Stealth Merger: Drug Companies and Government Medical Research

[Guest guest]

Stealth Merger: Drug Companies and Government Medical Research

Some of the National Institutes of Health's top scientists are also

collecting paychecks and stock options from biomedical firms.

Increasingly, such deals are kept secret.

By Willman

Times Staff Writer

December 7, 2003

BETHESDA, Md. & #151; " Subject No. 4 " died at 1:44 a.m. on June 14, 1999,

in the immense federal research clinic of the National Institutes of

Health.

The cause of death was clear: a complication from an experimental

treatment for kidney inflammation using a drug made by a German

company, Schering AG.

Among the first to be notified was Dr. I. Katz, the senior

NIH official whose institute conducted the study.

Unbeknown to the participants, Katz also was a paid consultant to

Schering AG.

Katz and his institute staff could have responded to the death by

stopping the study immediately. They also could have moved swiftly to

warn doctors outside the NIH who were prescribing the drug for

similar disorders. Either step might have threatened the market

potential for Schering AG's drug. They did neither.

Questioned later, Katz said that his consulting arrangement with

Schering AG did not influence his institute's decisions. His work

with the company was approved by NIH leaders.

Such dual roles & #151; federal research leader and drug company consultant

& #151; are increasingly common at the NIH, an agency once known for

independent scientific inquiry on behalf of a single client: the

public.

Two decades ago, the NIH was so distinct from industry that Margaret

Heckler, secretary of Health and Human Services in the Reagan

administration, could describe it as " an island of objective and

pristine research, untainted by the influences of commercialization. "

Today, with its senior scientists collecting paychecks and stock

options from biomedical companies, the NIH is no longer an island.

Interviews and corporate and federal records obtained by the Los

Angeles Times document hundreds of consulting payments to ranking NIH

officials, including:

& #149; Katz, director of the NIH's National Institute of Arthritis and

Musculoskeletal and Skin Diseases, who collected between $476,369 and

$616,365 in company fees in the last decade, according to his yearly

income-disclosure reports. Some of his fees were reported in ranges

without citing exact figures. Schering AG paid Katz at least

$170,000. Another company paid him more than $140,000 in consulting

fees. It won $1.7 million in grants from his institute before going

bankrupt last year.

& #149; Dr. I. Gallin, director of the NIH's Clinical Center, the

nation's largest site of medical experiments on humans, who has

received between $145,000 and $322,000 in fees and stock proceeds for

his consulting from 1997 through last year. In one case, Gallin co-

wrote an article highlighting a company's gene-transfer technology,

while hiring on as a consultant to a subsidiary of that company.

& #149; Dr. C. Eastman, the NIH's top diabetes researcher in 1997,

who wrote to the Food and Drug Administration that year defending a

product without disclosing in his letter that he was a paid

consultant to the manufacturer. Eastman's letter said the risk of

liver failure from the drug was " very minimal. " Six months later, a

patient, Audrey LaRue , who was taking the drug in an NIH study

that Eastman oversaw, suffered sudden liver failure and died. Liver

experts found that the drug probably caused the liver failure.

& #149; Dr. N. Germain, deputy director of a major laboratory at

the National Institute of Allergy and Infectious Diseases, who has

collected more than $1.4 million in company consulting fees in the

last 11 years, plus stock options. One of the companies collaborated

with his laboratory on research. The founder of another of the

companies worked with Germain on a separate NIH-sponsored project.

& #149; Schlom, director of the National Cancer Institute's

Laboratory of Tumor Immunology and Biology, who has taken $331,500 in

company fees over 10 years. Schlom helped lead NIH-funded studies

exploring wider use for a cancer drug & #151; at the same time that his

highest-paying client was seeking to make the drug through genetic

engineering.

& #149; M. Trent, who became scientific director of the National

Human Genome Research Institute in 1993 and, over the next three

years, reported between $50,608 and $163,000 in industry consulting

fees. Trent, who accepted nearly half of that income from a company

active in genetic research, was not required to file public financial-

disclosure statements as of 1997. He left the government last year.

