UCI Case Raises Issue of Schools’ Ties to Business

The scandal involving UC Irvine cancer researchers has placed the school in the middle of a national debate about the increasingly close relationships between universities and businesses and whether that closeness taints the credibility of researchers.

Federal policy encourages professors across the country to license their research to private companies, and universities aggressively market it. While that relationship has brought important discoveries into the marketplace, some academics worry that the pursuit of knowledge at universities has been compromised by the pursuit of wealth. The concerns are especially acute when the research involves human patients.

The investigations at UCI have delved in part into the relationship between researchers in a now-defunct university laboratory and Meyer Pharmaceuticals, the Irvine company that funded their research. Several of the researchers owned small pieces of the company, which was formed to commercialize their discoveries.

Indeed, in a May 1998 publication the university’s Office of Technology Alliances boasted of the companies spun off from UCI research, including Meyer Pharmaceuticals.

Professors at many universities may have ownership stakes in firms funding their research. If the resulting product succeeds, it can mean a windfall for the company, the researchers and the university.

Nationwide, the amount of money involved is huge. Universities across the country, always hungry for more dollars, received $483 million from businesses for technology licensing last year, up from $130 million three years earlier.

Critics worry this may affect the subjects a researcher undertakes and could taint research.

“A faculty member now has two sets of values,” said Sheldon Krimsky, a professor at Tufts University in Massachusetts who studies science policy. “That’s where the tragedy is. You have to embrace the values of the university, pursue knowledge for its own sake, and on the other hand, have to pursue practical values of marketing and development.”

All universities are looking for the breakthroughs in technology that will lead to the next nicotine patch or human growth hormone, both of which came from university research. The classic example is the recombinant DNA research that has earned about $200 million for Stanford and UC Berkeley, made the researchers wealthy and led to the pioneering biotech firm Genentech in South San Francisco.

The biotech field was practically invented through this university/industry partnership and is the hottest area for these technology transfers.

“You’re talking about an area where you develop a widget, go public, and you may be worth $60 million,” said Stanford professor Barton Bernstein, who has studied research conflicts of interest.

Stanford, whose inventions are gobbled up by Silicon Valley firms and is often looked at as a model for other universities, made $34 million from its technology royalties last year. Silicon Valley firms such as IntelliGenetics, DNAX and Regeneron Pharmaceuticals count Stanford professors among their founders.

“The rough rule of thumb is about one in a thousand invention disclosures generate royalty income in the millions of dollars,” said Jon Sandelin, a senior associate in Stanford’s Office of Technology Licensing. “Unfortunately, there’s no way to know which one of the one in a thousand will work out to be that blockbuster.”

The question, though, is whether the dollars involved make a difference in what research is undertaken and how it is conducted.

“Are you rewarded for traditional scholarship and teaching or rewarded for how much equity you’ve brought into the university, how many licenses you’ve generated, patents produced and contracts brought on campus?” asked Arthur Caplan, a bioethicist at the University of Pennsylvania. “That’s a very different set of standards, and you see those start to emerge in discussions of promoting or hiring faculty.”

As a relatively young university, UCI makes only a few hundred thousand dollars a year from inventions, and when the costs of the Office of Technology Alliances, which fosters such partnerships, are included, it loses money.

UC Irvine, pushing hard to join UCLA and UC Berkeley in the top ranks of national research universities, has seen its federal and private funding for research more than double in the past decade, from $47 million in fiscal 1987 to $97 million this year. Nearly half of that money goes to the College of Medicine, where the cancer center doctors worked.

One difference between UCI and more established schools is that only about 55% of its research funds come from the federal government, leaving UCI more dependent on private funds, such as those that came from Meyer Pharmaceuticals.

In this case, most of the money for the company came from Robert Meyer, introduced to the cancer researchers by Irvine lawyer Douglas Freeman. Meyer, who had recently had a close relative die of cancer, previously had invested in real estate, car dealerships and cattle.

In many ways, Meyer Pharmaceuticals is a typical start-up spun out of university research. Entrepreneurial professors discover a new technology they think could have a major impact, a venture capitalist buys controlling interest, and everyone waits to see if the company makes people rich or goes out of business in a few years.

“Many times a start-up wants someone who knows something about the invention, so they go back to the faculty inventor,” hiring him or giving him part ownership, said Robert Shelton, vice provost for research for the University of California system. “When managed properly, everyone comes out ahead. So I would say faculty are encouraged to take their expertise beyond the university.”

Researchers Must Disclose Business Ties

Universities have adopted regulations to ensure the integrity of research when partnerships with business are formed.

UCI’s conflict-of-interest policy, like those at many other universities, calls for researchers to disclose ties to companies financing their work. University officials then decide whether the conflict is significant. For example, UCI recommends against accepting a grant or contract for testing a product if the researcher has an interest of $1,000 or more with the company sponsoring the research. However, the policy also states that because “each case is unique, it is impossible to draw strict guidelines.”

