Dear Mr. Basta:
This letter is in response to your correspondence dated January 31, 2018
concerning the shareholder proposal (the “Proposal”) submitted to Biogen Inc. (the
“Company”) by Azzad Asset Management et al. (the “Proponents”) for inclusion in the
Company’s proxy materials for its upcoming annual meeting of security holders. We
also have received correspondence from the Proponents dated March 2, 2018. Copies of
all of the correspondence on which this response is based will be made available on our
website at http://www.sec.gov/divisions/corpfin/cf-noaction/14a-8.shtml. For your
reference, a brief discussion of the Division’s informal procedures regarding shareholder
proposals is also available at the same website address.
Matt S. McNair
Senior Special Counsel
Azzad Asset Management
Incoming letter dated January 31, 2018
The Proposal urges the compensation committee to report annually on the extent
to which risks related to public concern over drug pricing strategies are integrated into the
Company’s incentive compensation policies, plans and programs for senior executives.
We are unable to conclude that the Company has met its burden of demonstrating
that it may exclude the Proposal under rule 14a-8(i)(7) as a matter relating to the
Company’s ordinary business operations. Accordingly, we do not believe that the
Company may omit the Proposal from its proxy materials in reliance on rule 14a-8(i)(7).
We are unable to concur in your view that the Company may exclude the Proposal
under rule 14a-8(i)(10). Based on the information you have presented, it does not appear
that the Company’s public disclosures compare favorably with the guidelines of the
Proposal. Accordingly, we do not believe that the Company may omit the Proposal from
its proxy materials in reliance on rule 14a-8(i)(10).
M. Hughes Bates
The Division of Corporation Finance believes that its responsibility with respect
to matters arising under Rule 14a-8 [17 CFR 240.14a-8], as with other matters under the
proxy rules, is to aid those who must comply with the rule by offering informal advice
and suggestions and to determine, initially, whether or not it may be appropriate in a
particular matter to recommend enforcement action to the Commission. In connection
with a shareholder proposal under Rule 14a-8, the Division’s staff considers the
information furnished to it by the company in support of its intention to exclude the
proposal from the company’s proxy materials, as well as any information furnished by
the proponent or the proponent’s representative.
Although Rule 14a-8(k) does not require any communications from shareholders
to the Commission’s staff, the staff will always consider information concerning alleged
violations of the statutes and rules administered by the Commission, including arguments
as to whether or not activities proposed to be taken would violate the statute or rule
involved. The receipt by the staff of such information, however, should not be construed
as changing the staff’s informal procedures and proxy review into a formal or adversarial
It is important to note that the staff’s no-action responses to Rule 14a-8(j)
submissions reflect only informal views. The determinations reached in these no-action
letters do not and cannot adjudicate the merits of a company’s position with respect to the
proposal. Only a court such as a U.S. District Court can decide whether a company is
obligated to include shareholder proposals in its proxy materials. Accordingly, a
discretionary determination not to recommend or take Commission enforcement action
does not preclude a proponent, or any shareholder of a company, from pursuing any
rights he or she may have against the company in court, should the company’s
management omit the proposal from the company’s proxy materials.
Re: Request by Biogen Inc. to omit proposal submitted by Azzad Asset Management
Ladies and Gentlemen,
(the “Proponents”) submitted a shareholder
Biogen Inc. (“Biogen”
asks Biogen’s board to report to
shareholders on the extent to which risks related to public concerns over drug pricing strategies
are reflected in senior executive incentive compensation arrangements.
In a letter to the Division dated January 31, 2018
Proposal from its proxy materials
with the Company's 2018
shareholders. Biogen argues that
entitled to exclude
deals with Biogen’s ordinary business operations; and Rule 14-8(i)(10), because Biogen has
substantially implemented the Proposal. As discussed more fully below,
burden of proving its
exclude the Proposal in reliance on either of those exclusions
and the Proponents respectfully urge that Biogen’s request for relief should be denied.