Hidden From View

Increasingly, outside payments to NIH scientists are being hidden

from public view. Relying in part on a 1998 legal opinion, NIH

officials now allow more than 94% of the agency's top-paid employees

to keep their consulting income confidential.

As a result, the NIH is one of the most secretive agencies in the

federal government when it comes to financial disclosures. A survey

by The Times of 34 other federal agencies found that all had higher

percentages of eligible employees filing reports on outside income.

In several agencies, every top-paid official submitted public reports.

The trend toward secrecy among NIH scientists goes beyond their

failure to report outside income. Many of them also routinely sign

confidentiality agreements with their corporate employers, putting

their outside work under tight wraps.

Gallin, Germain, Katz, Schlom and Trent each said that their

consulting deals were authorized beforehand by NIH officials and had

no adverse effect on their government work. Eastman declined to

comment for this article.

Dr. Arnold S. Relman, the former editor of the New England Journal of

Medicine, said that private consulting by government scientists

posed " legitimate cause for concern. "

" If I am a scientist working in an NIH lab and I get a lot of money

in consulting fees, then I'm going to want to make sure that the

company does very well, " Relman said.

Relman and others in the field of medical ethics said company

payments raised important questions about public health decisions

made throughout the NIH:

& #149; Will judgment calls on the safety of individual patients be

affected by commercial interests?

& #149; Can study participants trust that experimental treatments are

chosen on merit and not because of officials' personal financial

interests?

& #149; Will scientists shade their interpretations of study results to

favor their clients?

& #149; Will officials favor their clients over other companies that seek

NIH grants or collaborations?

Conflict-of-interest questions also arise in the potentially

lucrative awarding of patents.

J. Kindt, the director of in-house research at the National

Institute of Allergy and Infectious Diseases, accepted $63,000 in

consulting fees from a New York biotechnology company, Innovir

Laboratories, and wound up an inventor on one of its patents.

Asked why the government received no consideration, Kindt said that

he had contributed to the " basic idea " while using vacation time.

" No work was done on it as a government employee, " said Kindt, whose

annual salary at the NIH is $191,200. His consulting with Innovir was

approved by NIH officials, Kindt said.

Others worry that the private arrangements can undermine the public

interest.

" The fact that paid consulting is happening I find very disturbing, "

said Dr. Curt D. Furberg, former head of clinical trials at the

National Heart, Lung and Blood Institute. " It should not be done. "

Private consulting fees tempt government scientists to pursue less-

deserving research and to " put a spin on their interpretation " of

study results, he said.

" Science should be for the sake of gaining knowledge and looking for

the truth, " Furberg said. " There should be no other factors involved

that can introduce bias on decision-making. "

Dr. Ruth L. Kirschstein, who as the deputy director or the acting

director of the NIH since 1993 has approved many of the top

officials' consulting arrangements, said she did not believe they had

compromised the public interest. " I think NIH scientists, NIH

directors and all the staff are highly ethical people with enormous

integrity, " she said. " And I think we do our business in the most

remarkable way. "

In response to The Times' findings, Kirschstein said, she

would " think about " whether administrators should learn more about a

company's ties to the NIH before approving the consulting

arrangements.

" Systems can always be tightened up, " Kirschstein said on Oct.

29. " And perhaps, based on this, we will do so. "

On Nov. 20, NIH Director Elias A. Zerhouni told agency leaders that

he would form a committee to help " determine the appropriateness " of

employees' consulting and other outside arrangements.

" I believe we can improve our performance by subjecting ethics

deliberations to a more transparent process, " Zerhouni said in a memo.

