Trial discretion doubted

The chairman of 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 results are announced publicly.

A report in US newspaper 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.

Writing to the Department of Justice and the Securities and Exchange Commission (SEC), Senator Charles Grassley asked both agencies to conduct a `complete and thorough review' of the allegations.

`Selling drug secrets violates a trust that is fundamental to the integrity of both scientific research and our financial markets,' he wrote in a letter addressed to the Attorney General, Alberto Gonzales, and SEC chairman, Christopher Cox.

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.

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 ìexcel in marketing more than medicineî.

ìPhysicians in every specialty have told us how good they feel about providing objective insights into science and technology that would otherwise be too complicated for investors to grasp.î

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.

ìIf a doctor breaks securities laws or his or her confidentiality agreement with a pharmaceutical research company to gain financially, they should be severely punished,î said Ken Johnson, PhRMA senior vice president.

Senator Grassley has 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.