The Proposal states:
RESOLVED, that shareholders of Biogen Inc. (“Biogen”) urge the Compensation Committee (the
concern over drug pricing strategies are integrated into Biogen’s incentive compensation policies,
plans and programs (together, “arrangements”) for senior executives. The report should include,
but need not be limited to, discussion of whether incentive compensation arrangements reward,
or not penalize, senior executives for (i) adopting pricing strategies, or making and honoring
commitments about pricing, that incorporate public concern regarding the level or rate of
increase in prescription drug prices; and (ii) considering risks related to drug pricing when
Rule 14a-8(i)(7) permits a company to omit a proposal that “deals with a matter relating to the
company’s ordinary business operations. Biogen makes several claims regarding the applicability
of the ordinary business exclusion to the Proposal, none of which has merit.
Biogen argues that the “thrust and focus” of the Proposal is not senior executive incentive
compensation arrangements but rather “Biogen’s pricing decisions and related risks.”
urges the Staff to grant its request based on a determination regarding the Proposal’s
Subjective motivation, however, is not ascertainable from a proposal; what
The Proposal’s resolved clause makes clear that the requested disclosure is not intended to
address drug pricing generally, the prices of particular medicines, access to medicines or any
other similar issue. Rather, the resolved clause asks solely for disclosure of how senior executive
compensation arrangements reflect pricing-related risks.
Unlike several of the determinations on which Biogen relies, the Proposal does not request a
policy change that would penalize senior executives for actions relating to an ordinary business
A proposal seeking to condition executive compensation payments on the achievement
No-Action Request, at 6.
Delta Air Lines (Mar. 27, 2012); Exelon Corp. (Feb. 21, 2007). Biogen’s reliance on Microsoft, Inc. (Sept. 17,
proposal, which focused on the relationship between executive and average employee pay, did not limit its
application to “senior executives.”
compensation than a proposal, like the Proposal, asking for disclosure regarding integration of a
particular risk into compensation arrangements.
The supporting statement also has a strong focus on senior executive incentive pay, contrary to
Biogen’s claim that it “focuses primarily on the risk to pharmaceutical companies like Biogen of a
public backlash against high drug prices.”
The supporting statement addresses several aspects
used in Biogen’s incentive compensation arrangements and the risks created when high
executive pay accompanies sizeable drug price increases. To make the case for why pricing-
related risks are important enough to be considered when setting senior executive compensation,
the supporting statement also discusses those risks. But that material does not somehow cancel
out or negate the unambiguous language and clear focus of the Proposal on senior executive
incentive compensation arrangements.
The Proposal is similar to a 2014 proposal at Gilead Sciences, Inc.
asking that metrics related to
relief, Gilead argued that although the proposal was “camouflage[d]” as addressing senior
executive compensation, its “main focus” was to “reduce the prices the Company charges for its
products.” The Staff disagreed and did not grant relief. Biogen’s effort to shift the subject from
senior executive compensation to drug pricing mirrors Gilead’s unsuccessful attempt.
Outside the drug company context, the Staff has also declined to allow exclusion on ordinary
factor. For example, in BB&T Corporation,
the proposal asked the company to consider the pay
in the proxy statement about how it did so. BB&T argued unsuccessfully that the proposal’s
No-Action Request, at 7.
Gilead Sciences, Inc. (Feb. 21, 2014)
That the Gilead proposal requested a policy change while the Proposal seeks disclosure does not affect the
had used to analyze disclosure proposals, deeming them not excludable on ordinary business grounds
regardless of the disclosure subject. The Commission announced that disclosure proposals would be analyzed
in the same way as proposals seeking a change in policy or behavior, by reference to the underlying subject
matter rather than the form. (See Exchange Act Release No. 20091 (Aug. 16, 1983); Staff Legal Bulletin 14H
(Oct. 22, 2015))
BB&T Corporation (Jan. 17, 2017). The outcome here differed from that in Microsoft, discussed supra in note
3, because the BB&T proposal addressed “senior executive” compensation.
ordinary business grounds.