In a brief telephone interview last week, Zerhouni said he wanted the

NIH " to manage not just the reality, but the perception of conflict

of interest. "

" If there is something that could be viewed as improper, I think we

need to be able to advise our scientists not to get into these

relationships, " he said. " My sense is our scientists are people of

goodwill. "

Temptations Abound

The NIH traces its beginnings to the Laboratory of Hygiene, founded

in 1887 within a Navy hospital on Staten Island in New York. It

became the federal government's first research institution for

confronting such epidemic diseases as cholera, diphtheria,

tuberculosis and smallpox.

The laboratory's success convinced Congress of its value in seeking

cures for diseases.

In 1938, the renamed National Institute of Health moved to its

present, 300-acre headquarters in Bethesda, about nine miles north of

the White House.

The agency's responsibilities & #151; and prominence & #151; have grown steadily.

In 1948, four institutes were created to support work on cardiac

disease, infectious diseases, dental disorders and experimental

biology. " Institute " in the agency's name became " Institutes. "

President Nixon turned to the NIH in 1971 to lead a war on cancer.

The agency has led the government's fight against AIDS. Two years

ago, President Bush enlisted the NIH to help counter biological

terrorism.

Republican and Democratic administrations have boosted spending for

the 27 research centers and institutes that compose today's NIH.

Since 1990, the annual budget has nearly quadrupled, to $27.9 billion

this fiscal year.

Senior NIH scientists are among the highest-paid employees in the

federal government.

With billions of dollars in product sales potentially at stake for

industry, and untold fortunes riding on biomedical stock prices,

commercial temptations abound:

Researchers poised to make a breakthrough in their NIH labs can, the

same day, land paid consulting positions with companies eager to

exploit their insights and cachet. Many companies cite their

connections to NIH scientists on Web sites and in news releases,

despite an agency rule against the practice. Selection of a company's

products for an NIH study can provide a bankable endorsement & #151;

attracting investors and boosting stock value. If the study yields

positive results, the benefits can be even greater.

Conflicts of interest among university medical researchers have

received wide attention in recent years. U.S. Rep. W.J. " "

Tauzin (R-La.) also raised questions recently about cash awards that

several nonprofit institutions made to a previous director of the

National Cancer Institute.

The consulting deals between drug companies and full-time, career

employees at the NIH, however, have gone all but unnoticed.

The wide embrace of private consulting within the NIH can be traced

in part to calls from Congress for quicker " translation " of basic

federal research into improved treatments for patients.

And for decades industry has pressed for more access to the

government's scientific discoveries.

As the number of government-held patents soared, companies sought

legislation encouraging commercialization of federally funded

inventions. The proponents said the changes also would make U.S.

firms more competitive with foreign companies whose research and

development programs were subsidized by their governments.

Laws enacted in the 1980s for the first time authorized formal

research collaborations between companies and scientific arms of the

government, including the NIH. Starting in late 1986, in-house

researchers at the NIH were permitted to arrange cooperative research

agreements with companies. The agreements were intended to benefit

both sides while advancing scientific discovery.

Other changes in law permitted the government agencies, and the

researchers, to share in future patent royalties for inventions.

The new laws said nothing about government employees being hired by

the companies.

Yet by the end of the 1980s, more companies were putting NIH

researchers on their payrolls, albeit within limits imposed by the

NIH.

Agency leaders in the 1990s began weakening those restrictions.

In November 1995, then-NIH Director Harold E. Varmus wrote to all

institute and center directors, rescinding " immediately " a policy

that had barred them from accepting consulting fees and payments of

stock from companies.

The changes, he wrote, would bring the NIH ethics rules more in line

with new, less stringent, executive branch standards. Loosening of

restrictions on employees' outside pursuits was occurring throughout

the government. And with biomedical companies ready to hire, few were

better positioned to benefit than employees at the NIH.

Varmus' memo & #151; which until now has not been made public & #151; scuttled

other restraints affecting all employees, including a $25,000 annual

limit on outside income, a prohibition on accepting company stock as

payment and a limit of 500 hours a year on outside activities.

His memo also offered a narrowed definition of conflict of interest:

Employees had been barred from consulting for any company that

collaborated with their NIH lab or branch. But Varmus said the ban

would be applied only if the researcher was personally involved in

the company's collaboration with the agency.

