"The Scent ... of a Casino" - Clinical Research Results as Fodder for Insider Trading

"The scent and smoke and sweat of a casino are nauseating at three in the morning. Then the soul-erosion produced by high gambling - a compost of greed and fear and nervous tension - becomes unbearable and the senses awake and revolt from it." - Ian Fleming.  Casino Royale.  1953

A major theme of this blog has been threats to the integrity of clinical research.  When I started out as a young naive academician in medicine, I viewed clinical research through the lens of evidence-based medicine, as primarily a means to develop better evidence to aid in the care of patients, and secondarily a way to advance science and public health.  Yet in the past 20 to 30 years, clinical research has become commercialized.  Now most randomized controlled clinical trials are done to support the licensing of drugs and devices for particular indications.  Furthermore, clinical research has become de facto a primary avenue of marketing of drugs and devices.  So we have discussed endlessly how clinical research has been manipulated by those with vested interests in selling drugs and devices, and may be suppressed when even such manipulation fails to produce results desired by commercial sponsors.

If that was not bad enough - and it is - now there is evidence that clinical research has become the roulette wheel in an investment casino.  This is the lesson provided by new US government charges that giant hedge fund SAC Capital used insider knowledge to trade drug company stocks.


Let me try to provide a narrative of the key elements of the case.

The Key Players

Matthew Martoma was a " former student at Harvard Law School, ... [who] co-wrote papers on medical ethics before seeking a business degree at Stanford University and joining a little-known Boston hedge fund."  Then, "in 2006, at age 32, Martoma made it to SAC Capital Advisors LP and gained the attention of the firm’s billionaire owner Steven A. Cohen."(1)

Dr Sidney Gilman is

an 80-year-old neurologist with expertise in neurodegenerative disorders, including Alzheimer’s disease. According to his biography on the University of Michigan website, Gilman first served on the faculty at Harvard and Columbia and then had a long and distinguished career at the University of Michigan, where he was the chair of the department of neurology for many years. He is a member of the Institute of Medicine of the National Academy of Sciences and a past president of the American Neurological Association. In other words, he’s a bigshot.

Gilman moonlighted as a consultant, working for an expert networking firm, where he provided advice to the financial industry (and which eventually led to the insider trading case), and for Elan Pharmaceuticals. In addition to his consulting for Elan, he also served as the chair of the Safety Monitoring Committee for a phase II clinical trial of a highly promising (at the time) Alzheimer’s drug, bapineuzumab, under development by Elan and Wyeth.(2)

The owner of SAC Capital, a hedge fund worth $14 billion, is Steven A Cohen, "a prodigious art collector, an investor in the New York Mets, a supporter of Mitt Romney’s presidential campaign."  His "career ... has reached mythic status on Wall Street. Over the last 20 years, Mr. Cohen has amassed a multibillion-dollar fortune by posting returns averaging 30 percent a year. SAC has grown into a firm with about 1,000 employees around the world."(3)

The Maneuver


Per the NY Times(4), 

The doctor met Martoma as a consultant for an expert- networking firm based in Manhattan and had sessions with Martoma from mid-2006 to July 2008, according to the government.

Gilman worked for Gerson Lehrman Group’s Scientific Advisory Board starting in 2002,... 

Also according to the NY Times(5)
 

Dr. Gilman’s consulting work for Mr. Martoma earned him about $108,000, according to court filings. Based in part on Dr. Gilman’s leaks about positive developments related to the clinical trials of a new Alzheimer’s drug, SAC accumulated a roughly $700 million position in the stocks of Wyeth and Elan, according to the government.

The S.E.C. said that the fund’s owner, Mr. Cohen, took a large position in Wyeth and Elan in his personal portfolio based on Mr. Martoma’s recommendation. Mr. Cohen maintained his holdings even though there was significant internal debate about the wisdom of such a large position in the drug makers, the government said.

Furthermore, per Larry Husten writing in Cardiobrief(2),

 While serving on the Safety Monitoring Committee of the trial, from the summer of 2006 through mid-July 2008, Gilman had access to the safety (but not the efficacy) data from the trial. Throughout this period he leaked the positive safety information to his contact at SAC (the enormous hedge fund), which then began to accumulate a large position in both Elan and Wyeth.

