Risk & Compliance

Senator Seeks Drug-Research Probe

''Selling drug secrets violates a trust that is fundamental to the integrity of both scientific research and our financial markets,'' says Sen. Cha...
Stephen TaubAugust 12, 2005

The chairman of the Senate Finance Committee has called on regulators to launch an investigation based on a Seattle Times report that medical researchers routinely accept money to reveal secrets about drug studies to Wall Street firms, according to that paper.

Sen. Charles Grassley (R-Iowa) told the paper in response to its story, “I’m asking the Securities and Exchange Commission to pursue the findings of this investigative report.” Grassley added that he was shocked to learn from the article that doctors sell clinical-trial information to investors. “Selling drug secrets violates a trust that is fundamental to the integrity of both scientific research and our financial markets,” he told the paper.

The Times, citing attorneys, noted that paying doctors for research secrets violates federal securities laws.

Grassley also told the paper that Congress needs to consider how the laws and regulations might be toughened up “to make it harder for these kinds of things to happen in the first place.”

The Times investigation found 26 cases where doctors had leaked confidential and critical details of drug research to Wall Street brokerage firms or hedge funds. In many of the cases, researchers were paid to discuss the research, which was not publicly available at the time.

The paper reported that companies including Citigroup Smith Barney, UBS, and Wachovia Securities subsequently issued reports detailing outcomes of research before it was even reported by the companies that performed it, then recommended to clients whether or not to buy or sell specific drug stocks based on this information.

According to the Times report, hedge funds and mutual funds were willing to shell out as much as $1 million to firms that have come to be known as matchmakers, which get the funds in touch with the researchers — and that are scarcely hiding their activities. For example, the paper noted that The Gerson Lehrman Group, the largest such matchmaker, claims a network of 60,000 doctors available to speak to investment firms.

“The idea that so many physicians are serving as consultants to the investment industry is quite astonishing,” Michael Jacobson, executive director for the Center for Science in the Public Interest, told the paper. “It doesn’t say much for the integrity of the researchers, when they have signed confidentiality clauses, that they feel they can talk freely with the investment community. The confidentiality agreements may have to be written more broadly.”

Mark Gerson, co-founder of Gerson Lehrman, told the Times that his firm advises doctors not to violate their confidentiality agreements with drug companies.