The Speaker of the House has been very good to Amgen. And vice-versa.
The year 2007 kicked off with expectations of good market news for the California-based biotech firm. It was expected to surge 27 percent on its share value that year according to analysts with Thompson Financial. Instead, it did just the opposite, beginning a sharp tumble down after just the first few weeks into the year.
After falling from the mid seventies to the mid fifties, the stock started to get back on its feet. Until May of 2007, that is, when Medicare announced it was considering new restrictions on the use of anemia treatment drugs made by Amgen for its own sales, and for Johnson & Johnson to market under a different product name. The New York Times reported on this issue in mid August, 2007:
Amgen executives said the new Medicare policy would force huge restrictions on use of Aranesp and force doctors to change how they practice. Doctors and patient groups are protesting the decision, but it is not clear that Medicare will change it.
When the final decision came out, Medicare had lifted many of the proposed restrictions and it looked like Amgen had dodged a bullet.
Friends in high places
But dodging wasn't the only maneuver that saved the company. As fortune would have it, this company that had never experienced such a down turn had a card up its sleeve. Amgen had an option that was not bound by the limitations of market forces. Amgen had a newly minted Speaker of the House with a portion of the company in her district, her former senior policy advisor in charge of the company's government affairs, and her own financial investment in a company which leased the rights to sell Amgen's most successful drug.
Amgen not only dogged a bullet, it had Nancy Pelosi to help smack the gun out of Medicare's hand. Although her signature is not visible on legislation, as Speaker she sets the agenda in the House. It suddenly became important for congress to intervene in this regulatory matter during the summer of 2007.
The effort in the House was spearheaded by one of her closest confidantes, Anna Eshoo. The sister Congresswoman told the San Francisco Chronicle "we've known each other for 30 years." The Chronicle has labeled her one of Pelosi's closest friends in Congress. A raft of bills, bipartisan in nature but mostly championed by Congresswoman Eshoo in the House, would be submitted that fall: (http://thomas.loc.gov/, search term "Erythropoiesis") 1 . Providing for congressional disapproval under chapter 8 of title 5, United States Code, of the rule submitted by the Centers for Medicare & Medicaid Services within the Department of... (Introduced in House)[H.J.RES.54.IH]2 . Providing for congressional disapproval under chapter 8 of title 5, United States Code, of the rule submitted by the Centers for Medicare & Medicaid Services within the Department of... (Introduced in Senate)[S.J.RES.22.IS]3 . To express the sense of the House of Representatives regarding the Medicare national coverage determination on the treatment of anemia in cancer patients. (Introduced in House)[H.RES.681.IH]4 . To express the sense of the Senate regarding the Medicare national coverage determination on the treatment of anemia in cancer patients. (Introduced in Senate)[S.RES.305.IS]
Follow the money
Over the next few months, Amgen executives, including the CEO, Chairman and President of Amgen, began donating money to congressional campaign committees and to some campaign coffers in particular. They were most generous to Pelosi, becoming her largest corporate donor for the year. The bulk of it came the week before Medicare was set to make the change official at the beginning of August.
It's not a new or particularly nefarious concept, donating money to a politician who can help you. It's just usually done a little more subtly, staggered out at seemly intervals, not all dumped in at once, at the end of July, as if to indicate a time of significance had arrived. And it usually doesn't involve a politician with a personal financial stake in the matter. Pelosi and her husband Paul owned between a quarter and a half million dollars of Johnson & Johnson stock as revealed on their 2006 disclosure form (page 10), and apparently still own it.
When Amgen execs pumped thousands of dollars into her campaign coffers, did they know she was immediately going to shepherd an effort to stop the planned restrictions? Did they know she was also going to revive a beneficial piece of legislation that had lain dormant for years?
Did Pelosi know that the bill she was submitting, the Early Treatment of HIV Act would ultimately offset some of the losses caused by the planned Medicare restrictions? To deny knowledge would be to admit ignorance of the effect of her legislation, that it was a rescue bill to help a struggling giant in her district, in her social circle, and its secondary marketing channel in her portfolio.
The public trust
In the scheme of things, a few tens of thousands of dollars in donations is not so much, nor is the mere fraction of a million dollar investment a big deal to the seriously wealthy Pelosis, but our public trust is priceless. So when we see a circumstance in which the government is planning to restrict government purchasing, and then we all of a sudden find anomalous donations to a politicians' campaign, and then we see that politician in charge empower the resurrection of a bill that will counter the effect of the restrictions, it at least raises the question of a quid-pro-quo, doesn't it?
Ironically, even as Pelosi was denying any impropriety in this matter, she was blaming Senator McCain for Boeing's loss of an Air Force fuel tanker contract that went to a foreign competitor. Boeing had originally won the bid, until it was discovered that an Air Force official received the promise of a job with Boeing in return for favoritism. McCain had made sure the renewed bidding process was well supervised.
What's the difference between the actions of the disgraced Air Force acquisition official and the appearances in the case of Speaker Pelosi? In both cases, a corporate moneybags benefited from support by an official with influence over a government acquisition matter. The most visible difference is that the Air Force official went to jail while Pelosi shrugs her shoulders and claims it's okay because the bill she submitted in 2007 had been submitted in 1999 and that she cares about people with AIDS. Could our jailed Air Force official have claimed she cared about keeping the corporate headquarters of the airframe supplier in the United States? Would investigators have bought that?
But even if we support ETHA, even if we believe in the right to make such campaign contributions, even if we believe the Medicare rule change was flawed, and even if we take the Speaker at her word on her motives, the appearance of pay-to-play is a problem. Just as is the appearance of the Speaker sending legislation to come before the House when that legislation affects a quarter to half million dollar entry in the Speaker's own stock portfolio.
Appearances do matter.
In 1999, Congressman Tom Delay was reprimanded by the House Ethics Committee for "participation in and facilitation of an energy company golf fundraiser". The ethics panel determined that at the very least his actions
"created an appearance that donors were being provided special access to you regarding the then-pending energy legislation."
Did Delay even own stock?
Did Amgen have special access to the Speaker in the summer of 2007 either through fund raiser events or friendly contacts? Should her sponsorship of ETHA and legislative management of the Medicare bills be considered "pending [pharmaceutical] legislation"?
Ultimately there may be no way to prove that the Speaker knew her bill would help Amgen. There may be no way to prove Amgen's generous campaign contributions were linked to the timely legislation halting the fall of Amgen in the autumn of last year.
And the public is not likely to hear or care about it. Not unless the media digs anyway. Will they? Will the New York Times apply the same standard of scrutiny as it did to John McCain's dealing with a certain lobbyist? Will the media, self-appointed watchdog of the government, do their job when a Democrat leader is on the line?