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The controversy around HHS secretary Tom Price’s stock portfolio, explained

Senate Confirmation Hearing Held For Rep. Tom Price To Become Health And Human Services Secretary Alex Wong/Getty Images
Libby Nelson is Vox's policy editor, leading coverage of how government action and inaction shape American life. Libby has more than a decade of policy journalism experience, including at Inside Higher Ed and Politico. She joined Vox in 2014.

Rep. Tom Price, President-elect Donald Trump’s pick for health and human services secretary, spent 12 years in Congress writing legislation on health care issues. And for at least the past four years, he bought and sold more than $300,000 in health care stocks — stocks whose value was affected by the legislation he was working on.

Senate Democrats hoped Price’s stock trades would derail his confirmation hearings, hammering on them in hearings. Instead, he was confirmed early Friday by a party line vote of 52 to 47.

Price’s trades might not be illegal, but they look bad; ethics experts advise that members of Congress refrain from trading individual stocks and stick to mutual funds while they’re in office.

They’re also part of a bigger pattern for the incoming president-elect and his nominees: From Trump’s own conflicts to his nominees’ struggles to finish their ethics paperwork on time, the new administration is repeatedly sending the signal that it doesn’t seem to care much about the norms and traditions of ethics.

Price traded stocks while he was a member of Congress

Price’s problems started with a Wall Street Journal report in December that found he’d bought and sold stocks worth more than $300,000 in about 40 health care companies while he was serving on committees working on health care legislation.

His financial disclosure shows he owns stock in several publicly traded companies in the health care field: Aetna, Amgen, Athenahealth, Biogen, Bristol Myers Squibb, CVS, Eli Lilly, Innate Immunotherapeutics, Jazz Pharmaceuticals, McKesson, Pfizer, and Zimmer Biomet. (He recently owned stock in one more, Thermo Fisher.) His investments include some of the biggest drug researchers and manufacturers, large health insurers, and health technology companies — companies whose share price is affected by Congress and the department Price wants to lead.

Still, Price’s investments often landed on the right side of ethics rules. House conflict-of-interest rules say lawmakers shouldn’t weigh in on legislation that could affect them financially, but there’s an exemption for publicly traded stocks worth less than $15,000. Most of Price’s trades fell into that category.

Similarly, a 2012 law, the STOCK Act, prohibits insider trading among members of Congress, meaning they can’t use information not available to the general public that they’ve learned in the course of their duties to make money buying and selling stock. There’s no evidence Price violated that law.

But that hasn’t stopped a slow drip of anecdotes about his decisions to buy and sell health care stock over the past year while introducing legislation that would affect those companies’ bottom lines:

  • In March 2016, according to a CNN investigation, Price bought up to $15,000 worth of stock in Zimmer Biomet, a medical device company that specializes in hip and knee implants. Two days later, he introduced legislation to delay a regulation that would have hurt the company’s business by changing how Medicare and Medicaid reimburse those procedures. Zimmer Biomet then donated to his campaign. (Price says he was not aware of the purchase, which was made by his broker.)
  • Price also bought shares in six pharmaceutical companies a week after a federal regulation was proposed that would lower reimbursements for doctors who prescribe expensive drugs for cancer and arthritis, according to Time magazine. The regulation was meant to help control health care costs by encouraging doctors to prescribe generic drugs and cheaper alternatives instead, and would have hurt pharmaceutical companies’ bottom lines. The companies lobbied against the regulation, and Price sponsored legislation to block it. It was never enacted.
  • Price was able to take advantage of a special deal in another biotech firm, Innate Immunotherapeutics, an Australian company developing a multiple sclerosis drug, according to Kaiser Health News. Price was offered discounted shares for “sophisticated investors” in summer 2016 after making a smaller investment in the company in 2015. (A fellow member of Congress, Rep. Chris Collins, is on the company’s board; members of the Collins family own about 20 percent of the company.)

It’s not clear Price broke the law — but it does look shady

Trump’s transition team argues that Price’s broker at Morgan Stanley bought the stocks and that Price didn’t make the decisions personally. He didn’t even know he owned the Zimmer Biomet stock for nearly three weeks, and he’d opposed the regulation on reimbursements for hip and knee replacements since long before he bought the stock.

But Price also told the Senate Committee on Health, Education, Labor, and Pensions that he made the decision to invest in Innate Immuno, the Australian drug company, himself after a conversation with his House of Representatives colleague Collins.

Regardless of who made the decision, there isn’t evidence proving that Price broke the law by trading on his insider knowledge. Proposed federal regulations are public, and he bought stock in Zimmer Biomet and pharmaceutical companies during a period when those companies’ stock prices had fallen considerably, due in part to concern about high drug prices. He or his broker, whoever made the decision, might have just thought they were good buys.

Still, Price did work on legislation that would affect companies he was invested in, and ethics rules for the House of Representatives find that to be dicey at best. The House doesn’t have strict rules on income from investments; the House Ethics Manual says those matters are handled through disclosure and the “discipline of the electoral process” — if voters are angry, they can vote you out.

But the manual does say that while it’s okay for members to vote on legislation affecting corporations of which they’re stockholders, being more directly involved — co-sponsoring the bill, for example, or advocating for it — warrants “added circumspection” and a check-in with the House Ethics Committee. Price appears to have advocated for legislation affecting his financial interest fairly routinely, and he continued to invest in companies his bills would affect rather than sticking to safer, diversified mutual funds.

The Trump transition’s ethics problems don’t stop with Price

Price will have to get rid of his conflicts of interest now that he’s confirmed, according to his agreement with the Office of Government Ethics. Price promised to divest from the health care companies (and to sell his other publicly traded stock as well), and he’ll be barred, while he’s in office, from investing in a wide range of public companies.

So his conflicts of interests don’t matter in the immediate sense. But they’re part of a larger miasma of unethical behavior that’s surrounded the Trump administration and raised questions about its commitments to ethical norms and guidelines.

The president-elect has refused to shed his own potential business conflicts entirely, saying only that he’ll turn his companies over to his two adult sons to run while he’s in office.

His transition team ignored the advice from the Office of Government Ethics that prospective Cabinet members should submit their financial disclosures early, before Trump publicly nominated them. That process could have caught Price’s stock trades before they became public knowledge and given the administration a chance to decide whether they wanted to nominate someone else instead.

The Senate initially scheduled hearings for Trump’s Cabinet members who hadn’t finalized their financial disclosures and ethics agreement, a break with tradition. When they rescheduled the hearings in most cases to wait until the agreements were complete, Trump’s team was reportedly upset and wanted to keep the process moving along.

That’s one reason Senate Democrats attacked Price for his stock trades. It’s not that his conflicts of interest will continue now that he’s in the Cabinet. It’s that they appear to be part of a larger pattern.