March 2, 2023

Marc S. Gerber

Skadden, Arps, Slate, Meagher & Flom LLP

Re:

Johnson & Johnson (the “Company”)

Incoming letter dated December 12, 2022

Dear Marc S. Gerber:

This letter is in response to your correspondence concerning the shareholder

proposal (the “Proposal”) submitted to the Company by Mercy Investment Services, Inc.

and co-filers for inclusion in the Company’s proxy materials for its upcoming annual

meeting of security holders.

The Proposal requests the Company’s board of directors establish and report on a

process by which the impact of extended patent exclusivities on product access would be

considered in deciding whether to apply for secondary and tertiary patents.

We are unable to concur in your view that the Company may exclude the Proposal

under Rule 14a-8(i)(7). In our view, the Proposal raises issues that transcend ordinary

business matters and does not micromanage the Company.

Copies of all of the correspondence on which this response is based will be made

available on our website at

https://www.sec.gov/corpfin/2022-2023-shareholder-

proposals-no-action

Sincerely,

Rule 14a-8 Review Team

cc:

Lydia Kuykendal

Mercy Investment Services, Inc.

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________

TEL: (202) 371-7000

FAX: (202) 393-5760

www.skadden.com

DIRECT DIAL

202-371-7233

DIRECT FAX

202-661-8280

EMAIL ADDRESS

marc.gerber@skadden.com

BY EMAIL

(shareholderproposals@sec.gov)

December 12, 2022

U.S. Securities and Exchange Commission

Division of Corporation Finance

Office of Chief Counsel

100 F Street, N.E.

Washington, D.C. 20549

RE:

Johnson & Johnson – 2023 Annual Meeting

Omission of Shareholder Proposal of

Mercy Investment Services, Inc. and co-filers

Ladies and Gentlemen:

Pursuant to Rule 14a-8(j) promulgated under the Securities Exchange Act of

1934, as amended (the “Exchange Act”), we are writing on behalf of our client,

Johnson & Johnson, a New Jersey corporation, to request that the Staff of the Division

of Corporation Finance (the “Staff”) of the U.S. Securities and Exchange Commission

(the “Commission”) concur with Johnson & Johnson’s view that, for the reasons stated

below, it may exclude the shareholder proposal and supporting statement (the

“Proposal”) submitted by Mercy Investment Services, Inc. (“Mercy”) and co-filers from

The following shareholders have co-filed the Proposal: Benedictine Sisters of Mount St. Scholastica,

Inc.; Benedictine Sisters of Virginia; Bon Secours Mercy Health, Inc.; CommonSpirit Health; the

Daughters of Charity, Province of St. Louise; Dominican Sisters of Springfield Illinois; Providence

St. Joseph Health; the Sisters of St. Francis of Philadelphia; and The Domestic and Foreign

Missionary Society of the Protestant Episcopal Church in the United States of America. The

co-filers’ submissions and related correspondence are not relevant to this no-action request and have

been omitted from the exhibits hereto but may be supplementally provided upon the Staff’s request.

Office of Chief Counsel

December 12, 2022

Page 2

the proxy materials to be distributed by Johnson & Johnson in connection with its 2023

annual meeting of shareholders (the “2023 proxy materials”). Mercy and the co-filers

are sometimes collectively referred to as the “Proponents.”

In accordance with Section C of Staff Legal Bulletin No. 14D (Nov. 7, 2008)

(“SLB 14D”), we are emailing this letter and its attachments to the Staff at

shareholderproposals@sec.gov. In accordance with Rule 14a-8(j), we are

simultaneously sending a copy of this letter and its attachments to the Proponents as

notice of Johnson & Johnson’s intent to omit the Proposal from the 2023 proxy

materials.

Rule 14a-8(k) and Section E of SLB 14D provide that shareholder proponents

are required to send companies a copy of any correspondence that the shareholder

proponents elect to submit to the Commission or the Staff. Accordingly, we are taking

this opportunity to remind the Proponents that if the Proponents submit correspondence

to the Commission or the Staff with respect to the Proposal, a copy of that

correspondence should concurrently be furnished to Johnson & Johnson.

The Proposal

The text of the resolution contained in the Proposal is set forth below:

RESOLVED

, that shareholders of Johnson & Johnson (“JNJ”) ask the

Board of Directors to establish and report on a process by which the

impact of extended patent exclusivities on product access would be

considered in deciding whether to apply for secondary and tertiary

patents. Secondary and tertiary patents are patents applied for after the

main active ingredient/molecule patent(s) and which relate to the

product. The report on the process should be prepared at reasonable cost,

omitting confidential and proprietary information, and published on

JNJ’s website.

II.

Basis for Exclusion

We hereby respectfully request that the Staff concur with Johnson & Johnson’s

view that the Proposal may be excluded from the 2023 proxy materials pursuant to Rule

14a-8(i)(7) because the Proposal deals with matters relating to Johnson & Johnson’s

ordinary business operations.

III.

Background

Johnson & Johnson received the Proposal via FedEx on November 7, 2022,

accompanied by a cover letter from Mercy, dated November 4, 2022, and a letter from

The Northern Trust Company, dated November 4, 2022, verifying Mercy’s continuous

Office of Chief Counsel

December 12, 2022

Page 3

ownership of at least the requisite amount of stock for at least the requisite period

preceding and including the date of submission of the Proposal. Copies of the Proposal

and cover letter are attached hereto as Exhibit A.

IV.

The Proposal May be Excluded Pursuant to Rule 14a-8(i)(7) Because the

Proposal Deals with Matters Relating to Johnson & Johnson’s Ordinary

Business Operations.

Under Rule 14a-8(i)(7), a shareholder proposal may be excluded from a

company’s proxy materials if the proposal “deals with matters relating to the company’s

ordinary business operations.” In Exchange Act Release No. 34-40018 (May 21, 1998)

(the “1998 Release”), the Commission stated that the policy underlying the ordinary

business exclusion rests on two central considerations. The first recognizes that certain

tasks are so fundamental to management’s ability to run a company on a day-to-day

basis that they could not, as a practical matter, be subject to direct shareholder

oversight. The second consideration relates to the degree to which the proposal seeks to

“micro-manage” the company by probing too deeply into matters of a complex nature

upon which shareholders, as a group, would not be in a position to make an informed

judgment. As demonstrated below, the Proposal implicates both of these two central

considerations.

The Proposal relates to Johnson & Johnson’s ordinary business matters.

The Commission has stated that a proposal requesting the dissemination of a

report is excludable under Rule 14a-8(i)(7) if the substance of the proposal involves a

matter of ordinary business of the company.

See

Exchange Act Release No. 34-20091

(Aug. 16, 1983) (“[T]he staff will consider whether the subject matter of the special

report or the committee involves a matter of ordinary business; where it does, the

proposal will be excludable under Rule 14a-8(c)(7).”);

see also, e.g.

The Coca-Cola Co.

(Feb. 16, 2022);

Deere & Co.

(Jan. 3, 2022);

JPMorgan Chase & Co.

(Mar. 22, 2019);

Royal Caribbean Cruises Ltd.

(Mar. 14, 2019);

Walgreens Boots Alliance, Inc.

(Nov.

20, 2018);

(May 11, 2018);

Amazon.com, Inc.

(Jan. 18, 2018). As the Commission

has explained, a proposal may probe too deeply into matters of a complex nature if it

“involves intricate detail, or seeks to impose specific time-frames or methods for

implementing complex policies.”

See 1998 Release

. Recently, in Staff Legal Bulletin

No. 14L (Nov. 3, 2021) (“SLB 14L”), the Staff explained that a proposal can be

excluded on the basis of micromanagement based “on the level of granularity sought in

the proposal and whether and to what extent it inappropriately limits discretion of the

board or management.”

