Sen.Burr Pushes Healthcare Industry Legislation While Trading Its Stocks
Reprinted with permission from ProPublica.
In his 15 years in the Senate, Richard Burr, a North Carolina Republican, has been one of the health care industry's staunchest friends.
Serving on the health care and finance committees, Burr advocated to end the tax on medical device makers, one of the industry's most-detested aspects of the 2010 Affordable Care Act. He pushed the Food and Drug Administration to speed up its approval process. As one of the most prominent Republican health care policy thinkers, he has sponsored or co-sponsored dozens of health-related bills, including a proposal to replace “Obamacare." He oversaw the implementation of major legislation to pump taxpayer money into private sector initiatives to address public health threats. “The industry feels very positive about Sen. Burr," the president of North Carolina's bioscience trade group said during Burr's last reelection campaign. “He's done a stellar job."
Burr also trades in and out of the industry's stocks.
Since 2013, Burr and his wife bought and sold between $639,500 and $1.1 million of stock in companies that make medical devices, equipment, supplies and drugs, according to a ProPublica analysis of his financial disclosures.
With weak laws and little oversight, such trading rarely trips any wires. There is no evidence Burr has acted illegally or violated Senate rules.
Senators are prohibited from pushing legislation in order to directly further their own financial interest, but they can own stocks in industries overseen by committees on which they sit and trade in and out of individual stocks.
Senators are prohibited from using inside information gleaned from their legislative work when trading, but that's almost impossible to define and prove. No member of Congress has been charged because of the Stop Trading on Congressional Knowledge Act, or the STOCK Act, which explicitly banned the use of inside information, since it was passed in 2012.
Burr is also one of the Senate's biggest beneficiaries of the industry's largesse. Medical companies, trade groups and their executives and lobbyists regularly donate to his political committees. He's received $1.5 million in donations from the pharmaceutical and medical product industries since his first election in 1994, according to the Center for Responsive Politics.
Burr's representatives declined to comment for this story.
Burr's financial interests have come under scrutiny in recent weeks. ProPublica reported he unloaded a significant portion of his stock holdings soon before the market crashed because of coronavirus fears, prompting an FBI investigation and calls for his resignation. Since then, ProPublica also has reported on Burr's timely sale of his shares of an obscure fertilizer company and his townhouse sale to a donor and powerful lobbyist who had business before Burr's committees. Burr has defended his recent stock sell-off, saying he relied solely on public information, including CNBC reports, to inform his trades and did not rely on information he obtained as a senator. He has also defended the townhouse sale, saying it was fair market value.
Sometimes Burr's financial interests and official business overlap. In March 2017, as Congress prepared to reauthorize the FDA's authority to take fees from drug companies and medical device makers to fund the approval process for new products, Burr took a strong pro-industry stance. During a hearing before the Senate Committee on Health, Education, Labor and Pensions, Burr grilled FDA officials about whether they were diverting funds to unrelated projects and suggested they return some of the money to companies.
Among the corporations lobbying the Senate on that legislation was Philips, a Dutch firm that produces medical devices including ultrasound scanners, catheters, patient monitors and ventilators. At the end of 2016, Burr and his wife owned $45,518 worth of the company's stock. Later that year, with the legislation still pending, they also bought $57,802 worth of Zimmer Biomet, an Indiana-based orthopedic device maker.
Even though such financial ties are broadly permitted, ethics experts advise lawmakers to avoid the appearance of a conflict that arises when they trade individual stocks, particularly those that are directly relevant to their legislative portfolios. Bills have been introduced in both chambers to ban the practice outright.
Tyler Gellasch, a former Senate staffer who helped draft the STOCK Act, said that trading of individual stocks by lawmakers should be banned and that trades of broader mutual funds and exchange traded funds should require clearance by ethics officials.
“Every single day, members of Congress and their staffs learn a ton of information, both public and non-public. And it's generally impossible for any member of Congress to even know what information they obtain as a part of their jobs is material nonpublic information versus how much is public information," he said. “It's rare that they're told that the information they have is material nonpublic information."
