The White House official who will shape a large part of the administration's drug price plan worked on many of the same issues as an industry lobbyist, raising questions about whether he violated President Donald Trump's ethics rules.
Joe Grogan — who has sweeping authority over drug pricing, entitlement programs and other aspects of federal health policy at the Office of Management and Budget — didn't obtain a waiver from a directive Trump issued during his first week in office that imposed a two-year cooling-off period between lobbying and regulating on the same "specific issue area."
Grogan worked as the top lobbyist for Gilead Sciences until he arrived at OMB last March, dealing with issues including how much federal health programs would pay for its medicines. Gilead was the company that in 2014 effectively set off the drug price controversy with Sovaldi, its breakthrough hepatitis C cure that cost $1,000 per pill and triggered a lengthy and highly critical Senate Finance Committee probe.
The administration says Grogan didn't need such a waiver because his OMB job doesn't overlap with what he did for California-based Gilead. His new role, OMB says, affects policy for an entire industry, not simply the one company he worked for.
But with the Trump administration now pledging to take on the high cost of prescription medicines, in large part through regulatory actions, Grogan, as OMB's associate director of health programs, will be in a pivotal position shaping drug policy — including aspects of Medicare and Medicaid. Some critics see a conflict.
“This is too close to what Mr. Grogan worked on when he was a drug lobbyist,” said Norman Eisen, chairman of Citizens for Responsibility and Ethics in Washington and former ethics chief for the Obama administration.
“To the extent that the Trump White House picked up the same language that I helped President [Barack] Obama write, this is something that we never would have allowed absent a waiver,” Eisen added.
Grogan convened the first meeting on the administration’s drug pricing policies in mid-April 2017 with a half dozen senior Health and Human Services officials, then led at least a dozen follow-up meetings through June to develop the plan, according to emails obtained under federal open records laws by legal watchdog group Democracy Forward, which describes itself as trying to expose improprieties in the executive branch.
Details of the meetings were heavily redacted, but the emails show they included senior officials from across HHS, the Federal Trade Commission, the U.S. Trade Representative and several White House offices, who on at least one occasion referred to themselves as “the drugs team.”
Grogan is hardly the only former lobbyist or industry official in the top ranks of the administration, but he is an exception among senior federal health policymakers for not completing federal ethics forms that laid out potential conflicts with his past work and what, if any, activities he would recuse himself from. HHS Secretary Alex Azar and Centers for Medicare & Medicaid Services Administrator Seema Verma completed such forms.
Grogan joined Gilead in 2011 and in his last year as its head of federal affairs, he was listed as lobbying on topics including the coverage and reimbursement of drugs in federal health programs, Food and Drug Administration policy, as well as a program that offered discounted drugs for hospitals and clinics serving low-income populations. The administration's 44-page blueprint on drug pricing released this month touches on all those areas. In his position at OMB, Grogan would shape or have a say over efforts to lower the price Medicare pays for drugs or to modify its prescription drug benefit. He’d also play some part in FDA initiatives to increase competition among different classes of medicines.
Ethics watchdogs say it’s not uncommon — or wrong — to have former industry officials weigh in on matters they used to preside over in the private sector, because they’re intimately familiar with the industry and players. The question is whether their actions benefit their former employers.
“You want a smart, qualified person, and presumably that’s what they got,” said Douglas Holtz-Eakin, president of the right-leaning American Action Forum, who added he didn’t know Grogan. “I have no automatic disqualification,” referring to a government official’s private sector background.
A senior OMB official said there is no conflict, because the Obama White House wasn’t working on drug pricing when Grogan was at Gilead and it’s not a discreet area on which he lobbied. Moreover, drug pricing broadly impacts the entire health sector, not specifically Grogan’s former employer, the official said. Grogan seeks guidance from OMB lawyers to ensure compliance with ethics rules and pledge restrictions, the official added.
Trump revoked an Obama revolving door rule that blocked any lobbyists registered in the preceding year from taking administration jobs, instead prescribing the two-year cooling-off period for lobbyists who joined his team. Grogan never received a waiver to the ethics rule, Yasaman Sutton, ethics official for OMB, told POLITICO.