So, allegedly based on information from Dr Gilman, the high-ranking academic physician doubling as a data monitoring committee chair for a drug trial, paid for these services by Elan, SAC Capital and Mr Cohen made a large investment in Elan and Wyeth, the companies sponsoring the trial.

But then, again per Husten(2),

 Later in June, Elan chose Gilman to present the full trial data at ICAD. Gilman did not become privy to this data until the middle of July when Elan gave him the full results of the trial. The results, in sharp contrast to the earlier view in the press release, were decidedly negative, offering little hope that the drug would be considered effective. Gilman apparently understood this, because he immediately gave the results to the hedge fund, which then rapidly and dramatically reversed its long position on Wyeth and Elan.

Specifically, per the New York Times(5), after

Dr. Gilman told Mr. Martoma that patients were experiencing serious side effects, prosecutors say. Afterward, Mr. Martoma e-mailed Mr. Cohen, telling him 'it’s important' that they speak. They spoke on the phone for nearly 20 minutes, the government says, and Mr. Martoma told his boss that he was no longer 'comfortable' with the investments.

The following day, SAC reversed course. Mr. Cohen’s head trader sold the firm’s entire inventory of roughly 10.5 million shares of Elan and about seven million shares of Wyeth, the government said. Once it had dumped the shares, SAC built a short position in the two stocks, betting their value would drop.

According to the S.E.C., the trader, Mr. Cohen and Mr. Martoma kept the sales confidential. The trade, wrote the head trader in an e-mail to Mr. Cohen, 'was executed quietly and efficiently over a four-day period through algos and darkpools' — referring to trades using algorithms and to trading platforms that do not have the same reporting requirements as the stock exchanges — 'and booked into two firm accounts that have very limited viewing access.'

After the companies announced the results of the trials, Elan’s stock fell about 42 percent and Wyeth’s about 12 percent.

The trading allowed SAC to avoid about $194 million in losses and earn about $83 million in profits on Elan and Wyeth, according to prosecutors.

At the end of 2008, Mr. Martoma received a bonus of about $9.3 million, the S.E.C. said.

So, having bet heavily on Elan and Wyeth based on Dr Gilman's initial information that the trial was showing positive results, SAC Capital and Mr Cohen then bet heavily against these companies based on Dr Gilman's new information that the trial would end up not showing such results.  Because they had this information allegedly before it was made public, these bets yielded huge profits.  Mr Martoma, the conduit between SAC Capital and allegedly Mr Cohen, made millions.  Dr Gilman made over a hundred thousand.

The Charges

Per Bloomberg(4),

Martoma, 38, was accused by prosecutors in Manhattan federal court with playing a lead role in what they called the most lucrative insider-trading scheme in history, given the $276 million profit he allegedly helped the hedge fund achieve.

The government started off taking a tough approach, per the NY Times(5),

FBI agents arrested Mr. Martoma, 38, early Tuesday morning at his home in Boca Raton, Fla. He was released on bail after making an appearance in Federal District Court in West Palm Beach. Mr. Martoma, who has been unemployed since leaving SAC in 2010, is expected to appear in federal court in Manhattan on Monday and enter a plea.

 In addition, Dr Gilman, per Bloomberg(1), "has entered into a non- prosecution agreement with prosecutors in which he agreed to testify before a federal grand jury and to forfeit $186,761, money which he was paid by Elan for his consulting work."

Mr Cohen has not been charged.  However, according to John Cassidy writing in the New Yorker(6),

the complaints do assert that Cohen, identified as 'Portfolio Manager A,' personally authorized many of Martoma's trades, and pocketed the bulk of the profits they generated.  In a statement accompanying the indictment [US Attorney Preet] Bharara was careful to state that S.AC., and by extension Cohen, reaped enormous rewards from the criminal wrongdoing, even though they weren't being charged.

the complaints do assert that Cohen, identified as “Portfolio Manager A,” personally authorized many of Martoma’s trades, and pocketed the bulk of the profits they generated. In a statement accompanying the indictment, Bharara was careful to state that S.A.C., and by extension Cohen, reaped enormous rewards from the criminal wrongdoing, even though they weren’t being charged.

