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Consult for Wall Street?


Consulting for Wall St. may be lucrative, but some critics say such arrangements involve inherent conflicts of interest.

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.

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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Jennifer N. Lee, MD, FAAFP
© National Institute for Occupational Safety and Health
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© National Institute for Occupational Safety and Health
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