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CONFLICT OF INTEREST?

Congressman Pushed Bills That Would’ve Helped Drug Company He Owns

Rep. Chris Collins sponsored legislation beneficial to the pharmaceutical industry, and especially the company where he’s a director. Why won’t the House investigate?

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Photo Illustration by The Daily Beast

Rep. Chris Collins (R-NY) has sponsored several bills that would have benefited a drug company in which he is the lead shareholder, a Daily Beast investigation has found.

Collins is also trying to make changes to a government program that would save the company millions of dollars if its drug is approved by the FDA.  

Collins’s office says he doesn’t believe his bills represent a conflict of interest, but he is already accused by independent Office of Congressional Ethics of violating House ethics rules and U.S. securities law for his dealings with the drug company.

The Daily Beast found at least four bills that Collins drafted or sponsored that would have directly affected the drug company, Innate Immunotherapeutics:

  • A 2013 bill that would have appropriated more money to an NIH grant program from which Innate previously received $300,000.
  • A 2016 bill that made it easier for drug companies to be granted FDA status to begin drug trials, which Innate received last year.
  • A 2017 bill that would allow drug companies to use a new research method in clinical trials, which Innate would have benefitted from.
  • A 2017 draft bill that would have changed the 340B drug discount program to exclude patients who need expensive “infusion” drugs like Innate’s.

The House Ethics Committee was told to investigate Collins by the Office of Congressional Ethics over his dealings with Innate, but the committee has yet to begin a formal investigation. The bills that would have affected Innate should prompt the committee to immediately begin its investigation, said Craig Holman of Public Citizen, a non-profit government watchdog.

“I am baffled as to the type of reasoning that the ethics committee came up with in declining to dismiss but not formally start their investigation, other than that it is a partisan deadlock: The Democrats want to pursue the investigation and the Republicans are stonewalling it,” said Holman, who has previously filed complaints regarding Collins’s conduct with the committee and the Securities and Exchange Commission.

Collins did not respond to multiple requests for comment, but denied through a spokesperson that any of the bills reviewed by The Daily Beast represent a conflict of interest or potential ethics violation.

Targeted program for the poor

Collins entered Congress in 2013 after years as a county executive and businessman in the Buffalo, New York area, where he still owns or partly owns several companies. Innate Immunotherapeutics is an Australian pharmaceutical company started in the mid-aughts. Around 2002, Collins invested in Innate and was named a director. Today he owns almost 17 percent of the company. (In 2017, almost 30 percent of Innate was owned by Collins, his children, chief of staff, and a circle of political donors, friends and several fellow congressman, some of whom still own stock in the company.)

Innate’s lone drug, MIS416, is an experimental treatment for secondary multiple sclerosis which failed its second clinical trial in June 2017, prompting Innate’s stock to plummet. The same week, the FDA approved MIS416 for clinical trials in the United States, which Innate had been seeking for years.

Innate would be saved if the FDA approves MIS416, a so-called “infusion” drug that is administered intravenously and would be one of the only treatments for the disease, worth tens of millions of dollars.

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Collins has targeted infusion drugs for removal from a federal program called 340B. The program requires pharmaceutical companies that participate in Medicaid to sell drugs to certain hospitals at deep discounts, some as much as 50 percent. The majority of those drugs are infusion drugs like Innate’s MIS416, which treat deadly diseases and are the some of the most expensive on the market with some individual sessions costing tens of thousands of dollars.

Collins has sought to remove infusion drugs by changing the “patient definition,” of 340B, according to a summary of a bill he drafted in 2017 that was obtained by The Daily Beast. The change would require drugs purchased with 340B discounts to only go to uninsured patients. Since most patients receiving infusion drugs are insured, removing them from 340B would remove infusion drugs from the program.

Those drugs represent 70 to 80 percent of all drugs purchased through 340B—or more than $8 billion in lost hospital revenue per year, according to Madeline Wallack, a former official at the Department of Health and Human Services who worked on 340B at the agency and now runs a consulting firm that helps hospitals maximize the program’s benefits. That money would go directly back to pharmaceutical companies like Innate.

“Any changes that Collins introduces are a distraction from the fact that the product that his company is developing, the launch price for his product would have been very high,” Wallack said of MIS416. “Drug companies and people like Collins want to limit who gets infused drugs because those are the most expensive ones. It’s a big distraction from the fact that the pharmaceutical industry wants to do everything they can to keep drug prices high.”

Drug companies and people like Collins want to limit who gets infused drugs because those are the most expensive ones. It’s a big distraction from the fact that the pharmaceutical industry wants to do everything they can to keep drug prices high.
ex-HHS official Madeline Wallack

Collins’ proposed change means billions of dollars in additional profits for drug companies each year, the same amount of losses for hospitals and, if Innate’s drug wouldn’t have failed, millions in additional profits the company.

Collins’ spokesperson, Sarah Minkel, did not respond to whether the congressman’s proposed change to the patient definition represents a conflict of interest, instead citing the drug’s failure.

“Again, MIS416 failed its 2B trial, suspending any further development,” Minkel said.