Read more: http://www.newyorker.com/online/blogs/johncassidy/2012/11/sharks-circle-around-hedge-fund-big.html#ixzz2DdLAchwv

Read more: http://www.newyorker.com/online/blogs/johncassidy/2012/11/sharks-circle-around-hedge-fund-big.html#ixzz2DdKdZcAY

In addition, there is now some likelihood that there will be legal actions against SAC Capital.  The company has reportedly received a "Wells notice" that the SEC is considering pursuing such action.  In addition, according to the New York Times(7), "an additional action against SAC, or even Mr. Cohen, could involve accusations of fraud based on the so-called control-person liability theory, meaning that it was in 'control' of Mr. Martoma when he engaged in insider trading."

the complaints do assert that Cohen, identified as “Portfolio Manager A,” personally authorized many of Martoma’s trades, and pocketed the bulk of the profits they generated. In a statement accompanying the indictment, Bharara was careful to state that S.A.C., and by extension Cohen, reaped enormous rewards from the criminal wrongdoing, even though they weren’t being charged.

Read more: http://www.newyorker.com/online/blogs/johncassidy/2012/11/sharks-circle-around-hedge-fund-big.html#ixzz2DdKdZcAY

Summary

At one point, I would have simply regarded the trial of bapineuzumab as a clinical scientific experiment meant to determine if a promising new therapy would work for the important clinical problem of Alzheimer's disease, and incidentally as means to learn more about the biology of that disease.  More recently, I would have regarded the trial as primarily a means for Elan and Wyeth to persuade the US Food and Drug Administration to approve this drug as a treatment for this disease, and then if so, a means for these companies to market it.  I would have been skeptical about the value of the clinical evidence supplied by the trial to support use of this drug, but would not have dismissed this evidence out of hand.

Now it appears that a major role of this trial was to be a roulette wheel in a Wall Street casino.  Big bettors on this wheel included people who may have had advance knowledge about the slot in which the ball would land.

Ideally, clinical research ought to be done by people who have no particular interest in the results turning out one way or the other.  Obviously, clinical investigators as humans may have opinions about how studies might turn out.  However, they should not be in positions to gain or lose money according to the results, or to be intimidated by those with interests in having the studies obtain particular results. Our current system in which many clinical studies are funded by organizations with interests in how the results turn out has lead to numerous cases of manipulation of study results, and sometimes suppression of studies whose results could not be manipulated successfully in the desired direction.  Such threats to study integrity make it difficult to make the best clinical decisions for individual patients, distort health policy, and break the trust of patients who volunteered to participate in the studies.

Now it appears that short-term stock trading that bets on the results of clinical research, sometimes informed by insider information about these results, could be another powerful external influence on clinical research that could additionally threaten its integrity.  Furthermore, as we speculated seven years ago (see this post and links backward), fear of insider trading may be making clinical research more opaque, and this opacity may allow even more control of research by sponsors (companies funding it) rather than investigators.

We have previously suggested that real consideration ought to be given to taking clinical research out of the hands of organizations, particularly health care corporations, that have vested interests in the direction of the results.  Knowledge that clinical research is increasingly becoming a casino for stock traders and hedge funds, and that research results are becoming the stuff of insider trading should further prompt this consideration. 


References
1.  Burton K, Kishan S, Van Voris B. Cohen's 'Elan Guy' Martoma dropped ethics for hedge fund.  Bloomberg, Nov 23, 2012.  Link here.  
2.  Husten L. The doctor and the center of the insider trading scandal.  Cardiobrief, Nov 27, 2012.  Link here.
3.  Lattman P. S.E.C. weighs suit against SAC Capital.  New York Times, Nov 28, 2012.  Link here.
4.  Van Voris B, Hurtado P. Insider crackdown uses SAC manager in health-care pivot.  Bloomberg, Nov 21, 2012.  Link here.
5.  Lattman P. Insider inquiry inching closer to a billionaire.  New York Times, Nov 20, 2012.  Link here.
6.  Cassidy J. It's time for Obama to bite the hedge-fund sharks.  New Yorker, Nov 21, 2012.  Link here.
7.  Lattman P. S.E.C. weighs suit against SAC Capital.  New York Times, Nov 28, 2012.  Link here. 

