Sunlight and Other Disinfectants: Disclosure Obligations under the Federal Securities and Drug Regulatory Regimes

Joseph G. Milner


Drug development requires patience. Beyond the inherent uncertainty of the development process itself, U.S. drug developers must comply with the regulatory approval process overseen by the U.S. Food and Drug Administration (FDA). Because this process takes time, drug development also costs money. Drug companies seeking to raise funds in U.S. capital markets must navigate the securities regime governed by the Securities & Exchange Commission (SEC). Despite their similar roles as protectors of consumers and public markets, SEC and FDA send conflicting signals about the information drug companies need to disclose to the public. While SEC primarily regulates by mandating public disclosure, FDA has historically regulated drugs through its pre-approval process and has only recently begun to add disclosure mechanisms to its regulatory regime. Moreover, a trio of federal statutes requires FDA to keep sensitive information submitted by drug companies confidential. The regimes’ distinct priorities and approaches create tensions that surface when publicly traded drug companies must decide whether and how to publicly disclose information related to drug development. This paper surveys the two agencies’ conflicting priorities and regulations and explores the resulting problems that can arise for drug companies. It recommends that Congress liberalize statutory restraints on FDA’s ability to disclose sponsor-submitted confidential information in order to help alleviate the tensions between these regimes and provide the public with more accurate information about drug companies and their products.