Furberg, the former NIH official, said Varmus' actions invited, at

minimum, appearances of conflict of interest.

" I'm amazed at what he did, " said Furberg, a professor at Wake Forest

University. " And to do it in secrecy I find very objectionable. This

is a critical change in the NIH policy. "

In 1999, Varmus wrote a letter to the institute directors that

cautioned them to " avoid even the appearance of a conflict of

interest. " But in an attachment to the letter, he told them that

employees " may briefly discuss or mention current work " to outsiders,

in effect giving agency scientists permission to reveal their

unpublished, confidential research.

Varmus, now president and chief executive of the Memorial Sloan-

Kettering Cancer Center in New York, declined to be interviewed for

this article. His spokeswoman, R. Anne , said that Varmus, who

in 1989 shared a Nobel Prize for research into the genetic basis of

cancer, believed that NIH employees should take personal

responsibility for avoiding conflicts of interest, regardless of what

agency rules allow.

Kirschstein, after taking over as Varmus' interim successor at the

NIH three years ago, said in a May 2000 speech to medical researchers

that conflicts of interest posed " a major concern. "

" While the federal government was once the dominant force for

supporting clinical research, today we share the arena with

biotechnology companies, pharmaceutical firms and many others & #151; all

interested in the possibility of financial gain from their research.

" Profit raises issues of public trust, " she said. " When scientific

inquiry generates findings that can make a profit for the researcher

and the institution, their images become clouded. "

Yet officials have lifted controls on consulting even as industry's

stake in NIH research has deepened. When Zerhouni, the current NIH

director, appeared before the House Subcommittee on Environment,

Technology and Standards last year, he cited 274 ongoing research and

development agreements between the federal agency and industry.

At the same time, NIH leaders have moved to what they describe

as " managing " conflicts of interest. Employees are allowed to consult

if they receive prior clearance from an administrator at their

institute or, in the case of most institute directors, from NIH

headquarters.

An Honor System

Potential conflicts are typically addressed by allowing employees to

sign " recusals. " Under these agreements, NIH employees pledge not to

participate in decisions affecting an outside client. Agency

officials, Kirschstein said, rely on an honor system to enforce

recusals and other conflict-of-interest rules.

The Times found instances in which the recusals did not work as

intended.

In the mid-to-late 1990s, Eastman, the diabetes researcher,

participated in a series of decisions affecting the drug company

employing him as a consultant, despite having signed a recusal.

Separately, Katz, the director of the arthritis institute, signed a

recusal involving his client, Schering AG, which nevertheless

supplied the NIH with the drug involved in the kidney patient's death

in 1999.

Katz said that he did not know at the time that Schering AG was the

maker of the drug his institute was testing.

Compliance with the recusals can, itself, undercut the interests of

the NIH and taxpayers, who support the agency. When heads of

institutes and laboratories recuse themselves, they sometimes

constrain their ability to carry out their government duties.

Kirschstein, who for the last eight years has personally reviewed

requests from the institute directors to consult privately for pay,

said she tended to approve the deals, unless she saw " real conflict. "

" I've disapproved some & #151; and I've approved many, " she said.

In her view, recusals have worked " extremely well " in avoiding

conflicts of interest.

Other present and former officials say it is difficult, if not

impossible, for researchers to keep separate their confidential

government information when they consult for companies.

" You can't police the thing, " Philip S. Chen Jr., a senior advisor in

the NIH director's office who has served as an agency scientist or

administrator since the 1950s, said in an interview last year. " The

rules are there & #151; whether they follow the rules is another thing. "

A former NIH director voiced surprise at the agency's loosened

approach to conflicts of interest.

" There has been a lot of relaxation, " said Dr. Bernadine P. Healy,

who served as director from 1991 to 1993. Before, Healy said in an

interview, " there were very strict ethics rules for NIH scientists.