Aetna Government Contract Discredited

Last week, the Sacramento Business Journal reported on irregularities in how health insurance/ managed care giant Aetna obtained a contract with the US military health plan Tricare:

Aetna Inc. hired a former high-level Tricare employee with access to proprietary information about Health Net Inc.’s performance that could have given Aetna a competitive edge in its bid for a lucrative military health care contract, the U.S. Government Accountability Office has concluded.

The GAO details six flaws in the procurement process in new documents posted online Tuesday and recommends that Aetna should be excluded from the competition, leaving Health Net 'as the only viable awardee.'

The agency recommends Tricare officials perform a thorough review of what sensitive information the former Tricare employee had access to and decide what action to take to address the problem. The GAO also recommends that Health Net be reimbursed the cost of filing the protest, including attorneys fees.

The Business Journal described the details of the irregularities:

The GAO decision pointed to six flaws in the in the bid evaluation process, including:

* The agency credited Aetna with past performance of its parent and corporate affiliates but did not record which entities were involved or establish the roles they would play in the contract
* The evaluation gave Aetna the highest past performance rating without considering that its past performance was small compared with the size of the Tricare contract
* The price evaluation did not consider whether Aetna’s proposed staffing reflected a lack of understanding of the technical requirements of the contract — or showed a willingness to take a risk on the business
* The agency failed to consider the risk involved with Aetna’s proposed plan to hire large percentages of Health Net’s work force at lower pay rates
* The agency did not consider Health Net’s network provider discounts when assessing its pricing information for the program and
* The agency failed to protest Aetna’s hiring a former Tricare official with inside knowledge of Health Net’s performance on the previous contract.

'The contracting officer never considered the matter — because the awardee did not bring it to his attention— and the record shows that the individual had access to non-public proprietary information,' the decision states.

The Montgomery Advertiser added:

Though it doesn’t allege that procurement integrity law was broken, the GAO said contracting agencies like TMA have an obligation 'to avoid even the appearance of impropriety' in government procurement. This time it failed.

It's been only about nine months since we discussed legal or regulatory issues for Aetna.  In February, 2009 we discussed its settlement of accusations it underpaid claims in part through its use of a now discredited database marketed by Ingenix, a subsidiary of its supposed competitor, UnitedHealth Group.

Aetna boasts that it is

Helping to manage health care, one of the most important things in life

We believe we can help create a better health care system. This belief drives our daily decisions as one of the nation's leading health care benefits companies. We work hard to provide our members with information and resources to help them make informed decisions about their health.

Furthemore, it boasts of its mission

We help people achieve health and financial security by providing easy access to cost-effective, high-quality health care. And we continue to be a leader in building a stronger, more effective health care system by working with doctors, hospitals, employers, patients, public officials and others.

It seems one way in which Aetna works with public officials is to hire those that might have some inside knowledge of specific government contracting processes, and then take advantage of that to boost their chances of obtaining lucrative contracts, if I am reading the summary of the GAO findings correctly. 

Maybe most people have grown cynical about health care organizations', especially commercial health care insurance companies' mission statements, and may dismiss them as marketing fluff, if not complete balderdash.  However, to improve health care quality while controlling costs, facilitating access, and restoring professionalism, would be health care reformers need to make health care organizational leaders live up to their noble-sounding proclamations of corporate social responsibility. 

"Wall Street and Clinical Trials"

We have previously posted (here, here, here and here) about what came to be known as the "drug secrets" story. The Seattle Times revealed that physician-researchers had agreed to talk to Wall Street analysts and investors about clinical research, and were at times alleged to have revealed "drug secrets" from on-going studies. This provoked some indignation about whether these researchers were participating in insider trading.
Lost in much of the media coverage was the issue that the confidentiality agreements (usually between pharmaceutical company trial sponsors and medical schools and academic medical centers) were of questionable ethicality, given that most research subjects in clinical trials are lead to believe that they are participating to advance science, not the commercial interests of the trial's sponsor.
The indefatigable Robert Steinbrook has written a nice summary of all these issues, just published in the New England Journal of Medicine (Steinbrook R. Wall Street and clinical trials N Engl J Med 2005; 353: 1091-3). In particular he notes that the ethics of confidentiality clauses in contracts governing clinical trials are open to question,

These confidentiality agreements - which are meant to protect the business interests of drug companies - can also be the gag clauses that may prevent investigators from examining clinical trials data independently or submitting a manuscript for publication without first obtaining the consent of the sponsor.

