FDA, SEC to Boost Information Sharing
Regulators announced new measures Thursday to improve detection of potential securities law violations by companies that try to deceive the public about the status of federal scrutiny of their products.
Two federal agencies, the Food and Drug Administration and the Securities and Exchange Commission, outlined steps they were taking “to enhance the public’s protection against false and misleading information.”
The plan is meant to improve the sharing of information in cases where drug companies or other businesses regulated by the FDA spread false or misleading statements about a product’s reviews by the FDA, agency officials said.
The reviews can have a powerful effect on stock prices of companies seeking approval for products. “When companies misrepresent the status of the FDA’s review of their products, investors can be harmed,” said Stephen Cutler, the SEC’s enforcement director.
FDA Commissioner Mark McClellan said that now, if any FDA employee suspects erroneous or exaggerated public statements by a company, “we have a new process to bring them to the attention of the SEC staff as quickly and efficiently as possible.”
A 2002 congressional investigation of an ImClone Systems Inc. case prompted scrutiny of the FDA’s role and procedures for informing drug makers about the status of their applications for product approval.
ImClone founder Samuel D. Waksal has admitted selling his shares in late 2001 after he was tipped that the FDA report on the firm’s much-promoted cancer drug would be negative. Waksal was sentenced in June to seven years in prison and ordered to pay more than $3 million.
Waksal’s friend Martha Stewart, now on trial on charges of obstruction of justice and securities fraud, is accused of lying to investigators about why she sold her nearly 4,000 shares of ImClone about the same time. Prosecutors allege that Stewart decided to sell when she heard that Waksal was trying to sell.
Stewart has denied wrongdoing and insisted that she had a preexisting agreement with her broker to sell the stock when it fell to $60 a share.
The case has raised questions about the responsibilities of FDA regulators who knew about the stock-moving report days before but apparently had no procedure for restricting such information.
Based on a review of court documents and congressional testimony, a cancer specialist at the FDA told a Washington lawyer that ImClone would soon receive a letter rejecting its application to market Erbitux. Congressional investigators have said that call was an innocent mistake.
