A Moral Cesspool

“A moral cesspool.” That’s what Arthur Caplan, director of the Center for Bioethics at the University of Pennsylvania had to say about the results of an investigation by the Seattle Times. The Times found certain Wall Street investment firms are paying doctors to brief elite investors on the results of confidential and proprietary drug studies before they released those results to the general public. These investors (and their firms) act on this confidential information, taking advantage of the resulting stock moves once the information becomes public.

According to the Seattle Times, investment researchers pay doctors to talk to big money investment clients about a particular disease or emerging treatments using their expertise as doctors. But oftentimes, the doctors end up revealing confidential information about drug research. One anonymous investor describes how the scam operates:

“We get them to talk about the weather, or the Mariners, then you pop in your one innocent question you want to know about,” said the analyst, who spoke on the condition that his name not be used. “Then you switch back to whatever it was you were talking about before. When the doctor hangs up, he thinks he’s had a nice conversation about the weather or the Mariners.”

Even when the doctors don’t outwardly reveal detailed confidential results, they often reveal observations from the confidential studies that give crucial clues as to whether a drug will receive approval from the Food and Drug Administration.


The fact that investment firms are profiting off of inside information is bad, but what’s worse is that these doctors are compromising the research. The premature disclosures can taint the data and sink effective new treatments. And even though the drug companies are shocked (shocked!) to find that their data is being sold, they are reluctant to sue either the investment firms or the doctors because the companies need both to continue to operate. And so the gravy train keeps going.

All the while, the doctors involved plead ignorance or naivetĩ.

[Dr. Corey] Langer said he didn’t know what his Wall Street contacts did with his information. “They don’t tell me, and frankly I don’t want to know,” he said.

Thankfully, regulators are starting to take notice. In response to the Times’s investigation, Senator Charles Grassley (R-IA), chair of the Senate Finance Committee, has instructed the Securities and Exchange Commission to investigate the practice.