Bush's FDA - Perpetual Leaker of Insider Information
The steady leaking of insider information about products under review by the FDA has caused enormous losses for average American investors since the Bush Administration took control of the agency six years ago.
There are several ways that investors can profit from this type of insider information. The first is obvious, buy the stock because approval of a product will almost certainly raise a company's stock value. Investors who know about the decision ahead of time can bet the farm based on that information.
But investors who are tipped off that a product will not be approved can do the opposite. They can bet that company's stock value will fall by selling the stock short knowing full-well that the minute the news of non-approval becomes public, the stock's value will drop like a rock.
When the leaking of this type of information occurs, the losers are always the investors who play by the rules and make bets based on the best public information available. Unfortunately, in many instances, these are the very people who can least afford the loss.
One high-ranking member of the Bush Administration's FDA, Dr Richard Pazdur, has been one of the leakers in two cases involving cancer drugs that caused investors to lose vast amounts of money.
The first case devastated investors when a company's stock value dropped more than $1.5 billion in less than 3 weeks after Dr Pazdur tipped off the Cancer Leadership Council's legal counsel Samuel Turner that the FDA planned to reject the application for approval of a cancer drug the week before the decision was scheduled to be sent to the main sponsor, ImClone, on December 28, 2001.
At that time, Mr Turner also was a registered lobbyist for a number of pharmaceutical companies, including Bristol-Myers Squibb, which just happens to be the largest manufacturer of chemotherapeutic drugs.
Bristol-Meyer tipped off ImClone owners Harlan and Sam Waxal, and family members immediately started selling their stock. An investigation by the SEC later determined that the Waksals sold more than $10 million worth of stock in the 48 hours before the FDA's rejection of the application for drug was made public.
According to a June 16, 2002 report on Newsbytes News Network, short sellers also made millions by placing bets that ImClone's stock value would fall in the weeks before the FDA publicly rejected the application.
The House Committee on Energy and Commerce investigated the insider trading in this case, and a subcommittee held a hearing on June 13, 2002. At the start, the chairman noted that there were two stories here.
One, he said, "will be more fully told by the SEC and the Justice Department as it examines how the FDA process and what appears to be some rather amoristic players conspired in a way that allowed insider trading to potentially occur and an awful lot of investors to lose a lot of money while insiders were trading on information that was available only to them."
"The other story," he noted, "is about the process at FDA and how the FDA process allowed this to happen."
A transcript of the hearings shows that when members of Congress asked directly who within the FDA leaked the information to Bristol-Myers, Dr Pazdur and the rest of the Bush Administration officials talked in circles and never answered.
But in the end, somebody pulled some strings because Dr Pazdur got off Scott free, which probably accounts for his lack of fear when engaging in similar, behind-the-scenes activities in 2007.
In the more recent case, the continued short selling in Dendreon's stock following the Provenge Advisory Committee meeting of March 29, 2006, despite the fact that the Committee recommended approval of the drug, surely indicates that information leaked to Wall Street from inside the FDA guaranteed that the drug would not be approved.