In this instance, the Proposal seeks to micromanage Johnson & Johnson by

dictating the establishment of a particular intellectual property analysis that

inappropriately limits discretion of the board and management. It does so by requesting

that Johnson & Johnson establish a process by which the impact of extended patent

protections on one particular factor—product access—would be considered, and

reported on, in deciding whether to apply for secondary and tertiary patents. The

Proposal thus seeks to direct how Johnson & Johnson develops and safeguards its

intellectual property.

As described above, decisions concerning whether, when and how Johnson &

Johnson applies for patents require complex business judgments by Johnson &

Office of Chief Counsel

December 12, 2022

Page 7

Johnson’s management that must account for myriad factors. In making such decisions,

Johnson & Johnson’s management must consider and balance these factors, including

the costs incurred in developing intellectual property, compliance and risk

considerations, legal and regulatory factors and the characteristics of Johnson &

Johnson’s products, among other matters. By seeking to impose a specific process on

Johnson & Johnson’s management of its intellectual property, the Proposal attempts to

micromanage Johnson & Johnson by probing too deeply into matters of a complex

nature upon which shareholders, as a group, are not in a position to make an informed

judgment.

Accordingly, the Proposal should be excluded from Johnson & Johnson’s 2023

proxy materials pursuant to Rule 14a-8(i)(7) as relating to its ordinary business

operations.

Conclusion

Based upon the foregoing analysis, Johnson & Johnson respectfully requests that

the Staff concur that it will take no action if Johnson & Johnson excludes the Proposal

from its 2023 proxy materials. Should the Staff disagree with the conclusions set forth

in this letter, or should any additional information be desired in support of Johnson &

Johnson’s position, we would appreciate the opportunity to confer with the Staff

concerning these matters prior to the issuance of the Staff’s response. Please do not

hesitate to contact the undersigned at (202) 371-7233.

Very truly yours,

Marc S. Gerber

Enclosures

cc:

Marc Larkins

Worldwide Vice President, Corporate Governance & Corporate Secretary

Johnson & Johnson

Lydia Kuykendal

Director of Shareholder Advocacy

Mercy Investment Services, Inc.

Lydia Kuykendal, on behalf of Bon Secours Mercy Health, Inc., Daughters of

Charity, Province of St. Louise, Providence St. Joseph Health and The Domestic

and Foreign Missionary Society of the Protestant Episcopal Church in the

United States of America

Office of Chief Counsel

December 12, 2022

Page 8

Rose Marie Stallbaumer, OSB

Benedictine Sisters of Mount St. Scholastica

Andrea Westkamp, OSB

Treasurer

Benedictine Sisters of Virginia

Laura Krausa, MNM

System Director Advocacy Programs

CommonSpirit Health

Sr. Marcelline Koch, OP

Dominican Sisters of Springfield Illinois

Tom McCaney

Director, Corporate Social Responsibility

The Sisters of St. Francis of Philadelphia

EXHIBIT A

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2039 North Geyer Road . St. Louis, Missouri 63131-3332 . 314.909.4609 . 314.909.4694 (fax)

www.mercyinvestmentservices.org

January 3, 2023

Via

e-mail at shareholderproposals@sec.gov

Securities and

Exchange

Commission

Office

of the

Chief Counsel

Division

Corporation Finance

100 F

Street,

Washington, DC

20549

Re: Request by Johnson & Johnson to omit proposal submitted by Mercy Investment Services Inc.

and co-filers

Ladies and Gentlemen,

Pursuant

Rule

14a-8

under

the Securities

Exchange

Act of

1934, Mercy Investment

Services, Inc. and nine co-filers

(together, the “Proponents”) submitted a shareholder

proposal

(the

“Proposal”)

Johnson & Johnson (“JNJ”

or the

“Company”).

The Proposal

asks

JNJ to establish

and report on a process by which the impact of extended patent exclusivities on patient access

would be considered in deciding whether to apply for secondary and tertiary patents on JNJ’s

products.

In a letter to the Division dated December 12, 2022

(the “No-Action

Request”),

JNJ stated

that it intends

omit

the

Proposal from its proxy materials

be distributed

to shareholders in

connection

with the 2023

annual

meeting of

shareholders. JNJ argues that

it is

entitled to exclude

the Proposal in reliance on Rule 14a-8(i)(7), on the ground that the Proposal relates to JNJ’s

ordinary business operations. Because the Proposal deals with the significant social policy issue of

the impact of intellectual property (“IP”) protections on patient access,

JNJ

has not met its burden

of proving its

entitlement to

exclude the Proposal, and the Proponents respectfully ask that its

request for relief be denied.

2039 North Geyer Road . St. Louis, Missouri 63131-3332 . 314.909.4609 . 314.909.4694 (fax)

www.mercyinvestmentservices.org

The Proposal

The Proposal states:

RESOLVED

, that shareholders of Johnson & Johnson (“JNJ”) ask the Board of Directors

to establish and report on a process by which the impact of extended patent exclusivities on

product access would be considered in deciding whether to apply for secondary and tertiary

patents. Secondary and tertiary patents are patents applied for after the main active

ingredient/molecule patent(s) and which relate to the product. The report on the process

should be prepared at reasonable cost, omitting confidential and proprietary information,

and published on JNJ’s website.

Background

Prescription drugs have assumed an increasingly important role in American health care: the

proportion of health care spending attributable to retail prescription drugs rose from 7% in the

1990s to 12% in 2019.

Congress has carefully balanced incentivizing scientific innovation in

pharmaceuticals with promoting competition in the name of affordability.

Obtaining a patent for a

new drug gives the manufacturer exclusive marketing rights for a specified period, generally 20 years,

to reward the company for the risk and expense involved in developing the drug.

Once the patent

expires, manufacturers are free to make generic versions of the drug—or in the case of a biologic, a

biosimilar version—which drives down prices.

At least, that’s how the system is supposed to work. Branded drug makers have powerful

incentives to prolong exclusivity periods, especially those applicable to top-selling drugs. They

exploit weaknesses in the U.S. patent and health care systems in several ways, including product

hopping, or switching patients to a slightly different product with a later-expiring patent; pay-for-

delay settlements, in which putative generic manufacturers receive something of value in exchange

for not launching a generic competitor; and “evergreening” leading to so-called “patent thickets,”

numerous overlapping patents on a drug filed after the primary patent has been granted and the

drug approved by the Food and Drug Administration (“FDA”)—referred to as secondary and

tertiary

patents--that are expensive and time-consuming for a potential generic manufacturer to

challenge.

Overpatenting keeps prices high, impeding access. That impact is particularly troubling given

that U.S. drug prices are the highest in the world

; the rise in spending on prescription drugs

https://www.gao.gov/prescription-drug-spending

https://www.healthaffairs.org/do/10.1377/forefront.20181106.217086/full/

https://sgp.fas.org/crs/misc/R46221.pdf, at 1.

https://www.fda.gov/files/drugs/published/Exclusivity-and-Generic-Drugs--What-Does-It-Mean-.pdf

A tertiary patent applies to a drug-device combination, such as the EpiPen.

https://blog.petrieflom.law.harvard.edu/2018/04/30/tertiary-patents-an-emerging-phenomenon/

See https://sgp.fas.org/crs/misc/R46221.pdf, at 1-2. Secondary patents may address matters such as manufacturing

methods, dosing, and methods of administering the drug. https://sgp.fas.org/crs/misc/R46221.pdf, at 9.

https://www.commonwealthfund.org/publications/podcast/2022/feb/its-the-patents-stupid-why-drugs-cost-so-

much-in-us

2039 North Geyer Road . St. Louis, Missouri 63131-3332 . 314.909.4609 . 314.909.4694 (fax)

www.mercyinvestmentservices.org

outpaces increases in health care spending more generally

; and three in 10 Americans on a

prescription drug report not taking their medicine as prescribed due to cost.

Studies show that the

introduction of generic versions of a drug lead to significantly lower prices.

Over 100 patents have

been granted on JNJ’s Remicade, an anti-inflammatory biologic drug

that is one of the Company’s

top-selling prescription medicines.

