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Sloan Kettering under fire for potential conflict-of-interest in start-up deal

By Jesse Schwartz
Published: September 26th, 2018

Memorial Sloan Kettering Cancer Center has come under fire for its stake in an artificial intelligence start-up founded by three researchers from the center. Several individuals who hold leadership positions at Sloan Kettering also hold equity in the new venture.

Paige.AI is among a number of start-ups that are applying artificial intelligence to health care solutions. Its key advantage is that is has exclusive rights to the cancer center’s archive of 25 million patient tissue slides, as well as decades of work by Memorial Sloan Kettering’s world-class pathologists.

The health care center holds an equity stake in Paige.AI, as does a member of its executive board, the head of one of its research labs, and the chairman of its pathology department. In addition, three other board members are investors in the start-up.

The deal between Sloan Kettering and Paige.AI had already alarmed doctors and scientists at the center for its potential conflict-of-interest issues, but a recent investigation by ProPublica and the New York Times showed that the start-up’s chief medical officer, José Baselga, failed to disclose some of his financial ties to the health and drug industries in multiple research articles, causing a new uproar around the Paige.AI arrangement.

Baselga has since resigned, and Craig B. Thompson, chief executive of Memorial Sloan Kettering, has assembled a task force to review the center’s conflict-of-interest policies.

Staff pathologists at the center have argued that it is unfair that the founders of Paige.AI received equity stakes in a company that relies on the pathologists’ research developed over 60 years. They also worry about the start-up using patient data without the patients’ knowledge, even if the data is anonymous, in a for-profit venture.

Experts in nonprofit law and corporate governance have pointed out that charitable institutions like Memorial Sloan Kettering must show that they didn’t provide assets to insiders for less than fair market value. Those experts are concerned about whether or not the health center complied with federal and state law around this issue when it struck the deal with Paige.AI.

According to officials at Memorial Sloan Kettering, the deal was entirely legitimate and crucial to advancing the technology, which, they say, could change the future of cancer diagnosis. “This is an incredibly expensive undertaking. It needs a lot of money,” says Gregory Raskin, vice president of technology development at Memorial Sloan Kettering. “We feel this is a really valuable and important technology to get developed.”

Marcus S. Owens, a Washington lawyer and former head of the IRS division that oversees tax-exempt organizations, comments, “It just seems awfully coincidental that the individuals involved happen to be people in control and influence of that asset, and they ended up with an exclusive use of it. It seems to create a cascading series of conflicts for the operation of Sloan Kettering.”

Hospital officials say the details for distributing profits from Paige.AI have not been worked out. According to Kathryn Martin, chief operating officer at Memorial Sloan Kettering, if the deal is successful, some funds could be put back into the pathology department to support research projects.

Source: The New York Times

Based on demand for guidance on COI issues in research commercialization activity, we are hosting an encore presentation of our highly rated distance learning event Blurred Lines and Gray Areas: Managing Conflicts of Interest in University Tech Transfer, on Tuesday, October 30th. CLICK HERE for details.

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