SEC, FDA boost effort to police drug claims
Federal drug and financial securities officials have stepped up their cooperation to spot drug companies that misstate their progress with regulators, the Securities and Exchange Commission's top officer in Boston said yesterday.
The effort between his agency and the Food and Drug Administration dates back a year, under pressure from Congress upset with disclosures by drug developers like ImClone Systems Inc.
Those efforts have led to closer ties between the two agencies, said Walter Ricciardi, head of the SEC's Boston office, at a legal conference for life sciences executives sponsored by Nutter McClennen & Fish LLP.
Ricciardi said FDA officials are now referring additional cases for SEC reviews and becoming witnesses in some investigations. Because the fate of small biotechnology firms often hinges on the future of a single drug under development, communications with the FDA about the drug's effectiveness and safety is of keen interest to investors, he said.
Ricciardi didn't offer any data that would indicate the new policy has led to an increased number of enforcement actions against the drug makers. He also stressed that the SEC wasn't zeroing in on drug companies.
''I don't want anyone thinking we are targeting the biotechnology industry," he said. ''That's not happening."
But some attorneys at the event said the industry now expects SEC scrutiny. ''This is a real effort," said Jonathan Kotlier, a Nutter partner and a former Justice Department official who often defends companies accused of wrongdoing. ''They're positioning themselves at the FDA so that they can say to the SEC if they see a [questionable] press release, 'that's not exactly what we said.' "
Some executives at the session said they weren't pleased by the extra work taken on by the FDA.
''It amazes me that people at the FDA have time to read securities filings," said one executive, who asked not to be named.
Exactly how open pharmaceutical and biotechnology companies have been about their dealings with the FDA became a hot issue in 2002, after disclosures by ImClone Systems, the New York cancer-drug maker.
The company's former chief executive, Samuel Waksal, was sentenced to prison after admitting he tried to sell shares in the company before disclosing to investors it had received a bad mark from the FDA, which eventually sent its share price tumbling.
Congressmen, especially former Louisiana Republican Billy Tauzin, were critical of the FDA for not alerting the SEC more aggressively about the company's limited communications. In response, the SEC and FDA unveiled last year a new policy to improve cooperation. For example, the FDA now aims to bring more nonpublic information to the SEC's attention as it reviews a company's press releases and securities filings.
While it's unclear if these stepped-up ties have led to more enforcement actions, there have been a spate of cases in which local biotechnology firms said they faced SEC reviews. At the end of 2003, for instance, Biopure Corp., a Cambridge blood-substitute developer, disclosed receiving notices that the SEC might sue it and various executives. According to Biopure, the notices center on whether the firm did enough to disclose to investors issues such as the halt of a proposed clinical trial by the FDA. Biopure says its disclosures were correct.
Ross Kerber can be reached at kerber@globe.com.
