Senator seeks probe of drug researcher payments
Mon Aug 8, 2005 5:42 PM ET
WASHINGTON (Reuters) - A top Republican senator on Monday urged the Securities and Exchange Commission and the Justice Department to look into a report that Wall Street investors paid researchers to reveal confidential information about ongoing drug studies.
"Selling drug secrets violates a trust that is fundamental to the integrity of both scientific research and our financial markets," Sen. Charles Grassley of Iowa said in a letter to SEC Chairman Chris Cox and Attorney General Alberto Gonzales.
The Seattle Times on Sunday said some medical researchers received up to $500 per hour to tell brokerages and hedge funds about the likelihood of a drug's success and marketability.
Large investors can use the information to position themselves to profit from movement in a stock once the trial results become public, the report said.
The newspaper said it had found some 26 cases where doctors "leaked confidential and critical details" of their research to Wall Street players.
"Obviously this is the type of information that would affect the sale of stocks," Grassley told CNBC business television, "I want to know whether laws have been violated."
An SEC spokesman declined to comment on Grassley's letter. A Justice Department representative was not available to comment.
The Times also described "matchmaker firms," set up to make researchers available to investors for an hourly fee.
"If they're the vehicle for the violation of law, it seems to me that they ought to come in for some investigation as well," Grassley said during his CNBC interview.
Gerson Lehrman Group, named in the newspaper story as a matchmaker firm, defended its services in a statement on Monday. It said it allowed investors to avoid "companies that excel in marketing more than medicine."
"Physicians 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," the statement said.
Billy Tauzin, president of the Pharmaceutical Research and Manufacturers of America, told Reuters that clinical trials must be "a trustworthy process so that folks who work within it are busy trying to get the truth about a drug ... not busy trying to help somebody on Wall Street make money."
Grassley is chairman of the Senate Finance Committee, which oversees payments to the U.S. insurance programs Medicare and Medicaid, and has taken a strong interest in the government's drug approval process.
(Additional reporting by Susan Cornwell, Lisa Richwine and Jeremy Pelofsky)
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