HHS nominee Tom Price bought stock, then authored bill benefiting company

President Trump's nominee to be the nation's top health official introduced legislation last May that benefited a health company he had recently invested in.

The $15,000 purchase of shares in McKesson is but the latest financial action raising questions about possible conflicts of interest during the confirmation battle over Rep. Tom Price, R-Ga.  The orthopedic surgeon was approved by the Senate Finance Committee on Wednesday and his nomination will soon be voted on by the full Senate. 

Price introduced the Patient Access to Durable Medical Equipment Act on May 12, a week after McKesson warned in its annual report to stockholders that its profits and those of its clients were at risk because of cuts faced in Medicare payments. Price's stockbroker informed him of the purchase in early April, according to a report Price submitted to the House. 

Price's bill reversed cuts in reimbursement to makers of home medical beds and other equipment. McKesson, which bills itself as the oldest and largest health care company in the world, distributes drugs, medical supplies and equipment including beds and lifts for homes. 

Price's nomination was already being opposed by several Democratic senators over other health care company investments, and at least two members of Congress have asked the Securities and Exchange Commission to investigate. Democratic members of the finance panel boycotted Wednesday's vote in part to protest Trump's immigration order last weekend. 

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Since 2012, Price has traded shares worth more than $300,000 in about 40 health-related companies, according to a Wall Street Journal analysis. At the same time, Price was on the House Ways and Means Committee’s subcommittee on health working on measures that could affect his investments. 

"It's crazy"

USA TODAY provided details surrounding Price's McKesson investment to three former government ethics lawyers who have represented or investigated both Republicans and Democrats. 

"It's crazy," says Richard Painter, former chief ethics lawyer for President George W. Bush whose job included vetting nominees. "We wouldn’t have put up with anybody in the Bush administration buying and selling health care stocks. When you engage in this kind of conduct, you’re asking for allegations to be made against you."

Larry Noble, former general counsel of the Federal Election Commission, said "there appears to be a direct connection" between Price being notified he bought the stock, "receiving notice from the company that any reductions in reimbursement could hurt its bottom line and the introduction of legislation to delay the cuts."

"It’s a straight line," says Noble. 

That puts Price at risk of violating the Stop Trading On Congressional Knowledge (STOCK) Act, which was designed to keep members of Congress from using information they have through their jobs to make money in the stock market.

Even if Price's broker bought without Price's knowledge, once he knew about the purchase, he should have directed the broker to sell the shares because he was introducing legislation that would benefit the company or consulted the ethics committee, Noble says.  

The Obama administration cracked down on payments to the medical equipment industry, which has been plagued by Medicare and Medicaid fraud for years. Tougher enforcement of who can legally get the equipment has led to substantial reductions in medical equipment payments.

When asked for comment, HHS provided a statement from an unnamed official that said Price has long been concerned about problems with the "durable medical equipment" (DME) competitive bidding process, adding that he introduced legislation to reform it in both 2012 and 2013. It also rebuffed what it saw as a suggestion that Price's involvement in public service has been motivated by something other than improving people's lives. 

The legislation Price sponsored on medical equipment had 121 co-sponsors, including 19 Democrats, the Trump administration noted. 

Earlier allegations about Price's special access to discounted stock for the Australian company Innate Immunotherapeutics — and misstatements about it — were not linked to Price's sponsorship of specific legislation that benefited the company. 

The McKesson purchase "raises a serious issue because there's no question he knew he had the stock when he introduced the legislation," said Noble, now general counsel of the bipartisan Campaign Legal Center. 

"If you, as a member of Congress, buy and sell health care stocks at the same time you are possessing non-public information about that legislation, you are taking the risk of being charged with criminal insider trading," says Painter, now a University of Minnesota law professor. 

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The House Ethics Manual states that whenever a member of Congress is considering sponsoring legislation or taking similar action "on a matter that may affect his or her personal financial interests," the member should seek guidance from the House Ethics Committee. Price did not consult with the committee as there was no conflict of interest, the Trump administration said. 

"It's fairly difficult to get in trouble in the House or Senate" when it comes to conflicts of interest, says Robert Walker, former chief counsel to the Senate and House Ethics committees. Still, Walker's advice to members of Congress is: "Invest in diversified mutual funds."

"Price is certainly not the only member of the House or Senate who buys and sells stock in this way or has individual stock in his portfolio,"  says Walker, now with law firm Wiley Rein. "But even if there's not an actual conflict under House rules, there will be potential appearance questions so you need to be able to meet those head on."  

McKesson partner celebrates

After passing the House, Price's legislation died in the Senate before portions, especially related to reimbursement in rural areas, were included in the 21st Century Cures Act. When that law passed the Senate on Dec. 6, the home health equipment services organization VGM Group couldn't contain their enthusiasm. McKesson is a "vendor partner" of VGM. 

“It is a red letter day for DME providers and their patients with the passage of rural relief," John Gallagher, VGM’s vice president of government relations said in a blog post illustrated by a picture of him with Price. "Providers will be able to recoup dollars over the past six months with a foundation being laid for the future with a change in leadership at HHS.”

Price was nominated to head HHS in late November. 

McKesson spokeswoman Kristin Hunter said the company "did not meet with Rep. Price prior to his introducing the legislation."

Even if Price's McKesson purchase doesn't constitute insider trading or violate House ethics rules, the ethics lawyers were unanimous in their view that it doesn't look good.  

"It's just stupid and shows very poor judgment," says Painter.  "That's something the Senate needs to consider."