But MIS416 had promise in 2013, when Collins first began targeting 340B. On the House floor that year Collins said 340B hospitals were “cheating” by maximizing profits from the program.

“In regards to 340B, Collins is seeking transparency in a program that has very little oversight,” Minkel said. “Hospital profits from 340B discounts are supposed to benefit indigent populations. There is no mechanism within the federal government to ensure that.”

But 340B already benefits those populations, according to Wallack. By purchasing drugs at the 340B discount, selling them at full price to insured patients who can afford them and pocketing the difference, hospitals are able make up for losses incurred by treating the very “indigent populations” Collins says he wants to help, Wallack said.

“340B is a gift, and I mean that because the bearer of the burden is the drug industry; it’s not on the government to come up with any funding,” Wallack said. “If they do away with this gift, what’s going to happen in another couple years is we’re going to have to come up with another way to combat the incredibly high prices of these drugs, and manufacturers are not going to say, Well, let’s go back to 340B.”

Sponsored pro-pharma bills

Prior to Collins’ work on 340B, he crafted legislation that has both a broad effect on industries and a specific effect on businesses he partially owns, including Innate.

In 2013, the first bill he sponsored in Congress called for the removal of penalties put in place by Obamacare that fined businesses with more than 50 employees who didn’t offer health insurance to those employees. Then and now, Collins owns as much as $1 million in two such companies—Zeptometrix, a medical device company that employs between 51 and 200 people, and Chembio Diagnostic Systems, another medical device company that employs more than 50 people.

The second bill Collins sponsored in 2013 would have appropriated for more funds to be made available through the National Institutes of Health to scientists and researchers looking to get their drugs to market. Praised by a bipartisan group of lawmakers, the bill would have been beneficial to small companies like Innate that take huge risks on drugs to treat incurable diseases like MS.

In fact, Innate's drug had already been used in a study that later benefitted from NIH grants when Collins crafted the bill.

In 2009, Innate CEO Simon Wilkinson travelled to Buffalo where he sought investors for the company. There, Wilkinson met a scientist at the Roswell Park Cancer Center, Kunle Odunsi, who in 2011, was awarded a grant of more than $300,000 from the NIH’s National Cancer Institute to continue a trial that had begun in 2010 using Innate’s drug, MIS416. (The drug was used in the first phase of the trial, which sought to treat ovarian cancer in mice, but not the second, NIH-funded phase.)

“Scientists often need a funding boost to take the initial steps to see if their invention or concept has the potential to be commercialized,” Collins said in a press release about the bill, called the TRANSFER Act. “Without this critical legwork, a scientist is often unable to partner with a business or an investor to take their idea to the next level.”

Collins followed the TRANSFER Act with a 2015 bill that allowed drug companies and medical-device manufacturers to use 3D human tissue models (essentially manufactured human tissue) in trials before applying for FDA approval. (The bill went nowhere, but Collins introduced a virtually identical bill in 2017.)  3D tissue modeling has already netted significant results in MS research, which Innate’s drug sought to treat. The NIH considers 3D modelling so important that it recently awarded $30 million in grants to study and develop 3D methods. In May 2017, a team of researchers in Texas was the first to print 3D models of MS brain lesions, hailed as a breakthrough in the field of MS research.

Without addressing the relationship between 3D modelling and MS research, Collins’ office once again pointed to Innate’s stock value in explaining why Collins’ bill didn’t represent a conflict of interest.

At the time Collins introduced the 3D modeling bill, however, Innate’s drug wasn’t a failure. In March 2015, the company informed its shareholders that MIS416 had “prolonged survival” in the cancerous mice from Odunsi’s study and that Innate was “strengthening” its intellectual property rights by patenting the drug in numerous countries as a treatment for MS and cancer.

While most of Collins’s conflicted legislation that would have affected his companies has had little success, he did succeed in getting the 21st Century Cures Act made into law. As The Daily Beast previously reported, the bill streamlined the grant process for FDA investigational new drug status, which at the time Innate was seeking. The company was granted that status in June 2017, six days before it announced that its second clinical trial was a failure. Collins played a direct role in passage of the bill, which also secured more NIH funds for drug research, including at the Roswell Park Cancer Center, he noted following the Cures Act’s passage.

At issue is whether Collins’s bills would affect many companies, a small group of them, or Collins’ businesses alone, according to Larry Noble of the Campaign Legal Center, a government watchdog.

“If you can show these bills have a broader effect on the industry and not just a specific one on your company, it’s not a direct conflict of interest for you to be working or voting on that legislation,” Noble said. “That’s a loophole in the law, and it shows that the law isn’t strong enough.”

Again, Collins’ office argued that the failure of Innate’s drug means none of Collins’ bills represent a conflict of interest. Noble disagreed.

“If there was a conflict of interest when he was involved in this legislation, it still exists,” he said. “Just because the company wasn’t successful doesn’t mean it’s not a conflict of interest.”

Correction, 4/17/18: A previous version of this story referred to Kunle Odunsi as an Innate investor and said Innate’s drug was used in the NIH study. We regret the error.