Hughes Medical Institute Is Walking Tightrope : Tries to Flex Its Large Financial Muscles Without Offending Establishment

As so many reclusive billionaire eccentrics do, J. Paul Getty and Howard R. Hughes discovered the cruel fact that no matter how rich you are, you can’t take it with you.

Ironically, the money they left behind constitutes a legacy of power and influence that rivals what they had when they were alive.

Getty’s $1-billion endowment to the art museum that bears his name has simultaneously transformed and outraged the art world: Overlooking the Pacific Ocean from a cliff-top in Malibu, the Getty Museum can outbid any museum in the world for any art object it desires. As a result, prices have climbed and more than one curator has said the economics of collecting never will be the same.

By contrast, Hughes, a hypochondriac obsessed more with disease than Degas, inadvertently created the richest private medical research organization on earth.

With its endowment of roughly $5 billion, the Howard Hughes Medical Institute, which is based in Bethesda, Md., might have a similar impact on the future of biological research and development, bidding against universities and other research institutions for biology’s best and brightest scientists.

Won’t Overpower Rest

Will it overpower the rest of the medical research community? Dr. Donald S. Fredrickson, president of HHMI and the man considered vital to its future, says no.

“We’re not collecting these scientists and putting them away in galleries,” he said. “We are really going out to institutions and taking those precious works of art and, in a sense, enhancing their effect, making them more accessible, perhaps, by linking them to others.”

HHMI’s “artworks” are the roughly 250 eminent scientists employed by the institute to pursue their research in laboratory units established by HHMI at prominent university teaching hospitals. HHMI has built and lavishly equipped 18 such units across the nation at universities such as Yale, Harvard, Johns Hopkins, Stanford and Duke.

Hughes scientists work in one of four areas: genetics, immunology or metabolic control and neuroscience. They hold faculty positions at the university where the lab is situated but receive their salaries from HHMI.

The Hughes institute thereby conducts medical research in accordance with its charter, and long-controversial tax status, as a “medical research organization.”

HHMI is not a foundation. It is a private, nonprofit corporation that was created in 1953 as the sole stockholder of Hughes Aircraft Co., a troubled division of Hughes Tool Co. It cannot award grants or scholarships, but it escapes Internal Revenue Service spending rules for foundations and claims tax-exempt status.

For years, critics have called the institute a scam created to shield Hughes Aircraft from being taxed. The IRS has questioned the setup because only a small fraction of the company’s revenue has gone to the institute.

Sold for $5.2 Billion

In 1984, the defense contractor channeled $80 million to HHMI out of its $4.9 billion in revenue. Until Hughes’ death a decade ago, the institute never received more than $4.2 million from the company in any one year.

HHMI’s board of trustees sought to placate the IRS by selling Hughes Aircraft a year ago after a widely publicized auction in which the bidders included Boeing and Ford Motor.

General Motors won with a $5.2-billion bid. In a stroke, HHMI became one of the largest private philanthropies in the world, with assets far above the $3.6 billion of the Ford Foundation, the nation’s largest foundation.

With the proceeds, HHMI expects to expand operations to four more universities by 1991 and is working on a plan to help 20 additional institutions by supporting individual scientists.

The institute plans to spend more than $215 million by the end of the next fiscal year, when it also hopes to establish a presence overseas.

Could Hire the Best

HHMI expects to be spending $300 million a year by 1990.

With that kind of clout, HHMI officials know they could hire many of the nation’s most brilliant scientists, luring them out of some institutions into a few chosen by Hughes.

Fredrickson, who became president of HHMI in 1984, is aware of the concern, and recently wrote: “We have been poetically warned that we might create veritable ‘black holes’ so densely packed with talent that they will rob the cosmos of essential illumination.”

HHMI officials also have considered using the institute’s power to support scientists in private companies, and he knows such moves could upset the traditional research Establishment. To help it avoid such missteps, the HHMI board chose Fredrickson to help it become the gentle giant, rather than an 800-pound gorilla, of medical research.

