Trump’s HHS choice: First a letter to Medicare. Then a campaign contribution

Tom Price, the Georgia congressman tapped for the nation’s top health job, pressed Medicare officials on a funding change that led to a windfall for the small biotech company run by one of his top campaign contributors, according to a document released under an open records request.

Price faced a Senate hearing Tuesday, Jan. 24, on his nomination to be secretary of Health and Human Services, a role that would put him at the helm of an agency overseeing billions in spending. His initial hearing revealed the depth of Democratic lawmakers’ concerns about Price’s investments in health care stocks.

The document shows for the first time the nature of the assistance Price provided for MiMedx, a firm in his district that would become a top campaign contributor, seeding his political funds with more than $40,000 in the years since Price directed the letter to Medicare officials.

The Medicare letter that Price and seven other lawmakers sent on Oct. 9, 2013, was related to a product called EpiFix, a small graft made of pulverized placenta that’s meant to aid wound healing. Price’s signature is first on the letter, which was signed by five other physicians who are members of Congress.

“Senate Democrats may find it significant that MiMedx only began contributing to Rep. Price after he intervened with Medicare on their behalf,” said Brett Kappel, a campaign finance lawyer in Washington. “He was the company’s congressman for 10 years before that, and no one at the company had contributed to him before the Medicare decision in the company’s favor.”

Before President Donald Trump’s swearing-in Friday, Jan. 20, a spokesman for Trump’s transition acknowledged that Price has helped the company “in navigating regulatory waters, just as he would for any constituent.”

A request for comment Monday, Jan. 23, directed to the HHS press office was answered by a senior communications adviser at the agency who lauded Price as a physician who is “grateful for the opportunity to bring his expertise to enacting better policies.”

“Any suggestion that his motivations for public service have been anything other than to seek to improve the lives of the American people is simply wrong,” said Ryan Murphy, the HHS adviser, who was previously a spokesman for Price in his personal office and most recently communications director for the House Budget Committee, of which Price is chairman.

In an emailed response to questions, MiMedx chief executive Pete Petit said Monday, Jan. 23, that the company made a presentation to the Congressional Doctors Caucus in Washington in support of Medicare’s proposed payment change, in line with the letter Price and others sent. Petit said they did so even though the proposed change was “worse for MiMedx,” but “the best policy for the industry.”

He acknowledged, though, that the policy Medicare ultimately approved was “a win for MiMedx and the industry because the final rule amount reimbursement increased over the proposed rule amount.”

The company makes skin grafts and injections made of placentas and amniotic membranes, which are meant to help with wound healing.

Federal campaign finance records show MiMedx, through its political action committee, chief executive and his relatives, has contributed more than $40,000 to Price’s campaign and joint fundraising committees since 2014, with contributions starting six months after Price sent the letter. With combined PAC and individual donations, the company was ranked as Price’s top contributor for 2015-2016 by the nonpartisan Center for Responsive Politics.

The 2013 letter to thenMedicare administrator Marilyn Tavenner has strong echoes of the same concerns MiMedx executives were airing at the time. It touches on the issue of “waste” in the use of oversized grafts used to help heal wounds around the ankle and on the feet of people with diabetes. The letter says $75 million in wound grafts were wasted in 2011 because of an inefficient pricing model that paid for sections of graft that were being thrown away. It encourages Medicare to move to a new, tiered system of reimbursing for the wound grafts.

“As stewards of our taxpaying constituents’ dollars, we are committed to ensuring public programs such as Medicare are administered in the most efficient manner,” Price and seven other congressmen wrote in the letter to Tavenner released under a records request by CQ HealthBeat. “We believe this proposal will reduce waste.”

In an earnings call that same month, Petit reported that the company had been “quite busy in Washington meeting with Senators and Congressmen and encouraged them to support the CMS reimbursement change on skin substitutes.”

Also that October, executives briefed investors on concerns that resemble those detailed in the lawmakers’ letter. The earnings call transcript said competitors’ grafts result in “massive wastage” that they estimate at $100 million, given that 80 percent of competitors’ grafts are discarded.

It wasn’t long, though, before MiMedx had great news. During a Dec. 5, 2013, call with investors, the company reported that Medicare changed its wound payment policies in ways that exceeded its expectations. The changes include ending the waste and moving to a tiered payment system.

Executive Bill Taylor estimated that doctors can pay the company $318 for a sheet of EpiFix and then bill Medicare for $1,371.19 in reimbursement. The result: Doctors who use EpiFix on patients would be able to keep about $1,000, a strong incentive to use the graft.

“It’s a real win for MiMedx,” Petit told investors.

The company has seen significant revenue growth, reporting in a press release that its income for 2014 — the year the Medicare pay change took effect — was $118 million, double the amount it earned the year before. Company executives have told investors the advanced wound care market is expected to be worth $1.25 billion in 2018.

Earlier this month, Kaiser Health News reported that Petit urged employees in 2015 to contribute to its PAC as he was publicly pressing the Food and Drug Administration to change its stance on the regulation of the injection.

An email from Petit’s address sent to managers demanded donations “IMMEDIATELY” to the company’s PAC, according to documents reviewed by KHN.

“I’m going to ask one more time for our field management to send something to our PAC. And, IMMEDIATELY,” said the email sent under Petit’s name. “We have PAC business to transact, and we need at least 50 donors to do so.”

The ongoing FDA scrutiny could potentially affect the company’s bottom line or lead to a recall of their injectable wound-care products, the firm told investors in 2013. The FDA declined to say whether it heard from Price about the company or to answer questions about its review of MiMedx products. Petit, a prominent businessman in the Atlanta suburbs, served as a Trump campaign finance chair in Georgia. Petit said he and his wife saw Price and his wife at an inaugural event but did not discuss MiMedx.

Kaiser Health News is a national health policy news service that is part of the nonpartisan Henry J. Kaiser Family Foundation.