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Politics & Government

OPINION: How Big Is Insider Trading Scandal for FDA?

The Gaithersburg chemist who was caught with his hand in the cookie jar could be a major problem for the Agency.

Was greed the only motive for Cheng Yi Liang, the 57-year old chemist from Gaithersburg arrested last week along with his 25-year-old son Andrew in one of the Food & Drug Administration’s (FDA) biggest-ever scandals?

To be sure, Liang, a mid-level career bureaucrat, must have enjoyed driving to work in Silver Spring in his snazzy new Infiniti sedan ($41K sticker price).  He and his wife plunked down nearly $65,000  for a luxury Infiniti sedan and an Odyssey mini-van (bought at Herson’s Honda on Frederick Road) in just a couple of visits to car showrooms, according to court filings.

They also paid off credit card debt with the proceeds of the $3.6-million they allegedly gained illegally by trading on inside information of pending FDA drug approval decisions.

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One thing’s clear: the Liang case is a devastating blow to both the FDA and to investors who rely on a level playing field and honest and ethical dealings in the marketplace.

Liang used his position at the Center for Drug Evaluation Research in the Office of New Drug Quality Assessment to access inside information on approval of drugs, undermining the integrity of the entire process. He has worked at FDA since 1996 with an annual salary of close to $123,000 last year.

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On perhaps his most shocking trade, Liang got advance word on a major FDA policy reversal that involved Vanda, a Rockville-based biotech outfit. In that case the FDA surprisingly approved Vanda’s schizophrenia drug, called Fanupt, after first rejecting it.

Liang bought Vanda shares ahead of the announcement and watched them rocket from about one dollar to over $15 in just a matter of minutes.  He sold at $9.40 per share and pocketed $l.04-million on that trade alone.

“With investor suspicions as they are, and with growing discontentment with ethics in Washington by the population as a whole, the FDA wants anything but allegations of its personnel abusing their positions,” one stock market blogger noted in the affair’s aftermath.

“Let’s not fool ourselves,” they added. “No one out there believes that Liang is the only one in that agency acting with the best interests of their own pockets at heart—he’s just the guy who got caught.” 

And beyond that: “If a guy is willing to risk everything to make a few bucks from inside information, would  he also be willing to alter information  or put a folder at the bottom of a review pile in order to delay a decision that might benefit the new Porsche that he wants?”

Something for FDA officials, stock analysts, investors and the general public to ponder.

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