Biogen claims that the Proponents’ interest in drug pricing should be taken into account in
determining the Proposal’s thrust and focus. Specifically, Biogen points to the fact that some of
the Proponents submitted a proposal to the Company in the last proxy season seeking drug
The Proponents do not dispute that they are concerned about the significant
incentives matter and that senior executive pay should not amplify pricing-related risks or
discourage measures to manage them appropriately. The purpose of the Proposal is to explore
The Staff declined to adopt the same reasoning Biogen advances here in the 2014 Gilead
In Gilead, the president of a patient advocacy organization, the AIDS
regarding patient access to Gilead’s medicines into CEO compensation arrangements. Gilead
urged that the proposal’s “thrust and focus” was not executive pay, but rather drug pricing,
pointing to the “longstanding public relations, media and protest campaign” AHF had been
waging against Gilead to lower its drug prices, including a “die-in” and mock funeral procession
to Gilead’s headquarters.
Like Biogen, Gilead claimed that “While the resolution and supporting statement include
references to compensation paid to the Company’s CEO, a reading of the Proposal as a whole
makes clear that the focus of the Proposal is to have the Company make its products available at
a reduced cost.” The Staff did not concur with Gilead’s view that the proposal dealt with the
Company’s ordinary business operations. Biogen’s case here is even weaker than Gilead’s, as the
Proposal seeks only disclosure, not a policy change that would financially penalize the CEO for
Even assuming the Proposal’s subject were the pricing of pharmaceuticals, high drug prices are a
matter of such consistent and sustained societal debate, with a sufficiently strong connection to
Biogen, to qualify as a significant social policy issue transcending ordinary business.
Biogen concedes that the Staff has denied requests to exclude on ordinary business grounds two
types of proposals dealing with pharmaceutical pricing, one seeking a price restraint policy and
and Warner Lambert Company
(together, the “price restraint proposals”),
the companies unsuccessfully argued that proposals requesting a policy of pharmaceutical price
restraint were excludable on ordinary business grounds.
More recently, the Staff declined to allow omission of proposals seeking greater drug pricing
transparency. In the 2015 proxy season, proposals asked Gilead, Vertex and Celgene (together,
the “drug pricing risk disclosure proposals”) to report on the risks created by rising pressure to
contain U.S. specialty drug prices. All three companies invoked the ordinary business exclusion,
arguing that the proposals concerned the prices charged for their products, which was not a
significant social policy issue, and would micromanage the companies by asking for information
on a complex matter that shareholders would not be in a position to understand.
successfully argued that high specialty drug prices are a significant social policy issue and that
the broad focus on risks and trends obviated concerns over micromanagement.
Biogen argues that the price restraint and pricing risk disclosure proposals do not apply here
because the Proposal “seeks to delve much more deeply into Biogen’s day-to-day affairs.”
the price restraint proposals sought to affect the prices actually charged for drugs, while the
pricing risk disclosure proposals asked companies to report on how they were responding to
several sources of risk related to drug pricing. The 2014 Gilead proposal, which Biogen does not
address, requested the use of specific CEO pay metrics related to patient access. The Proposal,
by contrast, requests senior executive compensation disclosure to be made only once a year—
hardly a day-to-day matter--and is not overly specific or detailed.
Biogen also tries to distinguish the Proposal from the price restraint and drug pricing risk
disclosure proposals on the ground that both of those successful formulations were focused on
“providing affordable access to prescription drugs.”
Biogen seems to want to have it both ways,
differs from proposals that have survived no-action challenge because the Proposal is not about
affordable access to medicines. But patient access is not unrelated to the Proposal, as lack of
access generates much of the risk created by high drug prices. Accordingly, it is not surprising
Eli Lilly and Company (Feb. 25, 1993)
Bristol-Myers Squibb Company (Feb. 21, 2000)
Warner Lambert Company (Feb. 21, 2000)
Gilead Sciences, Inc. (Feb. 23, 2015); Celgene Corporation (Mar. 19, 2015); Vertex Pharmaceuticals Inc.
