Many of the discoveries in biotech are made by researchers at academic or government institutions. When these researchers opt to commercialize their technologies while remaining at their institutions, there is a widespread perception that there is an inherent conflict between their interest - and that of their institution - in pure science and their interest in personal financial gain.

While the conflict "problem" has a popular currency, there is a dearth of hard facts to suggest that academic misbehavior is any more prevalent because of their commercial interests than the drive for tenure, grants and academic accolades.

But while many of the conflict of interest charges can be attributed to run-of-the-mill anti-corporate cant, the arguments of Howard Hughes Medical Institute President Thomas Cech do not fall into that category.

Writing in the Feb. 2 issue of Science, Cech and HHMI General Counsel Joan Leonard argued that the Institute's policy of limiting its researchers to no more than 5 percent of equity in any company they found or consult for is better at preventing conflicts of interest than are policies that focus on disclosure.

What is the problem?

"We all know money holds the potential to corrupt," said Steven Holtzman, chief business officer at Millennium Pharmaceuticals Inc. (MLNM, Cambridge, Mass.). "These problems are real, and more importantly are perceived to be real. So the question is how to enact policies that are reasonable."

Holtzman noted that at the time MLNM was formed, the four founders held a 100 percent stake. Following the first venture round, their collective stake fell to about one-third, in the form of restricted stock that vested over time.

None of the four founders was simultaneously doing sponsored research for the company, and when Eric Lander of the Whitehead Institute eventually did do research for MLNM, he had to divest his equity, according to Holtzman. The other three founders were Raju Kucherlapati of the Albert Einstein College of Medicine, Daniel Cohen of CEPH, and HHMI investigator Jeffrey Friedman. Prior to the company's 1996 IPO, Lander held a 4.1 percent equity stake and Kucherlapati held a 1.7 percent stake.

"Many research institutions have taken the position that if you are providing funding to someone's lab, that person cannot have any equity in the company, the theory being that they might twist their results," said Holtzman, who is a member of the National Bioethics Advisory Commission (NBAC). "Alternatively, others have said that researchers can have equity, but they can't do funded research, whether clinical or non-clinical. And about 50 percent of institutions have no such policies, they just ask for disclosure."

MLNM takes the position that, if it is permitted by the researcher's institution, investigators can receive both equity and sponsored research funding for non-clinical research. "We have never had someone who holds equity who also did clinical research on our behalf," he noted.

Still, said Holtzman, "the first defense against corruption is full disclosure."