Democrats have taken stock of Dr. Tom Price’s financial dealings before the Senate votes on his nomination to be secretary of Health and Human Services. The two most recent lines of attack, reported in separate media stories last week, concern health care investments Price said were made at the direction of his broker and critics say he should have prevented. But “could have” has become the central issue.
According to a financial disclosure filing, Price bought shares of seven companies in the health care sector on March 17, 2016: the pharmaceutical firms Amgen, Biogen, Bristol-Myers Squibb, Eli Lilly, McKesson, and Pfizer, and the medical device manufacturer Zimmer Biomet. These transactions, worth between $1,001 and $15,000 each, drew scrutiny for their alleged connection to the Georgia physician and representative’s legislative activity. Specifically, Price was against two proposed rules from the Centers for Medicare and Medicaid Services that would have harmed the first six businesses and Biomet, respectively. Price denounced the proposal affecting the pharma group on March 10, and he cosponsored legislation to block it on April 29. He introduced a bill to delay the other CMS action, which pertained to Biomet’s industry, on March 24.
Price and his team have defended him from wrongdoing with multiple bits of background information. For example, he said during a confirmation hearing last week that he has opposed “having the federal government dictate what drugs are available to patients”—his takeaway from the pharma-related regulation—for “years and years.” Additionally, Price wrote of his disapproval to the medical device rule in September 2015, many months before taking his modest stake, $2,700, in Biomet.
But his most widely applicable explanation is that a financial manager has directed all but one of his investments in question. A memo from a Price spokesperson provided to THE WEEKLY STANDARD states that nearly all his stocks are held in three broker-directed accounts, including one with Morgan Stanley. Per the memo, that account was rebalanced across all sectors in the first quarter of 2016, explaining the numerous trades Price reported as being executed on March 17. Therefore, he’s said he didn’t have any knowledge of the purchases of pharmaceutical and Biomet shares.
Democrats have called the reasoning insufficient. Connecticut senator Chris Murphy, on the Senate panel conducting Price’s confirmation hearing last week, asked Price why he wouldn’t instruct his financial advisor to “stay clear of any companies that are directly affected by [his] legislative work.”
“Because,” Price responded, “the agreement that we have is that [the advisor] provide a diversified portfolio … and make certain that in order to protect one’s assets that there’s a diversified arrangement for the purchase of stocks.”
The lingering question is whether Price was able and ought to have instructed his broker to do otherwise. Per information from a spokesperson, first provided to Politico and later to TWS, the nominee’s Morgan Stanley agreement reads, “[Y]our Financial Advisor, and not you, has the discretion to decide what securities to buy and sell in your account.” It continues: “Your Financial Advisor manages your [Portfolio Management] account in light of information you provide about your investment objectives and financial situation.” Politico wrote that this “fine print” undercut the excuse that Price had “no control” over the spotlighted stocks.
The fine print appears to go on. The agreement language sent to TWS and reported elsewhere is contained in an investors brochure dated September 26, 2016, and accessible on Morgan Stanley’s website. (On Tuesday, Morgan Stanley alerted TWS to an updated copy of January 23, 2016, which contains the same material quoted here.) In the document, there is a section below the overviews of the brokerage’s “Portfolio Management Program”—from which the provided text draws—and “Institutional Cash Advisory Program” labeled “Investment Restrictions.” The section reads (emphasis mine):
If the pharma and Biomet shares were part of a mutual fund or an exchange-traded fund, there would be no basis for criticism of Price. But the investments are listed individually on his financial disclosure. House ethics rules state that filers are not required to list “the holdings of or transactions made in” a mutual fund or an ETF.
A question to a Price spokesman particularly about the Biomet shares and if they were part of such a fund was unanswered as of press time. The Biomet purchase was singled out in a CNN story the Trump transition team rebutted aggressively.
All the fuss about it and the pharma stock is only part of a complicated account of Price’s trading activity, which has invited criticism from Democrats and ethics experts for “appearances” and become a focal point of his confirmation process. He appeared before the Senate Health, Education, Labor, and Pensions Committee last week, but the panel is not responsible for voting on his nomination. That task belongs to the Senate Finance Committee, which holds a hearing on Price Tuesday.
The other security of note is Price’s stake in the Australian drug-maker Innate Immunotherapeutics, the only company, a Price spokesman says, for which he and not an advisor has directed his transactions. He has personally bought stock in the firm multiple times since 2015, including a purchase between $50,001 and $100,000 last summer. He was part of a private offering to a select group of “sophisticated U.S. investors”, according to a company document, including Price’s House colleague and White House transition official Chris Collins: a member of Innate Immuno’s board of directors, its largest shareholder, and the individual responsible, Price says, for informing him of the organization.
Democrats have scavenged for bits of information about the relationship that would damage Price. Patty Murray, ranking member of the Senate HELP committee, asked Price last week whether Collins provided him specifically with a stock tip: “[I]f he gave you information about a company, you were offered shares in the company at prices not available to the public, [and] you bought those shares, is that not a stock tip?”
Price said he learned of Innate Immuno from Collins but performed his own research before investing. The “prices not available to the public” were included in the private sale—18 cents a share, per the company, on a stock “rapidly escalating in value … to more than 90 cents,” according to Kaiser Health News. Price had previously invested in Innate Immuno at the time of the issue.
The company said it would use the funds raised, in part, to “seek approval from the United States Food and Drug Administration for an Investigational New Drug programme in the United States” for MIS416, a drug it has been developing to combat secondary progressive multiple sclerosis. Approval of an IND application allows a drug-maker to ship an investigational drug across state lines to clinical investigators. According to the Price memo, he was piqued by Innate Immuno’s efforts to fight the disease, patients with which he treated during his clinical practice, prior to first taking a stake in the company in January 2015.
After he did, he lined up behind legislation first introduced that May, the 21st Century Cures Act, whose main thrust was to streamline and, in effect, accelerate the pace of bringing new drugs to market. It became law last month. Critics have charged that the Cures Act could benefit the sort of drug Innate Immuno is pushing; legal experts in FDA regulations at the law firm Morgan Lewis noted that spending authorized by the law “expedites drug approval and removes some of the obstacles standing in the way of the prompt movement of investigational drugs from clinical trials to market.”
The 21st Century Cures Act was supported widely—it received 344 yes votes in the House and 94 in the Senate.
Price told Health and Human Services lawyers he would divest his financial interests in 43 companies within 90 days of his taking office. Listed among them are Innate Immunotherapeutics Ltd., the six pharma firms, and Biomet.
The financial world is dense. In most instances, Price’s team has been forward providing information to the press about his place in it. But many of his activities are being reviewed, and the broker-managed securities and Innate Immuno stock pose different ethical issues. New information has prompted new questions. One of them, if members of Congress should face restrictions pertaining to broker-directed transactions—a logical progression of the criticism—is for another debate. Others are about Innate Immuno, now that it’s known Price alone directed those trades. But congressional ethics experts cited by the New York Times said there was no indication he possessed nonpublic information before investing. Price has vowed as much, himself. With a lack of apparent evidence to contradict him on this and the related matters, his word has held up.
