There is now a website that pays doctors to post medical observations, including reports on side effects and off label uses. Needless to say, this has raised some eyebrows. Sermo Inc. runs a website, sermo.com, as a password-protected private forum where raw postings by doctors can be viewed, for a fee, by Wall Street investment firms. I have to admit, a site where doctors are paid to post thoughts about drugs and side effects makes me a little squeamish. Even the tag line (“Who Else Knows?”) seems a little Orwellian.

Founder Daniel Palestrant says the site will serve as an early-warning system about potentially dangerous drug reactions. The site will also be a forum for doctors to share information about off-label uses of drugs. Off-label use of an approved drug refers to a use that is not included in the approved label. Off-label use does not imply an improper use. The practitioner who prescribes a drug is responsible for deciding which drug and dosing regimen the patient will receive and for what purposes. This decision is made on the basis of the information contained in the drug’s label or other data available to the prescriber. The off-label use of a drug should be based on sound scientific evidence, expert medical judgment, or published literature.

Admittedly, the FDA, which is charged with monitoring drug safety, can’t be on the front lines every day and has come under criticism for failing to respond to reports of drug side effects. Still, some may not feel comfortable about the ability of someone, even if that someone is a doctor, being able to make anonymous postings about perceived side effects.

Sermo pays doctors $30 to $50 to post observations and says it already has “several hundred” credentialed contributors. Once doctors are credentialed and accepted to the Sermo site, their medical observations are ranked for noteworthiness and credibility by other doctors, who also get paid for their observations. The site lists the amount paid to date as $132,145.00.

Public Citizen, a Washington nonprofit consumer advocacy group, said companies should not attempt to supplant the FDA’s watchdog role. The FDA already gathers specific side-effect information that doctors and companies submit in a government-mandated format. Sermo is an open bulletin board where doctors post about anything anonymously and seems to be designed to help investors more than patient.

Sermo charges subscription fees to its largest subscribers but doesn’t disclose the size of the fees. The company said big subscribers are Wall Street investment companies looking for preliminary information that might help them anticipate swings in a drug company’s stock.

An admitted key factor is how to separate the wheat from the chaff. Sermo uses a set of credibility-ranking systems where peers support (or not) any observations. It’s designed to prevent any exaggerated or inflated claims from spiraling out of control, there’s no way to really prevent any over-reactions from going nuclear.

Also, there doesn’t seem to be any mechanism to prevent stock fraud by pumping up (or sounding the alarm on) a certain drug and then trading ahead of the crowd. I don’t know how Sermo could prevent collusion among several doctors who agree to make a drug look particularly valuable or dangerous knowing that the information is being fed straight to big investing firms. And even if it all is legit, it still feels unnerving that Wall Street houses will get an early, inside look ahead of common investors.

The company closed on $3 million in capital from Longworth Venture Partners and looks to raise another $8 million to $10 million.

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