Democracy Forward Demands Ethics Investigation into White House Official’s Role in Developing Special Drug Pricing Project With Novartis

Democracy Forward filed a complaint with the Office of Government Ethics requesting an immediate investigation into whether senior White House official Joseph Grogan violated ethics laws by working on a drug pricing project of significant financial interest to his former employer.

Internal government emails obtained by Democracy Forward show that, as a White House official, Grogan worked with drugmaker Novartis to develop a novel and potentially lucrative drug pricing arrangement for CAR-T therapy, a specialized cancer treatment.  According to the emails, Grogan was recused from this project — just days before a public announcement — when his former employer, Gilead Sciences, announced its intent to acquire another drug company in the CAR-T space.  But Gilead had been working to enter the CAR-T market for more than a year, raising questions about whether Grogan should have been working on the CAR-T pricing demonstration project at all.

After joining the Office of Management and Budget (OMB) in March 2017, Grogan, the former Head of Federal Affairs for Gilead, began working with Novartis to develop new Medicaid and Medicare payment arrangements for the CAR-T therapy.  Within two days of Grogan’s recusal, Novartis secured FDA approval for use of CAR-T (later priced at $475,000 per treatment) and announced its collaboration with CMS on a new pricing approach.

Days before the potential Novartis drug pricing arrangement was announced, Gilead publicly announced its intent to acquire Kite Pharma, the other leading developer of the CAR-T therapy in the United States, apart from Novartis.  Indeed, following the Trump Administration’s announcement of its collaboration with Novartis on this pricing demonstration project, Gilead’s stock rose 5 percent.

When Gilead’s acquisition was announced publicly, Grogan emailed OMB ethics officials about the CAR-T project — which he described as “almost nearing completion” — given Gilead’s entry into the market.  Told that ethics rules required his recusal, he agreed and noted that the demonstration project could continue “through the normal process of approving demonstrations that HHS designs and seeks to launch.”

Gilead’s substantial steps toward entering the CAR-T market, including its pursuit of Kite Pharma, while Grogan worked at Gilead raise serious questions as to whether Grogan should have been recused from development of the special pricing project earlier — or whether it was appropriate for him to work on it at all.

During the time Grogan worked at Gilead:

  • Gilead and Kite Pharma had been holding “informal discussions” about a potential acquisition since at least 2015, according to SEC filings.
  • In January 2017, top officials from Gilead and Kite Pharma met to discuss Gilead’s interest in oncology.
  • Also in January 2017, Gilead hired Alessandro Riva, who had previously run the oncology department for Novartis AG, and who Gilead has described as a “critical leader” in helping the company enter the oncology drug therapy market.
  • In February 2017, Gilead and Kite entered into a confidentiality agreement to negotiate a potential acquisition.

In March 2017, following all of these events, Grogan entered the Trump Administration and began working on the CAR-T pricing arrangements.  In May 2017, while Grogan was working on the project, Gilead’s Chief Scientific Officer publicly said the company was “narrowing in on” cellular therapy like CAR-T as it sought to become a leader in cancer drug development.

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