An interesting article titled “Do Physicians/Researchers Trade Stock Based on Privileged Information?” written by Elie Donath and Mark J. Eisenberg appears in the Summer 2012 issue of The Journal of Law, Medicine & Ethics (vol. 40, issue 2, pages 391-393).
Speculation is made that
“…physicians/researchers are inappropriately profiting (by buying or selling stock) from information derived from advance copies of high-impact clinical trial data distributed by medical conferences or journals.”
A case study is made looking at the American Society of Clinical Oncology. Up until 2008 ASCO selectively and discreetly distributed abstracts from all forthcoming presentations at the ASCO Conference to ASCO members 2 weeks prior to them becoming publicly accessible at the conference. The authors used multiple linear regression to look at the percentage change in stock price on the first trading day following the release of these abstracts.
A table in the paper presents the results and more specifics of what the study measured. Two results were made from the study.
1) “stock price movements on the day following abstract-release are strongly indicative of where the stock will end up two weeks later when ASCO happens (i.e., if stock price falls on this day the stock is likely to fall further and vice versa) for both time periods.”
2) “price movements (and the corresponding regression analyses) during 2006-2007 resemble those which took place during 2008-2009 — but to a lesser extent.”
Hence the authors suggest that trading of allegedly unavailable information was taking place to some degree in the two week period prior to 2008 where the information was not public.
The authors conclude
“…without appropriate safeguards, medical professionals are likely to engage in (or inform others about) stock trading based on privileged information.”
Essentially this study indicates that medical professionals violate securities law unless their medical association takes action to prevent this.