Trump admin funds plasma company based in owner's condo

RICHARD LARDNER and JASON DEAREN
·14-min read

WASHINGTON (AP) — When the Trump administration gave a well-connected Republican donor seed money to test a possible COVID-19-fighting blood plasma technology, it noted the company’s “manufacturing facilities” in Charleston, South Carolina.

Plasma Technologies LLC is indeed based in the stately waterfront city. But there are no manufacturing facilities. Instead, the company exists within the luxury condo of its majority owner, Eugene Zurlo.

Zurlo's company may be in line for as much as $65 million in taxpayer dollars; enough to start building an actual production plant, according to internal government records and other documents obtained by The Associated Press.

The story of how a tiny business that exists only on paper has managed to snare attention from the highest reaches of the U.S. military and government is emblematic of the Trump administration’s frenetic response to the coronavirus pandemic.

It's also another in a series of contracts awarded to people with close political ties to key officials despite concerns voiced by government scientists. Among the others: an ill-conceived $21 million study of Pepcid as a COVID therapy and more than a half billion dollars to ApiJect Systems America, a startup with an unapproved medicine injection technology and no factory to manufacture the devices.

In addition, a government whistleblower claimed that a $1.6 billion vaccine contract to Novavax Inc. was made over objections of scientific staff.

At the center of these deals is Dr. Robert Kadlec, a senior Trump appointee at the Department of the Health and Human Services who backed the Pepcid, Novavax and ApiJect projects. Records obtained by the AP also describe Kadlec as a key supporter of Zurlo’s company.

In one government email obtained by the AP, an official said Kadlec, whose job as assistant secretary for preparedness and response is to help guide the nation through public health emergencies, was “all in” on Plasma Technologies.

This was the case despite misgivings from the scientists he oversees. One of them said the company would be just another “mouth to feed” that would distract from other important work on the pandemic. An HHS spokesperson said Kadlec “does not have a role in technical review of proposals nor in negotiating contracts.”

Kadlec has come under pressure from the White House to act with more urgency and not be bound by lower-level officials whom Trump has castigated as the “deep state” and accused of politically motivated delays in fielding COVID-19 vaccines and remedies. This pressure has led to investments in numerous untested companies.

The AP reached out to more than a dozen blood plasma industry leaders and medical experts. Few had heard of Zurlo’s company or its technology, and would not comment.

Zurlo, the company’s founder and a former pharmaceutical industry executive, told the AP in an email that the renewed interest in his company is being driven by COVID and other diseases.

“It is increasingly clear that the collection of adequate supplies of plasma is not possible; the answer being the adoption of new process technology that fully utilizes the scarce plasma currently available,” he said.

But whether Zurlo’s technology, which claims to increase the amount of disease-fighting plasma harvested from human blood, will be an improvement over other methods is still anyone’s guess.

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A FORMER SENATOR ON BOARD

Top government officials began to take notice of Plasma Technologies after Rick Santorum, a former Republican senator from Pennsylvania and two-time presidential candidate, became part-owner, according to the records and AP interviews.

After Congress supplied hundreds of billions of dollars to combat the pandemic, Santorum stepped up his sales pitch for the company’s method of turning human plasma into a therapeutic product — a process the company has described as a game changer. In mid-August, the federal government awarded Plasma Technologies a $750,000 grant to demonstrate that it could deliver on its promises.

Santorum, who’s held no elective office since 2007, remains influential among social conservatives, a key part of President Donald Trump’s political base. Santorum has extolled the president’s handling of the pandemic on national television in his job as a CNN commentator, arguing that the nation’s response would have been worse under a Democratic administration.

Trump "didn’t botch it,” Santorum said recently in response to charges that the president had done a poor job leading the country through COVID-19. “I mean you guys keep blaming Trump. This is a local decision.”

HHS would not comment when asked whether Santorum’s public backing of the president led to a company he has a financial stake in getting a government contract.

Zurlo has deep ties to the Republican Party. He has contributed thousands of dollars to Santorum’s campaigns and to other GOP campaigns and political action committees. He entertained Santorum and his family at the mansion Zurlo used to own on Kiawah Island, an exclusive golf resort in South Carolina. They would play golf during the day and enjoy evenings overlooking the Atlantic, according to Michel “Mitch” LaPlante, a former business associate of Zurlo’s who attended several dinners with Santorum and Zurlo.

The business relationship between Zurlo and LaPlante turned ugly after those days of hobnobbing on Kiawah. A real estate deal they had invested in together fell into foreclosure, leading to a suit seeking more than $700 million by their mortgage lender. Each man sued the other for fraud and severed their business ties acrimoniously.

Zurlo founded Plasma Technologies in 2003, according to articles of organization and other records filed with South Carolina’s secretary of state. The company’s most recently listed address is Zurlo’s condominium in Charleston’s French Quarter.

The company has no other presence in South Carolina — or any other state — even though a U.S. government spokeswoman told the AP that Plasma Technologies has “manufacturing facilities” in Charleston.

