Wall Street biotech insider gets No. 2 job at the FDA
By Alicia Mundy
Seattle Times Washington bureau
Only a month ago, Dr. Scott Gottlieb was a Wall Street insider, promoting hot biotech stocks to investors.
Now Gottlieb holds the No. 2 job at the Food and Drug Administration (FDA), the federal agency that approves new drugs, oversees their safety and affects the fortunes of companies he once touted.
Wall Street likes the appointment of Gottlieb, 33, who believes in faster drug approval and fewer news-release warnings to the public about potential side effects of drugs.
But some medical experts are shocked by his July 29 appointment, coming at a time when the public is increasingly concerned about the safety of popular medicines. In addition, the federal government has just begun scrutinizing the growing financial ties between Wall Street firms and doctors researching new drugs.
Gottlieb's new job "further impedes the independence of the FDA," said Dr. Jerome Kassirer, former editor of The New England Journal of Medicine. "Gottlieb has an orientation which belies the goal of the FDA."
"I've never heard of anything like this," said Merrill Goozner, a director at the liberal Center for Science in the Public Interest.
"If he's had dealings regarding companies whose products are up for review at the agency, it strikes me as a potential conflict of interest. You want a barrier between the regulated and the regulators. It's fundamental," Goozner said.
Dr. Scott Gottlieb
FDA deputy commissioner for policy
Salary: About $140,000
1994: Bachelor's degree in economics, Wesleyan University
1994-1995: Alex. Brown & Sons, investment bank
1995-1999: Mount Sinai Medical School, New York
1996-2001: Wrote for The Journal of the American Medical Association
1997-2005: Staff writer, British Medical Journal
2000-2002: Author, Gilder Biotech Report
2003-2005: Medical internist, Stamford (Conn.) Hospital
2003: Resident scholar on medical policy, American Enterprise Institute
March 2003-May 2004: Senior adviser, then director of medical-policy development, FDA
June-October 2004: Senior adviser, Centers for Medicare & Medicaid Services
Late 2004-July 2005: Resident scholar on FDA and Medicare policies, American Enterprise Institute
Late 2004-July 2005: Author, Forbes/Gottlieb Medical Technology Report
Late 2004-July 2005: Private consultant/speaker to investment firms and the pharmaceutical industry
Source: AEI and Dr. Scott Gottlieb
A half-dozen current or former officials at the FDA say they do not know of anyone from Wall Street moving directly into such a high-level job at the agency.
Until last month, Gottlieb was editor of a popular biotechnology investor newsletter, Forbes / Gottlieb Medical Technology Investor. Forbes touted Gottlieb's stock-picking success on its Web site in mid-May:
"Special Offer: In the last few months, Dr. Scott Gottlieb recommended two cancer cure stocks to subscribers that have already climbed 38%. Click here for the latest report from Forbes / Gottlieb Medical Technology Investor, 'Three Biotech Stocks To Buy Now.' "
Now, as one of three deputy commissioners, Gottlieb will help oversee such major policies as the FDA's fast-track approval process for drug and biotech products, a priority for many Wall Street funds and the pharmaceutical industry.
Gottlieb said he has cut his ties to Wall Street and discontinued his newsletter. He doesn't see a conflict between that work and his new role as a high-ranking regulator.
"What I learned while working on Wall Street has informed almost everything that I have done since, but especially my work in the government," he responded in an e-mail to questions from The Seattle Times. (The FDA would not allow the Times to interview Gottlieb or provide answers to questions about his background. The FDA has not released his financial-disclosure forms.)
"[It] has helped me appreciate where regulatory policy can be improved upon to help enable medical innovation and to turn scientific breakthroughs into practical medical solutions that can help patients."
Gottlieb was an analyst for a Wall Street investment firm before going to Mt. Sinai School of Medicine in New York. He earned a medical degree in 1999, then did an internal-medicine residency. From 2003 until a few weeks ago, he saw patients during weekend shifts two or three times a month at Stamford Hospital in Stamford, Conn., he said.
Since becoming a physician, he has worn many hats. From 2000 to 2002, Gottlieb wrote the Gilder Biotech Report, an investment newsletter, reporting on potential FDA decisions, drug and biotech developments. He also worked as a staff writer for the British Medical Journal.
In 2003, he was a full-time resident scholar working on FDA policy issues at Washington, D.C.'s most formidable conservative think tank, the American Enterprise Institute (AEI).
