When doctors speak, Wall Street listens. And Wall Street is actively soliciting physician voices: thousands of doctors are
being paid to participate in surveys and act as consultants to hedge funds, brokerage firms, and other sophisticated investors.
The hike in the number of physician-consultants is largely aided by matchmaker firms, such as industry leader The Gerson Lehrman
Group of New York, which currently has 50,000 doctors on its Healthcare Council. Companies like Gerson act as middlemen, linking
physicians with major financial concerns. They scan their own databases of doctors and select from a broad array of specialties
to find those that will best suit their clients' needs.
Investment experts are eager to learn the science that will determine the potential success of a drug or device. Hedge funds,
for example, are able to make enormous profits if, say, there's reason to believe a drug in the trial stage will fail, and
they go on to "short" that company's stock in anticipation that the share price will plunge. Conversely, of course, investment
firms and all funds can reap big rewards if the buzz about a particular drug is positive and they can invest huge sums of
money before the company's stock goes up.
The insight physicians are asked to share goes far beyond what might be gained from being on an advisory board or involved
in a drug trial. Physicians may be asked to explain the way a drug works or to relay common problems that patients experience.
"Doctors are valued for their experience, and the projects they're hired for are most often educational," says Daniel Cruise,
spokesperson for Gerson Lehrman. "A money manager or analyst, for example, needs to understand the science and front-line
experience in order to make informed judgments. It's their responsibility to do their homework before making decisions about
which healthcare companies they should fund with their clients' money." There's been a fair share of controversy
Without a doubt, consulting for an investment firm can be a lucrative sideline. Doctors are paid from $200 to $1,000 an hour
(the average is $230), to participate in phone calls, panel discussions, surveys, and to write white papers. They may be asked
questions that are extremely general, such as their opinion about the future of a certain field of medicine, or particulars
concerning new therapies.
The relationship seems like an ideal match between those who need to know and others in the know. But lately it's become the
focus of considerable controversy. In large part, that's because of a small number of cases in which doctors, either intentionally
or inadvertently, leaked confidential information. Last August, for instance, a Seattle Times investigation uncovered "at least 26 cases in which doctors have leaked confidential and critical details of their ongoing
drug research" to at least three major brokerage firms. In virtually all those cases, the firms used that information to provide
reports to their clients with buy or sell recommendations. Word of one failing drug trial preceded a major stock sell-off,
and the drug company's stock price plummeted. In another instance, the paper reported, physicians involved in a clinical trial
told a brokerage firm that the new drug was better than a recently introduced product that treated the same condition. The
brokerage report summarizing those findings came out some three weeks before the results of the study were announced. Investors
who had acted on the firm's report could have made a 40 percent return in those three weeks. The decision to trade stock that's
based on insider information is, of course, illegal.
Aside from a few sensational examples of Deep Throat in a lab coat, there are more-subtle instances where the mere appearance
of impropriety has cast a shadow. Take the case of Eric J. Topol, who learned the hard way that physician consulting can sometimes
be fraught with ethical land mines.
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