Advanced Search
MyIDEAS: Login to save this article or follow this journal

Why Lower Drug Prices Benefit Institutional Investors: an application of universal ownership theory

Contents:

Author Info

  • Steve Lippman
  • Daniel E. Rosan

    (Interfaith Center on Corporate Responsibility)

  • Adam Seitchik

    (Trillium Asset Management)

Registered author(s):

    Abstract

    Changes in prescription drug prices have broad ripple effects across the diverse portfolios that most institutional investors hold. Lower prices cut into pharmaceutical company profits, but improve the overall productivity and profitability of other investable sectors of the economy. This paper considers the net impact of cuts in drug prices on investor portfolios. We find that falls in pharmaceutical company profits resulting from price cuts would be largely if not fully offset by a combination of health plan cost-savings and increases in consumer spending power. Furthermore, falling drug prices benefit investors through the dynamic benefits from a healthier workforce with greater access to prescription drugs. We conclude that, from the perspective of the broadly diversified "universal investor", support for lower drug prices is consistent with a fiduciary duty to seek attractive long-term returns at the portfolio level. Strategies for shareholder activism should be expanded, including engagement with corporate health care purchasers and advocacy for public policy reform. Copyright (c) 2007 The Authors; Journal compilation (c) 2007 Blackwell Publishing Ltd.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1467-8683.2007.00578.x
    File Function: link to full text
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Bibliographic Info

    Article provided by Wiley Blackwell in its journal Corporate Governance: An International Review.

    Volume (Year): 15 (2007)
    Issue (Month): 3 (05)
    Pages: 455-466

    as in new window
    Handle: RePEc:bla:corgov:v:15:y:2007:i:3:p:455-466

    Contact details of provider:
    Web page: http://www.blackwellpublishing.com/journal.asp?ref=0964-8410&site=1

    Order Information:
    Web: http://www.blackwellpublishing.com/journal.asp?ref=0964-8410&site=1

    Related research

    Keywords:

    References

    No references listed on IDEAS
    You can help add them by filling out this form.

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:bla:corgov:v:15:y:2007:i:3:p:455-466. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.