U.S. Officials Probe Cost of Genetic Decoder
Federal officials are investigating whether the government was overcharged for gene sequencing machines developed at Caltech and widely considered crucial to the coming genetic revolution.
Both the government and private companies are using the machines in a race to decipher the human genetic code. The outcome of the competition could determine whether the medical miracles that are expected to flow from the decoding will end up in public or private hands.
The genetic code determines human heredity, and newly emerging knowledge of it is expected to point to novel ways of diagnosing and treating such devastating disorders as cancer, heart disease and a host of hereditary conditions that have long defied treatment.
Central to the federal investigation is whether Caltech researchers used federal funds to develop the technology that makes the machines possible. If they did, a 1980 law limits what the government can be charged for the machines and could force the repayment of millions, or perhaps tens of millions, of dollars.
Officials have subpoenaed lab notebooks and other records of former Caltech researchers involved in the invention of the machine. They have also sought records from PE Corp., a Connecticut-based company that has licensed the decoding technology from Caltech. The university holds several critical patents on the technology. The company effectively has an exclusive license for its use and has made about 80% of the automated machines sold to date.
The Department of Health and Human Services confirmed Tuesday that its inspector general’s office has been conducting an investigation and that documents have been subpoenaed. A spokeswoman, Judy Holtz, refused to provide details of the probe.
Both Caltech and PE adamantly denied Tuesday that federal funds were used in the invention of the decoder, known as the four-color automated DNA sequencer.
Under the 1980 law, the government permitted universities and some businesses to win patents and take title to inventions made with federal funds, but with the proviso that Washington not be charged steep fees for their use. At least until recently, the government and government-funded scientists were far and away the biggest buyers of DNA sequencers.
Asked about the probe late Tuesday, both Caltech officials and PE executives predicted that it would bear no fruit.
In a written statement issued by its attorneys, the university acknowledged that it had received “a civil subpoena for documents pertaining to the invention of the DNA sequencer.”
But the statement said: “Based on our evaluation of the historical record, which dates back some 25 years, we are confident that [Caltech] followed all proper procedures with respect to claiming the rights to the DNA sequencing chemistry and technology. There is no question that the invention that is the basis for the commercial DNA sequencer was funded by private grants. No federal funding was received or used to support this invention, and therefore the federal government has no rights to the invention.”
Michael W. Hunkapiller, a former Caltech researcher who is now president of PE Biosystems, the PE subsidiary that makes the sequencers, took a similar position, asserting that development of the sequencer “had nothing to do with government funding.”
“What’s ironic is that we tried so hard to get government funding at the early stages of the project, and we were told consistently that they weren’t interested,” Hunkapiller said.
Behind the scenes, both the university and the company have mounted a fierce defense of their claims to the technology, providing researchers who have received subpoenas with lawyers and arguing in correspondence with federal officials that there is no basis for the probe.
But their efforts seem likely to be dogged by a trail of federal grant applications, scientific papers and other documents that specifically credit federal funds with helping to underwrite the invention of the four-color technology and embodying of it in a working machine.
For example, a 1985 application for $1.8 million in National Science Foundation money specifically says that the money was being sought to develop a DNA decoder. An 1986 article in the scientific journal “Nature” that describes the new technology credits the NSF for supporting research that led to the invention. Caltech and the NSF both issued press releases and held a joint conference in 1986 to unveil the new machine.
The Caltech press release said, “Development of the DNA sequenator was sponsored by the National Science Foundation” as well as by grants from a group of private companies.
Caltech’s and PE’s efforts to deflect the government could also be complicated by the views of one of the sequencer’s principal inventors, Lloyd M. Smith, a former Caltech researcher now at the University of Wisconsin.
Smith acknowledged in a telephone interview that he did not know exactly where the money to support his work was coming from when he was laboring over the decoding technology as a postdoctoral fellow in the Caltech labs of Dr. Leroy Hood during the mid-1980s. But he said that the lab “was totally made of federal money.”
Asked whether he and his colleagues could have invented the sequencer and made it work without federal funds, Smith said, “No, not in my opinion. The whole environment of the lab was permeated with federal funds.”
The 1980 legislation, known as the Bayh-Dole Act, requires universities to report all inventions to the federal government if any taxpayers’ dollars are used to develop the idea or reduce the invention to practice. In such cases, the government hands over title to the invention to the academic institution but retains a right to its use and is freed from paying royalties on it.
Over the years, federal auditors have complained that the requirements were all too often ignored. There was little financial impact until the current age of biotechnology when a new discovery could lead to a billion-dollar drug or the founding of a billion-dollar company.
Caltech’s defense centers on the timing of a National Science Foundation grant to Hood’s lab. Documents show that Caltech promised that, under the grant, new instruments “will be developed.”
However, John Wooley, who managed the foundation’s biological instrumentation program, said that his agency approved the grant only after it was convinced it would work.
A team of experts, he said, looked at a prototype of the machine and “judged that it worked.” But Wooley acknowledged that he could not assess whether, in the parlance of the Bayh-Dole act, it had been “reduced to practice.”
“I don’t know what a lawyer would say,” Wooley said. “I don’t know what the nuances are about ‘reduced to practice.’ ”
Beyond the details of the Caltech investigation loom a series of issues likely to crop up with growing frequency--and contentiousness--in the coming years.
After two decades of encouraging private-sector use of federally funded research findings, Washington is discovering that some of those findings are proving extremely valuable and increasingly costly for the government to make use of.
At $300,000 a machine, the DNA sequencer is a case in point and has been attracting the attention not only of investigators but also of politicians. “We have been looking into charges that the American taxpayers may have been overcharged for these sequencers,” said Rep. Ralph M. Hall of Texas, the ranking Democrat on the House Science Committee.
Then there is the question of whether a new generation of discovery that is emerging out of a previous, federally funded generation of findings will end up in the public or private sector. Some believe that the most dramatic example is that of the soon-to-be-deciphered human genetic code.
The feat of deciphering the entire code is only now possible because of the development of the automated DNA sequencer. Before automated sequencing, cracking even a tiny portion of the code involved a tricky manual process that could take months to complete. Using the new automated method, which depends on four florescent dyes that mark the chemical building blocks that make up DNA and can be read by machine, the same job can be done in a matter of hours.
Two groups are now using the automated sequencing methods developed at Caltech to decipher the entire code. The first is the federally funded Human Genome Project, which makes its findings immediately public by posting them on computer Web sites. The second is a PE subsidiary, Celera Genomics Group, which has said it will eventually release some of its findings to the public, but seeks patents on others and keeps the rest as part of a proprietary database to which it will sell subscriptions.