The Proposal asks JNJ to take the impact on patient access into

account when making decisions about applying for secondary and tertiary patents.

Ordinary Business

JNJ argues that the Proposal deals with the Company’s ordinary business operations, and is

thus excludable in reliance on Rule 14a-8(i)(7), because it relates to the Company’s products and

how JNJ “decides to safeguard and protect the intellectual property rights associated with the

products it develops and sells.”

JNJ also claims that the Proposal would micromanage it. Neither

argument has merit.

It is true that the Division generally regards a company’s product offerings and choices

about IP protections as ordinary business matters. If a proposal focuses on a significant social policy

issue, however, the fact that it implicates a company’s products or IP does not support exclusion on

ordinary business grounds.

Last season, the Staff recently considered and rejected arguments much like those JNJ now

makes when determining that three different proposals to pharmaceutical firms addressing IP

transcended ordinary business. First, JNJ sought to exclude a proposal asking for a report on the

public health costs of its limited sharing of COVID-19 vaccine IP. As it does here, JNJ argued that

the proposal’s subject was the distribution of the company’s products and services, the licensing of

its technologies, and/or decisions about safeguarding its IP, all of which JNJ urged were ordinary

business.

The proponent framed the proposal’s topic as “whether companies should pursue profits

in a manner that degrades critical environmental and social systems, with a focus on the Company’s

approach to guarding intellectual property involving COVID-19 vaccine technology.” The Staff

declined to grant relief.

Second, the Staff rejected two no-action requests making arguments nearly identical to JNJ’s

here about proposals focusing on the role of IP protections in impeding access to vaccines. The

proposals, which were submitted to Pfizer and Moderna, asked the companies to report to

shareholders on the feasibility of transferring intellectual property and technical knowledge to

facilitate the production of COVID-19 vaccine doses in low- and middle-income countries. Both

Pfizer and Moderna urged that the proposal addressed the ordinary business matters of the

company’s products and IP protections.

The proponent countered that the proposal’s topic,

ensuring equitable access to vaccines and the role of IP protections in maintaining inequity, was a

https://sgp.fas.org/crs/misc/R46221.pdf, at 2.

https://www.kff.org/health-costs/poll-finding/public-opinion-on-prescription-drugs-and-their-prices/

https://www.fda.gov/media/133509/download, at 2; https://www.fda.gov/media/161540/download, at 6;

https://pubmed.ncbi.nlm.nih.gov/34904207/; https://www.cbo.gov/sites/default/files/105th-congress-1997-

1998/reports/pharm.pdf; https://www.cbo.gov/publication/57772

www.bloomberg.com/news/articles/2017-09-07/this-shield-of-patents-protects-the-world-s-best-selling-drug

See https://www.sec.gov/ix?doc=/Archives/edgar/data/0000200406/000020040622000022/jnj-20220102.htm, at

24.

No-Action Request, at 3-4.

Johnson & Johnson (Feb. 8, 2022)

Pfizer, Inc. (Feb. 23, 2022); Moderna, Inc. (Feb. 8, 2022).

2039 North Geyer Road . St. Louis, Missouri 63131-3332 . 314.909.4609 . 314.909.4694 (fax)

www.mercyinvestmentservices.org

significant social policy issue. The Staff did not concur with either company, stating that the

proposal “transcends ordinary business matters.”

In the third set of determinations, the Staff declined to allow two pharmaceutical companies

to exclude proposals dealing with anticompetitive practices on ordinary business grounds. The

proposals asked the companies to report to shareholders on how their boards oversee risks related

to anticompetitive practices. The supporting statements discussed patent thickets as well as other

practices. The companies claimed that the proposals addressed the ordinary business matters of legal

compliance and/or management of IP. The proponents urged that the proposals dealt with the

significant social policy issue of “

the strategic, reputational, and public policy risks created by

anticompetitive practices.”

Similar outcomes have been reached on other kinds of proposals involving companies’

products where proponents persuaded the Staff that a significant policy issue was implicated. For

example:

•

The Staff did not agree with JNJ’s

claim that a proposal asking the company to

establish and implement standards of response to the HIV/AIDS pandemic in

developing countries could be excluded in reliance on the ordinary business

exclusion because it addressed product development, research and testing; the

proponent had urged that the proposal addressed the significant policy issue of the

HIV/AIDS pandemic.

•

Gilead’s

argument that a proposal seeking a report on risks related to rising

pressures to contain specialty drug prices was excludable on ordinary business

grounds was not persuasive, even though Gilead had pointed to the focus on its

products and pricing decisions.

•

In Denny’s,

the Staff did not concur with the company’s claim that a proposal

asking it to sell at least 10% cage-free eggs by volume was excludable because it

implicated the sale of particular products, siding with the proponent’s

characterization of the proposal’s subject as the significant policy issue of “[r]educing

cruel confinement conditions for egg-laying hens” (i.e., animal cruelty).

The role of IP protections in keeping drug prices high and limiting patient access is a subject

of consistent and widespread public debate, the standard applied in determining whether a

proposal’s subject transcends ordinary business operations.

Media have given substantial attention to the issue in the past few years, despite its technical

nature. Some examples include:

•

Editorial Board, “Save America’s Patent System,” The New York Times, Apr. 17, 2022

(“

Twelve of the drugs that Medicare spends the most on are protected by more than 600

AbbVie, Inc. (Mar. 11, 2022); Pfizer, Inc. (Mar. 8, 2022).

Johnson & Johnson (Feb. 7, 2003)

Gilead Sciences Inc. (Feb. 23, 2015); see also Celgene Corporation (Mar. 19, 2015); Vertex Pharmaceuticals Inc. (Feb.

25, 2015). The Staff has long declined to allow exclusion on ordinary business grounds of proposals addressing drug

pricing, which quite directly implicate companies’ products. See Eli Lilly and Company (Feb. 25, 1993); Bristol-Myers

Squibb Company (Feb. 21, 2000) (same); Warner Lambert Company (Feb. 21, 2000) (same).

Denny’s Inc. (Mar. 17, 2009)

See, e.g., www.sec.gov/interps/legal/cfslb14a.htm.

https://www.nytimes.com/2022/04/16/opinion/patents-reform-drug-prices.html

2039 North Geyer Road . St. Louis, Missouri 63131-3332 . 314.909.4609 . 314.909.4694 (fax)

www.mercyinvestmentservices.org

patents in total, according to the committee. Many of those patents contain little that's

truly new. But the thickets they create have the potential to extend product monopolies

for decades. In so doing, they promise to add billions to the nation's soaring health care

costs -- and to pharmaceutical coffers.”)

•

Editorial Board, “How Big Pharma plays games with drug patents and how to combat

it,” USA Today, Jan. 18, 2019

(

“The pharmaceutical industry has shown contempt for

this attempt at balance through a range of abusive tactics. Two common, and sometimes

related, maneuvers are called ‘

evergreening

’ and ‘thicketing.’”)

•

Robin Feldman, “Our patent system is broken. And it could be stifling innovation,” The

Washington Post, Aug. 8, 2021

•

Berkeley Lovelace Jr., “’Gaming’ of U.S. patent system is keeping drug prices sky high,

report says,” NBCNews.com, Sept. 15, 2022

•

“Biden Drug Price Pressure on Patent Office Draws Skeptics,” Bloomberg, Sept. 21,

2021

(“Patents—viewed by some as an obstacle to greater competition in

pharmaceuticals—have seized the spotlight in a wide-ranging government effort to get at

high drug costs.”)

•

Cynthia Koons, “This Shield of Patents Protects the World’s Best-selling Drug,”

Bloomberg Businessweek, Sept. 7, 2017

(focuses on patent thickets and specifically

mentions JNJ’s Remicade)

•

Matthew Lane, “The Key to Lowering Drug Prices is Improving Patent Quality,”

Techdirt, July 21, 2021

(“

One of the key drivers of these rising costs are the habit of

drug makers of blocking competition on older drugs that have proven themselves to be

blockbusters. And the best modern strategy for doing that is creating a patent thicket.”)

