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Insider Trading in Neurology Case Spotlights Legal Constraints in Working with Industry

Rukovets, Olga

doi: 10.1097/01.NT.0000426336.70018.9e
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US ATTORNEY Preet Bharara laid out details of the insider trading case involving disclosure of data about bapineuzumab at a news conference on Nov

US ATTORNEY Preet Bharara laid out details of the insider trading case involving disclosure of data about bapineuzumab at a news conference on Nov

An insider trading case involving a neurologist who provided confidential information about an ongoing clinical trial invites discussion about the legal and ethical boundaries of academic-industry collaborations and investor activity.

Partnerships between neurologists and industry are ubiquitous when it comes to drug research and development, but when financial interests in the success or failure of a therapy are linked to investor activity, there is potential for not only conflicts of interest, but also fraud and criminality.

Biotechnology companies that invest in investigational drugs do so at considerable financial risk. Indeed, in an October 19, 2011, paper in the Journal of the National Cancer Institute, investigators assessed the stock prices of companies investing in experimental anticancer drugs 120 trading days before and after the first public announcement of clinical trials with positive and negative outcomes and regulatory decisions. They found that stock prices before the first public announcement differ for companies that report positive versus negative trials — with an average increase by 13.7 percent for companies reporting positive trials and a decrease by 0.7 percent for companies reporting negative trials.

But more than an ethical lapse or a conflict of interest, it is considered a violation of the Security Act of 1933 for investors to make a financial securities trade based on disclosure of “nonpublic information”such as clinical trial results — and it is a criminal breach to disclose such information after signing a non-disclosure agreement with a company.

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The largest and most recent insidertrading case ever charged by the Securities and Exchange Commission (SEC) is a case in point. In legal documents filed by the SEC on Nov. 20, 2012,hedge fund manager Matthew Martoma was charged with withdrawing stock in Wyeth and Elan, the developers of the Alzheimer's disease drug bapineuzumab — allowing the hedge funds to gain a profit and avoid a loss that totaled more than $276 million — based on tip-offs on negative trial results by neurologist Sidney Gilman, MD, who served as chairman of the safety monitoring committee overseeing the bapineuzumab trial.Dr. Gilman, the document noted, had signed a non-disclosure agreement with Elan as a consultant, and also was aware of the confidential nature of the data in his role with the safety monitoring committee.



The SEC document alleges that Dr. Gilman, professor of neurology at the University of Michigan in Ann Arbor, provided Martoma “with nonpublic information about the ongoing clinical trial” between 2006 and 2008. Further, the SEC charged that on or around July 17, 2008, Dr.Gilman provided Martoma with the detailed negative results of the clinical trial, 12 days before the trial findings were publicly disclosed at the International Conference on Alzheimer's Disease in Chicago.

Dr. Gilman was introduced toMartoma, according to the document, through an “expert network” that signs up academics and industry professionals as consultants and “matches” them up with money managers, investors, etc. who seek their advice. According to the SEC, Dr. Gilman received $108,000 from the firm for his consultations with Martoma and the investment firm CR Intrinsic Investors, Inc, between 2006 and 2008.

The government agreed not to prosecute Dr. Gillman in exchange for his cooperation with the case; he also agreed to pay federal authorities $234,000 of the money he had earned from Wyeth and the expert firm. He resigned from the University of Michigan on Nov. 27, 2012.

Neurology Today reached out to many in the field familiar with the case, but because of their relationship with Dr. Gilman, they chose not to comment. Several medical ethics experts however shared advice on how neurologists can maintain a lawful relationship, and avoid similar conflicts while working with industry. [For the detailed allegations, see the original SEC docket for the case:]

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Michael A. Williams, MD, the medical director of the Sandra and Malcolm Berman Brain & Spine Institute at Sinai Hospital of Baltimore, and a former chair of the Ethics, Law, and Humanities Committee — a joint committee of the AAN, American Neurological Association, and Child Neurology Society — said that there's nothing inherently wrong either ethically or legally about neurologists working with financial investors or industry.

Neurologists may serve as a sounding board or an expert in a particular field for a company in order to develop a new pharmacologic agent or biological agent or medical device, he said. “A neurologist may serve as a speaker on behalf of industry. And those relationships have many external constraints by the Food and Drug Administration and by the Accreditation Council for Continuing Medical Education,” which are in place to regulate them, Dr. Williams said.

In working with industry, neurologists (or other consultants) will be privy to proprietary information, and most consulting arrangements include a non-disclosure agreement or a confidentiality agreement, he told Neurology Today. “Neurologists should understand that if they are consulting, for example, on drug X and they possess certain information on the studies with drug X or the manufacturing of drug X, then they may not share that information with anybody else.” Violating this agreement is a contractual violation and a conflict of interest, and in some instances, it may be a violation of the law, he added.

These agreements, he continued, spell out the details for maintaining the confidentiality of the information and of any records — paper or electronic — in relation to it. “It specifically says that you may not share this information with others unless we tell you that you can or unless this information comes into the public domain.”

