SEC INVESTIGATING DEALS BETWEEN DRUG RESEARCHERS AND WALL STREET

The SEC has launched an investigation into allegations that Wall Street investors routinely pay medical researchers for confidential information about ongoing drug studies, according to The Seattle Times.

The reported probe stems from an earlier Times article that found at least 26 cases in which doctors had leaked confidential and critical details of their ongoing drug research to Wall Street brokerages or hedge funds. That revelation prompted Senate Finance Committee Chairman Chuck Grassley (R-Iowa) to ask both the SEC and the Justice Department to investigate the matter.

"Selling drug secrets violates a trust that is fundamental to the integrity of both scientific research and our financial markets," said Grassley in a recent letter to U.S. Attorney General Alberto Gonzales and SEC Chairman Christopher Cox.

According to the Times report, doctors can earn $300 to $500 per hour when talking to elite investors. The researchers were paid to discuss their studies, giving investors the inside scoop on prospects for volatile biotech companies, a practice that violates federal securities laws, according to the Times. A drug's prospects in the biotech industry can send a small firm's stock either soaring or plummeting, it adds.

Pharmaceutical executives know about the practice, but can't crack down on the doctors they rely upon for conducting patient testing, the Times story notes.