Some Dana-Farber Cancer Institute trustees stood to profit from their philanthropic role
The trustees of the world-renowned Dana-Farber Cancer Institute serve a vital role. They hire the chief executive, are stewards for its thousands of vulnerable patients, organize big-ticket fund-raisers, and in some cases, give millions of dollars themselves.
While the volunteer board position carries complex demands, it also puts the trustees in direct contact with the institute’s doctors and scientists who are on the front lines of the race to cure cancer.
And with that, it has also given some trustees a unique opportunity for personal enrichment.
Dana-Farber has long supported its trustees who decide to invest in its research, believing the work of its scientists could be better leveraged into pathbreaking treatments, and profits, with access to the venture capital and financial expertise some trustees could bring.
But it is a practice by trustees that is prohibited at two of the nation’s major cancer centers and that raises ethical questions about the appropriate role for leaders of a nonprofit hospital.
And on Wednesday, after the Boston Globe Spotlight Team had been questioning hospital leaders on its investigative findings, Dana-Farber abruptly reversed course and two longtime trustees resigned.
“We continue to refine our approach,” trustee chair Josh Bekenstein and trustee vice chair Richard Lubin wrote the Globe, “to ensure that when someone with cancer walks through Dana-Farber’s doors, they know they can trust that the entire organization is completely focused on helping them achieve their best possible outcome.”
The new policy, they said, bars all trustees from newly investing in or serving as a board member or executive of a company primarily created to license Dana-Farber technology.
Bekenstein and Lubin, in the letter, denied that there had been any trustee improprieties, or that any member of the board had unduly profited from Dana-Farber research.
The Globe Spotlight Team investigation focused on several potentially lucrative ventures joining trustees’ wealth and market expertise to Dana-Farber’s scientific findings.
FOR ONE COMPANY THAT TRUSTEE MARC COHEN LAUNCHED
BASED ON DANA-FARBER DISCOVERIES,
THE VALUE OF HIS SHARES WENT UP BY
ABOUT $85 MILLION
AS OF LATE SEPTEMBER.
Marc Cohen, a longtime trustee, entrepreneur, and venture capitalist, launched five startups, grounded in Dana-Farber research, between 2008 and this year, raising some eyebrows when he participated in negotiations with the hospital’s licensing officials over the financial terms for his first three such firms. For one company that he launched based on Dana-Farber intellectual property, C4 Therapeutics, the value of his shares had gone up by roughly $85 million as of late September.
C4, based in Watertown, has just started clinical trials targeting multiple myeloma and lymphoma.
Cohen, who made his fortune as a technology entrepreneur, resigned from the board after the policy change, saying he planned to focus instead on advising a Dana-Farber venture philanthropy fund, an initiative he is “incredibly proud of.”
The Spotlight Team’s examination of publicly available documents identified seven people who were invested in startup biotechnology companies based on the institute’s discoveries while serving as trustees.
Also, at least nine trustees have leadership positions in venture capital or other investment firms that have shares in at least one startup born of Dana-Farber research.
Because most of these startups are privately held and not required to disclose investors, the number of trustee-investors could be higher. Dana-Farber officials have declined to give the Globe a full list of trustees who have invested in the institution’s roughly 50 startups.
The hospital’s engagement in such ventures is, of itself, no surprise. Boston is among the world’s capitals in biomedical discovery, an economy of innovation that begins at the intersection of laboratory research and finance, where ideas become companies with dreams of bringing new healing technology to the sick — and profits to investors. It is work that begins with the glimmer of a concept, and often federal research dollars, but eventually needs private financing to bring to market.
Many of the major hospitals in town are engaged in this work, partnering with existing pharmaceutical companies or licensing their discoveries to investors in exchange for cash or a stake in the new startup. But Dana-Farber has been among the most aggressive and entrepreneurial in pursuing venture capital money, which has helped propel the hospital to a leading place in the world of cancer research — and the hope of capitalizing on it — but also opened it to hard questions.
When pressed by the Globe over the past several months, Dana-Farber officials consistently defended the institute’s policy of allowing — even explicitly supporting — trustees who decide to invest in its biotech startups, saying that trustees had been increasingly interested in such a role and that prohibiting the practice would hurt the institute’s ability to attract qualified trustees.
But after Globe reporters asked executives and trustee investors for details on this largely confidential practice, board leaders wrote to the Globe Oct. 6 to announce a change in the rules.
Bekenstein and Lubin, who revealed the change, rejected with vehemence any “insinuation or allegation” that trustees have ever put the potential for personal gains above their duty to safeguard the interests of Dana-Farber and, above all, its patients.
But these types of investments by hospital trustees, which have faced little public scrutiny until now, have troubled even some inside Dana-Farber — including on its board.
“This has always been controversial,” said one trustee, who did not want to be identified because he was not authorized to talk about board deliberations. “Trustees are not supposed to gain anything from being a trustee. The idea that trustees could make money from research didn’t look good to people. But others felt that trustees should be permitted to take a risk on this research.”
The Dana-Farber trustees include some of the wealthiest and most influential individuals in Boston and beyond, and their role on the board gives them direct access to some of the institute’s top cancer researchers. Many trustees come from the world of venture capital and private equity: Bain Capital, for instance, has five top executives on the Dana-Farber board.
These broader ties have been applauded by some as the reason why Boston has become a vibrant hub of innovation; others, including some rank-and-file physicians, worry that this is contributing to a focus on profit-seeking in medicine that can distract from patient care.
Investing in pharmaceutical startups is far from guaranteed profit — many lose money. But some investors, such as Cohen, have enjoyed generous returns, even when the new treatments didn’t pan out.
It can take many years for any scientist’s novel idea for a drug treatment to be tested on patients, and then potentially brought to the US Food and Drug Administration for approval. Hospitals engaged in such work typically provide lab space and help pay the scientist’s salary, but it takes another infusion of cash, often by an established drug company or a startup based on private investors, to run the costly clinical trials and see if the results merit seeking regulatory approval.
It was Cohen’s involvement in negotiations with Dana-Farber on behalf of his startup drug…