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US committee probes doctors’ complicity with Wall Street analysts



11 August, 2005: Following reports in a national daily, the US Senate finance committee has called for a federal investigation into claims that some doctors are supplying Wall Street analysts with crucial and confidential clinical trials information before the public announcements of results.

A report in the Seattle Times cited 26 cases in which doctors had allegedly leaked details of their research to investment firms, despite having signed strict confidentiality agreements.

The article, entitled Selling Drug Secrets, reported that some of Wall Street's largest and most influential brokerage firms and hedge funds tried to obtain trial data on potential new drugs by paying doctors close to the research to reveal their thoughts on upcoming pipeline treatments.

With a single drug's prospects often determining whether a small biotech company's share price soars or crashes, inside information can prove invaluable to investors looking to exploit quick price swings by buying stock low or selling it high.

Senators had asked the Department of Justice and the Securities and Exchange Commission (SEC) to conduct a `complete and thorough review' of the allegations.

The article also claimed that hedge funds and mutual funds pay up to $1m a year to `matchmaker' firms, which pair Wall Street investment firms with doctors involved in ongoing clinical trials. It reported that the largest of these firms, Gerson Lehrman, has contractual agreements with more than 60,000 doctors to speak to investors.

Gerson Lehrman reacted to the claims by publishing a statement, making clear that the company allowed investors to avoid companies that “excel in marketing more than medicine”.

The Pharmaceutical Research and Manufacturers of America (PhRMA), the body representing the US pharma industry, condemned the practice of providing investors with inside information about clinical drug trials.

“If a doctor breaks securities laws or his or her confidentiality agreement with a pharmaceutical research company to gain financially, they should be severely punished,” a PhRMA spokesperson said.

Senators asked the Department of Justice and the SEC whether Congress should consider tightening legislation on divulging medical information to investors. The agencies are yet to comment on the allegations.


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