At UCI, five researchers at the Mixed Lymphocyte Culture laboratory bought founding shares of Meyer Pharmaceuticals. Gale Granger owned 5%, Hung Fan 3.5% and John Hiserodt, Paul Zeltzer and Tetsuya Gatanga bought 1% each.

Before the recent revelations, UCI officials were concerned Meyer Pharmaceuticals was in a position where it could exert too much influence on a researcher.

Twice, the university’s Conflict of Interest Committee told professor Gale Granger it would not approve a Meyer research contract unless he reduced his ownership in the company. In March 1997, the committee recommended he cut his ownership from 5% to 3.5%. Six months later, before it would OK a $325,000 research contract with Meyer, the committee told Granger he would have to cut all ties to the company.

“My god,” Granger e-mailed Frederic Wan, the vice chancellor for research, according to documents provided by UCI. “I started the company and you guys will not allow me to own any part of it! This will have very negative effects on other faculty who might be thinking about business ventures.”

Granger was removed as a researcher from another project involving patients with pancreatic cancer because Meyer was financing it, the UCI documents show.

Granger did not return calls.

As it turned out, other problems with the laboratory were discovered in UCI inquiries. Dr. Hiserodt, a UCI cancer doctor and vice president of Meyer, had been barred from working on federally funded projects because he had falsified research data at the University of Pittsburgh. Because the cancer center receives federal funds, concerns were raised about Hiserodt doing any research there.

While at UCI, Hiserodt sent an unapproved treatment to Florida for a dying 8-year-old girl. The federal Food and Drug Administration is investigating whether this violated any laws.

In addition, the UCI inquiries discovered that doctors at the MLC lab had violated FDA standards. Those violations included soliciting donations from patients undergoing experimental treatment, UCI internal documents say. Researchers allegedly failed to report adverse reactions in patients and did not obtain proper approvals for the trials, according to the report of a consultant hired by Meyer Pharmaceuticals. UCI closed the laboratory after several of the allegations came to light.

The growth in the deals between universities and private companies began in 1980 when Congress passed a law allowing universities to own patents for discoveries made with federal money, to license the technology and to split profits with professors. Before the law passed, the technology was free to anyone. The federal government is far and away the largest donor of research funds.

In essence, the law allowed universities to become the research and development arms of corporations, said Henry Etzkowitz, director of the Science Research Institute at the State University of New York at Purchase.

The law lets universities sell exclusive rights to their technology, giving a company a monopoly until the patent runs out 17 years later. This exclusivity is key for drug companies, which might invest a decade and up to $150 million to develop a new product.

One result of the law has been that it is almost impossible to find a biotech company not connected to university research, either through technology licensing or professors who own a stake in the company or who sit on its advisory board.

But the potential for riches also has brought its share of problems.

A study published in the New England Journal of Medicine this year reported that most scientists who have supported the use of channel blockers, which treat high blood pressure and angina, have unreported financial ties to companies that manufacture them.

A Harvard study found that half the university researchers who received gifts from biotech or drug companies said firms expected to have influence over their work.

There also have been more individual problems. The University of Houston sued a former researcher, asserting that he didn’t tell anyone he had invented a heart valve while working at the school. After he left, he signed a deal with a private firm to market the invention, and the university claimed it was frozen out of potentially lucrative royalties. The case was settled out of court.

About 15 years ago at Harvard, an ophthalmologist started a company to develop an eye drug, which he tested on patients. One problem, said Dr. David Blumenthal, director of Harvard’s Institute for Health Policy, was that it appeared as if the ophthalmologist would make money if his experimental work was successful. The university was worried his personal stake could bias the research.

As a result, Harvard developed the strictest conflict-of-interest rules in the country. The university prohibits its professors from engaging in two types of research relationships: They are not allowed to do research with humans when they have a financial interest in the outcome of the research, and they are prohibited from holding a major financial position in a company for which they are doing research.

The relationship between Meyer Pharmaceuticals and researchers who own small pieces of the company could not have taken place at Harvard.

“Basically, you have to make a choice between doing research in a capacity as a faculty member and having a major equity holding in a company,” Blumenthal said.

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Times staff writer Esther Schrader contributed to this report.

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Patents Pay Off

American universities received $446.6 million from the licensing of patents in 1997, with the University of California system leading the way.

1997 U.S. University Patents:

Applied for: 3,644

Issued: 2,239

Top 10 Universities Receiving Income from Licenses, Fiscal Year 1997

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Adjusted Gross x Income From Licenses U.S. Patents University (in millions) Issued 1. University of California system $61.3 206 2. Columbia University 46.1 43 3. Stanford University 34.0 64 4. Florida State University 29.9 10 5. Massachusetts Inst. of Technology 19.7 134 6. Michigan State University 18.3 37 7. University of Florida 18.2 47 8. WARF/Univ. of Wisconsin-Madison 17.2 69 9. Harvard University 13.4 39 10. Carnegie Mellon University 13.4 4

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Source: The Assn. of University Technology Managers, Inc.