You couldn't have virtually any connection with a company if your

institute was in any way doing research involving their products. "

At least one vestige of the old days remains.

During last year's holiday season, workers were advised to refuse

gifts from outsiders worth more than $20.

" Just a reminder, " ethics coordinator C. Condray wrote,

introducing a five-page memo, " that sometimes gifts and events can

create the appearance of a lack of impartiality. "

Fewer Public Filings

While making it easier for scientists to cut consulting deals, the

NIH has made it harder for the public to find out about them.

The Ethics in Government Act requires yearly financial-disclosure

reports from senior federal employees. This year, employees paid

$102,168 or more generally must disclose outside income by filing

a " 278 " form, which is available for public review. Other employees

may file a " 450 " form & #151; which does not specify the amount of money

received from an outside party and is kept confidential.

At the NIH, 2,259 employees make more than $102,168, according to

data provided by the NIH. Those records show that 127 of the

employees & #151; about 6% & #151; are filing disclosure forms available to the

public.

From 1997 through 2002, the number of NIH employees filing public

reports of their outside income dropped by about 64%, according to

the agency records. Most of those employees have switched to filing

the confidential 450 form.

At the National Institute of Allergy and Infectious Diseases & #151; which

researches treatments for AIDS and other life-threatening maladies & #151;

only three officials file public reports revealing their outside

income, according to NIH records.

Officials at the NIH said that an advisory legal opinion from the

U.S. Office of Government Ethics gave them the discretion to bypass

public disclosure.

Issued in 1998, the opinion said that the threshold for public

disclosure was to be set, not by a federal employee's actual salary,

but by the low end of his or her pay grade. If the minimum salary in

an employee's grade is beneath the $102,168 threshold, he or she is

exempt from filing a public report.

The NIH has shifted many of its high-salaried employees into pay

plans with minimums that dip below the threshold.

For instance, two prominent NIH laboratory leaders, Schlom and

Germain, make $180,400 and $179,900, respectively. Within roughly the

last year, NIH changed each of their pay plans, and they now are

exempt from public disclosure.

They file confidential forms, which instruct employees to not specify

the dollar amounts they receive from outside parties.

Asked why the NIH has assigned highly paid staff to plans that

eliminate public disclosure of employees' outside income, an NIH

spokesman, Burklow, provided a written response:

" The primary benefit of the alternate pay plans is to attract and

retain the best scientists in a highly competitive environment. "

Said Ralbovsky, another NIH spokesman: " What it really boils

down [to] is that fewer people are filing 278s because of changes in

pay plans. "

The shift imparts an implicit message to employees, said J.

Galasso, a former NIH researcher and administrator who retired in

1996:

" If you've got something to hide, you file a 450. If you don't, you

file a 278. "

Make-or-Break Grants

As director of the National Institute of Arthritis and

Musculoskeletal and Skin Diseases, Katz is one of the few at the NIH

who still must file public financial-disclosure reports.

Katz, 62, is paid $200,000 a year & #151; more than members of Congress,

justices on the Supreme Court and the vice president.

His institute leads the government's research into the causes,

treatment and prevention of disorders of the joints, bones and

overall muscle-skeletal system.

With a yearly institute budget of $485.4 million, Katz's decisions

are watched closely by industry. The director's office decides how

much of the budget will be spent on grants and contracts coveted by

companies.

And Katz has been available for outside consultation: From 1993

through 2002, Katz took between $476,369 and $616,365 in fees from

seven biotech and pharmaceutical companies, according to his annual

disclosure statements. He consulted while chief of the dermatology

branch at the National Cancer Institute and continued after becoming

arthritis institute director in 1995.

Katz said that his private consulting broke no rules and that he

relied in part on Varmus' 1995 memo while entering arrangements with

companies.

" The consultations provided my global knowledge as a dermatologist

and research scientist, " Katz said in written responses to questions

from The Times. " I have always received official permission to

perform these consultations and have performed these consultations

outside of my normal NIH work schedule and according to strict

government guidelines and rules. "

One of his clients was Advanced Tissue Sciences Inc.