I am very glad to see that this made it into the New England Journal, because the furor over revealing "drug secrets" and the evils of insider trading threatened not just to obscure the questionable nature of the confidentiality clauses that defined the "drug secrets," but to make these clauses appear legitimate.

More Smoke from the "Drug Secrets" Story

The Seattle Times "Drug Secrets" series about researchers being paid to talk to investors about ongoing clinical research continues to generate smoke that seems to be obscuring some important underlying issues.
To me, the biggest such issue is that clinical research should be open, transparent, not confidential or secret (except for the identities of the research subjects, and perhaps in some special cases involving national security).
Let me reiterate four reasons why keeping information about and data from ongoing clinical research secret is bad.
1.It may cause patients to suffer.
Recent examples suggest that commercial research sponsors may try to keep secret data about hazards of medications, devices, and toxic exposures. Such data can at times be apparent before a study is complete. Keeping such data secret allows people to continue to be unknowingly exposed to such hazards. Two of the classic cases of research suppression in the 1990's demonstrated this issue.

• In the "David Kern case," a textile manufacturer, Microfibres Inc., tried to prevent Dr. David Kern, a general internist and occupational medicine physicians at Memorial Hospital of Rhode Island and faculty member at Brown University, from presenting an abstract that described a case-series of a new pulmonary disease, flock-workers lung, that affected workers at Microfibres Inc. factories. Kern did present the abstract, but under a threat, never carried out, of law-suit, Memorial Hospital of Rhode Island removed Kern as head of the Occupational Medicine program, and refused to renew his contract, even though he was an Associate Professor. Brown University was unable to reverse these moves by the hospital, and Brown officials blamed Kern for signing an agreement to protect trade secrets, even though the agreement was unrelated to the research Kern did on the disease, and his research did not obviously reveal any trade secrets. [1-4]
• In the "Nancy Olivieri case," Apotex, a pharmaceutical company, acted against Dr. Nancy Olivieri for revealing preliminary data from a trial of deferiprone, a chelating agent for the treatment of iron overload in thalassemia, suggesting that the drug was often ineffective in treating iron overload, and appeared to be associated with hepatic fibrosis. Ultimately, a report by the Canadian Association of University Teachers also held that her academic freedom was abridged, in the context of a negotiation between the University of Toronto and Apotex over a large donation, and that the hospital harassed Dr. Olivieri during her dispute with Apotex (link here for report)

2. It violates the promise made to research subjects that their participation will advance science.
I have never heard of patients in trials run by academic institutions being told that their participation is solely for commercial product development or marketing purposes. As Steinbroook put it, "a basic tenet of research ethics is that the data from clinical trials should be fully analyzed and published. If the knowledge gained from trials is not shared, subjects have been exposed to risk needlessly."[5]
3. It conflicts with the core mission and values of medical schools and universities.
Gagging researchers violates their academic freedom. Gagging researchers is in direct conflict with universities' missions to promote free enquiry. (For example, the mission of Brown University includes "discovering, communicating, and preserving knowledge and understanding in a spirit of free inquiry...." (link here).
4. It may violate the free speech clause of the First Amendment of the US Constitution.
At least for state universities in the US.