Thus, there is an inherent tension in Fredrickson’s hopes and ambitions for HHMI. On the one hand, he waxes enthusiastic about HHMI’s potential as a major force in research and his own interests in “changing the status quo . “

On the other hand, he quickly adds that HHMI pales next to the size and scope of the budget of the National Institutes of Health and that people shouldn’t worry about the institute’s influence.

HHMI’s board members said they believed that Fredrickson would be precisely the administrator to balance these concerns because of his experience running NIH, the federal sponsor of medical research that operates on an annual budget equal to HHMI’s entire endowment. Fredrickson spent 29 years at NIH, including seven as director, just a few blocks from the plush HHMI office where he sits today.

Earned Top Reputation

“We wanted to be sure we got Dr. Fredrickson because he was the best-qualified person in the country,” said Dr. George W. Thorn, president of HHMI from 1981 to 1984 and chairman of the board of trustees.

A physician and internationally recognized research scientist, Fredrickson served as NIH director from 1975 to 1981, earning a reputation as a savvy administrative infighter who protected the research community from government regulation while winning government support for an expanding NIH budget.

During Fredrickson’s tenure at NIH, the agency spent hundreds of millions of dollars a year on the burgeoning areas of genetic engineering and molecular biology. The advances of those years laid the foundation for the genetic engineering industry, populated by companies such as Genentech and Cetus, as well as the research HHMI conducts.

In moving from the public to the private sector, Fredrickson also is helping move HHMI out of the shadows of its secretive past.

When Hughes was alive, HHMI officers were not allowed to talk to the press or to Hughes, said Thorn, a retired Harvard medical professor who has been with the institute since the start.

“It was terribly frustrating,” Thorn said. “The problem, very frequently, was that we could not get a decision from Mr. Hughes on what to do. So I would make a recommendation, and if I received no answer in two weeks, I would proceed--knowing that my head could get cut off.”

Fredrickson, by contrast, is known as a relentless charmer--an elegant articulator of the institute’s mission and activities. He remains active in other arenas of public life, serving as head of NIH’s centennial committee, for example.

Welcomes Attention

Now, HHMI appears to welcome public attention and is moving to reaffirm ties with its established research homes as well as to create new ones.

Fredrickson, galloping from medical convention to research gathering to university, performs “shuttle diplomacy” in an effort to give HHMI the public reputation to match its financial strength.

Fredrickson believes that HHMI’s investments “will have a very important unifying effect, perhaps across the world, among institutions. . . . I see us as a bridge, as many bridges, and ultimately a bridge from science to society,” he said.

The bridge between nonprofit and for-profit science is one upon which HHMI may build. Just as it can fund research at major hospitals and universities, HHMI can, if it chooses, fund work at leading biotechnology companies, which use the newest techniques of microbiology to create new products.

Such funding could give U.S. companies a significant research edge as they seek to compete against Japanese and European biotechnology companies. While it would be unusual for a nonprofit organization to help fund for-profit science, the line between basic and applied genetic research has blurred. In addition, many of the world’s top molecular biologists work for private companies.

Fredrickson does not rule out assisting for-profit concerns, emphasizing that HHMI wants to fund the best people in a given field. It would be possible, for example, for HHMI to fund private scientists on the condition that their work be published but that the company would be able to keep proprietary the applications it gleans from such research.

“Genentech’s response to that would be very favorable,” said Dr. Stephen A. Sherwin, Genentech’s director of clinical research. “We have always been a company that understands the need to publish in a timely manner the basis of our research.

“If I were in the position of Dr. Fredrickson, I would have as my first and foremost consideration the quality of the institution and personnel,” and if private companies fit those criteria, Sherwin said, HHMI should consider them for possible funding.

However, there are concerns about HHMI’s further blurring the line between private and public research funding priorities.

“I would have serious concerns” if HHMI funded for-profit activities, said Dr. Arnold Relman, editor of the New England Journal of Medicine and a prominent critic of the for-profit ethic in medical research.

Yet, these blurred distinctions between academia and enterprise offer a unique opportunity for HHMI to influence America’s industrial competitiveness in global biotechnology markets as well as its basic biological research.

Whether HHMI exercises its options and flexes its muscles in those areas will be noted by researchers in laboratories and companies around the world.