By not obtaining a waiver or laying out potential conflicts and recusals in writing, Grogan stands out from Azar, a former CEO of the U.S. division of drugmaker Eli Lilly, who vowed to distance himself for a year from the Biotechnology Innovation Organization and the Healthcare Leadership Council, whose boards he served on until January 2017. CMS Administrator Verma said she wouldn’t preside over decisions involving clients or matters she dealt with as a private Medicaid consultant.
Many health policy watchers say even if Grogan’s actions on drug policy have been legal, his role is still troubling.
Gilead’s pricing of hepatitis C drugs was the target of a bipartisan, 18-monthlong investigation by the Senate Finance Committee, which concluded in 2015 that the company tried to maximize revenue by pricing Sovaldi at $84,000 for a single course of treatment, and introducing a follow-on drug Harvoni at $94,500.
Gilead declined to comment on Grogan’s work for the company and at the White House.
An OMB spokesman dismissed concerns about favoritism or conflicts, saying administration policies such as those outlined in a fiscal 2019 budget proposal would hurt, not boost, the bottom lines of the brand-name pharmaceutical industry.
“The idea that he is doing favors for drug companies is absurd, and is counter to a plain look at his work product,” the spokesman said. “Mr. Grogan agrees with President Trump that pharmaceutical prices are too high, and he is working hard to support the president’s efforts to lower drug prices to help the American people.”
Trump's executive order on former lobbyists made new administration officials pledge they “will not for a period of two years after the date of my appointment participate in any particular matter on which I lobbied on within the two years before the date of my appointment or participate in the specific issue area in which that particular matter falls.”
The independent Office of Government Ethics defined the term “specific issue area” in a six-page guidance last March, since the executive order did not. It concluded if an administration official had lobbied his or her current executive branch agency on a specific section of a regulation, he or she would have to seek a two-year recusal from working on the entire regulation while with the administration.
Other senior Trump health officials with drug industry ties have complied with the ethics rule and signed agreements laying out potential conflicts. They include Dan Best, a former CVS vice president who is now heading up drug pricing efforts at HHS and Lance Leggitt, chief of staff to then-HHS Secretary Tom Price before becoming deputy director of the White House Domestic Policy Council, who represented drug companies while overseeing health care lobbying at Baker Donelson. John O'Brien, a staffer in Azar’s immediate office who is primarily supporting HHS’ Medicare initiatives, worked for PhRMA earlier in his career.
The parameters for ethics pledges shouldn’t be left for successive administrations to change, said Public Citizen government affairs lobbyist Craig Holman, who filed a complaint with the White House in March over Grogan and 28 other former lobbyists working for the administration in areas also including labor and transportation. “That is broader than a specific policy ... These ethics officers are defining the terms to suit their own needs.”
Waivers are issued by White House counsel Don McGahn, who has granted at least 24, but the Trump administration has refused to make them public.
Grogan has taken steps to distance himself from his former employer. Last August, he recused himself from working on a value-based payment demonstration to pay for pricey new gene therapy cancer treatments after Gilead bought a small company that was on the verge of winning FDA approval for so-called CAR-T therapy.
Grogan told the OMB ethics office at the time he held “several discussions” about a possible demonstration that likely would be run out of Medicare’s innovation center after Gilead announced it was looking to buy the company, named Kite Pharma, since it would benefit his old employer, according to the emails obtained by Democracy Forward. He wrote in an email that he had no knowledge Gilead was looking to purchase Kite.
Critics say despite those disclosures, Grogan should disqualify himself from working on the drug pricing plan. “The policy proposals [Grogan] was associated with were notable for favoring the industry, despite the president's rhetoric that they were ‘getting away with murder,’” said John Rother, president of the National Coalition on Health Care. “I think most independent observers believe it's not appropriate for a drug lobbyist to assume a lead role on policy on issues he lobbied on.”
“The simplest explanation for Mr. Grogan working without such an agreement is that he did not think he had to commit to avoiding policy making of financial interest to his former employer,” said Tyson Brody, investigations director for Democracy Forward.