So paying researchers to talk to investors about on-going research is bad if this discussion, too, is kept confidential, e.g., restricted only to a few investors (so that the research is still being kept secret from the general public, other researchers, physicians, etc.); or if the amount paid to the researchers is excessive, suggesting that they are being paid to influence the research in some way, not to just talk about it.
But it is not obviously worse than paying researchers (or more likely, the organizations that employ them) to keep the research confidential in the first place.Recent cases of suppression of medical research seemed to have spurred movement to ban what Robert Steinbrook accurately called "Gag Clauses in Clinical Trial Agreements."[5] For example, the American Association of Medical College put out a statement in December, 2004, that it "strongly supports the elimination of restrictive confidentiality clauses in clinical trial contracts between pharmaceutical companies and academic or physician researchers." (link here) In same month, the American Medical Association also resolved "to eliminate from research contracts the confidentiality clauses that prevent medical scientists from communicating their findings in clinical trials." (link here )
Yet most of the discussion of the Seattle Times series seems to focus only the evil of paying researchers to talk about research, and not the evil of paying to keep research secret. In fact, most mentions of gag clauses are as something that it is bad to violate.
For example, we have previously posted on how members of congress have focused on this issue as one involving insider trading.
The Seattle Times' own editorial on the their news series did as well.
But most curious is the response of the American Association of Medical Colleges (AAMC). The Times' reported last week that a memo sent by the AAMC to all medical schools directing them to "tell their doctors to scrupulously honor' confidentiality agreements forongoing research."
Fearing that the news article may have not fully described this message, I secured a copy of it from another medical school, whose dean had put it in wide circulation. It, indeed, did not include a reminder of the AAMC's previous condemnation of the very confidentiality agreements it now called to be "scrupulously" honored.
To badly mix metaphors, we risk taking our eyes off the ball here. Gag clauses for researchers are bad. While urging researchers to adhere to current clauses to avoid personal legal liability, we should urge institutions to explore whether there are legal means to nullify such clauses, and certainly not to sign new ones in the future. Simon Cameron, President Lincoln's Secretary of War, reputedly said, "An honest politician is one who, when he is bought, will stay bought." I hope the confusion now surrounding the "Drug Secret" series will not lead people into saying that about physicians and medical researchers.

References
1. DG Kern, RS Crausman, TH Durand et al. Flock worker's lung: chronic interstitial lung disease in the nylon flocking industry. Ann Intern Med 1998; 129: 261-272. (link here)
2. Shuchman M. Secrecy in science: the flock worker's lung investigation. Ann Intern Med 1998; 129: 341-344. (link here)
3. Marsh DJ. Intimidation of researchers by special interest groups. N Engl J Med 1997; 337: 1317-1318. (link here)
4. Shuchman M. Consequences of blowing the whistle in medical research. Ann Intern Med 2000; 132: 1013-1015. (link here)
5. Steinbrook R. Gag clauses in clinical-trial agreements. N Engl J Med 2005; 352: 2160-2162. (link here)

Protecting "Research Integrity" By Keeping "Drug Secrets?"

The latest follow-up to the stories about "selling drug secrets" has just appeared in the Seattle Times. Washington state congressman, Rep. Jay Inslee (D), has called for congressional investigation. His rationale was, "we in the Northwest have a great stake in the integrity of the biomedical-research process." Referring to reports that physicians charged consulting fees to talk about ongoing drug trials to Wall Street analysts, he said "this alleged practice violates the ethical and legal walls that needs [sic] to exist between doctors with insider knowledge about clinical drug trials [italics added] and Wall Street. We have a responsibility to protect the integrity of medical and scientific research."
This mirrors what Sen. Charles Grassely (R-Iowa) wrote, "the potential violations of the law and scientific ethics challenge the fundamental integrity of how scientific research is performed and how we proect our financial markets from manipulation."
I agree that it may have been unseemly for the scientists mentioned in the original Seattle Times series to charge large consulting fees to talk about their current research. But, OK, folks, hold the phone here. Since when does protecting "research integrity" mean preventing researchers from talking about their work?
On the contrary, it clearly is unethical to suppress the results of research done on human subjects. Let me quote Dickersin and Rennie from their article calling for registration of all clinical trials. (Dickersin K, Rennie D. Registering clinical trials. JAMA 2003; 290: 516-523.)

Patients who agree to participate in clinical research do so with the understanding that they are contributing to medical knowledge. If the knowledge gained in a trial is never communicated to others, then their contribution is unrealized and the covenant between researcher and patient, indeed, between ethical review boards and patients, is broken.
A crucial question is whether the distortion of available evidence, aside from being unethical, actually harms patients. There is evidence that it does.

