Statistically Insignificant Deaths: Disclosing Drug Harms to Investors (and Patients) Under Sec Rule 10b-5 by George A. Mocsary :: SSRN

I'm in favor of disclosure of drug adverse effects, as Fordham Law grad and now law professor George Mocsary lucidly argues. He argues that the statistical significance standard for disclosure by drug companies of adverse effect reports deprives investors - and patients and doctors - of relevant information.  A further problem is that drug companies don't have very good information- because they generally have no duty to actively study what happens to patients who actually use the drug.  The dangers of Vioxx which figures in Mocsary's analysis were largely the product of studies intended by Merck to expand approved uses.  Neither the FDA nor any recognized common law duty compelled Merck to systematically monitor Vioxx actual health effects on the arthritic patients who took the massively promoted pain-reliever. I urged recognition of an affirmative duty to monitor drug use in a 2007 article Punctuated Equilibrium.  
Mocsary's article nicely ties together the interests of investors, patients, and physicians, demonstrating that while evidence against the "null hypothesis" that a drug does not cause harm may not be judged 'statistically significant" it may nonetheless be relevant to prudential considerations by consumers and investors.  - GWC

Statistically Insignificant Deaths: Disclosing Drug Harms to Investors (and Patients) Under Sec Rule 10b-5 by George A. Mocsary :: SSRN:

This Article, using statistical tools and theory in conjunction with more standard legal approaches, argues that pharmaceutical manufacturers should disclose all cases of illness or injury associated with their products because this data is material to patients and their doctors, and therefore to Securities and Exchange Commission Rule 10b-5’s “reasonable investor.” Patient and investor interests complement each other in this context, so each will benefit from disclosures that interest the other. Because individuals process more information than traditional statistical tests convey, they act reasonably in expanding their treatment and investment criteria beyond statistical data. Moreover, two sets of expert intermediaries—doctors and professional investors—will be involved. Their expertise will contribute to a more accurate assessment of the risks that adverse-event reports may suggest a drug presents, and of the significance of these risks to shareholders.

The Supreme Court’s reasons for not requiring full disclosure are out of place in the context of adverse-event reporting given Rule 10b-5’s pro-disclosure mandate and the fact that even seemingly singular and unconnected facts can substantially move investors’ and patients’ opinions about a drug’s safety, and thus its maker’s viability. A full-disclosure rule would place the determination of which facts are important into the hands of parties with “skin in the game” rather than regulators or self-interested drug makers.

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