U.S. Rep. Tom Price of Georgia, nominated by President Trump to serve as secretary of health and human services, faces a storm of criticism over his investments in medical and health-insurance companies.
Some of the controversy is frankly posturing by Democrats out to derail Price, who has been a prominent critic of Obamacare. Some of the controversy could and should have been avoided altogether if Price had taken some pretty simple steps to avoid conflicts of interest.
And some of it does raise real issues of judgment.
Let’s start with the basics:
Price, a doctor by profession, has naturally made health-care policy his primary area of competence in Congress. One measure of his influence in that field is the fact that over the past two years, individuals and companies in the health-care business have donated $730,000 to his campaign fund, the most of any industry. And as the Wall Street Journal originally reported in December, over the past four years Price has made some $300,000 in trades in more than 40 health-industry stocks.
That news immediately raised concerns that Price might be trading off insider knowledge gained as a member of Congress, which is illegal. He rebuts that charge emphatically. As Price pointed out in Senate testimony last week, the stock purchases were made in a broker-directed account, meaning that he played no role in those investment decisions and that a broker chose the investments on his behalf. With one notable exception, there’s no evidence to the contrary.
However, that arrangement doesn’t solve the whole problem. If Price did not select the stocks, he had full knowledge of which company’s stocks had been purchased on his behalf, and how much of each he held. For some people, that knowledge might prove a temptation, and it raises a question:
If you choose to make health-care policy your primary area of competence in Congress, wouldn’t it be wise to tell your broker to avoid investing in that industry altogether, and particularly in individual stocks? That way, none of these questions about corruption and conflict of interest could even be raised. Journalists and others who work in specialized areas operate under such conflict-avoidance rules all the time.
And if Price and his broker nonetheless believe that investing in the health-care industry is necessary for his financial success, they could have at least mitigated the issue by investing in health-care index funds, which contain a wide variety of stocks. No law requires that step, but sometimes what’s legal and what’s wise and ethical are two different standards.
I noted above that there was one exception to Price’s claim that all of his investments in health care were chosen by his broker. It involves Innate Immunotherapeutics, a small Australian startup that is his single largest health-care investment. Price acknowledges that he learned of the company from U.S. Rep. Chris Collins, a Republican congressman from New York. Collins sits on the board of Innate Immunotherapeutics, his family owns roughly 20 percent of its stock, and Collins led the Trump transition team overseeing the Department of Health and Human Services, the agency that Price is slated to lead.
The company’s future rides almost entirely on whether the U.S. Food and Drug Administration approves its one drug now in development. Over the last 18 months, the nominee to head HHS has ordered his broker to make several buys of Innate Immuno stock. Most of his purchases came in a private stock offering, meaning the chance to buy was open to specially selected investors but not to the general public, and at a reduced price.
In the five months since Price made his last major purchase of the stock, it has more than quadrupled in value, from roughly 30 cents a share to $1.35 a share. That’s a sweet, sweet deal. His defenders claim to see nothing wrong with a congressman specializing in health legislation who also accepts a special, private invitation to invest in a health-related stock that proves highly lucrative but depends on federal regulatory approval.
Me, I think it smells — what’s the word here? — swampy.