The Trump administration’s $765 million government loan given to Eastman Kodak under the Defense Production Act raises suspicions for a number of reasons, not least of which is the company’s reported plan to use the funds to manufacture ingredients for the antimalarial drug hydroxychloroquine. Kodak, a once-prominent photography company, has virtually no recent experience manufacturing pharmaceuticals; however, according to public lobbying data, Kodak invested a massive amount in lobbying the administration during the second quarter of 2020—precisely when the loan was being negotiated with the government. 

CREW launched an investigation into the Trump administration’s process in deciding to extend such a large, novel loan to an apparently financially unsound company, and the extent to which Kodak itself was involved in the administration’s decision making via its massive investment in lobbying the White House and other agencies. Part of the investigation focuses specifically on the communications between the various agencies involved in the decision and the White House, including the issue of whether the president’s affinity for hydroxychloroquine played a role in pushing the loan over the finish line. 

The Trump administration’s July 28th announcement that it had chosen Kodak, the distressed photography company, to spearhead a new initiative to bring back generic drug production to the United States sent shockwaves down Wall Street. Kodak’s shares jumped over 2000% in the days following the announcement, bringing the company’s valuation to almost $2 billion dollars at the peak of its surge. Just the day before, it was valued at under $115 million. Since this spike, Kodak’s shares had leveled out at about $15 per share, though new reports that the US Development Finance Corporation (DFC) might be reconsidering the loan has dropped the price to about $10.

Kodak has been in a steep decline since the popularization of the digital camera in the late 1990s. The company filed for bankruptcy protection in 2012. In 2018, Kodak unsuccessfully tried to pivot to blockchain. In its 2019 annual report, Kodak disclosed that it “is facing liquidity challenges due to operating losses and low or negative cash flow” that, in part, “raise substantial doubt about its ability to continue as a going concern.” This bleak picture continued in the first quarter of 2020 as it posted a net loss of $111 million. 

If it keeps burning cash at this rate, Kodak may blow through the taxpayer-funded $765 million Defense Production Act loan before even establishing a viable pharmaceutical business that could help address the surging pandemic. In fact, public reports suggest that it may take another $765 million loan to keep Kodak afloat until then.   

Officially, the government said that Kodak’s old manufacturing facilities could be repurposed to produce pharmaceutical ingredients, and that it is a priority to repatriate pharmaceutical production because while Americans consume “approximately 40 percent of the world’s supply of bulk components used to produce generic pharmaceutics, only 10 percent of these materials are manufactured in the United States.” Even if we accept the government’s public reasoning for the loan, the decision to lend to Kodak appears to be risky. There are a number of United States-based generic drug manufacturers that would likely have been a better option for a loan than a cash-poor photography company with no experience manufacturing pharmaceuticals since its ill-advised ownership of Sterling Drug from 1988 to 1994. 

Given that there must be United States manufacturers who would have been much lower risk recipients for a federal government loan, why did the Trump administration pick Kodak?

One reason could be that Kodak itself was involved in convincing the government to extend the loan. Lobbying Disclosure Act filings show that Kodak vastly ramped up its lobbying efforts in exactly the time period during which the loan was conceived and awarded. Kodak has not spent more than $500,000 on federal lobbying in a single year since 2011, according to data compiled by the Center for Responsive Politics. It did not spend any money on lobbying the executive branch in 2019 or in the first quarter of 2020. However, in just the second quarter of 2020, which covers the period following Trump’s executive order that allowed for the loan, Kodak spent $870,000 on federal lobbying by four of its executives. Kodak disclosed that those executives lobbied the White House and other agencies including the DOD on “COVID-19 Programs- Specialty Chemicals Manufacturing.” This appears to point directly to Kodak’s eventual loan to create specialty chemicals (namely, pharmaceuticals, including ingredients for hydroxychloroquine). But without more evidence, including copies of communications that CREW has requested between Kodak’s lobbyists and the Trump administration, we won’t know for sure the extent to which Kodak itself was involved in the process of disbursing this huge loan. 

Another reason could be Kodak’s reported decision to prioritize the manufacture of one of the critical ingredients in hydroxychloroquine. President Trump has been fixated on hydroxychloroquine as a miracle cure for the novel coronavirus, despite the fact that studies have found that the antimalarial drug is not useful in treating or preventing infection. The Food and Drug Administration recently revoked its Emergency Use Authorization for hydroxychloroquine and has now cautioned against its use in treating SARS-COV-2. Trump first talked about hydroxychloroquine in March, which caused a surge in Google searches for the drug. Similar spikes occurred throughout April, as the president continued to talk up the drug. By late April, however, interest appeared to have tapered off, until Trump once again touted the medication on May 18. Four days earlier, on May 14, Trump signed the executive order that would eventually result in Kodak’s $765 million loan to create a component part of hydroxychloroquine, among other chemicals. Interest in the drug continued to wane throughout June and July, until the president and his adult son Donald Trump, Jr., retweeted a viral internet video touting hydroxychloroquine. The video was released on Monday, July 27. The Trump administration announced the Kodak loan on Tuesday, July 28. 

Leaving timing aside, the process by which the administration ultimately chose Kodak also appears suspect: the day of the announcement (as Kodak stock surged), CEO James Continenza revealed in an interview with CNBC that Kodak has been in negotiations “for a few months” and had been having high-level talks with the government since May. If Kodak was truly engaging in negotiations since May, then the public deserves to know how that process unfolded and whether there were other bids on the contract, as Trump only signed the delegation of authority in mid-May. 

Giving a nearly insolvent company a possibly no-bid $765 million government loan to begin manufacturing a product that it had never before produced would be a serious risk of taxpayer money given the various factors outlined above. Attempting to shift generic drug manufacturing back to the United States would likely take “decades and billions,” according to one former FDA official. Why would anyone assume that Kodak could pivot to pharmaceuticals quickly enough to become solvent before their taxpayer cash runs out, or before the pandemic has claimed another few hundred thousand lives? Perhaps it is another instance of Trump’s favoritism towards hydroxychloroquine as a miracle cure, but if so, it is coming at the taxpayers’ expense.

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