If it is unethical to suppress "knowledge gained in a trial," how can one ethically suppress even preliminary, informal conversation about a clinical trial (setting aside whether someone is paid for having such a conversation)?
Part of the issue here is the curious double-standard we now seem to have for research funded by commercial sponsors, as opposed to that funded by government agencies and charitable foundations (see previous post here). Somehow, it seems to have become acceptable to silence researchers who perform research on human subjects but with commercial funding. Amazingly, this censorship is now being done in the guise of "protecting research integrity."
Maybe Congress should be investigating how much the physicians charged the Wall Street analysts to talk about their research. But what they really should be investigating are the confidentiality agreements that commercial research sponsors foisted on universities, academic medical centers, and by extension, the researchers who work for them.
However, if we let suppressing discussion of commercially funded clinical research become acceptable under the guise of protecting "trade secrets," woe to us and our patients.

A Murky Research Tale

The Seattle Times series that alleged physician researchers were leaking "drug secrets" to Wall Street (see post here) has already had repercussions. US Senator Charles Grassley (R- Iowa), head of the Senate Finance Committee, is already calling for a Securities and Exchange Commission (SEC) investigations, saying "Selling drug secrets violates a trust that is fundamental to the integrity of both scientific research and our financial markets," as reported again by the Seattle Times.
Yet although I acknowledge that the behavior of the physician researchers described in the Seattle Times series does not look too pretty, I contend that this story may be a bit murkier than it first seemed. Some additional questions to consider are:

• Were There Really "Drug Secrets?" - I previously posted about a New England Journal of Medicine article that described how medical school administrators entered into research contracts with commercial research sponsors. Half or more of schools permitted contracts that allowed the commercial research sponsor to "own" the data and to control of the writing of articles describing the research findings; and required the school to keep research results and the provisions of the research contract itself confidential. Such contracts appeared to be in conflict with medical schools' scientific and humanitarian mission. In particular, allowing research sponsors to suppress research results violates the implicit promises made to research subjects that their data will advance science. Thus, clinical research on humans ought not to produce any "drug secrets." Whether researchers who work for schools which agreed to these contracts ought to be bound to keep such "drug secrets" is unclear. Whether it is unethical to violate these contracts' confidentiality agreements is similarly unclear. Although disclosing research data to investment analysts does not give the physician researchers the moral high ground, establishing the confidentiality agreements within the contract does not give the research sponsors or the medical schools any moral high ground either.
• Of What Value is the Information Revealed by the Physicians? - The physicians in the Seattle Times series generally claimed that the information they revealed included general impressions of how the research project was going, and their "gut feelings" about which drugs involved in the comparisons was likely to be better. Consideration of some principles of evidence-based medicine suggest that this information is unlikely to accurately to predict the results of the clinical trials: 1) Double-blinding should have prevented the physicians from telling which patients got which drug. 2) In multi-center trials, results from one center may not predict results from the whole trial. 3) In long-term trials, short-term results may not predict final results. Although the stock analysts cited by the Seattle Times claimed that they could predict trial results based on the information revealed to them, they supplied only anecdotal data about their performance. In fact, their predictions may have been no better than chance alone. So the Wall Street analysts had no claim to the moral high ground either.

Although I cannot strongly defend the conduct of the physicians recounted by the Seattle Times, it would be far too simplistic to interpret it as yet another tale about greedy doctors. Rather, it should provoke us to re-think how we currently fund and practice clinical research.

Medical ethics tunneling through earth's mantle, heading straight for the core

In the Seattle Times yesterday, I was quite literally stunned to see the article "Drug researchers leak secrets to Wall Street".

This story represents the culmination of an ever-increasing fall in medical ethics, replaced by moral relativity and rationalizations for the inexcusable. Medical ethics are tunneling through earth's mantle, and heading straight for the core (and perhaps out the other side).

I recall in medical school in the late 1970's that ethicist George Annas taught my class (Boston University School of Medicine class of 1981) that only bad consequences would come from concentrating on money; that income would take care of itself and our primary concern should be the patient. At the time, I dismissed this as socialist prattle, thinking my colleagues and I would know better than to be corrupted by temptation. Ah, the days of youth and idealism....

At Merck & Co., Inc., corporate ethics called for "avoiding impropriety or even the appearance of impropriety", and to follow both the letter and the spirit of the law, making decisions regarding "gray areas" by the "acid test" of what we would be comfortable with in print or other public media. Those were wise words indeed ...


