Company Tied to Top HHS Official Landed $470 Million Deal for Pandemic Prep

In partnership with: Daily Beast

Last year, over the objections of government experts, a company with ties to a top federal official won a pandemic response contract worth up to $470 million, according to a Project On Government Oversight (POGO) and Anti-Corruption Data Collective investigation. 

Weeks after that Department of Health and Human Services (HHS) contract was awarded, a federal court unsealed a lawsuit alleging the agency had been previously defrauded into buying the drug from another company. The lawsuit alleged the drug was “more likely to perpetuate an influenza pandemic than to stop one.”

HHS has said that there was nothing improper about the nearly-half-billion-dollar contract, for a drug called oseltamivir, but more commonly known as Tamiflu, denying the claims of a prominent whistleblower. The agency argues the award saved taxpayer dollars, freeing up funds for other treatments. 

But even if this contract award does not directly involve the federal government’s response to the coronavirus, it underlines the risk that ties between contractors and top officials could skew how taxpayer dollars are spent during the pandemic. 

HHS did not respond to queries about the top official’s ties—or broader questions raised about industry influence over pandemic response—for this story.

When viewed alongside other cases of companies winning large pandemic-related contracts during the Trump administration, such as a massive coronavirus contract awarded to Eastman Kodak, questions of favoritism loom large. Nearly 30 of Trump’s political appointees at HHS previously worked as lobbyists, which appear to be about as many as during the previous 16 years under Presidents George W. Bush and Barack Obama. If anything, the available numbers are likely undercounts, and they don’t count appointees who had other industry roles, but weren’t registered lobbyists.

Representative Katie Porter (D-CA) earlier this year called for an investigation into the HHS’s revolving door—the movement of officials to and from companies and industry groups with business before a federal agency. “We cannot put patients’ lives at risk to boost the profits of large pharmaceutical companies,” she wrote.

Experts tend to agree.

“Having been in industry is not a disqualification, but is certainly something that you need to think about when appointing people to these positions,” said Dr. Timothy Brewer, a University of California-Los Angeles epidemiology professor. 

Whether the revolving door has played an improper role in government decision-making is usually tough to show. But what is clear is that companies with ties to Trump appointees have benefited by receiving large HHS contract awards to supply the Strategic National Stockpile, a network of federal repositories of medical supplies for public-health emergencies that has been sorely tested by the coronavirus pandemic.

One largely unexamined case of a company with ties to a top Trump appointee winning massive HHS funding involves a former client of Eric Hargan, who was confirmed as deputy secretary—the number two official—at the agency in October 2017. 

Hargan previously served on Trump’s transition team, and also served as HHS’s deputy secretary during the George W. Bush administration. In the intervening decade, he worked as a pharmaceutical industry lawyer and lobbyist.

“For health industry companies and investors, his experience as a senior official at the U.S. Department of Health and Human Services, combined with over a decade of experience as a transactional attorney, allow him to provide unique and advantageous insights to his clients,” reads an archived biography from the law firm Greenberg Traurig’s website.

During the Senate confirmation process in 2017, Hargan was asked if he would have any conflicts of interest as HHS’s deputy secretary. “None,” he responded, “except routine representation of clients in the health-care sector.”  

As second in command in Trump’s HHS, he immediately took up the role of acting secretary until the appointment of his now boss, Alex Azar—another former pharma executive—in January 2018.

But even as he worked on Trump’s HHS transition team, Hargan was simultaneously providing legal services for the drug company Alvogen, according to a federal ethics disclosure. After Hargan left, the company would go on to be awarded the huge HHS gig, its first such contract ever. 

Neither Alvogen nor Hargan responded to requests for comment for this story.

Serving on a presidential transition is a way to get an inside look at federal operations and potentially provides valuable insights for those with clients who have government business. Hargan was one among many with industry ties working on the Trump transition team in 2016, drawing criticism that the president-elect immediately abandoned his promise to “drain the swamp.” 

Even as Hargan held his dual roles as Alvogen legal adviser and Trump transition team member that December, the company announced it would sell oseltamivir, the first generic version of Tamiflu, calling it “an important milestone for our U.S. business.”

Just weeks after Hargan ceased working for Alvogen, according to his disclosure, the outgoing Obama administration held a pandemic influenza exercise with Trump’s transition team, in January 2017. One of the key takeaways from the exercise was that a “medical countermeasure strategy is key to success,” referring in part to antiviral drugs, according to records obtained by Politico

But the antiviral flu drug oseltamivir, part of a class of drugs called neuraminidase inhibitors (NIs), has a controversial history.

In 2014, the independent and respected Cochrane network of health experts issued a gold-standard review that stated “there is little evidence to support any belief that use of NIs reduces hospital admission or the risk of developing confirmed pneumonia.”

The UK-based network further wrote that “the evidence also suggests that there are insufficient grounds to support the use of NIs in preventing the person-to-person spread of influenza.” The Cochrane report relied on clinical trial data that the pharma giants Roche and GlaxoSmithKline had fought hard to keep secret, but which was finally disclosed after a four-year campaign by the British Medical Journal and others.