•

Alexander Sammon, “It’s Time for Public Pharma,” The American Prospect, July 25,

2022

(“

Much of the research and development for new discoveries is publicly funded,

and yet drugmakers charge whatever they want, with exclusive monopoly patent grants.

Not content to just enjoy that bounty, those companies work to extend that monopoly

period, through slight changes to the treatment (known as ‘patent evergreening’) or even

bribing generic companies to not compete (‘pay for delay’).”)

•

Joe Cahill, “Humira Patent Strategy Makes the Case for Reform,” Crain’s Chicago

Business, May 20, 2019

•

Gunjan Sinha, “How Patent Extensions Keep Some Drug Costs High,” Undark, June

16, 2021

•

Sarah Gantz, “Costs for lifesaving drugs have skyrocketed. Some experts say there are

intentional moves to prevent generic competition,” Philadelphia Inquirer, May 12, 2019

https://www.usatoday.com/story/opinion/2019/07/18/big-pharma-plays-games-drug-patents-you-pay-editorials-

debates/1769746001/

https://www.washingtonpost.com/outlook/2021/08/08/our-patent-system-is-broken-it-could-be-stifling-

innovation/

https://www.nbcnews.com/health/health-news/gaming-us-patent-system-keeping-drug-prices-sky-high-report-says-

rcna47507

https://news.bloomberglaw.com/health-law-and-business/biden-drug-price-pressure-on-patent-office-draws-skeptics

https://www.bloomberg.com/news/articles/2017-09-07/this-shield-of-patents-protects-the-world-s-best-selling-

drug

https://www.techdirt.com/2021/07/21/key-to-lowering-drug-prices-is-improving-patent-quality/

https://prospect.org/health/its-time-for-public-pharma/

https://www.chicagobusiness.com/joe-cahill-business/humira-patent-strategy-makes-case-reform

https://undark.org/2021/06/16/how-patent-extensions-keep-some-drug-costs-high/

2039 North Geyer Road . St. Louis, Missouri 63131-3332 . 314.909.4609 . 314.909.4694 (fax)

www.mercyinvestmentservices.org

•

Sarah Karlin-Smith and Brent D. Griffiths, “FDA to examine anticompetitive practices

by drug industry,” Politico, July 17, 2017

•

Ryan Chatelain, “House committee report blasts drug pricing strategies as ‘troubling,’”

NY1, Dec. 10, 2021

•

David Chanen, “Price caps on drugs part of AG’s plan,” Star Tribune (Minneapolis,

MN), Feb. 20, 2020 (discussing Minnesota AG’s report that highlighted abuse of patent

system)

•

Joe Nocera, “Here’s how drug companies game the patent system,” Chicago Tribune,

Oct. 23, 2017

•

Matthew Lane, “To rein in Big Pharma over high drug prices, start with patent reform,”

Roll Call, Jan. 17, 2020

(“

A significant reason for the skyrocketing price of prescription

drugs is that major pharmaceutical companies have enjoyed an effective open season on

raising drug prices. Armed with government-sponsored monopolies obtained through

shameless abuse of the patent system, Big Pharma has been free to raise prices at their

leisure.”)

•

Garrett Johnson and Wayne T. Brough, “Big pharma is abusing patents, and it’s hurting

America,” CNN, Sept. 13, 2019

(“

Large pharmaceutical companies have continually

engaged in the strategic accumulation of patents to restrict patient access to more

affordable drugs by delaying the entry of generic options into the market.”)

•

David Blumenthal, “The U.S. Can Lower Drug Prices Without Sacrificing Innovation,”

Harvard Business Review, Oct. 1, 2021

(“

One strategy they use is creating so-called

‘patent thickets’ around existing products. . . . [Challenging those patents] can take years

to adjudicate and cost huge sums in legal fees. Meanwhile, Big Pharma maintains its

monopolies and pricing power for decades longer than the 17 years contemplated under

current law.”)

•

Tahir Amin, “The problem with high drug prices isn’t ‘foreign freeloading,’ it’s the

patent system,” CNBC, June 25, 2018

•

“Congress takes aim again at pharmaceutical giant over patent-stacking for brand-name

drugs,” The Examiner (Washington, DC), May 20, 2021

•

Robert Pearl, “Why Patent Protection in the Drug Industry is Out of Control,” Forbes,

Jan. 19, 2017

•

Ahmed Aboulenein, “Consumer group says drugmakers abuse U.S. patent system to

keep prices high,” Reuters, Sept. 16, 2022

•

Sarah Jane Tribble, “Drugmakers Play the Patent Game to Ward Off Competitors,”

NBCNews.com, Oct. 2, 2018

https://www.politico.com/tipsheets/prescription-pulse/2017/07/17/fda-to-examine-anticompetitive-practices-by-

drug-industry-221368

https://www.ny1.com/nyc/all-boroughs/politics/2021/12/10/house-committee-report-blasts-drug-pricing-

strategies-as--troubling-

https://www.chicagotribune.com/opinion/commentary/ct-perspec-drugs-health-care-pharm-1024-20171023-

story.html

https://www.rollcall.com/2020/01/17/to-rein-in-big-pharma-over-high-drug-prices-start-with-patent-reform/

https://www.cnn.com/2019/09/12/perspectives/drug-patents-abuse/index.html

https://hbr.org/2021/10/the-u-s-can-lower-drug-prices-without-sacrificing-innovation

https://www.cnbc.com/2018/06/25/high-drug-prices-caused-by-us-patent-system.html

https://www.forbes.com/sites/robertpearl/2017/01/19/why-patent-protection-in-the-drug-industry-is-out-of-

control/?sh=73fa684178ca

https://www.reuters.com/business/healthcare-pharmaceuticals/consumer-group-says-drugmakers-abuse-us-patent-

system-keep-prices-high-2022-09-16/

https://www.nbcnews.com/health/health-news/drugmakers-play-patent-game-ward-competitors-n915911

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Legislators and regulators have also focused on the impact of IP protections—and

secondary and tertiary patents in particular—on access.

Bipartisan legislation addressing patent thickets has been introduced in Congress. The

REMEDY Act introduced in 2019 provided that a generic manufacturer could enter the market

after primary patent expiration without having to litigate the validity of secondary patents.

The

TERM Act, also introduced in 2019, would have shifted the burden of supporting secondary patents

from the putative generic or biosimilar manufacturer to the branded drug maker and required the

U.S. Patent and Trademark Office (“PTO”) to review its practices related to secondary patents.

The Second Look at Drug Patents Act would have required publication of patents filed after

approval of a new drug or abbreviated new drug application by the FDA in order to facilitate validity

challenges.

The

Affordable Prescriptions for Patients Through Improvements to Patent Litigation

Act of 2019

would have limited

the number of patents that the manufacturer of a biologic

medicine can assert in a lawsuit against a company seeking to sell a biosimilar version.

In 2021, the Affordable Prescriptions for Patients Through Promoting Competition Act,

which prohibited product-hopping, was introduced.

Product hopping

occurs when branded drug

makers persuade prescribers to switch patients to products that have the same active ingredient as

the branded medicine, but with a small difference like a more convenient dosing schedule, tweaked

manufacturing process or different method of administration that forms the basis for a secondary or

tertiary patent. These efforts generally occur shortly before the primary patent expires; the new

product’s later-expiring patent preserves exclusivity, minimizing revenue loss when generic versions

of the original product become available.

In June 2022, a bipartisan group of Senators wrote to the director of the PTO about patent

thickets. The letter stated: “

In the drug industry, with the most minor, even cosmetic, tweaks to

delivery mechanisms, dosages, and formulations, companies are able to obtain dozens or hundreds

of patents for a single drug. This practice impedes generic drugs’ production, hurts competition, and

can even extend exclusivity beyond the congressionally mandated patent term.” It closed by asking

the PTO to “consider changes to your regulations and practices to address [overpatenting] problems

where they start, during examination. . . We therefore ask that your office issue a notice of proposed

rulemaking or a public request for comments” on several questions related to secondary patents.