The struggling biotech company in San Diego hired Katz as a

consultant in 1997, a year after he had announced a new NIH research

initiative for bone and connective-tissue repair.

Advanced Tissue installed Katz on its scientific advisory board and

paid him fees between $142,500 and $212,500 from 1997 through 2002,

according to his income-disclosure reports.

During that time, Katz's institute pledged $1.7 million in small-

business research grants to the company. The company announced nearly

every grant in a news release; Advanced Tissue's president termed the

grants " an endorsement by the government. "

In his written response, Katz said that he had signed a

recusal " withdrawing myself from any interactions between Advanced

Tissue Sciences and the government to remove any real or potential

conflict of interest. " The grants were awarded following evaluations

by NIH reviewers outside of Katz's institute.

Responsibility for administering the grants to Advanced Tissue was

delegated to one of his subordinates, Katz said.

The NIH policy manual says officials may not take fees from companies

seeking or receiving agency grants " if the employee is working on or

involved in these matters " or " supervising others who work on these

matters. "

Katz said his subordinate " handled all decisions regarding these

grants without informing me. "

However, Advanced Tissue kept him apprised as NIH grants were

obtained, a company executive said.

" He was informed, " said J. Ratcliffe, the firm's vice

president for research until its collapse a year ago. " We would have

made a written report to the SAB [scientific advisory board] members

twice a year. There would have been a report to the SAB meetings on

all grants, all grant activities. "

Ratcliffe said the company dealt with Katz's potential conflict of

interest by paying him in fees alone, and not stock options. Both men

said Katz did not advise the company on the NIH grants.

His consultations, Katz said, were limited to his scientific

expertise and " never involved, directly or indirectly, the

preparation or discussion of material which could relate to any

financial dealings between [Advanced Tissue] and the NIH. "

Kirschstein, the senior NIH official who each year approved Katz's

consulting with Advanced Tissue, said she did not learn the company

held grants with the arthritis institute until The Times inquired.

" I didn't even know there were grants, " Kirschstein said.

As it turned out, the grants would be among the few positive

financial developments for Advanced Tissue.

By December 2001, its cumulative net operating losses were

approximately $292.7 million. Barely a year later, the company

entered bankruptcy and shut its doors, having collected about $1.5

million of the $1.7 million in small-business research grants.

Life-and-Death Decisions

While Katz was consulting for Advanced Tissue, he also was on the

payroll of Schering AG, which made Fludara, a drug that his research

staff was using as an experimental treatment for autoimmune diseases.

From the time he began consulting for Schering AG in 1996 through

2002, Katz collected between $170,000 and $240,000 in fees from the

company, his disclosure reports show.

In his responses to questions, Katz said that he " first became aware "

that Fludara was a Schering AG product when The Times made inquiries.

Fludara had been approved by the Food and Drug Administration in 1991

to treat leukemia, but the company wanted to expand its use to other

diseases, a goal the NIH studies could advance.

Two people died in the studies conducted by Katz's institute.

In one study using Fludara to treat muscular disorders, a patient

suffered what agency researchers reported in July 1998 as a " sudden

death & #133; not thought to be drug related. "

The second fatality, indisputably, resulted from the treatment. It

involved " Subject No. 4, " who had enrolled in a separate study,

designed to treat kidney inflammation related to lupus, a disease of

the immune system.

Schering AG provided Katz's institute with a supply of Fludara and

with analyses of patients' blood samples through its U.S. affiliate,

Berlex Laboratories, records and interviews show. The company also

contributed a total of $60,000 to the institute to support the

research, eliciting a July 1, 1998, thank-you letter from Katz.

Participants entering the study were warned of some risks. The NIH

advised them that Fludara might cause damage to their blood cells and

that, as a result, " blood transfusions may be required. "

That is what befell Ann , identified in NIH documents

as " Subject No. 4. "

, a registered nurse, lived with her husband, their two

daughters and a son in Plainville, Mass., about 37 miles southwest of

Boston. She received four transfusions between March and May of 1999,

yet grew sicker.