The report caused an international scandal and led Roche to punch back hard, disputing the Cochrane findings and leading to a string of competing medical reviews.

Despite the controversy, in late 2018, HHS Assistant Secretary of Preparedness and Response Robert Kadlec, Hargan’s subordinate and another Trump appointee, pushed to stockpile the drug in the U.S., according to a whistleblower complaint filed this year. The whistleblower, Rick Bright, was, until recently, the head of HHS’s Biomedical Advanced Research and Development Authority who famously broke with Azar, Trump, and other officials over what he said was their inattention to the dire need for personal protective equipment—and an undue fixation on antimalarial drug hydroxychloroquine. (Disclosure: One of Bright’s attorneys is a member of POGO’s board of directors.) 

Around the same time Bright said Kadlec began to push to buy the influenza antiviral oseltamivir, Alvogen’s lobbyists began advocating for the “development and procurement of influenza antivirals” in communications with HHS and Congress, according to a lobbying disclosure.

In response to Kadlec’s efforts inside HHS, Bright said he and other career scientific experts objected to procuring oseltamivir, calling it an “inferior” choice because it was less effective against the flu than other medicines. Kadlec did not respond to requests for comment for this story.

Lending support to Bright’s complaint is a passage in a Trump HHS budget request to Congress that states that growing influenza resistance is a “serious concern for existing small molecule antivirals drugs, such as oseltamivir (Tamiflu).” And a 2013 study found that in 2007 and 2008 an “oseltamivir‐resistant” strain of the flu “emerged in the northern hemisphere and spread rapidly around the world.” (According to Brewer, the UCLA epidemiology professor, oseltamivir is in a class of drugs that “still remains our primary workhorse” for treating the flu.)

HHS forged ahead. In January 2019, the HHS secretary’s office put out a solicitation for a five-year contract to supply hundreds of millions of oseltamivir capsules to replenish the Strategic National Stockpile. The contract received three bids and, in August 2019, was awarded to Alvogen, with a projected total value of up to $470 million.

Meanwhile, things came to a head for Bright this spring. He said Kadlec and Secretary Azar had already been angered by the concerns he raised about the Alvogen contract and other allegedly questionable deals where companies used the services of a well-connected consultant. Bright retired from federal service this month, citing continuing retaliation. “As the Administration continues to censor and sideline its scientists, and this country approaches the darkest winter in our nation’s history, Dr. Bright had no choice but to resign,” Bright’s attorneys wrote in a new addendum to his whistleblower complaint.

In a statement, HHS has said it “strongly disagrees with the allegations and characterizations made by Rick Bright.” Regarding the Alvogen contract, HHS said it obtained Alvogen’s drug because it cost far less than a non-generic alternative. Thus, HHS’s statement said, Kadlec’s office “could replenish more expiring anti-virals in the strategic national stockpile (SNS) with oseltamivir. The contract for oseltamivir left the SNS the flexibility to acquire other products.” 

However, around the same time Trump’s HHS was awarding the new contract to buy more oseltamivir, a lawsuit became public alleging the agency had been previously defrauded into buying the same drug. Just weeks after HHS awarded the contract to Alvogen, a federal court unsealed a whistleblower’s fraud lawsuit regarding oseltamivir on September 10, 2019. On behalf of the federal government and dozens of state governments, one of the Cochrane reviewers, Dr. Thomas Jefferson, alleged in the complaint that pharma giant Roche “executed a successful fraudulent scheme to sell expensive courses of the drug Tamiflu (oseltamivir).” 

Jefferson alleged that, due to misrepresentations regarding oseltamivir, the federal government and states were defrauded to the tune of over $1.4 billion as of 2014. A month ago, a federal judge denied Roche’s motion to dismiss the case, which is ongoing.

Roche has said it “has complete confidence in the safety and efficacy of Tamiflu and the company plans to vigorously defend itself against these allegations.” Roche has also said that the Cochrane study that Jefferson was part of contained fundamental flaws; a 2014 Roche-funded study found use of Tamiflu reduced the incidence of death by 19 percent compared to no treatment.

Win or lose, the case could shed light on whether the government has been adequately vetting the pandemic treatments and other supplies it spends taxpayer money on and how forthcoming its suppliers have been.

“This case is more important than ever as our government responds to the desperate need to stockpile protective equipment and supplies for the COVID-19 pandemic,” one of Jefferson’s attorneys said in an October statement.

Beyond this one case, the industry ties of HHS officials pose a broader threat, experts said.

“There are critics of vaccines and mainstream medical testing and treatment that are going to use the conflict-of-interest club to attack and undermine the support for them,” said Arthur Caplan, a bioethics professor with New York University’s medical school. “Trust right now is very fragile.”

As for Hargan’s connection to Alvogen, in April 2017, he agreed to not “participate in an official capacity in any particular matter that is directly and substantially related to” Alvogen, as well as dozens of other companies, for a period of two years.

That timeout lapsed last year.

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