Corporatization of Medicine
Doctors testing new drugs are sworn to keep their research secret
until drug companies announce the final results. But elite Wall
Street firms looking to make quick profits have
found a way to harvest these secrets:
They pay doctors to divulge the details early.
A Seattle Times investigation found at least 26 cases in which
doctors have leaked confidential and critical details of their
ongoing drug research to Wall Street firms.
The practice involves doctors at top research universities from
UCLA to the University of Pennsylvania, and powerful financial
firms including Citigroup Smith Barney, UBS and Wachovia Securities.
In 24 of the 26 cases, the firms issued reports to select clients
with detailed information obtained from doctors involved in confidential
studies. The reports advised clients whether to buy or sell a
drug stock.
Trading stock based on secret information bought from medical researchers is
illegal, say legal experts who were told of The Times' findings.
"That's a good way to go to jail," said lawyer Thomas Newkirk,
former associate director of enforcement at the Securities and
Exchange Commission (SEC).
Whether they are paid or not, medical researchers who talk with
Wall Street about their ongoing research violate confidentiality
agreements they sign before drug companies allow the drug testing
to begin.
Until now, the selling of drug secrets has been hidden from securities
regulators and the public, but biotech and Wall Street insiders
said the practice is widespread.
"Everybody does this.... It's now common practice," said the
chief executive of California biotech company Valentis, Ben McGraw,
a former Wall Street analyst.
The practice of selling drug secrets, The Times found, is being
driven by hedge funds, the largely unregulated investment pools
that cater to the super-rich. Hedge funds can make money with
aggressive strategies that exploit quick price swings in stocks,
and the volatile biotech industry provides many such opportunities.
A single drug's prospects can determine whether a small biotech
company's stock soars or plummets, so any inside information provides
a potent investing edge.
Such information is so valuable that elite investors pay up to
$1 million a year to firms known as matchmakers, which pair Wall
Street firms with doctors involved in ongoing drug research. Gerson
Lehrman Group, the largest matchmaker, claims to have 60,000 doctors
available to speak to Wall Street, double the number from three
years earlier.
Matchmakers typically pay doctors $300 to $500 an hour to talk
to elite investors. Some doctors said they can make tens of thousands
of dollars a year from such talks.
Drug-company executives say they know about the practice but
can't crack down on the doctors they rely upon for conducting
patient testing.
Ordinary investors are victimized when inside information is
leaked to select investors. Those who know in advance whether
a drug is going to succeed or fail can buy stock low or sell it
high to those who don't know, making quick fortunes by taking
advantage of unwitting investors.
And there is a broader cost to society: Leaking details about
ongoing research can introduce bias into drug trials and possibly
halt development of potentially life-saving drugs, biotech executives
said.
"It appalls me, I must say," said Christopher Henney, a Seattle
biotech pioneer who co-founded Immunex, now part of Amgen. "It's
absolutely outrageous that they [researchers] would allow themselves
to be corrupted in that way."
"The practice is a moral cesspool," said Arthur Caplan, director
of the Center for Bioethics at the University of Pennsylvania.
"It really just seems to me to be the last straw in the corporatization
of American medicine."
Full
Story from The Seatlle Times
Reference
Source 137
August
8, 2005
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