So, for example, “if a neurologist is working with a company again on drug X and the neurologist knows that the company is having some issues with maintaining the quality of the manufacturing process of drug X, the neurologist can't disclose that information to anyone. But if The New York Times then runs an article that says this company is having trouble with the ‘quality’ of drug X, that information is now in the public domain,” Dr. Williams explained. The neurologist could speak about it at that point — although the neurologist would probably do well to check with the company first about what he or she can or cannot say, he added.

The agreements govern the rules of behavior by both stating the goals of the relationship as well as some of the limitations with respect to what can and cannot be disclosed about the underlying research, said Dan Larriviere, MD, JD, acting chair of neurology and the residency program director at Ochsner Medical Foundation in New Orleans, and current chair of the Ethics, Law and Humanities Committee.

When he is working as aconsultant for a company, neurologist RogerPorter, MD,chief scientific officer of theEpilepsy Therapy Project, and former vice president of clinical pharmacology at Wyeth, said that he doesn't discuss confidential information even with his closest friends. “If he/she is working at company A and I am working atcompany B, we don't cross-talk at all about data or information and so forth. The most that I even tell people is whom I consult for, and that's it—and I have to do that to disclose.”Dr. Porter added that he doesn't even carry anyconfidential information on his laptop when he travels.

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It is important to remember that the non-disclosure agreement is a contract, Dr. Williams pointed out. Some neurologists sign them without an attorney, “but my own experience is that, more often than not, it is wise to have an attorney take a look to be certain that there are no surprises contained within the language of the agreement,” he said.

Dr. Larriviere, who is also a member of the Neurology Today editorial advisory board,added: “Very often those contracts are long and may contain a good deal of language that is unique to legal professionals. Neurologists should look over those contracts very carefully and if there are issues and language that they don't understand, they should either talk to the general counsel or risk management group at their institution (if they are employed by an institution) or hire and speak with their own attorney.”

It's also important to recognize, Dr. Williams stressed, that the interests of the two parties (science and industry) may not be aligned. The goals of an industry or corporation are obviously for the successful development of the products and services for that company. The goals of the neurologist may be funding for research or extra income by providing expertise, consulting, or speaking on behalf of this company,” he said.

Especially because the parties may have different goals, when signing this contract, make sure you understand:“What are the boundaries? What are the penalties if I violate the agreement? Or what are the penalties if the other side — industry — violates the agreement?” Dr. Williams said.

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Neurologist Dawn McGuire, MD, who is founder and President of NeurAccess, a translational neurotherapeutics consulting firm, and a member of the Ethics, Law, and Humanities Committee, said: “We can't be blind to the fact that commerce and business agendas are key drivers of science at this time in history. But there is much room for common ground because, after all, neurology — indeed, medicine as a whole — is a business as well. Viability, sustainability, and the color of the bottom line make all the difference, whether we are talking about the Neurological Institute at Columbia, or neurotherapeutics research at Biogen-Idec or Genentech. I see neurology/industry collaborations as marriages of differences, but not opposites,”she told Neurology Today.

Ultimately, “if an individual neurologist finds herself or himself entering into any sort of relationship with industry, it's really at that point that there's an individual responsibility to understand what they're getting into,” Dr. Williams added. At university medical centers, for example, there is a mandatory review of the agreements through internalcounsel before they are signed, Dr.Williams said. “But neurologists in privatepractice or group practice outside that structure are still ultimately responsible for anyagreement that they sign.”

Since neurologists don't come from a background of business or the law, they may not always think about whether they can or can't share certain kinds of information, which is more cause for involving a lawyer, Dr. Williams said.

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Might there be professional consequences for a neurologist who ends up in the news, like in this recent story? Possibly, Dr. Williams said. The AAN has a Code of Professional Conduct (CPC), and the Academy has a grievance process and a fair hearing process.

Members of the Academy agree to be governed by the CPC as a condition of membership, and violating that code jeopardizes that membership, Dr. Larriviere told Neurology Today. “Anyone can file a complaint with the grievance committee about an Academy member who they suspect has violated the CPC. The grievance committee will hear that case and determine whether there is sufficient evidence to refer the case to a fair hearing panel. The fair hearing panel is responsible for deciding whether or not that member violated the code of professional conduct. If a violation has occurred, the panel will then determine the appropriate sanction, including expulsion from the Academy.”



Going forward, Dr. McGuire said, we must build industry-academic collaborations transparently, “so that it is clear what information is being firewalled, and why. And we must insist, in any public/private partnership, that data sharing of methods and results is built in to a data dissemination plan. The Osteoarthritis Initiative, a partnership between NIH and a number of pharmaceutical companies, stands as exemplary in this regard, with data sets easily available to researchers, over and above published papers.”

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• The insider trading case involving Sidney Gilman and Mathew Martoma:
    • The SEC charges against Mathew Martoma:
      • The Security Act of 1933:
        • The AAN disciplinary actionpolicy:
          • Rothenstein JM, Tomlinson G, Detsky AS, et al. Company stock prices before and after public announcements related to oncology drugs. J Natl Cancer Inst 2011;103(20):1507–1512.
            • Overgaard CB,van den Broek RA, Detsky AS, et al.Biotechnology stock prices before public announcements: Evidence of insider trading? J Investig Med 2000:48(2):118–124.
              ©2013 American Academy of Neurology