“Fairy tale,” LaPlante said when asked if Plasma Technologies operates any commercial space in South Carolina’s most populous city.

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OUTSIDE, LOOKING IN

Granting tens of millions of dollars to Plasma Technologies would track with Trump’s support for treating COVID-19 patients with convalescent plasma. Plasma, the yellowish liquid part of blood, harbors various antibodies, the soldiers of the body’s immune response that can target specific intruders such as viruses. Studies are underway to see if plasma taken from people who have recently recovered from COVID-19 can help those newly diagnosed fight the infection.

Zurlo has spent years trying to break into a sector of the pharmaceutical industry that manufactures therapies using antibodies called immunoglobulins, which are taken from healthy people to treat immune disorders. But routine immunoglobulin treatments are only one part of the field.

During the pandemic, many plasma companies are focusing on “hyperimmune globulin,” a therapy that pools and purifies plasma from recovered COVID-19 patients. The result is a powerful “potential global treatment for people at risk for serious complications from COVID-19,” according to the CoVIg-19 Plasma Alliance, an industry group that includes the world’s largest plasma companies. Hyperimmune globulin produced by several companies is being tested in new COVID-19 patients.

The process for making these plasma-based therapies is called fractionation, and Plasma Technologies markets its approach as a “disruptive and transformative” technology that makes for a more potent product, according to the records. A document prepared by Plasma Technologies in late May that outlines the company’s business strategy is focused on how much better its method is than a World War II-era process named for its developer, Edwin Cohn.

Dr. Jeff Henderson, an infectious disease specialist at the Washington University School of Medicine in St. Louis, said it is very likely that many companies have already developed improvements over the decades-old “Cohn” method. They just don’t discuss them publicly because they are trade secrets.

“There may be 50 technologies in use that are an improvement over Cohn fractionation,” Henderson said.

But Santorum described the plasma fractionation industry as more interested in keeping shareholders happy than adopting new technologies that would require expensive modifications to their manufacturing lines.

“You’ve got companies that are doing really well and don’t want to change anything,” Santorum said in an interview with the AP.

“We’re the little guy trying to fight City Hall.”

Plasma Technologies seemed to be on its way in 2014. The company had licensed its system to Dallas-based Access Pharmaceuticals, according to financial records filed with the Securities and Exchange Commission.

One filing described Zurlo as a trailblazer whose technology would “fundamentally change the economics of plasma fractionation.” Under the terms of the licensing agreement, Plasma Technologies was to be paid $1 million in cash with an additional $4 million in cash or stock to come.

But three years later, the agreement ended abruptly, according to the SEC records.

Now named Abeona Therapeutics, the company was grappling with crushing deficits — $346 million in June 2017. It’s unclear whether any of that red ink was due to the deal with Plasma Technologies. But by the end of 2017, “the agreement was terminated and the technology was returned” to Zurlo’s company, according to an Abeona SEC filing.

A spokesman for Abeona Therapeutics declined to comment on the licensing agreement with Plasma Technologies.

Santorum blamed the deal’s demise on onerous regulatory hurdles imposed by the Food and Drug Administration to ensure patient safety.

“They basically killed the product,” he said.

Santorum rejected any suggestion that Zurlo’s innovation is unproven, even though his company has never made an FDA-approved product. Plasma Technologies, he declared, is on the verge of transforming the industry, and for a fraction of the cost to develop a coronavirus vaccine.

“I’m just telling you, it’s gonna happen,” Santorum said.

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A LINE IN

Zurlo brought Santorum aboard after the agreement with Abeona fell through. “We’ve got an FDA problem. Can you help me?” Santorum recalled Zurlo telling him.

Zurlo’s close relationship to Santorum offered a direct line into the FDA. The former senator had built a connection with Dr. Peter Marks, a senior FDA official, according to the documents obtained by AP.

In September 2019, Marks introduced Santorum at an FDA workshop held to explore the development of therapies for a rare disease. Santorum told the group about his youngest child, who was born with a life-threatening condition known as Trisomy 18, according to a transcript. Immunoglobulin treatments had saved her life, he told the audience.

Santorum’s personal story about his child’s illness was intertwined with a promotion of Plasma Technologies. Santorum said Zurlo, whom he called “a good friend,” had invented a groundbreaking technology for better plasma-based therapies to help his child and others.

Santorum credited Marks, director of FDA’s Center for Biologics Evaluation and Research, for pledging to remove barriers that have kept Plasma Technologies on the outside, looking in. “All I’m saying is, we have an opportunity because of Dr. Marks and what he has laid forward,” Santorum said at the workshop.

The former senator told the AP it would have been a “crime” if he hadn’t used his influence to get Plasma Technologies recognized.

“Shame on me if I hadn’t,” he said.

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A SMALL SHAREHOLDER

In mid-April, a few weeks after Trump declared the coronavirus pandemic a national emergency, Santorum described Marks as an enthusiastic backer of Plasma Technologies, according to an email routed to multiple officials in the Biomedical Advanced Research and Development Authority, or BARDA, an HHS office Kadlec oversees.

