LUCRATIVE LICENSING DEALS WITH DRUG, BIOTECH FIRMS ARE RAISING ETHICS ISSUES
FOR HOSPITALS
Death of Johns Hopkins Volunteer Stirs Old Debate
By Liz Kowalczyk, Globe Staff Date
03/24/2002
When Amgen, the world's largest biotechnology company, recently promised
to
triple sales of a top-selling arthritis drug called Enbrel, there was a
little-known beneficiary: Massachusetts General Hospital.
Mass. General AIDS researcher Brian Seed helped discover Enbrel in the late
1980s, and over the next several years the hospital patented and licensed
the drug. It turned out to be a lucrative move: Seed and Mass. General saw
more than $16 million in royalties last year. If sales of the $800
million-a-year injectable medication rise, so will their share of the
profits.
A decade ago, many academic medical centers shunned profit-making deals
with industry. But Harvard Medical School's major teaching hospitals,
hoping to replicate deals like Enbrel, are aggressively licensing
discoveries by their physicians and researchers to biotechnology and
pharmaceutical companies. And they are grappling with a host of business
and ethics issues, including how to protect patients when hospitals and
doctors have a financial stake in the outcome of their treatment.
Children's Hospital last year closed 33 deals, up from 13 three years ago,
while royalties and fees doubled from $2.7 million to nearly $6 million.
Partners HealthCare, the parent organization of Mass. General and Brigham
and Women's Hospital, earned $31 million in royalties last year, half from
Enbrel, a sixfold increase since 1998.
Dr. Edward Benz, president of Dana-Farber Cancer Institute, where the
number of deals has grown 60 percent in the last three years, said "there's
been a sea change nationally" at academic medical centers, in part because
of a 1980 law allowing universities and hospitals to profit from research.
But at Harvard's teaching hospitals, the shift also has been fueled by
concern that they are not doing enough to leverage the enormous amount of
research money flowing annually into Boston - $1 billion in federal grants.
Sloan-Kettering Cancer Institute in New York City has one-fifth the
research funding of Partners. But it earned $46 million in licensing fees
and royalties in 2000, mostly from Neupogen, a $1.3 billion-a-year drug
licensed to Amgen that reduces infections caused by chemotherapy.
The five independent hospitals that receive the most money from the
National Institutes of Health are all Harvard teaching hospitals.
Children's Hospital, which received $110 million in research money last
year, is the largest pediatric scientific enterprise in the world. "We
don't want our researchers' ideas sitting on the shelf," said Bruce Zetter,
interim vice president of research at Children's.
The push for "technology transfer" at the Harvard hospitals - and
at many
academic medical centers - has significant implications for patients, who
benefit from the discovery of more effective medications. Enbrel, for
example, has proved highly effective in helping control pain and limiting
damage to joints in people with rheumatoid arthritis.
While universities and hospitals have the most extensive basic research
enterprises in the country, they need pharmaceutical companies with deep
pockets to develop and market their discoveries. But in some cases
questions have been raised about whether these relationships have hurt
patient care.
One prominent case was the 1999 death of Jesse Gelsinger, an 18-year-old
who was enrolled in a gene therapy trial at the University of Pennsylvania.
The family's lawsuit against the university, which was settled in 2000,
alleged that researchers lost focus on safety partly because the university
held equity in the company developing the drug and the lead doctor held
one-third of its shares. The doctor, James Wilson, eventually cashed in his
shares for $13 million, according to the Gelsinger family attorney, Alan
Milstein. The university said it did not neglect patient safety, but could
not comment on specifics.
"The rewards in some of these relationships are too great," Milstein
said.
"The money from industry is too great. The researcher is supposed to
be
this objective, unbiased observer with no interest in the outcome of the
experiment."
Harvard Medical School has some of the strictest conflict-of-interest rules
in the country for individual researchers, forbidding them to hold more
than $20,000 worth of stock in a company for which they perform research.
But there are no systemwide rules for when a hospital holds equity.
Dana-Farber, Partners and Beth Israel Deaconess Medical Center do not
conduct clinical trials for companies in which they hold equity, executives
said. Children's Hospital does allow the hospital to participate in
clinical trials under those circumstances, but requires that the hospital's
financial stake be disclosed to patients in the trials. There are no such
trials underway at Children's now.