Congressional committees have held many hearings addressing secondary and tertiary

patents and access to medicines. In July 2021, the Senate Judiciary Subcommittee on Competition

Policy, Antitrust, and Consumer Rights held a hearing on “A Prescription for Change: Cracking

Down on Anticompetitive Conduct in Prescription Drug Markets.” At that hearing, the vice

president for Biosimilars Patents and Legal for Fresenius Kabi, a company that specializes in

injectable medicines, biosimilars and medical technologies, testified that the “root cause” of

unaffordable U.S. drug prices is patent thickets. She explained that numerous low-quality secondary

https://www.durbin.senate.gov/newsroom/press-releases/durbin-cassidy-introduce-remedy-act-to-lower-drug-

prices-by-curbing-patent-manipulation-promoting-generic-

competition#:~:text=The%20REMEDY%20Act%20amends%20FDA,that%20delay%20generic%20market%20entry.

https://www.congress.gov/bill/116th-congress/house-bill/3199/text

https://www.congress.gov/bill/116th-congress/senate-bill/1617

https://www.congress.gov/bill/116th-congress/house-bill/3991

https://www.congress.gov/bill/117th-congress/house-bill/2873

www.leahy.senate.gov/imo/media/doc/20220608%20Letter%20to%20PTO%20on%20repetitive%20patents.pdf

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patents extend exclusivity and are prohibitively expensive for a potential generic or biosimilar maker

to challenge.

The House Judiciary Antitrust Subcommittee held a hearing in April 2021 on “

Treating the

Problem: Addressing Anticompetitive Conduct and Consolidation in Health Care Markets.”

Experts on drug companies’ anticompetitive practices testified, including Professor Robin Feldman,

who discussed the relationship between secondary patents and product-hopping.

The

House Committee on Energy and Commerce’s Subcommittee on Health held a hearing

on “Lowering the Cost of Prescription Drugs: Reducing Barriers to Market Competition” in March

2019.

Witnesses testified regarding the impact of anticompetitive practices, including patent

thickets. A government relations officer from Kaiser Permanente stated:

Drug companies have virtually unfettered discretion to raise prices, which imposes

considerable—and often devastating—financial hardship on patients and families. We are

very concerned by over-patenting, exclusivity gaming and pernicious lifecycle management

trends. Too often, the primary goal of these tactics is to leverage the law to stifle

competition, rather than to protect meaningful clinical advancements

The House Oversight Committee initiated a sweeping investigation in 2019 into “pricing and

business practices in the pharmaceutical industry.”

After reviewing more than 1.5 million pages of

internal company documents and holding five hearings, the Committee issued a report in December

2021, concluding that “companies have manipulated the patent system and marketing exclusivities

granted by the Food and Drug Administration to extend their monopolies far longer than lawmakers

envisioned when they created these systems.”

The Committee found that the companies it

investigated “have obtained over 600 patents on the 12 drugs examined, which could potentially

extend their monopoly periods to a combined total of nearly 300 years.”

Secondary patents were a

focus of the Committee’s investigation; its report opined that “in many cases, pharmaceutical

https://www.judiciary.senate.gov/imo/media/doc/Testimony%20-%20July%2013%202021_Rachel_Moodie.pdf

https://oversight.house.gov/news/press-releases/house-judiciary-antitrust-subcommittee-to-hold-hearing-on-

anticompetitive

https://docs.house.gov/meetings/JU/JU05/20210429/112518/HHRG-117-JU05-Wstate-FeldmanR-20210429.pdf,

at 3-4

https://energycommerce.house.gov/committee-activity/hearings/hearing-on-lowering-the-cost-of-prescription-

drugs-reducing-barriers-to

https://energycommerce.house.gov/sites/democrats.energycommerce.house.gov/files/documents/Testimony-

Barrueta-Drug%20Pricing%20Hearing-031319.pdf; see also

https://energycommerce.house.gov/sites/democrats.energycommerce.house.gov/files/documents/Testimony-Davis-

Drug%20Pricing%20Hearing-031319.pdf (head of Association for Accessible Medicines stating that “Increasingly,

brand-name drug companies are building patent ‘estates’ around their drugs, not just for the original innovative research,

but for much smaller changes that may not be deserving of decades-long monopolies. . . . Addressing abuse of the patent

system must be front-and-center if Congress is effectively going to reduce drug prices for patients.”).

oversight.house.gov/sites/democrats.oversight.house.gov/files/DRUG%20PRICING%20REPORT%20WITH%20AP

PENDIX%20v3.pdf, at i.

oversight.house.gov/sites/democrats.oversight.house.gov/files/DRUG%20PRICING%20REPORT%20WITH%20AP

PENDIX%20v3.pdf, at i.

oversight.house.gov/sites/democrats.oversight.house.gov/files/DRUG%20PRICING%20REPORT%20WITH%20AP

PENDIX%20v3.pdf, at ix.

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companies have obtained secondary patents covering topics that are not particularly innovative.”

The resulting extended exclusivity periods allow “drug companies to raise prices without threat to

their market share, and lead to higher prices for American patients and increased spending by

government programs.”

The House Ways and Means Committee’s Subcommittee on Health held a hearing in March

2019 on the cost of drugs to the Medicare program. In his opening statement, Subcommittee

Chairman Doggett noted that “

[o]ver the last decade, 74 percent of all pharmaceutical patent

applications were not for new innovative cures, but were for modifying existing drugs, which often

took the form of what's referred to as evergreening, simply to protect monopoly pricing, not to

provide new drugs.”

One witness commented that “instead of innovation, we are seeing secondary

patents piled on to old drugs over and over again. When a company makes a secondary change to a

drug, such as adjusting the drug's dosage, the R&D investment is often far less than is required for

the drug's initial development. And in addition, the change may not mean much from a therapeutic

standpoint. So, we may be lavishing rewards without getting the innovation that we desperately

need.”

Another witness identified patent thickets as key to high drug prices.

The Senate Finance Committee held a hearing on “Drug Pricing in America: A Prescription

for Change, Part I”

in January 2019, at which the Committee heard testimony on drug makers’

anticompetitive practices. The Executive Vice President of the John and Laura Arnold Foundation

linked patenting practices and drug prices, testifying at the hearing:

Instead of encouraging research into the next generation of cures, firms with drugs approved

by the Food and Drug Administration (FDA) are incentivized to hold on to their

monopolies as long as possible and deploy as many anticompetitive tactics as possible to

ensure generics or biosimilars are not available. . . . Between 2005 and 2015, over 75 percent

of drugs associated with new patents were for drugs already on the market. Of the roughly

100 bestselling drugs, nearly 80 percent obtained an additional patent to extend their

monopoly period at least once; nearly 50 percent extended it more than once. For the 12 top

selling drugs in the United States, manufacturers filed, on average, 125 patent applications

and were granted 71. For these same drugs, invoice prices have increased by 68 percent.

A 2017 hearing held by the House Judiciary Committee addressed “Antitrust Concerns and

the FDA Approval Process.” Although some witnesses focused on other anticompetitive practices,

the testimony from Harvard’s Aaron Kesselheim, an expert on drug pricing, described the use of

oversight.house.gov/sites/democrats.oversight.house.gov/files/DRUG%20PRICING%20REPORT%20WITH%20AP

PENDIX%20v3.pdf, at 81.

oversight.house.gov/sites/democrats.oversight.house.gov/files/DRUG%20PRICING%20REPORT%20WITH%20AP

PENDIX%20v3.pdf, at 77.

https://www.youtube.com/watch?v=aA3cDgRp37s (at 3:15).

https://www.youtube.com/watch?v=aA3cDgRp37s (at 10:09).

https://www.youtube.com/watch?v=aA3cDgRp37s (at 20:22).

https://www.finance.senate.gov/hearings/drug-pricing-in-america-a-prescription-for-change-part-i

https://www.finance.senate.gov/imo/media/doc/29JAN2019MILLERSTMNT.pdf

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secondary patents to delay generic entry.

