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Investment board demands Pfizer end battle against Canadian imports
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Minnesota's four constitutional officers make up the State Investment Board. From left to right: Auditor Pat Anderson, Secretary of State Mary Kiffmeyer, Gov. Pawlenty, Attorney General Mike Hatch. (MPR Photo/Tom Scheck)
The Minnesota State Board of Investment adopted a resolution Wednesday that would encourage the drug company, Pfizer, and other drug companies, to change their business practices. Minnesota's pension funds own about $476 million in Pfizer stock. Gov. Pawlenty, who sits on the investment board, proposed the resolution after the company cut off supplies to Canadian drug wholesalers that sell to Americans. Some worry that the proposed action could decrease Pfizer's stock price and hurt retirees who depend on the state's pension fund.

St. Paul, Minn. — The State Board of Investment waded into the prescription drug debate by trying to hit Pfizer where it hurts the most -- the bottom line. The board approved a resolution to ask Pfizer shareholders to begin the process of forcing the pharmaceutical company to restructure its global prescription drug pricing system.

The proposal, initiated by Gov. Tim Pawlenty, also calls on Pfizer to continue shipping drugs to all wholesalers in Canada and to fully disclose its lobbying, legal and marketing costs.

Pawlenty says the state will now take the resolution to the company's annual meeting, with the hopes that other shareholders will vote in favor of it. If it gets enough shareholder support, Pawlenty says it would force Pfizer to lower the cost of prescription drugs in the U.S.

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Image Kiffmeyer opposed Pfizer resolution

"In this case, I just think the drug companies are wrong, and now I have a platform and an opportunity to tell them they're wrong. Now we're in a bit of a fight with them and I'm going to continue the fight," Pawlenty says.

The investment board is taking action after Pfizer announced that it would cut off drug sales to two Canadian wholesalers that the company believes is selling drugs to U.S. consumers. The board also says action should be taken against any other drug company that cuts its supply to Canada.

Pawlenty started a state-run Web site in February that would help U.S. citizens buy less expensive medications from Canada.

At the investment board meeting, Pawlenty, Attorney General Mike Hatch and State Auditor Pat Anderson voted in favor of the proposal. Secretary of State Mary Kiffmeyer voted against it. She said the move could depress the value of the state's own shares of Pfizer's stock and in turn affect state payments to retirees, which are based on the pension fund's overall performance.

"If boards or companies are doing something illegal, we should take legal action. If it's market forces, we should bring to bear market forces. If it is legislative action, such as Congressman Gutknecht's legislation and other things that are going on, then we should do that. My concern, again, is that this is somebody else's money and I'm carrying that responsibility," Kiffmeyer says.

My concern is that this is somebody else's money and I'm carrying that responsibility.
- Secretary of State Mary Kiffmeyer

State law requires the board to maximize returns on its investments. Pawlenty believes the proposal would do that because he says Pfizer can't continue to pay high legal, lobbying and marketing costs to defeat proposals to lower drugs prices in the U.S.

About 118,000 retired teachers, state workers and public employees currently draw pensions from the state. Jim Monroe, executive director of the Minnesota Association of Public Employees, says he has mixed feelings about the board's action. He says he's pleased the board is taking some action against Pfizer, but he says he's concerned that the board is mixing politics with investment.

"This seems to be more of an issue responding to the governor, who is reaching out and pushing Pfizer because of what happened in Canada. That, I think, may be crossing the line. We're taking a hard look at this because it happened fairly quickly," says Monroe.

Pawlenty says at this point he's not willing to consider selling all of the company's stock in Pfizer. Minnesota's stake in the company is less than 1 percent of Pfizer's total value of $280 billion.

Pfizer officials declined to comment on tape for this report, but issued a statement saying it welcomes shareholder concerns. The company says because of the timing of its annual meetings, the earliest shareholders could take up the resolution would be 2005.

This is not the first time the state has taken action against a company. The state divested itself of all tobacco stocks in 2001. Alfred Marcus, a professor of strategic management at the University of Minnesota, says Minnesota's action by itself won't amount to much. But he says it could be a different story if other states jump on board.

"Pfizer is probably worried about the contagion effect. Are other states going to do the exact same thing? Are other pension funds going to be under pressure to do the same thing?" Marcus says. "Are large institutional investors going to follow suit -- so in that sense it may have greater impact than it otherwise would have."

Pawlenty says he intends to write letters to other governors in the hopes of garnering more support for the idea.

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