Along the way, he became a leading proponent of doctors increasing their income by selling their understanding of drugs and the federal regulatory process to stock analysts and investment firms — "Moving your Career from Main Street to Wall Street," as Gottlieb wrote in an investment column in the American Medical Association newsletter.
He joined the Food and Drug Administration in March 2003 as a senior adviser on policy and soon made an impression. Later that year, the SG Cowen brokerage house sent a report to subscribers, "A Recap of What's Gone Right at the FDA," that praised Gottlieb and other new FDA officials under then-Commissioner Dr. Mark McClellan for working to streamline the drug-approval process.
"Should McClellan's team succeed in getting their strategies adopted into the framework of the approval process, the team's impact on FDA policy could last well beyond the current administration."
Gottlieb moved with McClellan, brother of White House spokesman Scott McClellan, to the federal Centers for Medicare & Medicaid Services in June 2004 and left that October.
He then returned as a full-time scholar at the AEI and started the Forbes / Gottlieb Medical Technology Report.
Gottlieb, a Bush administration appointee making about $140,000, comes to the FDA with an agenda. In addition to advocating faster drug approvals, he has complained the FDA sends out too many "shotgun warnings" on any particular drug's emerging side effects, which he said may cause patients to overreact.
He wants the warnings to be sent to doctors first, and without "overstating a product's risk."
He also has urged that the FDA change longstanding policy and release data on experimental drugs at different stages of the research, from animal tests to final patient studies.
Releasing more data at each stage would help investors put money behind promising drugs and products earlier and would better protect patients in the clinical trials, he has explained.
Three years ago, Gottlieb wrote about an issue that was spotlighted last month in a Seattle Times investigation — the practice of doctors leaking details of ongoing drug research to investment firms, which can then profit from the information by selling or buying stocks.
The Times found 26 cases in which doctors leaked confidential and critical details of their ongoing drug research to Wall Street firms. The report has led to a Securities and Exchange Commission investigation.
"Traders will go to great lengths to get market signals from medical researchers," Gottlieb wrote in Barron's, an investor publication, "and the tight lid the FDA keeps on clinical-trials data has spawned a thriving niche of boutique investment-research firms that link money managers with medical experts capable of giving investors a wink and a nod."
Gottlieb is against such leaks. But he did not call for better enforcement of confidentiality agreements that should preclude such behavior. He instead urged that the FDA open up its drug-approval process to investors and the public.
"Bizarre FDA rules allow companies to hide clinical information practically in perpetuity. Something needs to change," he wrote in the Gilder Biotech newsletter in 2002.
"The FDA could and should release data contained in a company's (FDA) filings at each stage in the process. ... Why shouldn't markets know what bureaucrats and insiders do?"
Kassirer, the former editor of The New England Journal of Medicine, said early release of clinical-trial information "strikes me as potentially good for investors but bad for the validity of clinical research."
"Releasing data early could result in premature and erroneous conclusions about the drug or device being tested, premature ending of clinical trials and even inappropriate enrollment of patients," he said.
The FDA would not comment on Gottlieb's ideas on changing policy to allow for earlier release of clinical trial information, except to note that the articles were written before Gottlieb joined the agency.
He also has consulted for, and written positively about, a major matchmaking firm that links doctors with Wall Street investors, the Gerson Lehrman Group in New York.
He has known founder Mark Gerson for several years, and both are part of the conservative establishment in D.C. With his pro-market views "Scott is popular with some people at the White House," said Robert Goldberg of the Manhattan Institute, a conservative think tank. He is a friend of both men.
Gottlieb highlighted Gerson's firm in investment columns he wrote for the AMA newsletter, and encouraged doctors to join Gerson's network and others. Not only can doctors increase their income, but they can help Wall Street investors decide which new technologies to put their money behind, he wrote.
Gottlieb said by e-mail that he was not paid to recruit physicians for Gerson's group. He added he had recommended a handful of policy-makers to Gerson Lehrman and was paid for probably fewer than eight hours of work.
Gottlieb said he also did a little work for the SG Cowen brokerage house but has not taken part in any conference calls between drug researchers and investors discussing ongoing clinical research.
When the FDA announced Gottlieb's hiring last month, it noted Gottlieb had been a practicing physician, a scholar at AEI and correspondent for the British Medical Journal. The agency did not mention Gottlieb's stints as editor of the two popular biotech investment newsletters or his work with Wall Street firms.
August 28, 2005
As I am three years older than him, and have put more hours in as a therapist as he has has a doctor, I plan on submitting my resume for consideration for the number 2 position at the APA on Monday.