In addition to the general problem posed by patent

thickets, Kesselheim explained how secondary patents facilitate product hopping.

Anticompetitive conduct in the pharmaceutical industry, including abuse of the patent

system, is a priority for federal agencies. In 2021, President Biden issued Executive Order 14036

entitled “Executive Order on Promoting Competition in the American economy” (the “E.O.”). It

provided, among other things, that “[t]he Secretary of Health and Human Services shall . . . [work

to] lower the prices of and improve access to prescription drugs and biologics [and] continue to

promote generic drug and biosimilar competition” by “help[ing] ensure that the patent system, while

incentivizing innovation, does not also unjustifiably delay generic drug and biosimilar competition

beyond that reasonably contemplated by applicable law.”

The E.O. also directed the Secretary of

Health and Human Services to take various steps to “promote generic drug and biosimilar

competition.” Pursuant to the E.O., the FDA and PTO are collaborating to implement strategies to

lower drug prices.

The previous administration also focused on how patenting practices can delay generic entry.

In 2017, the FDA sought comment on the “

appropriate balance between encouraging innovation in

drug development and accelerating the availability to the public of lower cost alternatives to

innovator drugs

.”

The Federal Register notice of the related meeting explained that, “

In some

cases . . . the legal framework surrounding [patents and first-generic exclusivities] may have been

applied to delay generic competition to an extent that may not have been intended by the Hatch-

Waxman Amendments, and in ways that may not serve the public health. Relatedly, certain elements

of the approval process for both innovator and generic drugs have been used in ways that may

(depending on the circumstances) inappropriately hinder generic competition.”

The FDA

specifically sought stakeholder input on patents, the citizen petition process, and obstacles faced by

potential generic competitors in obtaining branded drug samples for testing.

The Acting Director

of the FTC’s Bureau of Competition testified in 2017 that “[a]lthough the widespread introduction

of generic drugs has saved Americans hundreds of billions of dollars in drug costs, some companies

have exploited the ability to delay generic entry through abuse of government processes.”

In 2020, Minnesota State Attorney General

Keith Ellison

released recommendations for

addressing prescription drug costs, including the creation of a commission that could investigate

industry practices and cap the prices of some drugs. His report cited the abuse of the patent

system—and patent thickets specifically--as a key factor contributing to high drug prices. It stated,

“

First, the misuse and abuse of federal patent and exclusivity laws by drug manufacturers has led to

high-cost branded drugs being insulated from generic competition for years— if not decades—

beyond the initial patent and exclusivity periods. For example, AbbVie created a ‘patent thicket’ for

https://docs.house.gov/meetings/JU/JU05/20170727/106333/HHRG-115-JU05-Wstate-KesselheimA-

20170727.pdf

https://docs.house.gov/meetings/JU/JU05/20170727/106333/HHRG-115-JU05-Wstate-KesselheimA-

20170727.pdf, at 6-7.

https://www.whitehouse.gov/briefing-room/presidential-actions/2021/07/09/executive-order-on-promoting-

competition-in-the-american-economy/, at section 5(p)(vi).

https://www.uspto.gov/sites/default/files/documents/PTO-FDA-nextsteps-7-6-2022.pdf

https://s3.amazonaws.com/public-inspection.federalregister.gov/2017-12641.pdf

https://docs.house.gov/meetings/JU/JU05/20170727/106333/HHRG-115-JU05-Wstate-MeierM-20170727.pdf

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Humira, which is used to treat arthritis and is the top-selling drug in the world, by securing 132

patents for the drug, which resulted in 39 years of patent protection.”

Health care payors have also called for patent reform to moderate drug price increases. A

senior vice president for government relations at Kaiser Permanente opined recently that patent

thickets deter development of biosimilars for costly biologic medicines and drive up health care

costs. He urged Congress to revisit patent laws to “address[] how drugmakers manipulate the patent

system to maximize profit on long-existing products.”

In December 2021, America’s Health

Insurance Plans, the trade association for health insurers, released a study regarding drug prices and

exclusivity protections. It found that “

many drugs with long periods of patent protection are the

result of Big Pharma shenanigans and anti-competitive tactics like patent thicketing, patent

evergreening, and pay-for-delay settlements.”

In 2022, Priti Krishtel, co-founder and co-executive director of patent watchdog group the

Initiative for Medicines, Access and Knowledge (I-MAK) was selected to receive a MacArthur

Fellowship (sometimes referred to as the “genius grant”). When announcing her selection, the

program described I-MAK’s work on patent reform and the impact of secondary patents on access:

“Patents are intended to incentivize innovation by ensuring that only the patent holder can

sell and profit from the product for a fixed time. However, many pharmaceutical companies

seek to extend their monopolies by filing multiple patents on small changes (such as changes

in dosage) to existing drugs over several years. This stifles competition, delays generic

production, and keeps medicines out of the hands of people who need them the most.”

The existence of a significant social policy issue, then, distinguishes the Proposal from those

analyzed in the determinations JNJ cites on pages 3-6 of the No-Action Request.

JNJ cites numerous determinations in which the Staff allowed exclusion on ordinary

business grounds of proposals that dealt with companies’ products and services, but none of those

proposals involved a significant policy issue. In Wells Fargo

and JPMorgan Chase,

proposals

focused on specific products that the proponents argued were forms of predatory lending, which

had previously been found to transcend ordinary business. The Staff granted relief, characterizing

the proposals as relating to the ordinary business matter of products and services offered by the

companies.

In the three other determinations on which JNJ relies, the proponents unsuccessfully argued

that the use of the company’s products for lethal injection, the controversy over releasing the film

“Song of the South” on Blu-ray, and the company’s stewardship program for specific products were

significant social policy issues. The proponent did not even respond to the company’s no-action

https://www.ag.state.mn.us/Office/Initiatives/PharmaceuticalDrugPrices/Taskforce.asp

https://about.kaiserpermanente.org/news/want-to-lower-drug-prices-reform-the-us-patent-system

https://www.ahip.org/news/press-releases/new-research-big-pharma-companies-earn-big-revenues-through-patent-

gaming

https://www.macfound.org/fellows/class-of-2022/priti-krishtel#searchresults

Wells Fargo & Co. (Jan. 28, 2013,

recon. denied

Mar. 4, 2013)

JPMorgan Chase & Co

(Mar. 16, 2010)

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request in IBM,

where the proposal asked the company to assume a greater role in promoting open

source software. Thus, IBM’s characterization of the proposal’s subject as the marketing, delivery

and support of its software products went unchallenged.

The Proposal does not focus on ordinary business matters despite touching upon a

significant policy issue, as JNJ claims.

Instead, access to JNJ’s products and its policies regarding IP

protection are integral elements of the significant policy issue on which the Proposal focuses. Several

of the determinations JNJ cites involved proposals that raised a significant policy issue, but also

grafted on elements that implicated day-to-day management. In contrast, the

sole

focus of the

Proposal is a significant policy issue. This is distinct from the determinations on which JNJ relies:

•

In PetSmart,

the proposal asked the company to require its suppliers to attest that they had

not violated certain laws related to animal cruelty. PetSmart urged that the laws in question

governed not only animal cruelty, a significant policy issue, but also mundane matters such

as record keeping. The Staff concurred and granted relief, citing the breadth of the laws

referenced in the proposal. Importantly, however, the Staff did not concur with PetSmart’s

more sweeping argument, which is similar to the one JNJ makes here: that even if animal

cruelty is a significant social policy issue, the selection of suppliers is an ordinary business

matter, essentially negating significant social policy issue status.

•

The proposal in CIGNA

asked the company to report on how it was “responding to

regulatory, legislative and public pressures to ensure affordable health care coverage” as well

as “the measures our company is taking to contain the price increases of health insurance

premiums.” CIGNA argued that the second part of the resolved clause focused on the

ordinary business matter of expense management, rather than health care reform, as shown

by the supporting statement’s discussion of the relationship between administrative costs

and premiums. The Staff concurred with CIGNA’s view that the proposal was excludable

because it addressed “the manner in which the company manages its expenses.”