On June 1, trembling with chills, was admitted to the NIH

Clinical Center in Bethesda. Within days, lab results confirmed that

she was in the grip of graft-versus-host disease. The graft of

outside material & #151; in this instance, blood from a transfusion & #151;

attacks and overwhelms the immune system and organs of the new host.

Fatal in about 90% of cases, the malady had been documented in

leukemia and other cancer patients who took Fludara. For that reason,

the risk of graft-versus-host disease was noted in the product

labeling & #151; as was a warning about irradiating transfusions as a

prevention.

But the NIH doctors did not specify that transfusions should be

irradiated for patients in the lupus study. In an interview, Dr.

H. Klippel, then the institute's clinical director, said he could not

recall whether he or his colleagues took stock of the label warning.

In Britain, authorities were more cautious, recommending that blood

transfusions for all patients taking Fludara be irradiated. The

British recommendations were described in 1996 in The Lancet, a

medical journal with an international circulation.

Two weeks after being admitted to the NIH Clinical Center, 42-year-

old Ann died.

" Steve Katz was notified almost immediately, " Klippel said.

Katz's subordinates warned the remaining patients and their personal

doctors about the death and, for the first time, advised them to

irradiate any transfusions. The FDA was informed.

But the NIH office responsible for conducting an inquiry into

research deaths was not promptly notified.

And while Katz's institute stopped enrolling recruits, the treatment

of those already in the study continued for nine months after

's death.

After five of the other 12 patients given Fludara experienced

abnormal changes in their blood, increasing their risk of infection,

the experiment was stopped, 20 months before its scheduled conclusion.

'Absolutely No Role'

While Fludara's use for anything other than leukemia remained

experimental, an increasing number of doctors were prescribing

it " off-label " for diseases of the immune system, including

rheumatoid arthritis.

Yet the NIH was slow in warning them about the lethal, but

preventable, problem of graft-versus-host disease.

It was not until October 2000, 16 months after died, that

doctors from the NIH briefly summarized the death in Transfusion, the

journal of the American Assn. of Blood Banks.

Meanwhile, three articles written by NIH doctors and published from

March 2000 through May 2001 referred to the agency's work with

Fludara without mentioning the risk of graft-versus-host disease or

the death in their study.

In an article published in the May 2001 issue of the journal

Pharmacotherapy, the doctors, three from Katz's institute, wrote that

Fludara " was well tolerated " and thanked the company for providing

the drug and " analytical support. "

Not until last week & #151; 4 1/2 years after the event & #151; did the same

doctors appear as authors of a full-length article describing

's death. It was published in Transfusion.

In his responses to The Times, Katz said that, to his knowledge, " all

matters concerning the adverse event were handled according to

standard operating procedures. "

Katz said that he had signed a recusal, pledging not to participate

in matters involving Schering AG. He said he had nothing to do with

initiating the study, " was not advised that it was ongoing and had

absolutely no role in overseeing its conduct. "

The Times documented three instances in which he discussed the study:

The July 1998 letter acknowledging the company's first half of the

$60,000 donation; the June 1999 phone call from Klippel notifying him

of the death; and a meeting in April 2000 with Kirschstein to discuss

the fatality and his institute's response to it.

Katz confirmed all three incidents in a series of e-mail exchanges.

He said he wrote the letter without realizing that Berlex

Laboratories was the American arm of Schering AG.

" At that time, I was unaware of any relationship between Berlex

Laboratories and Schering AG and was, therefore, unaware that my

sending the thank you letter might present any conflict of interest. "

Katz declined to identify when he learned that Berlex was the U.S.

affiliate of Schering AG.

The relationship between Schering AG and Berlex has not been a

secret. News articles describe Berlex as Schering AG's U.S. business

unit. The Berlex and Schering AG Web sites make clear the

affiliation. In 1998 & #151; two years after Katz was hired & #151; Berlex

accounted for 17% of Schering AG's net global sales.