Still, the hospitals are debating policies to cover a range of other
situations that could create a conflict of interest or harm patients or the
hospitals' reputations.
Immunex, which announced in December it was being bought by Amgen, is
aggressively testing Enbrel for a range of other illnesses, including
psoriasis. Mass. General must decide what to do if Amgen asks it to
participate in the clinical trials.
Since the hospital stands to gain more royalties from the success of such
clinical trials, should it take part?
Seed began working on methods to fool the HIV virus in the late 1980s at
Mass. General, an investigation that eventually led to Enbrel. He declined
to be interviewed for this story. But hospital executives said his idea was
to create decoy proteins to which the virus would bind, rather than to
vital cells in the body. It quickly became clear that this type of fusion
would work across a range of proteins, and Mass. General licensed the idea
of protein fusion in 1997. Immunex applied the concept to block a protein
that causes destruction of the joints.
After Immunex and Amgen announced their deal, Amgen chief executive Kevin
Sharer promised to triple the drug's sales, which will mean increasing the
sales force and putting testing in patients with other illnesses on the
fast track. So far, Mass. General has earned $25 million in Enbrel
royalties, a quarter of which goes to Seed.
Frances Toneguzzo, Mass. General's director for corporate-sponsored
research and licensing, said she believes the hospital could participate in
clinical trials with extra oversight, such as a second investigator to
monitor the lead investigator.
Children's is discussing whether to sell its equity in 14 companies, worth
an estimated $5 million to $10 million. One of these companies is Entremed,
which paid for experiments in which Dr. Judah Folkman of Children's
discovered Angiostatin - a protein drug designed to cut off the blood
supply to malignant tumors.
Small biotech companies often are cash poor and can't offer upfront fees to
hospitals in return for intellectual property, so they offer equity
instead. Harvard University has a policy of selling equity at a fixed,
predetermined point - when the company goes public, for example - to avoid
the appearance of playing the market. But Children's did not want to appear
to be profiting when Entremed went public in 1996, Zetter said, so it held
onto its stock.
"We wanted to make sure the research was judged on its own merits and
there
was no possibility of someone saying, `Children's is in this just to make
money,' " Zetter said. "It seemed at the time the simplest thing
to do was
to not do anything."
These quandaries have grown more common since 1980, when Congress passed
the Bayh-Doyle Act, allowing universities and hospitals to patent federally
funded research and license inventions to private companies. The law
blurred the line between academic research and business. Some nonprofit
institutions and companies have benefited enormously from the law. Columbia
University, for example, patented a gene-transfer process in 1983 that 28
companies have used to make new drugs. It was a significant contributor to
the university's $143 million in licensing royalties last year.
At first, universities with strong engineering programs patented their
discoveries most aggressively. But hospitals have become increasingly
interested, particularly since managed care restricted their income during
the 1990s and heated competition for patients fostered a more
entrepreneurial attitude.
In recent years, the Harvard hospitals have significantly expanded their
technology transfer staffs and their outreach to doctors and researchers
who might have profitable ideas. Children's doubled its staff in the last
two years, recruiting seven PhDs, two MBAs, and three lawyers. Partners
doubled its staff working with industry to 30 since the late 1990s.
Tufts-New England Medical Center, which has 30 active licenses and $1.1
million in annual royalties, also plans to expand.
Dr. David Blumenthal, a Harvard professor and director of Mass. General's
Institute for Health Policy, said that even though hospitals have had a
growing interest in licensing discoveries, most do not make money.
Successful universities and academic medical centers usually stumbled upon
a single blockbuster, such as Sloan-Kettering's Neupogen.
"Mostly this has not paid off in a big way," he said. "This
is a risky
business and a low probability activity. Most patents aren't licensed and
most licensed patents don't make much money. A university will be very
lucky if they have a big hit. Nevertheless, they continue to pursue it
avidly."
Even if the revenue remains modest, Toneguzzo said that the money is
important to the hospital's research mission. At Mass. General, royalties
are divided into four equal parts - 25 percent each for the inventor, his
or her lab, the department, and the hospital.
"I don't see this as a revenue stream that will keep the hospital afloat,"
she said. "Having said that, it's very important money because it comes
with no strings attached. So it lets our researchers try out new things
that they normally can't get funding for."