(Feb. 25, 2015)
as the risk of legislative or regulatory backlash. Like the price restraint and drug pricing risk
disclosure proposals, and in contrast to the drug pricing proposals the Staff allowed companies to
omit last year (cited on pages 7-8 of the No-Action Request), the Proposal does not seek detailed
Biogen claims that the Proposal is excludable, even if it “may touch upon” a significant social
policy issue, where the Staff finds that “its primary focus” is an ordinary business matter.
is just another way of saying that the Proposal is excludable if its subject is not deemed to be a
significant social policy issue, which does not seem to be in dispute.
In the determinations cited by Biogen on page 9 of the No-Action Request, the subject of the
proposal had some connection to a significant social policy issue, such as animal cruelty or plant
closings. However, either a sufficiently strong nexus did not exist because the company was a
retailer whose role was passive
elements that would interfere with day-to-day management and attenuated the connection to the
significant social policy issue.
The Commission’s 1998 release
clearly explains that if the subject of a proposal is a significant
[P]roposals relating to [ordinary business] matters but focusing on
sufficiently significant social policy issues (e.g., significant discrimination matters)
generally would not be considered to be excludable, because the proposals would transcend the
day-to-day business matters and raise policy issues so significant that it would be appropriate for
a shareholder vote.” (emphasis added)
Since the Staff issued its determinations on the drug pricing risk disclosure proposals, discussed
above, the public debate over high drug prices has only intensified. Shortly before his
inauguration, President Trump warned that the drug industry was “getting away with murder”
proposal on health care reform); Capital One Financial Corp. (Feb. 3, 2005) (proposal addressed plant closings,
which in some proposal formulations had been considered a significant social policy issue, but requested that
the company provide detailed information about outsourcing and plant closings).
Exchange Act Release No. 40018 (May 21, 1998).
advantage of us” and indicated a desire bring U.S. drug prices closer to those paid outside the
sufficiently strong nexus to Biogen that exclusion of the Proposal on ordinary business grounds
would be inappropriate. Biogen has been the subject of significant criticism for its pricing of
Spinraza, which treats spinal muscular atrophy (“SMA”), a deadly genetic muscle-wasting
disease. The first-year price for Spinraza was set at $750,000, with each year thereafter costing
In a Harvard Business Review article ominously titled “The Cost of Drugs for Rare
treats SMA patients estimated that the cost of treating the most severely affected U.S. patients
for just the first year would be $3.8 billion.
might be “the straw that breaks the camel’s back in terms of the U.S. market’s tolerance for rare
disease drug pricing.”
Congressmen Elijah Cummings and Peter Welch began an investigation into the price
increases, requesting information from Biogen and other makers of MS drugs and citing concerns
FiercePharma, Jan. 11, 2017 (https://www.fiercepharma.com/pharma/trump-hints-to-plans-for-pharma-first-
Sarah Karlin-Smith, “Trump Renews Attacks on High Drug Prices,” Politico, Oct. 16, 2017
Carolyn Y. Johnson, “Here’s Why Pharma is Happy to Help Foot the Bill for this $750,000 Drug,” The
Washington Post, June 9, 2017 (https://www.washingtonpost.com/business/heres-why-pharma-is-happy-to-
250d0b15f83b_story.html?utm_term=.85bfe1df908c); see also Julie Appleby, “Drug Puts a $750,000 ‘Price Tag
on Life’,” NPR, Aug. 1, 2017 (https://www.npr.org/sections/health-shots/2017/08/01/540100976/drug-puts-a-750-
000-price-tag-on-life); Robert Weisman & Jonathan Saltzman, “The New Price of Hope,” The Boston Globe,
Dec. 17, 2017
A. Gordon Smith, “The Cost of Drugs for Rare Diseases is Threatening the U.S. Healthcare System,”
Harvard Business Review, Apr. 7, 2017 (https://hbr.org/2017/04/the-cost-of-drugs-for-rare-diseases-is-
Aimee Picchi, “The Cost of Biogen’s New Drug: $750,000 Per Patient,” CBS News Moneywatch, Dec. 29,
Max Stendahl, “Biogen Boosts Price of Top MS Drugs, Analyst Says,” Boston Business Journal, Jan. 3, 2017
Finally, although Biogen does not explicitly claim that the Proposal would micro-manage the
“matters of a complex nature upon which shareholders, as a group, [are] not in . . . a position to
make an informed judgment.” As discussed at some length above, disclosures regarding drugs
and their prices, standing alone, would not be responsive to the Proposal, which asks for
reporting on senior executive compensation arrangements.
