Stimulating list

Original text: Koos Schwartz, FEM Business
Translation: Frank Brakenhoff

About two billion people in poor countries do not have access to medicines. Dutchman Wim Leereveld thinks he has found a method that encourages major pharmaceutical companies to increase this access.

Major pharmaceutical companies don’t despise making money and they make huge profits selling medicines for Western diseases of prosperity. But do they also take action against one of the most painful problems there is: the fact that 1 to 2 billion people cannot get the medicines they need? And if there are drug companies trying to find solutions to this problem, then what are these solutions? What do they do? In which company an investor must place his money if he doesn’t just want a nice dividend, but also a good feeling about his investment?

The answer will be given in the second half of 2008, when the Dutchman Wim Leereveld presents the ATM Index.

ATM is short for Access to Medicine, which is exactly what this index shows. The higher a company is ranked on his list, the more it does to make medicines more accessible to developing countries. The basic idea behind the index is similar to the idea behind the Dow Jones Sustainability Index, which grades how sustainable companies operate in their field. It is an incentive for a lot of companies: corporations likeTNT (post and delivery) and Akzo Nobel (chemical industry) are quite proud to have received the title of ‘most sustainable’ in their industry last year.

Leereveld is hoping to achieve a similar effect with the ATM Index. He stresses that it is not the purpose of his brainchild to blacken companies that are not concerned with accessibility. “On the one hand the index shows there are companies that take an interest in the developing world. On the other hand I hope the index will be an incentive for companies to do more about access to medicines.”

Feeling of competition

According to Leereveld it is beyond dispute that access has to improve. He agrees with a lot of aid organizations that have been working on this issue for years.
However, those organizations are not always effective, Leereveld believes. “They demand a lot from pharmaceutical companies, but they don’t know them very well. They also lump the pharmaceutical businesses together, even though there are many differences between them. That’s partly why they don’t always get on very well with the industry.”

Leereveld worked in the pharmaceutical sector for years and does not suffer from these objections; he was not hampered by ´mixed feelings´ while creating the index. Leereveld: “The index makes an appeal to competitiveness, just like any sustainability index”. The ATM Index will be published for the first time in 2008 and will list 20 pharmaceutical companies, crowning five years of work.

In a sense the foundation of the index was laid on 9/11, says Leereveld. In the nineties he was working with Walsh International, an enterprise that provided services to pharmaceutical companies. When Walsh was split up and part of it was quoted on the stock exchange, he cashed in and left, Leereveld worked for a while as a consultant.

Around the turn of the century his conscience started to trouble him. He started to cut his ties on 9/11. Just as he was asking himself about the consequences for his child of the assault on the World Trade Center and the Pentagon, he met with a Dutch business man who built schools in Kenia. That’s when the penny dropped: he knew he shouldn’t wait any longer to put into action the ideas he had been contemplating for a while.

A lot has happened since 9/11. In cooperation with aid organizations and with the help of advice from governments, ministries, the World Health Organization (WHO) and charitable institutions like the Bill and Melinda Gates Foundation, a checklist was developed as the basis for the index. The list was then sent to the big pharmaceutical companies for comment. A number of them replied, like Roche and Novo Nordisk. Some of them, like GlaxoSmithKline, forwarded the criteria to an organization that looks after the interests of major pharmaceutical businesses. But there were also organizations, like the American Wyeth, that did not react at all or pulled out after having provided some comments, such as Pfizer.

The checklist is now complete: eight criteria have been used to establish the final list.

No salary

At the same time Leereveld had to seek funding. A number of aid organizations, such as Oxfam Novib, as well as the Dutch and the British Ministries of Foreign Affairs and the banks SNS Reaal and the Rabobank, became donors. The income generated covers the costs of the two employees who work for Leereveld, as well as his own costs. Leereveld himself does not yet receive any salary.

He received moral support and advice from the Bill and Melinda Gates Foundation – among others – and from big investors like Schroders, Morley, Henderson and SNS Asset Management. They are prepared to take the index into account in their investment decisions. The UN has also shown interest in the project.

The most significant part of Leereveld’s costs is the American agency Innovest, which calculates the index, searches through annual reports and other reports by pharmaceutical companies and reads publications by WHO and governments. This is how Innovest checks whether the big pharmaceutical companies are complying with the criteria. A few Innovest employees are working on his project, according to Leereveld.

Innovest also supplies the data for the Carbon Disclosure Project, which tries to discover what big companies are doing to limit their emissions of greenhouse gasses.

Putting this list together is no sinecure. First of all there are the eight criteria, involving issues like the prices of medicines in poor countries, the way companies handle patents, the amount of research into (tropical) diseases which tend to be ignored, donations, and the question whether making medicines available to developing countries is a structural part of company policy, controlled by top management. These criteria have been subdivided into 28 indicators and 88 ‘measuring points’.

This means it is possible to measure how many researchers are involved in the research into certain diseases, how much money is spent for this purpose, how expensive medicines are in poor countries, what companies do for charity, if these expenses are effective, and if companies are exploiting their patents in poor countries. A score is associated with every measuring point. Whoever scores the most points will be number one this summer.

Discussion

Leereveld does not disguise the fact that there has been discussion about the criteria, the measuring points and the scores. American companies, for example, thought that the scores for drug donations were too low. “American companies donate relatively large amounts. However, scattering a couple of million, according to the Index, is less important than a structural approach to increasing the availability of medicines in poor countries. That is why the ‘donations’ criterion doesn’t carry a lot of weight in the final assessment.”

Some measuring points and criteria seem to be obvious, like the requirement to deliver high-quality products. Other measuring points are very demanding for the drug companies, like transparency in their pricing policy in poor countries. Leereveld: “Criteria and measuring points are open to discussion. It’s very possible that they might change in the years to come or that the criteria will be weighted differently.”

The number of companies on the index will change in any case. Initially there will be [20] companies, with more to come in subsequent years. Leereveld admits there may be disadvantages to the index. The list can lead to oversimplified headlines (‘Drug company ignores developing world’). This Leereveld would regret – “It’s a balanced list” – but he is not yet sure how to avoid it. There is also a chance that investors would use the list to rule out drug companies just because they spend a lot of money increasing the availability of medicines in poor countries. Such expenditures might be at the cost of shareholder value.

Leereveld is not afraid of this effect. “If a company is very active in a poor country, it may turn out positive for business in that country. Apart from that, a high ranking on the index says something about the management. A high ranking is good for the image and a positive image pays off.”