Brainstorm Health: Novartis Cohen Connection, EpiPen Shortage, Uninsured Rate Rises

For all the heady talk of Big-I “Innovation” propelling the pharmaceutical industry, we are often reminded that more mundane, and sometimes unseemly, forces are really driving the train. From engaging in rampant price gouging to blocking generic drug competition to fueling the epidemic of opioid addiction, drug makers and distributors have often used behind-the-scenes machinations and the greased levers of market, regulatory, and political power to pad their profits. PhRMA, the big-money trade group for the largest pharmaceutical companies, spent $25.4 million last year, $5 million more than it spent in 2016, on lobbying efforts. (The site, OpenSecrets.org, brought to you by the nonpartisan Center for Responsive Politics, provides a list of the bills PhRMA’s K Street emissaries actually tried to influence in 2017. It’s all-encompassing.) Still, as much as many of us shake our heads at such cloakroom-and-dagger plotting, we’ve grown to expect that it happens.

It saddens me immensely to say it, but we’re used to it.

What we’re not used to are the actions that were reported yesterday—by Michael Avenatti, the now-ubiquitous attorney for Stephanie Clifford, also known as the former porn star Stormy Daniels, who is embroiled in a lawsuit with President Trump. (Well, I’ll just quote the Times here: “Ms. Clifford…was paid $130,000 by Mr. Cohen to keep quiet about claims that she had an affair with Mr. Trump after meeting him in 2006. She sued last month to get out of the nondisclosure agreement she signed in October 2016, claiming it is void because Mr. Trump had never signed it.”)

The story that broke yesterday is that Essential Consultants—the apparent shell corporation that attorney Cohen apparently used to silence Ms. Clifford—also received some substantial inflows of cash. Some of that lucre reportedly came from a company with ties to a Russian oligarch—and some from major blue chip companies, including AT&T and Novartis. John Carroll at Endpoints News has a cogent summary and analysis here.

Novartis now acknowledges that it paid Cohen’s consulting firm a total of $1.2 million (rather than the $400,000 that was reported yesterday by Avenatti), as part of a one-year agreement that the Swiss drug giant entered into in February 2017, just after Trump was sworn in. It’s not clear what sort of service Cohen—who, to the best of anyone’s knowledge, had zero experience or expertise in the pharmaceutical trade—offered in return for all this cash. But it’s hard not to jump to the most straightforward conclusion: Cohen’s one and seemingly only “asset” to offer Novartis was the President’s receptive ear.

A source close to the company tells me that, “with the recent change in administration, Novartis believed that Michael Cohen could advise the company as to how the Trump administration might approach certain U.S. healthcare policy matters, including the Affordable Care Act. The agreement was for a term of one year, and paid Essential Consultants $100,000 per month.”

The pressing need for this advice, says the source, was that the Democrats were suddenly out of power and the Republicans were suddenly in power, but it wasn’t clear if Mr. Trump thought (or would act) like a traditional Republican or heaven knows what—so the Swiss drug company was searching for some “clarity.”

In March 2017, Novartis had its first meeting with Cohen under this agreement, the source says. “But following this initial meeting, Novartis determined that Cohen and Essential Consultants would be unable to provide the services that Novartis had anticipated related to U.S. healthcare policy matters and the decision was taken not to engage further. As the contract unfortunately could only be terminated for cause, payments continued to be made until the contract expired by its own terms in February 2018.”

The source also makes the point that the engagement predated the new CEO, Vas Narasimhan, who “was in no way involved with this agreement.” Contrary to recent media reports, says the insider, “this agreement was also in no way related to the to the group dinner Dr. Narasimhan had at the World Economic Forum in Davos with President Trump and 15 Europe based industry leaders.”

As for the Special Counsel’s office, “Novartis was contacted in November 2017 regarding the company’s agreement with Essential Consultants. Novartis cooperated fully with the Special Counsel’s office and provided all the information requested. Novartis considers this matter closed as to itself and is not aware of any outstanding questions regarding the agreement.”

Which brings us back to the question of how much unseemliness is the business of normal these days. If Novartis’s interest in reaching out to Trump via Michael Cohen was merely “pay for way”—that is, to find out where pharma-related policy in the new administration might be headed, as my source says, that’s one thing. If it was “pay to sway”—spending money outside of traditional lobbying efforts to directly influence policy at the highest level of government, that’s worse. And if it was “pay to play”—securing the promise of some policy or regulatory change in exchange for this investment in Michael Cohen’s firm—that’s even more distressing.

In any case, there’s no way we’ve heard the last of this.

The rest of the day’s news is below.

Clifton Leaf, Editor in Chief, FORTUNE

@CliftonLeaf

clifton.leaf@fortune.com

DIGITAL HEALTH

This AI algorithm mimicked brain cell activity. Scientists at University College London (UCL), in collaboration with researchers from Google's AI-focused outfit DeepMind, have created an artificial intelligence-powered algorithm that mimics the activity patterns of specialized brain cells, Nature reports. “It is striking that the computer model, coming from a totally different perspective, ended up with the grid pattern we know from biology,” Nobel Prize winner Edvard Moser told the publication of the deep learning technique. (Nature)

INDICATIONS

There's officially an EpiPen shortage underway. The Food and Drug Administration (FDA) officially added several key epinephrine products, including Mylan's EpiPen and Impax Labs' Adrenaclick, to its drug shortage list on Wednesday. This followed patient group reports that there had been backlogs for prescriptions; today, the FDA explained that these are related to some manufacturing instabilities, though it's unclear when those will be resolved. In the meantime, people who need to refill their prescriptions still have some options, including alternative products like Kaleo's Auvi-Q (read more on that here). (Fortune)

THE BIG PICTURE

The uninsured rate got worse in 17 states. A new Gallup report finds that the number of uninsured Americans continued to increase in 17 states last year. That's the first time in four years that any state had a rise in the uninsurance rate at all, and also the first time in that span that zero states experienced a reduction in the uninsured rate. The survey follows multiple Trump administration efforts to undermine the Affordable Care Act through both regulatory and Congressional mechanisms. (Gallup)