The ways in which senior executive compensation arrangements take into account a particular
business challenge are not foreign to shareholders. Shareholders consider proxy statement
disclosure explaining the link between strategic objectives or aspects of the business climate and
executive compensation arrangements when casting votes on ballot items. That disclosure may
describe factors related to external pressures or risks. For instance, in its statement in
opposition to a 2017 shareholder proposal on reserve-related compensation metrics,
ConocoPhillips explained how climate change scenario planning and progress on low-carbon
objectives were reflected in senior executive compensation arrangements.
Proposal cannot be said to micromanage Biogen.
In summary, the Proposal’s subject is senior executive incentive compensation, a topic that has
consistently been deemed a significant social policy issue transcending ordinary business. Even if
high drug prices were considered the Proposal’s subject, though, the broad focus on policy, as
opposed to details about specific medicines, takes it out of the realm of ordinary business. As
well, a sufficient nexus exists between the broader issue of high drug prices and Biogen’s
business. Shareholders have substantial experience evaluating disclosures regarding senior
executive pay arrangements, including the ways in which those arrangements incorporate risks
or business challenges. Biogen has thus failed to meet its burden of establishing that it is
entitled to exclude the Proposal in reliance on Rule 14a-8(i)(7).
Allison Gatlin, “Biogen, Teva Slip After After Democrats Launch MS Drug Pricing Probe,” Investors
Business Daily, Aug. 17, 2017 (https://www.investors.com/news/technology/biogen-teva-slip-after-democrats-
See Proxy Statement filed on April 3, 2017, at 86
Rule 14a-8(i)(10) because its current disclosure satisfies the “essential objectives” of the Proposal.
Biogen contends that the general proxy statement disclosure about compensation metrics and
compensation risk substantially implements the Proposal. None of that disclosure makes
reference to drug pricing, though. Biogen seems to be asking shareholders to infer that pricing is
not integrated into senior executive incentive compensation arrangements or that it is
incorporated but not discussed in the Compensation Discussion and Analysis section of the proxy
statement because it does not create a “material risk.”
That does not constitute substantial
related risks are reflected in senior executive compensation arrangements.
* * *
has not satisfied its burden
of showing that it is entitled
to omit the Proposal in reliance on Rule 14a-8(i)(7) or 14a-8(i)(10). The Proponents thus
respectfully request that Biogen’s request for relief be denied.
opportunity to be
assistance in this matter. If you have
or need additional information, please contact me at (571) 551-6865 or our attorney
Beth Young at (718) 369-6169.
Investment Communications Director
Beth Young, Esq.
Definitive Proxy Statement of Biogen Inc. filed on Apr. 26, 2017, at 37.
Susan H. Alexander
225 Binney Street
Cambridge, MA 02142
I am writing you on behalf of the Missionary Oblates of Mary Immaculate OIP Investment Trust to co-file the
stockholder resolution on Senior Executive Incentives – Integrate Drug Pricing Risk. In brief, the proposal
, that shareholders of Biogen Inc. (“Biogen”) urge the Compensation Committee to report
annually to shareholders on the extent to which risks related to public concern over drug pricing strategies are
integrated into Biogen’s incentive compensation policies, plans and programs (together, “arrangements”) for
senior executives. The report should include, but need not be limited to, discussion of whether incentive
compensation arrangements reward, or not penalize, senior executives for (i) adopting pricing strategies, or
making and honoring commitments about pricing, that incorporate public concern regarding the level or rate of
increase in prescription drug prices; and (ii) considering risks related to drug pricing when allocating capital.
