DRAIN THE SWAMP?
Rep. Chris Collins Broke Promise to Divest From Foreign Pharmaceutical Company
Innate Immunotherapeutics got FDA approval to test its drug in the U.S. Yet a top investor and congressman remains invested.
Rep. Chris Collins said he would be divested of his interest in a foreign pharmaceutical company by the time it arrived in the U.S.
It has. And he’s not.
The FDA last month approved a multiple sclerosis drug made by Innate Immunotherapeutics for clinical trials here. Collins, a Republican from New York, told The Buffalo News last week that he remains an investor.
That wasn’t the case months ago, when Collins told a reporter with the Rochester Democrat and Chronicle that by the time Innate reached the FDA-test stage, he’d “be out of it then.”
Collins owns nearly 17 percent of the company and is a member of its board. His two children, chief of staff, several campaign donors, and five fellow Republican lawmakers are also invested. Collins participated in Innate’s initial public offering in Australia and bought more stock after he pushed a bill that could help the company. His dealings with Innate have put him under investigation by the Office of Congressional Ethics, though he has repeatedly denied any wrongdoing. (Collins’ office did not respond to requests for comment for this story.)
Meanwhile, Collins sits on a House subcommittee that has oversight of the FDA, and has reportedly used his position in Congress to sell other Republicans on buying Innate stock.
Reps. Mike Conaway, John Culberson, Doug Lamborn, Billy Long, and Markwayne Mullin bought into Innate earlier this year. Long and Mullin sit with Collins on the House Health Subcommittee, which has oversight of the FDA.
Sitting above the FDA is Tom Price, secretary of Health and Human Services and a former Innate shareholder. Price first purchased Innate stock in 2015, then invested more in summer 2016 when the company explicitly said it was raising capital to, among other things, “seek approval from the United States Food and Drug Administration for an Investigational New Drug programme in the United States” (PDF).
Collins joined Price in purchasing more Innate stock after the company said it would seek FDA approval. Collins also authored language in the 21st Century Cures Act that will help companies like Innate that are testing experimental drugs get FDA approval more quickly. Price said he supported the legislation.
A successful American clinical trial could mean FDA approval—and Innate’s entry into the lucrative U.S. drug market, which the company believes is worth an estimated $3 billion in profits for its lone drug.
The company announced it had received investigational new drug clearance from the FDA on June 21.
The good news came just in time.
Less than a week later, Innate said it learned its drug had failed a second clinical trial in Australia, and the company requested a halt in trading on the Australian Stock Exchange so it could announce the bad news. When trading resumed, the stock plummeted. Prices fell from nearly 60 cents a share following the FDA announcement to just more than a nickel.
Collins has lost between $17 million and $44 million because of Innate’s nosedive, and his circle of family, friends, and colleagues are looking at combined losses in the millions of dollars.
It’s a steep fall from January, when Collins was overheard on the House floor bragging about “how many millionaires I’ve made in Buffalo.”
“Sophisticated investors know there’s a risk, and, as you now know, that there was never any inside information that would indicate otherwise,” Collins told The Buffalo News last week, referencing accusations that he had inside knowledge of the company’s prospects when he discussed Innate with Price and, possibly, others.
Price sold his Innate stock in January, as required when he became the head of HHS, and made a profit of at least $150,000, according to ProPublica.
Price was no ordinary investor though—in fact, he said he had learned of the company directly from Collins, looked into Innate’s drug himself, and decided to invest in 2015. Then Price invested more when the company offered discount stock purchases to a select group of shareholders like himself with the stated goal of seeking FDA approval.
At the time Price was a congressman with great influence in health care matters, such as writing legislation to repeal the Affordable Care Act, and was a likely pick to lead HHS in a Trump administration.
Price applied for the discounted stock buy, called private placements, which were detailed in a June 2016 newsletter Price received.
More than a dozen others who have relationships with Collins were approved for the discount, according to Innate’s 2016 annual report (PDF), including his chief of staff, Michael Hook.
During Price’s confirmation hearings, Democratic Sens. Patty Murray and Ron Wyden pressed Price on whether the discounts were available to the general public, which they were not: Only those already invested in Innate were eligible.
The senators were likely alluding to the spirit of the STOCK Act, which bans insider trading by members of Congress and prohibits them from participating in initial public offerings unless the IPO is “available to the public generally.”
During an intense exchange that prompted Sen. Orrin Hatch to mediate, Wyden and Price traded blows over the private placement offering. For the first time during his two days’ worth of confirmation hearings, Price raised his voice, appearing perturbed.
“Maybe it would help if you laid out the accusations, sir,” Price told Wyden.
“Well, you purchased stock in an Australian company through private offerings at discounts not available to the public,” Wyden said.
Price fought back.
“They were, if I may, they were made available to every single individual who was an investor at the time,” he said.
While true, the investors who were given the discounts were almost entirely friends and associates of Collins. Price did not make note of that fact.
The day after Price’s final confirmation hearing, Collins’ fellow subcommittee members Reps. Long and Mullin invested as much as $300,000 combined in Innate. Within three days, Reps. Culberson, Conaway, and Lamborn invested as much as $95,000 combined.
The Hill reported last month that Collins has been regularly pitching Innate as an investment opportunity to his fellow lawmakers since at least last year. “I’ve never encouraged anyone to buy the stock. Ever,” Collins told the newspaper.
A spokesperson for Long previously told The Daily Beast that the congressman learned of Innate from scads of news reports about the company during Price’s confirmation hearings. A spokesperson for Culberson also said the Texas congressman learned of Innate through the media. Mullin, Conaway, and Lamborn’s offices did not return requests for comment.
Rep. Louise Slaughter, a Democrat, has introduced legislation that would prohibit members of Congress from participating in private placement offerings like the one Price participated in that helped Innate fund its path toward FDA clinical trial approval. The bill, the End Congressional Stock Market Abuse Act, would also close a loophole that allowed Collins to participate in Innate’s 2013 IPO. That loophole was first reported in April by The Daily Beast.
The last two weeks of tumultuous news for Innate prompted Slaughter to again publicly call for an investigation into Collins and the company.
“The sudden collapse of Innate only increases the number of unanswered questions surrounding Congressman Collins,” Slaughter said in a statement to The Daily Beast. “This drug went from being called extremely promising to being found no better than a placebo. This scandal has only continued to grow, which is why we need the appropriate entities continue their investigations. We are not sent to Congress to enrich ourselves.”