•

Capital One

successfully argued that a proposal went beyond addressing the arguably

significant policy issue of outsourcing to include several ordinary business matters such as

“estimated or anticipated cost savings associated with job elimination actions taken by the

company over the past five years.”

In the 2021 proxy season, JNJ

unsuccessfully advanced an argument similar to the one it

makes here in an effort to exclude a proposal seeking disclosure regarding the role of public funding

in the company’s decisions affecting access to its COVID-19 products. JNJ claimed that the

proposal addressed the ordinary business matter of its pricing decisions in addition to an

unidentified “potential significant policy issue” (presumably the COVID-19 pandemic or access to

vaccines and therapeutics). The proponent contended that access to COVID-19 vaccines and

therapeutics, including the role of public funding in decisions regarding such access, was a significant

policy issue despite the connection to pricing of JNJ’s products. The Staff declined to grant relief.

International Business Machines Corp. (Jan. 22, 2009).

No-Action Request, at 5.

PetSmart, Inc. (Mar. 24, 2011).

CIGNA Corporation (Feb. 23, 2015).

Capital One Financial Corp. (Feb. 3, 2005).

Johnson & Johnson (Feb. 12, 2021).

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Finally, the Proposal would not micromanage JNJ. Staff Legal Bulletin (“SLB”) 14L recently

clarified the Staff’s approach to micromanagement claims. It states that the Staff will analyze “the

level of granularity sought in the proposal and to what extent it inappropriately limits the discretion

of the board or management.”

SLB 14L indicated that climate change proposals that “suggest

targets or timelines so long as the proposals afford discretion to management as to how to achieve

such goals” will not be deemed excludable on micromanagement grounds. Thus, a proposal can ask

a company to change its behavior, even to set a specific objective like an emissions reduction target,

as long as it doesn’t instruct management or the board on exactly how to implement the change.

JNJ argues that the Proposal “seeks to micromanage Johnson & Johnson by dictating the

establishment of a particular intellectual property analysis that inappropriately limits discretion of the

board and management.” But the Proposal does not specify any details around the Proposal’s

implementation. It does not prescribe the weight to be accorded to access considerations, dictate

how they should be balanced against other factors, or control how the impact on access should be

measured. The Proposal, then, suggests a factor to be included in the deliberative process but

“afford[s] discretion to management as to how to achieve” that outcome, in the words of SLB 14L.

Last season, despite similar arguments, JNJ failed to convince the Staff that it should be

permitted to exclude a proposal advocating for a change in the company’s approach to executive

incentive compensation.

The proposal asked JNJ’s board to adopt a policy that legal and

compliance costs should not be excluded when calculating metrics for senior executives’ executive

compensation awards. JNJ urged that the proposal micromanaged because it sought to

inappropriately limit the discretion of the JNJ board’s compensation committee by dictating how

financial performance metrics could be adjusted. The Staff did not concur with JNJ.

The Proposal is less prescriptive than last year’s JNJ executive pay proposal. Both concern

inputs into a formula or deliberative process. The Proposal inserts an input but leaves room for

discretion in how to determine the impact on access and incorporate it into other factors JNJ already

takes into account. The 2022 proposal, by contrast, prohibited an input—legal and compliance

costs—from being removed from a formula. These costs are established through the financial

accounting process and management does not have discretion over their amounts or the fact that

expenses are subtracted from revenues to produce net income. By its nature, then, the change

requested in last year’s proposal affords less opportunity for management to exercise discretion over

the proposal’s implementation.

In sum, JNJ is not entitled to exclude the Proposal on ordinary business grounds because the

role IP protections play in access to medicines—the Proposal’s sole subject--is

a significant social

policy issue transcending ordinary business, as evidenced by the consistent and widespread public

debate in the media and among policy makers. The Proposal gives JNJ’s management significant

discretion over how to incorporate the impact on patient access into the decision making process

regarding secondary and tertiary patents, ensuring that the Proposal would not micromanage JNJ.

* * *

Staff Legal Bulletin 14L (Nov. 3, 2021).

Johnson & Johnson (Mar. 2, 2022).

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www.mercyinvestmentservices.org

For the

reasons set forth above, JNJ

has not satisfied its burden

of showing that it is entitled

to omit the Proposal in reliance on Rule 14a-8(i)(7)). The Proponents thus respectfully request that

JNJ’s

request for relief be denied.

The Proponents

appreciate the

opportunity to be

assistance in this matter. If you have

any

questions

or need additional information, please contact me at (317) 910-8581.

Sincerely,

Lydia Kuykendal

Director of Shareholder Advocacy

Mercy Investment Services, Inc

cc:

Marc Gerber, marc.gerber@skadden.com

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EMAIL ADDRESS

marc.gerber@skadden.com

BY EMAIL

(shareholderproposals@sec.gov)

January 9, 2023

U.S. Securities and Exchange Commission

Division of Corporation Finance

Office of Chief Counsel

100 F Street, N.E.

Washington, D.C. 20549

RE:

Johnson & Johnson – 2023 Annual Meeting

Supplement to Letter dated December 12, 2022

Relating to Shareholder Proposal of Mercy

Investments Services, Inc. and co-filers

Ladies and Gentlemen:

We refer to our letter dated December 12, 2022 (the “No-Action Request”),

submitted on behalf of our client, Johnson & Johnson, a New Jersey corporation,

pursuant to which we requested that the Staff of the Division of Corporation Finance

(the “Staff”) of the U.S. Securities and Exchange Commission (the “Commission”)

concur with Johnson & Johnson’s view that the shareholder proposal and supporting

statement (the “Proposal”) submitted by Mercy Investment Services, Inc. (“Mercy”)

and co-filers (collectively with Mercy, the “Proponents”) may be excluded from the

proxy materials to be distributed by Johnson & Johnson in connection with its 2023

annual meeting of shareholders (the “2023 proxy materials”).

This letter is in response to the letter to the Staff, dated January 3, 2023,

submitted by Mercy (the “Proponents’ Letter”), and supplements the

No-Action Request. In accordance with Rule 14a-8(j), a copy of this letter also is

being sent to the Proponents.

Office of Chief Counsel

January 9, 2023

Page 2

The Proponents’ Letter presents an uncompelling attempt to rebut the No-

Action Request. In particular, it argues that the Proposal should not be excluded as

relating to Johnson & Johnson’s ordinary business because it focuses on a significant

policy issue. As explained below, this argument is not persuasive.

Notably, the Proponents’ Letter concedes that a company’s product offerings

and choices about intellectual property protections are ordinary business matters and

does not dispute that these are the Proposal’s focus. Given that, to our knowledge,

the Staff has never recognized a significant policy issue relating to the general role of

intellectual property protections in access to medicines in ordinary circumstances,

this should be the end of the analysis.

Nevertheless, the Proponents’ Letter asserts that the Staff should recognize a

new significant policy issue for various reasons. In doing so, the Proponents’ Letter

attempts to draw support from a number of unrelated prior decisions where the Staff

did not permit exclusion of proposals under Rule 14a-8(i)(7). Specifically, the

Proponents’ Letter tries to draw support from

Johnson & Johnson

(Feb. 8, 2022),

Pfizer, Inc.

(Feb. 23, 2022) and

Moderna, Inc.

(Feb. 8, 2022). These instances are

inapposite, however, as they were related to proposals focused on the narrow

question of intellectual property decisions relating to COVID-19 vaccines in the

midst of a global pandemic. These letters simply established the Staff’s view that the

subject of intellectual property decisions involving COVID-19 vaccines during the

height of the pandemic transcended the companies’ ordinary business matters, rather

than standing for the Proponents’ sweeping characterization that intellectual property

decisions concerning pharmaceutical products allegedly impacting patient access to

those products always transcends a pharmaceutical company’s ordinary business.