Oliver Renner, a spokesman in Berlin for Schering AG, said: " Berlex

Laboratories is a fully owned subsidiary of Schering AG. We are

distributing our products under the name of Berlex in the United

States. We also conduct research and development work through our

Berlex entities. "

Katz, asked about the phone call he received when died, said

he did not then realize what company made the study drug. Although

the study was ongoing, he said he did nothing in response to being

notified of the death.

" No further action was required or undertaken by me, " Katz said.

He said he remained uninformed about Schering AG's connection to the

study when he met with Kirschstein in April 2000.

" The reason that I did not exclude myself from any contact regarding

the lupus [clinical] trial was that I was unaware, and no one on the

staff brought to my attention, that the trial had any relationship to

Schering AG, " Katz said. He noted that the arthritis institute first

used Fludara for lupus in 1993, before he arrived as director.

Representatives of Schering AG said the company did nothing out of

the ordinary in collaborating with the NIH & #151; and in hiring Katz.

" The discovery and development of new pharmaceuticals often involves

a combination of government and private industry efforts, " the

company said in a statement. " It is also a common practice for

pharmaceutical companies to work with many leading external experts & #133;.

In keeping with this practice, we have a consulting agreement with a

Dr. Katz from the NIH involving his expertise in the field of

dermatology. "

Schering AG is no longer pursuing development of Fludara as a

treatment for autoimmune diseases.

Kirschstein, the NIH official who approved Katz's consulting for

Schering AG, said she had not known its drug was being tested by his

institute.

Kirschstein said she did recall being visited by Katz and his top

aide in April 2000. The NIH's human protection office had just opened

an internal review of the lupus-related study, questioning the

researchers' failure to protect against graft-versus-host disease, as

well as their failure to report the death to agency investigators in

a timely fashion.

" Dr. Katz and his scientific director came to me & #133; to tell me about a

study in which a drug was used and there was a death, " Kirschstein

said. " They did not tell me the name of the drug, and did not tell me

much about the study, but told me that they and the [department] were

looking into it. "

In a follow-up letter two years later, the internal review absolved

the institute of responsibility for 's death. Her husband has

filed a wrongful-death lawsuit against the government in U.S.

District Court. The lawsuit does not refer to Katz.

's mother, Carmella Tarte, said time had not eased her grief.

" We all went to the hospital, but we never even got to talk to her, "

Tarte said in an interview. " It's been four years and, well,

Thanksgiving was just another day, you know? She has children she

didn't see graduate. "

*

About This Report

In late 1998, the Los Angeles Times began examining payments from

drug companies to employees of the National Institutes of Health and

the agency's research collaborations with industry. This report is

based on records from the federal government and from companies, as

well as scores of interviews.

In early 1999, the newspaper first sought income-disclosure reports

for all eligible employees of the 27 research institutes and centers

of the NIH. The newspaper, as of this month, had filed 36 requests

with the NIH for documents under the Freedom of Information Act.

According to NIH staff, the agency has provided documents totaling

13,784 pages, including annual financial-disclosure reports, memos

and internal e-mails.

A significant number of NIH employees had by this year stopped filing

yearly income reports that are open to public inspection. To assess

the relative extent of public financial disclosure at the NIH, The

Times in July queried dozens of other federal agencies under the

Freedom of Information Act.

Other documentation, describing products and hundreds of research

collaborations between the NIH and industry, was retrieved from

company and NIH Web sites, from filings with the Securities and

Exchange Commission, and from lawsuits filed in federal and state

courts. Other related documents were obtained from the Food and Drug

Administration under the Freedom of Information Act.

*

Contributors

Times researcher Janet Lundblad in Los Angeles assisted in this

report. Researchers and Chandler in

Washington also contributed.

If you want other stories on this topic, search the Archives at

latimes.com/archives.