October 12, 2015 / 3:47 PM / 4 years ago

Physician insider trading cases suggest tighter rules needed

(Reuters Health) - A spate of recent insider trading cases involving physicians suggests that tighter rules may be needed to limit interactions between medical researchers and the companies and investors seeking to profit from their data, some doctors argue in the journal JAMA Internal Medicine.

Health care in the United States is big business, accounting for about $2.9 trillion a year in spending, or about 17.4 percent of the gross domestic product, according to Dr. Aaron Kesselheim of Brigham and Women’s Hospital and Harvard University and colleagues, whose “Special Communication” paper appeared online today.

Many companies in the health industry – including insurers, drugmakers and device manufacturers – are either publicly traded or financed at least in part by private investors.

Physicians may legally share their opinion with investors about medical research that is already public knowledge – such as data published in medical journals or presented at scientific meetings.

But it’s illegal for anybody in the U.S. to trade stocks based on nonpublic information, and physicians may not reveal confidential information to investors such as data from unpublished or ongoing clinical trials, the article’s authors point out.

Recent insider trading cases – including one involving a University of Michigan researcher accused of telling an investor at the hedge fund SAC Capital about an Alzheimer’s drug that failed in human trials before the results were public – highlight the need to more effectively restrict doctors’ interactions with investors, Kesselheim said by email.

“This system is built on ideas like trust and the notion that no one is cheating to get ahead,” Kesselheim said. “Our financial system would not be able to function if everyone acted like these individuals did.”

Educating doctors and researchers about the potential for insider trading to occur any time they discuss nonpublic aspects of their research may also help curb insider trading, but this won’t be enough on its own to stop the improper flow of information, the authors note.

One area that needs more policing is expert consulting networks set up by investors to get clinical insight from physicians about emerging therapies, Kesselheim and colleagues argue.

Physicians and scientists who serve on corporate boards or participate in clinical research should not participate in these expert consulting networks, the authors argue.

Universities and academic medical centers might also bar faculty and staff from entering into consulting arrangements with expert advisory panels that match scientists with hedge funds or brokerage firms, the authors suggest. That, they note, is what the University of Michigan did after the insider trading case tied to the Alzheimer’s drug trial.

The challenge in restricting what doctors can say and to whom is that the restrictions would still need to allow for the free flow of information that is the main tenet of scientific research, said Arthur Caplan, a bioethicist at New York University Langone Medical Center.

“One of the fundamental ideas of science is that people exchange ideas,” Caplan, who wasn’t involved in the article, told Reuters Health. “You can say here is the draft paper, here’s an experiment I’m working on, and exchange ideas and talk lab to lab.”

But when that exchange happens with an investor seeking to profit from nonpublic information, that’s insider trading.

His advice to doctors: “Understand that you have information sometimes that is of commercial value and you are expected to use it only for scientific purposes,” Caplan said.

SOURCE: bit.ly/IZGqPC JAMA Internal Medicine, published online October 12, 2015.

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