Johnson & Johnson and Pfizer Inc., are household names that, in addition to the millions of opioid drugs they distributed in the Tri-Cities also sell products for other purposes, from baby shampoo to medication to combat erectile dysfunction.The perceived health of these larger, diversified companies make them relatively safe and attractive targets for investment, and the state Treasury Department, which manages the employees' retirement investment funds, has acquired large values of shares of them -- $206.6 million worth of Johnson & Johnson and $133.9 million worth of Pfizer, according to a public portfolio summary from Sept. 30.Other, more specialized companies, have been assigned more responsibility for the region's addiction problem by prosecutors.AmerisourceBergen, Cardinal Health and the McKesson Corporation, three of the country's largest distributors of pharmaceutics, are currently under investigation by a coalition of 41 state attorneys general, led by Tennessee Attorney General Herbert Slatery. The group has issued subpoenas and sent letters to the companies asking for information about their marketing practices, trying to find out if they misled doctors and patients about the effectiveness and addictive properties of the medications. The attorneys general have also involved Teva Pharmaceuticals and Allergan. All five are in the state retirement system's portfolio.Locally, at least seven district attorneys have sued Teva and Mallinckrodt PLC, among others, alleging they fraudulently marketed opioids in the region. The state retirement system holds 2.5 million shares of Teva and 30,000 shares of Mallinckrodt.According to data compiled by health firm QuintilesIMS, Mallinckrodt's spinoff company Covidien distributed 83 million doses of opioids in the Tri-Cities between 2012 and 2016. It was the second largest distributor in that time period.Sullivan County District Attorney Barry Staubus is one of the prosecutors pursuing a case against the drug companies. As a state employee, he also contributes to the state retirement system.Staubus said Tuesday his role in the state is as a prosecutor, investment decisions are left up to the experts at the Treasury Department."I know these companies do other things other than opioids, but that's my focus as a prosecutor," he said. "I assume the state monitors the market and changes investments as they see fit."In 2012, Mallinckrodt claimed it was the U.S.'s largest supplier of opioids. Last year, as states and the federal government scrutinized the company's sales practices surrounding its generic opioid, stock prices fell 55 percent. Last month, when President Donald Trump and Department of Justice Officials considered suing opioid manufacturers and marketers, the company's stock took another dive.Staubus said he understands the collective lawsuits against the company may have an effect on its profits, but said any claims that his lawsuit is having any effect on Mallinckrodt, whose stock he owns through the retirement system, is purely speculative.Some states, municipalities and unions are trying to use their powers as shareholders to change some of the pharmaceutical companies' practices.Meredith Miller, chief corporate governance officer of the UAW Retiree Medical Benefits Trust, said a 44-member coalition of state treasurers, state and city comptrollers, public employee pension funds, labor and faith-based funds and asset managers, have had some success advocating for transparency and corporate structure changes at some of the companies in which the group members' pension funds invest.Instead of calling for boycotts of the companies, the Investors for Opioid Accountability uses letter campaigns, dialogue with company officials and shareholder proposals to change the way large companies do business.The group's goal is to engage with 13 companies to better understand the role of the companies in the opioid crisis and how they are managing the mounting financial, legal and reputational risks that they are facing as a result of public concern. As long-term investors in these companies, Miller said they have identified certain corporate governance reforms that they believe would strengthen independent board oversight over opioid business decisions.On the group's urging Cardinal Health separated its chair and CEO positions and adopted a clawback provision for executive pay. Endo, Depomed and Mallinckrodt adopted clawback proposals, and Mallinckrodt expanded corporate political spending and lobbying transparency.So far, Tennessee's Treasurer has not joined the coalition.As an alternative to lawsuits, Miller said the pressure from institutional investors is also helpful in changing business philosophies at the major companies.CompanySharesMarket Value (Sept. 30) Abbott Labs 1,228,392.00 $65,546,997.12 Abbvie Inc 1,049,126.00 $93,225,336.36 Allergan PLC 236,461.00 $48,462,681.95 Amerisource Bergen 44,117.00 $3,650,681.75 Cardinal Health 140,952.00 $9,432,507.84 Depomed 55,047.00 $318,722.13 Impax Labs Inc 64,870.00 $1,316,861.00 Johnson + Johnson 1,589,601.00 $206,664,026.01 Mallinckrodt PLC 30,000.00 $1,121,100.00 McKesson Corp 57,388.00 $8,815,370.68 Mylan NV 308,914.00 $9,690,632.18 Pfizer Inc 3,751,774.00 $133,937,260.80 Teva Pharmaceuticals NE 2,500,000.00 $2,490,600.23