Federal Class Action Lawsuits fall Sharply
Professor Joe Grundfest spoke with the Financial Times' Nizar Manek on how it's "easy for plaintiffs" to claim that pharmaceutical companies made false promises when a drug fails.
There was a sharp drop in the number of federal class action lawsuits filed in the US last year, as plaintiffs pursued fewer cases in areas such as mergers and acquisitions and the financial services sector.
However, as regulators stepped up their crackdown on insider trading, there was a rise in the proportion of class action lawsuits filed based on allegations of insider trading, according to a report published on Wednesday.
"Historically, there's a lot of volatility in the biotech and pharma sector," said Joseph Grundfest, founder of the Stanford centre. "Drugs will fail, and when they do, it's often easy for plaintiffs to claim that the company falsely touted the promise of the new therapy."