I am hereby authorized to notify you of our intention to co-file this shareholder proposal with Azzad Asset
Management. I submit it for inclusion in the 2018 proxy statement for consideration and action by the
shareholders at the 2018 annual meeting in accordance with Rule 14-a-8 of the General Rules and
Regulations of the Securities and Exchange Act of 1934. We are the beneficial owner, as defined in Rule 13d-3
of the Securities Exchange Act of 1934, of 159 Biogen, Inc. shares.
We have been a continuous shareholder for one year of $2,000 in market value of Biogen, Inc. stock and will
continue to hold at least $2,000 of Biogen, Inc. stock through the next annual meeting. Verification of our
ownership position from our custodian is enclosed. A representative of the filers will attend the stockholders’
meeting to move the resolution as required by SEC rules.
We truly hope that the company will be willing to dialogue with the filers about this proposal. We consider
Azzad Asset Management the lead filer of this resolution and as so is authorized to act on our behalf in all
aspects of the resolution including negotiation and withdrawal. Please note that the contact person for this
resolution/proposal will be Joshua Brockwell of Azzad Asset Management who may be reached by phone 703-
207-7005 x109 or by email:
. As a co-filer, however, we respectfully request direct
communication from the company and to be listed in the proxy.
Rev. Sèamus Finn, OMI
Chief of Faith Consistent Investing
OIP Investment Trust
Missionary Oblates of Mary Immaculate
391 Michigan Avenue, NE, Washington, DC 20017 -- Tel: 202-529-4505 Fax: 202-529-4572
shareholders on the extent to which risks related to public concern over drug pricing strategies are integrated into
Biogen’s incentive compensation policies, plans and programs (together, “arrangements”) for senior executives. The
report should include, but need not be limited to, discussion of whether incentive compensation arrangements
reward, or not penalize, senior executives for (i) adopting pricing strategies, or making and honoring commitments
about pricing, that incorporate public concern regarding the level or rate of increase in prescription drug prices; and
(ii) considering risks related to drug pricing when allocating capital.
SUPPORTING STATEMENT: As long-term investors, we believe that senior executive incentive compensation
arrangements should reward creation of sustainable long-term value. To that end, it is important that those
arrangements align with company strategy and encourage responsible risk management.
A key risk facing pharmaceutical companies is backlash against high drug prices. Public outrage over high prices
and their impact on patient access may force price rollbacks and harm corporate reputation. Legislative or regulatory
investigations regarding pricing of prescription medicines may bring about broader changes. (E.g.,
Biogen was publicly criticized in 2017 for the $750,000 first-year price tag, and $375,000 annual cost thereafter, for
new spinal muscular atrophy treatment Spinraza. (E.g., https://www.npr.org/sections/health-
shots/2017/08/01/540100976/drug-puts-a-750-000-price-tag-on-life) Congressional attention has also recently
focused on the price of drugs for multiple sclerosis, including those sold by Biogen.
We are encouraged by Biogen’s improved transparency on pricing. We are concerned, however, that the incentive
compensation arrangements applicable to Biogen’s senior executives may not encourage senior executives to take
actions that result in lower short-term financial performance even when those actions may be in Biogen’s best long-
term financial interests.
Biogen uses revenue and earnings per share as metrics for the annual bonus (together with strategic goals), and
revenue and free cash flow as the metrics for the cash settled performance units program. (2017 Proxy Statement, at
38-41) A recent Credit Suisse analyst report found that “US drug price rises contributed 100% of industry EPS
growth in 2016” and characterized that fact as “the most important issue for a Pharma investor today.” The report
identified Biogen as a company where U.S. net price increases accounted for at least 100% of 2016 EPS growth.
(Global Pharma and Biotech Sector Review: Exploring Future US Pricing Pressure, Apr. 18, 2017, at 1)
In our view, excessive dependence on drug price increases is a risky and unsustainable strategy, especially when
price hikes drive large senior executive payouts. For example, media coverage noted that a 600% rise in Mylan’s
CEO’s total compensation accompanied the 400% EpiPen price increase. (See, e.g.,
The requested disclosure would allow shareholders to assess the extent to which compensation arrangements
encourage senior executives to responsibly manage risks relating to drug pricing and contribute to long-term value
creation. We urge shareholders to vote for this Proposal.