Springfield Mayor Asks Pension Fund to Sell Drug Stocks

September 29, 2003 (PLANPSPONSOR.com) - Springfield Massachusetts' mayor is asking the city's retirement board to put its money where his mouth is by selling all the city's pension fund investments in pharmaceutical companies.

The move to request the sale by the Springfield Retirement Board by Mayor Michael Albano could come as early as Tuesday. Overall, the proposed sale would represent about $6 million, or 2.6% of the $223 million fund, according to a Boston Globe report.

Albano says the behavior of the US drug companies, which he accuses of manipulating markets to protect high prices in the United States, justifies the sell-off. “It would send a message to the industry that these profits at the expense of the American consumer are outrageous,” Albano said. “They’re clearly flexing their muscles. It’s like a cartel, the oil cartel or the illegal drug cartel. That’s how they impact the marketplace and control pricing.”

In the grand scheme of things, t he fiscal impact of the proposed move on multibillion-dollar drug companies would be rather small. Springfield’s four largest pharmaceutical stock holdings are:

  • $1.59 million of Johnson & Johnson
  • $1.45 million of Pfizer Inc.
  • $635,000 of Eli Lilly & Co.
  • $601,000 of Merck & Co.

Albano realizes this, and insists he is trying to spark broader financial pressure on the pharmaceutical industry. “You can’t claim the pharmaceutical industry is gouging consumers while at the same time allowing the retirement system to derive profits from them,” he said. Albano would not predict the response of the Springfield Retirement Board, although he appointed three of its five members.

Springfield Plan

The proposed divesture is just the latest shot fired in the standoff between Springfield’s Canadian drug purchase program and authorities in the United States that seek to shut it down. Under the plan, Springfield entices city employees and retirees to take advantage of the voluntary system by waiving copayments on prescription drugs – currently ranging from $6 to $20 per prescription – for participants who place their orders though CanaRx Services Inc., an Ontario company that mails three-month supplies of prescribed drugs from Canadian pharmacies. Overall, this appears to be a small price to pay for the city that cites savings on drugs ranging from 20% to 80% and ultimately could put between $4 million and $9 million in savings back into city coffers (See Springfield, Mass. Pushes Canadian Drug Order Program ).

That move drew warnings from the Food and Drug Administration (FDA) and at the same time drew the attention of other public institutions. The FDA contends the stores violate federal law barring drug importation and pose risks that drugs shipped will be expired, counterfeit or mishandled.As evidence, the FDA points to a sting operation conducted last month in which the agency allegedly caught the supplier of Springfield’s Canadian drug shipments red handed in the improper handling of insulin, saying when the insulin arrived via regular mail, it was at room temperature, instead of chilled and delivered via overnight mail as it is supposed to be handled to ensure its effectiveness (See FDA Stings Springfield’s Canadian Drug Supplier ).

However, state governors in Illinois, Iowa and Minnesota have all called for reports on the potential impact of a similar program for their state employees (SeeIowa Looks To Hop on Canadian Drug Bandwagon, Illinois Gov Pushes For Canadian Drug Purchases , MN Governor Looks Up For Lower Drug Prices ).