Assuming this is true, here are the issues as I see them:

(1) Today, it seems many physician-scientists' concerns regarding impropriety (or even the appearance of impropriety) can be alleviated by a green substance administered in non-homeopathic doses. This green substance is certainly not listed in The Merck Index, the (not-for-profit) encyclopedia of medicinal chemistry whose authors I once managed, except perhaps on a sticker bookstores might place on the cover page.

(2) Statements that selling information about drugs undergoing clinical trials to high-paying speculators (e.g., hedge funds) "serves a clinical purpose" is a rationalization for lining ones' pockets.

(3) When the clinician has signed a confidentiality agreement, then by even talking to major investment companies, they are literally dancing on the precipice of impropriety. It does not take much for some to push them over the edge. If the organization where the clinician works has signed the confidentiality contract, the issue is murkier; however, that "appearance of impropriety" problem rears its head very hard at $5,000+ per day of chats to investors. (The public may think the term 'bribe' is a more accurate term for this level of compensation. Merriam-Webster definition: 1. money or favor given or promised in order to influence the judgment or conduct of a person in a position of trust; 2. something that serves to induce or influence.)

Of note, the honorarium for, say, critical scientific evaluation of incoming grant proposals at NIH (which is actually hard work) is something like two hundred dollars for an 8-hour working day. Clinicians should approach talking to investor and speculator groups for high dollars with the utmost of caution. Personally, I'd avoid it like the plague, but that's my own opinion.

(4) While the information "sold" by clinicians might reflect their isolated opinion(s) on a drug undergoing testing, and might lead investors in the wrong direction as easily as the right direction, there is the possibility - especially in clinical trials going very well or going very poorly - that an additive effect could give private investors (a.k.a. privileged speculators) an edge. By doing so, the sellers of the information are giving those investors a potential advantage over the common (a.k.a. non-wealthy and non-connected) investor that is destructive to truly free markets. This hurts us all. Justifications that such information "might have little likelihood of being correct" are ethically irrelevant if the information is deemed confidential by contract. To use a somewhat extreme example, it does not justify shooting at passers-by to one's home by saying that "my aim is so poor that I'm unlikely to hit anyone."

When the clinician-salesperson actually has direct access to priviliged RCT information such as blinding, adverse events, or partial results, the transgression of ethics is ever more egregious.

(5) Where there's smoke, there's fire. Just how widespread are these practices?

(6) The statement that "drug company executives know about the practice but can't crack down on the doctors they rely upon for conducting patient testing" makes one wonder if the real situation is that pharma "won't crack down", i.e., it makes one wonder if a quid pro quo contaminates clinical trials. You do the trials, we look the other way whenever you get lucrative opportunities to 'talk to investors' [for $500/hr or $5000/day].

(7) This possibility also raises the question -- on what other issues in the conduct of clinical trials do pharma companies "look the other way?"

(8) Such activities further harm public confidence in clinical researchers and the pharmaceutical industry (assuming public opinion could go much lower).

(9) If as this article claims there are "60,000 doctors" engaged in this process, that represents a pretty high percentage of doctors involved in clinical trials. It also represents a significant % of doctors in practice in the U.S. That is very, very disconcerting regarding the effects of the commercialization of medicine.

(10) Ultimately, a lot of people pay for stock market fraud either directly or indirectly. This is not a "no-victim" or "it just hurts the rich" problem by any means.

(11) Claims that clinicians "were hounded" by investment companies for information are not going to be received well by the Vioxx, Fen-Phen etc.-tarred public as an excuse for giving in and taking fees-for-information. I used to get calls soliciting me for information of one type or another at Merck. My simple response: "sorry, can't talk, company confidential, good bye."

(12) Claims that a clinician doesn't know how the information they sell will be used or care about it strike me as cavalier. The public will not react well to such attitudes.

I've now listed twelve thoughts on this issue. I can think of others, but I think my point is made: physicians are selling out to speculators for high 'fees' that would be construed by many as bribery.

Medicine needs a strong dose of what Dr. Annas prescribed so many years ago to a class of very idealistic medical students.

-- SS

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.
... 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.
... 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. [is 'bribe' a better term for these payments? The public may think so -- SS]

... 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.