Wednesday, August 24, 2005 - 12:00 AM

Dr. Scott Gottlieb

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

Age: 33

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.

Alicia Mundy: 202-662-7457 or amundy@seattletimes.com

Researcher Gene Balk contributed to this report.

Copyright © 2005 The Seattle Times Company

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