Gellasch points out that financial services professionals and corporate executives often have their trading restricted, and lawmakers should too.
“These folks are making billion-dollar decisions every single day," he said. “They receive material nonpublic information, but they also create it. The reason they have all this information is because they can change the outcomes."
A letter to an agency, a comment at a hearing, a press release, a bill proposal or a vote could all move markets, Gellasch said, immediately or even months down the line.
While trading health care-related stocks, Burr has also developed close political ties with the industry. During his last reelection campaign in 2016, lobbyists for drugmaker AbbVie and Johnson & Johnson invited donors to mingle with Burr at an event at an Italian trattoria. Burr has owned shares of both companies.
As a lawmaker from North Carolina — home to dozens of companies that develop medical devices and pharmaceuticals — it's not surprising that Burr would advocate for the health care industry. But there are multiple instances in which his financial interests have overlapped with his official actions.
In January 2015, Burr joined a bipartisan group of senators in proposing legislation to kill the tax on medical devices. “Repealing this job-killing medical device tax will help ensure America remains the world leader in the research and development of life-saving medical products," Burr said, one of several efforts he backed to permanently end the tax, which was repealed in 2019.
Financial disclosures show that as of the end of 2014, Burr and his wife owned a combined 1,000 shares of Abbott Laboratories worth approximately $41,800. The Illinois-based medical device maker, a Burr donor, was lobbying to end the tax.
Last October, Burr again took a stance that aligned with Philips' interests. The Centers for Medicare and Medicaid Services was considering whether to change how the giant government run health care program would reimburse providers for radiation treatments on cancer patients. CMS wanted to experiment with moving from multiple per-treatment payments to one bundled sum, no matter how many treatments were provided, which would have saved taxpayers $260 million over a five-year period, according to a CMS estimate.
Philips, which sells a range of equipment used in radiation treatments, wrote to CMS to ask for a delay in the payment model experiment, and to express concerns with the low reimbursement rates. A week later, Burr and another senator wrote a similar letter to CMS echoing some of the company's concerns: “We believe that the current proposal does not fully balance the incentive to participate with the decrease in payment rate, potentially jeopardizing the availability of radiation therapy for seniors."
In recent weeks, Philips has become the target of congressional scrutiny for taking millions in tax dollars to develop affordable ventilators to be stockpiled for use during a pandemic. Instead the company produced none for the government and sold ventilators for a much higher price overseas.
The government office responsible for the Philips contract was the Biomedical Advanced Research and Development Authority — the creation of which was one of Burr's top legislative achievements in 2006 as part of a major bill he authored to address public health threats including bioterrorism and pandemics. The office, part of the Department of Health and Human Services, has been compared to a venture capital firm. A key aspect of the bill was to dole out grants to private companies working on products to address public health threats and help them through the regulatory process. In recent weeks, it has been examining private industry proposals for respirators, ventilators, tests, vaccines and therapeutics to COVID-19.
Though Burr has continued to advocate for BARDA over the years, there is no evidence Burr had any role in Philips' ventilator contract.
Unlike with his stock sales ahead of the market crash on coronavirus fears, Burr's previous stock moves have yielded mixed results. He sold shares of Zimmer Biomet, in January 2019, before the stock began a steep climb, ending the year up 50%. Other trades proved more timely: Burr bought shares of AbbVie in June 2019 on the day the company announced plans to acquire fellow drugmaker Allergan, a move that was initially unpopular with investors but preceded a rise in the company's stock price.
It's unclear how much of his portfolio still includes health care stocks because Burr has not yet reported his total assets for 2020.
In recent years, a number of lawmakers have come under fire for trading stocks relevant to their legislative agendas. Most notably, Tom Price, President Donald Trump's first pick to lead HHS, was criticized during his confirmation hearings for trading more than $300,000 of shares in health companies over a four-year period while working on health care legislation in the House.
Burr came to his defense, asserting that Price's critics in Congress “currently buy and sell and trade assets" just as Price had done.
“Does it burn you," Burr asked Price during the hearing, “that they want to hold you to a different standard, now that you're a nominee, than they are as a member?"
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