U.S. House to Investigate Drug Ingredient Manufacturing Loan to Kodak
Eastman Kodak Company is probably best known for the products it develops for the world of photography and not pharmaceuticals. However, the camera maker was tapped by the White House to begin manufacturing essential ingredients for some medications in a push to bolster domestic supplies.
Eastman Kodak was set to receive a $785 million loan from the government to begin that process. However, that funding has been placed on hold after House Democrats initiated an investigation into stock transactions that occurred around the time the loan was announced. The company’s stock jumped 25% and some Kodak executives initiated trades that were close to that jump, Politico reported.
The Trump administration awarded the deal to the camera company under the Defense Production Act. In May, the White House issued an order that gave a new organization, the International Development Finance Corp., the power to begin rebuilding domestic production of generic drugmaking materials. Kodak was selected by IDF in July for its chemical manufacture knowhow, as related to photographic chemicals. The deal, as could be expected, raised some eyebrows regarding the nature of the loan. Kodak is not quite known for its drug ingredient development capabilities, but, as Politico noted, the company does have chemical manufacturing experience. Eastman Kodak plans to pivot the work performed at two of its plants, one in New York and one in Minnesota, to focus on the manufacture of drug ingredients. Kodak is expected to manufacture essential drug ingredients in short supply, as determined by the Food and Drug Administration.
House Democrats paused the funding following a report in the Wall Street Journal that indicated the U.S. Securities and Exchange Commission was investigating the loan to Kodak. One day before the federal loan was announced, Eastman Kodak Chief Executive Officer James Continenza was awarded 1.75 million stock options. When the loan was announced, company stock jumped, earning the chairman a considerable amount of money. Other executives were also granted stock options ahead of the loan, Benzinga reported. In its probe of the loan, House Democrats are seeking internal documents and communications from Kodak regarding the issuance of those stock options. They are also seeking information regarding stock trades made by company executives, Politico said.
Last week the Trump administration issued an Executive Order aimed at boosting U.S-based manufacturing capabilities. The order called for the government to give purchasing priority to purchase “essential drugs” and medical supplies that are produced in the United States, rather than from abroad as is the current practice. Approximately 70% of drug ingredients are sourced from overseas, with the bulk of those coming from sources in China and India. The loan was awarded to Kodak in July, ahead of the Executive Order. In May, the government partnered with Virginia-based Phlow Corporation to build a reserve of key ingredients used in the manufacture of essential medications in order to reduce the burden of reliance on foreign sources and bolster the nation’s drug manufacturing infrastructure. That deal included an initial investment of $354 million and an additional $458 million included as potential options for long-term sustainability.