When the government gets so involved in an economic sector that it can literally make or break companies by decree, corruption always follows.
Bloomberg reports, that trading on inside information is rampant in pharmaceuticals. The industry is a cozy one, with drug developers and scientists only a couple of degrees of separation away from doctors and sales reps who have money to play with.
Since the FDA can take down years of work on a whim, the fluctuations in stock prices prior to and after FDA decisions can be large. Fortunes can be made in the blink of an eye, and still other fortunes padded. Sometimes, often, according to Bloomberg, these fluctuations tempt the insider trading devil.
For the record, a very good case can be made for getting rid of insider trading laws all together. But for the time being it is very illegal, and on occasion sends people to prison, and sometimes even to the morgue.
The markets are awash in insider trading, and the health- care industry has been particularly hard-hit. Health-care businesses offer illegal traders more opportunities to profit than the finance and technology sectors that have traditionally been prime victims of insiders who leaked confidential data about earnings or deals.
Health companies can live or die on the results of drug trials, which stretch for years before regulators make decisions that can trigger hundreds of millions of dollars in profits or losses. And the industry has undergone significant consolidation, leading to several multibillion-dollar mergers.