Calling himself a “small shareholder” in Plasma Technologies, Santorum wrote, “Dr. Marks said I should communicate to you that he is ‘excited about this process and looks forward to working with us to get our process adopted by the industry.’”

The FDA declined a request to interview Marks and also declined to answer questions about whether he’s been helping Plasma Technologies secure a commercial foothold.

“Dr. Marks’ enthusiastic nature should not be mistaken for support for any specific product or technology," FDA spokeswoman Stephanie Caccomo said.

Federal ethics rules ban government employees from giving preferential treatment to any private organization or individual, according to Scott Amey, general counsel at the nonprofit Project on Government Oversight.

“Public trust in government decisions and a level playing field is essential to good government, so this situation deserves a look,” Amey said.

Santorum confirmed that he communicated directly with Kadlec, whom he described as “very supportive” of Plasma Technologies.

But Santorum’s initial pitch at HHS failed to gain traction among the agency’s scientists, who didn’t see Zurlo’s technology as worthy of millions in emergency pandemic funding, according to the emails and Rick Bright, the former BARDA director. They were focused on COVID-19 vaccines and treatments that could be delivered quickly, and saw the Plasma Technologies project as a longer-term effort.

“They were not excited,” recalled Bright, a vaccine expert who’s been sharply critical of Kadlec’s tenure at HHS. “They did not jump all over this and say, ‘We’ve got to get this going right away.’”

Bright filed a whistleblower complaint in May that alleges the Trump administration failed to prepare for the onslaught of the coronavirus.

With HHS scientists unconvinced, Plasma Technologies submitted a proposal dated May 28 to the Defense Department, which also is heavily engaged in the government’s COVID-19 response.

The detailed proposal, obtained by the AP, sought $51.6 million to build a plasma fractionation facility in Atlanta or Raleigh, North Carolina.

With a military audience in mind, the proposal emphasizes the national security implications of the coronavirus pandemic, stressing the need to churn out sufficient doses of antibody-rich hyperimmune globulin “to bolster force health protection for members of our military who are at especially high risk of infection, or whose performance is critical to national security and safety.” The proposal adds these plasma-derived proteins can be used as a treatment for viral infections until a vaccine is available.

The pitch fell flat. At first.

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ANOTHER MOUTH TO FEED

In a June 12 email to HHS scientists, Army Lt. Col. Kara Schmid wrote that the price tag for Plasma Technologies was too high, even for the Pentagon, and that key parts of the company’s proposal were too vague.

“I’m just unclear if it has $50M worth of value,” Schmid wrote, adding she was “lukewarm at this point.”

Brian Tse, a BARDA health scientist, told Schmid that his office had passed on Plasma Technologies. With no production facility, Zurlo’s company intended to get COVID-19 patient plasma from blood donation centers that were already under heavy stress because of the pandemic.

“I believe that adding one additional ‘mouth to feed’ to the same source is more likely to induce delays to the projects already underway than it is to solve problems,” Tse wrote.

Despite the doubts, Kadlec didn’t lose interest in Plasma Technologies, according to the emails. “Dr. Kadlec has specifically asked us to take a closer look,” an early July message read.

Over the rest of July, the messages among his staff expressed misgivings about Zurlo’s technology, yet the company remained in play.

Several days later, an HHS contracting officer rejected the idea that Plasma Technologies might partner with one of the plasma companies that the government was already working with.

“The connection is not viable from a contractual standpoint,” the officer wrote in a July 16 email.

Still, a week later, Plasma Technologies had a champion at the Pentagon.

Santorum said he was contacted by Steven Morani, the deputy assistant secretary of defense for materiel readiness. Defense Department officials were drawn to the idea of a U.S.-owned and operated fractionation facility, according to Santorum.

It’s not clear what changed, but messages from late July show Morani and other defense officials had conferred and would support the Plasma Technologies project. An initial $750,000 in emergency coronavirus spending would be used to prove the concept, a move backed by HHS, with as much as $65 million in government money to come later to build a commercial facility and to purchase plasma and other materials, according to the emails. That’s more even than Plasma Technologies requested.

The messages don’t say where that money would come from or why the additional $13.4 million is required.

Morani referred AP’s emailed questions about the company and the contract to a Defense Department spokeswoman, Jessica Maxwell, who declined to discuss future funding for Plasma Technologies.

“The $750,000 is currently the total amount of government funding planned for the effort,” Maxwell said.

Santorum, who criticized a reporter for writing what he termed a “political hit piece,” said Zurlo intends to donate any profits Plasma Technologies generates to charities that support the mission of the Catholic Church.

But Santorum had different plans for any returns on his investment.

“I have made no such claims as a father of seven who has three weddings this year,” he said. “If any money were to come, I would welcome that money to help pay my bills.”

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Dearen reported from New York. Associated Press writer Meg Kinnard in Charleston, South Carolina, contributed to this report.

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To contact AP’s investigative team, email investigative@ap.org