

Q: Can I trade on information I learn as a patient in a trial for an experimental drug?

A: Sufferers of chronic diseases often turn to experimental drugs for help. What if one of these drugs cured a patient? Can they trade on this valuable information?

Promising biotech and drug companies that are public traded routinely turn to patients to test drugs. These patients often learn if these drugs will be breakthroughs, or duds. That information can be valuable as it might indicate a future blockbuster drug.

Additionally, it's typical for CEOs of these small companies to brief all the patients in the test how others in the trial are faring. It doesn't take long for these patients to get a good idea of whether the company might be on the verge of something big.

Can patients, though, use this non-public information to trade on and make money on the stock? Yes, says Andrew Stoltmann of Stoltmann Law. He says the patient is free to trade on the information, and it's not illegal insider trading, for several reasons. First of all the patient is not an employee, officer or director of the firm. The patient has not duty whatsoever to keep the information private.

And while the patient is receiving the experimental drug, that's not considered a payment for services rendered. "This person can trade and not run afoul of insider trading rules," he says. "It's a close call, but the patient should be OK (in trading with the information)."


Follow Matt Krantz on Twitter: @mattkrantz.

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