U.S. Rep. Markwayne Mullin, who sits on a subcommittee with oversight of the Food and Drug Administration, says his six-figure investment in an Australian pharmaceutical company does not constitute a conflict of interest because the FDA has no oversight of that company.
But the company in question, Innate Immunotherapeutics, says otherwise.
“Innate Immunotherapeutics Limited is pleased to confirm it has received clearance from the U.S. Food and Drug Administration for the company’s investigational new drug (IND) application lodged last month,” Innate wrote in a news release June 21.
A month after Innate was given that clearance from the FDA, Mullin was asked during a conference call with Oklahoma reporters about his Jan. 12 purchase of at least $100,000 and as much as $250,000 worth of Innate stock.
The Republican from Westville said July 25 that, due to ongoing clinical studies in Australia, the FDA has no oversight of Innate. When asked if Innate was attempting to market its drug in the U.S. or could benefit from congressional legislation, Mullin twice said, “No.”
Innate’s business model — and its stock value — are largely dependent on the success of a single drug, MIS416, for secondary progressive multiple sclerosis. If approved by the FDA, it would be the only drug available to treat that form of MS, allowing Innate to corner the market and, according to the company’s own estimates, generate as much as $3 billion in profits in the U.S. alone.
“The successful opening of an IND in the U.S. is an important milestone in the ongoing clinical development of MIS416,” Innate said in its June 21 news release, again referring to FDA approval.
In its 2013 prospectus for potential investors, Innate mentions the FDA eight times. On five occasions, the company explains that submitting applications to the FDA is part of its strategy, going so far as to mention its budget for the FDA application process. Contrary to Mullin’s claim, the company’s documents and public statements repeatedly underscore the importance of FDA oversight to Innate’s success.
When Mullin bought his shares of stock in the tiny pharmaceutical company this January, Innate was trading at about $1 per share on the Australian Stock Exchange and had no approved drugs on the market. It was, by any measure, a roll of the dice, a risky investment that could pay off in a big way.
Mullin sits on the Health Subcommittee of the Committee on Energy and Commerce, which exercises “a great deal of influence” over the FDA, said Dr. Susan Wood, a former assistant commissioner in the FDA.
The FDA, recognizing the conflicts of interest inherent with owning stock, bars employees from holding shares in any industry regulated by the FDA. That includes televisions, the screens of which are FDA regulated. Former FDA Commissioner Lester Crawford pleaded guilty in 2006 to federal charges after failing to divest from companies the FDA regulates.
“Even the appearance of a conflict of interest is directly forbidden for FDA employees,” Wood said.
Congress, however, has no such prohibitions on apparent conflicts of interest or the ownership of stock.
In November, less than two months before he invested heavily in Innate, Mullin voted for and publicly touted the 21st Century Cures Act. The bill reformed the FDA’s drug approval process, requiring the FDA to consider lower standards of evidence when determining whether to approve a drug.
That provision was written by U.S. Rep. Chris Collins, R-N.Y., a longtime investor in Innate who has been overheard on Capitol Hill boasting about money he’s made from a drug company that doesn’t sell any drugs, according to The Hill. Collins’ investments and his stock tips to congressional colleagues are subjects of an ongoing investigation. A spokeswoman for Mullin said he did not buy Innate stock at the advice of Collins.
“The congressman learned of Innate when it became a newsworthy topic,” said Amy Lawrence. “When then-Congressman Tom Price was being considered as the secretary of Health and Human Services, Congressman Mullin decided to invest in Innate, only after doing his own personal research of the company.”
Public Citizen, a left-leaning good government group, has filed complaints with the Securities Exchange Commission and Office of Congressional Ethics concerning Collins and Price, but not Mullin.
“Knowledge of Mullin’s investments came much later than for Price and Collins, well after we filed the original complaints, and we have not found any evidence that Collins directly solicited investments from Mullin,” said Craig Holman, a government affairs lobbyist with the group.
It’s not clear how much stock Mullin owns in Innate. A financial disclosure form states he purchased 110 shares of the stock on Jan. 12, valued at $100,001 to $250,000. However, shares of Innate stock were trading for $1.01 on that date, making 110 shares worth just $111.
“The value of the stock owned by the congressman is accurate as disclosed in his financial disclosure report,” Lawrence said. “The financial disclosure report, which is mandated by the Committee on Ethics, ensures compliance with all applicable laws.”
It’s also not clear where he bought the stock. When Innate is traded on the Australian Stock Exchange, its symbol is IIL, but Mullin’s disclosure report lists the symbol INNMF. That symbol is used when Innate stock is purchased through an over-the-counter market. Over-the-counter transactions are done directly between a buyer and a seller with less transparency and fewer regulations, bypassing the typical stock exchange, according to Citizens for Responsibility and Ethics in Washington.
“It’s not clear from the report where he bought the shares exactly,” said John Morgan, a research associate at CREW. “It’s possible the purchase was made in Australia, but it doesn’t appear to have been made on the Australian Stock Exchange.”
In 2014, the House Ethics Committee reviewed Mullin’s finances to determine whether he violated federal law by allegedly earning more than $600,000 from his plumbing business and promoting the Broken Arrow-based company on television. His response to those allegations foreshadowed his investment in Innate.
“Apparently, it’s acceptable for members of Congress to own stock in companies we regulate in Congress, but somehow our plumbing company crosses some line,” Mullin said at the time.
It is legal for members of Congress to own stocks in companies they regulate. However, a 2012 law prohibits insider trading by members of Congress — the use of non-public information for profit in stock trading. Collins, the New York congressman, is under investigation for possible violations of the law that stem from his support for the 21st Century Cures Act.
As for Mullin’s investment gamble in Innate, it has yet to pay off. In June, the multiple sclerosis drug failed to show results during a 93-patient clinical trial. The drug’s stock price plummeted 93 percent and has yet to rebound. As of lasst week, it was worth five cents.
Members of Congress must report significant purchases or sales of stock within 45 days of the trade. Holman said he is monitoring Mullin’s recent stock trading activity to see if he sold his Innate stock before its collapse in value, “which would suggest insider trading.”
“So far there is no such evidence,” he said.