The Proponent’s Letter also attempts to draw support from

Pfizer, Inc.

(Mar.

8, 2022) and

AbbVie, Inc.

(Mar. 11, 2022), but these instances similarly cannot be

generalized to support the Proponents’ broad assertions. As the Proponents’ Letter

describes, the proposals in these instances focused on “the strategic, reputational, and

public policy risks created by anticompetitive practices,” rather than the specific

matter of the alleged impact of intellectual property protections on patient access at

issue here. Accordingly, the Staff’s prior no-action decisions relied on by the

Proponents’ Letter fail to demonstrate that the Proposal implicates a significant

policy issue previously recognized by the Staff.

Perhaps recognizing this shortcoming, the Proponents’ Letter also attempts to

demonstrate that there is broad societal interest in the matter raised by the Proposal

through lengthy discussions of past media publications, proposed legislation,

Congressional hearings, federal agency and other executive branch actions and

certain statements from the private sector on patent practices. These citations,

Office of Chief Counsel

January 9, 2023

Page 3

however, fail to establish a broad societal focus on the issue of the impact of

intellectual property protections on patient access to pharmaceutical products

generally. Given that the pharmaceutical industry and patent protections are highly

regulated areas, it is not surprising that pharmaceutical companies’ patent practices

have drawn attention of certain groups of interested parties and become the topic of

Congressional hearings and proposed legislation from time to time. That fact alone

does not support the Proponents’ assertion that the Proposal’s topic transcends the

company’s ordinary business matters. The test for whether a significant policy issue

exists is not whether select groups find the issue significant; instead, the test is

whether the issue holds broad societal significance. The Proponents’ Letter only

demonstrates interest from a small group with a vested interest in the matter.

In addition, even assuming the Proponent’s Letter demonstrates some level of

societal concern, it fails to establish a sustained level of concern over time. The

discussions cited in the Proponents’ Letter indicate that interest in the Proposal’s

topic has waned over the years and, therefore, the Staff has even less reason to

recognize the Proposal’s topic as a new significant policy issue today. For example,

among the 23 media publications that the Proponents’ Letter cites, only four were

issued in 2022 and no media outlet published on the issue more than once other than

Bloomberg and NBCNews. Similarly, a vast majority of the proposed legislation

and Congressional hearings the Proponents’ Letter cites occurred in 2019 or earlier.

Therefore, the Proponents have not demonstrated, and we see no reason why, this

issue should now be recognized as one with broad societal impact.

Accordingly, the Proposal should be excluded from Johnson & Johnson’s

2023 proxy materials pursuant to Rule 14a-8(i)(7) as relating to its ordinary business

operations.

Should the Staff disagree with the conclusions set forth in this letter, or

should any additional information be desired in support of Johnson & Johnson’s

position, we would appreciate the opportunity to confer with the Staff concerning

these matters prior to the issuance of the Staff’s response. Please do not hesitate to

contact the undersigned at (202) 371-7233.

Very truly yours,

Marc S. Gerber

Office of Chief Counsel

January 9, 2023

Page 4

cc:

Marc Larkins

Worldwide Vice President, Corporate Governance & Corporate Secretary

Johnson & Johnson

Lydia Kuykendal

Director of Shareholder Advocacy

Mercy Investment Services, Inc.

Lydia Kuykendal, on behalf of Bon Secours Mercy Health, Inc., Daughters of

Charity, Province of St. Louise, Providence St. Joseph Health and The

Domestic and Foreign Missionary Society of the Protestant Episcopal Church

in the United States of America

Rose Marie Stallbaumer, OSB

Benedictine Sisters of Mount St. Scholastica

Andrea Westkamp, OSB

Treasurer

Benedictine Sisters of Virginia

Laura Krausa, MNM

System Director Advocacy Programs

CommonSpirit Health

Sr. Marcelline Koch, OP

Dominican Sisters of Springfield Illinois

Tom McCaney

Director, Corporate Social Responsibility

The Sisters of St. Francis of Philadelphia

2039 North Geyer Road . St. Louis, Missouri 63131-3332 . 314.909.4609 . 314.909.4694 (fax)

www.mercyinvestmentservices.org

January 11, 2023

Via

e-mail at shareholderproposals@sec.gov

Securities and

Exchange

Commission

Office

of the

Chief Counsel

Division

Corporation Finance

100 F

Street,

Washington, DC

20549

Re: Request by Johnson & Johnson to omit proposal submitted by Mercy Investment Services Inc.

and co-filers

Ladies and Gentlemen,

This letter responds to one of the arguments made in Johnson & Johnson’s (“JNJ’s” or the

“Company’s”) letter dated January 9, 2023 supplementing its request (the “No-Action Request”) to

exclude the shareholder proposal (the “Proposal”) filed by Mercy Investment Services and co-filers

(the “Proponents”), which asks JNJ to consider the impact on patient access when deciding whether

to apply for secondary and tertiary patents.

JNJ urges that the determinations issued last year to JNJ,

Pfizer

and Moderna,

declining to

allow those companies to exclude proposals asking them to issue certain reports related to the

intellectual property (“IP”) associated with their COVID-19 vaccines and therapeutics, are

inapposite because the Proposal does not involve the COVID-19 pandemic. But the Division has

repeatedly found that drug pricing and access to medicines are significant social policy issues, even

Johnson & Johnson (Feb. 8, 2022)

Pfizer, Inc. (Feb. 23, 2022).

Moderna Inc. (Feb. 8, 2022).

2039 North Geyer Road . St. Louis, Missouri 63131-3332 . 314.909.4609 . 314.909.4694 (fax)

www.mercyinvestmentservices.org

absent a pandemic. For instance, in Gilead,

Celgene,

and Vertex,

the Staff declined to allow

exclusion of proposals seeking a report on risks associated with high drug prices, over the

companies’ objection that the proposals dealt with their products. Thus, last year’s JNJ, Pfizer, and

Moderna determinations could be read as standing for the proposition that patient access continues

to be a significant social policy issue even where a proposal’s specific request focuses on IP sharing.

Here, the Proposal’s whole raison d’etre is patient access; there is no aspect of the Proposal that

addresses IP outside the context of access. The Proponents could agree with JNJ’s analysis if the

Proposal asked the Company, for example, to consider the impact on JNJ’s profitability when it

applies for secondary or tertiary patents. In that case, IP would be the primary focus and there

would be no significant policy issue to avoid application of the ordinary business exclusion. Given

the centrality of access to the Proposal, however, the fact that it does not invoke the COVID-19

pandemic does not compel exclusion.

The Proponents

appreciate the

opportunity to be

assistance in this matter. If you have

any

questions

or need additional information, please contact me at (317) 910-8581.

Sincerely,

Lydia Kuykendal

Director of Shareholder Advocacy

Mercy Investment Services, Inc

cc:

Marc Gerber, marc.gerber@skadden.com

Co-filers

Gilead Sciences Inc. (Feb. 23, 2015)

Celgene Corporation (Mar. 19, 2015)

Vertex Pharmaceuticals Inc. (Feb. 25, 2015)

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________

TEL: (202) 371-7000

FAX: (202) 393-5760

www.skadden.com

DIRECT DIAL

202-371-7233

DIRECT FAX

202-661-8280

EMAIL ADDRESS

marc.gerber@skadden.com

BY EMAIL

(shareholderproposals@sec.gov)

January 19, 2023

U.S. Securities and Exchange Commission

Division of Corporation Finance

Office of Chief Counsel

100 F Street, N.E.

Washington, D.C. 20549

RE:

Johnson & Johnson – 2023 Annual Meeting

Supplement to Letter dated December 12, 2022

Relating to Shareholder Proposal of Mercy

Investment Services, Inc. and co-filers

Ladies and Gentlemen:

We refer to our letter dated December 12, 2022 (the “No-Action Request”)

and our letter dated January 9, 2023 supplementing the No-Action Request,