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Spotlight Follow up

Mass General Brigham resists the lead of hospitals banning or limiting trustee investments in its startups

The state’s largest hospital system declines to follow the lead of Dana-Farber Cancer Institute and several top hospitals in banning trustees from investing in — and potentially profiting from — its biotech startups

Mass General Brigham, headquartered in Somerville, is the region’s biggest powerhouse for biotech inventions with about 300 startups grounded in the work of its researchers.Lane Turner/Globe Staff

Last month, Dana-Farber Cancer Institute in Boston adopted tough new rules to ensure that its trustees don’t profit personally from their prestigious volunteer role, one that gives them front-row seats to cutting-edge — and potentially lucrative — ideas for fighting cancer.

Joining several other leading US hospitals, the institution banned trustees from newly investing in startup companies based on discoveries made in Dana-Farber’s labs. The sudden change came as the Globe Spotlight Team found that at least seven trustees had personally invested in Dana-Farber startups, including one trustee who cofounded five startups and saw his stock shares in one soar by about $85 million as of this fall.


But officials at Mass General Brigham — the region’s biggest powerhouse for biotech inventions with about 300 startups grounded in the work of its researchers — are not planning to ban trustee investments or create an ethics policy that specifically addresses such investments.

Many MGB startups are private ventures that aren’t required to reveal investors, making it difficult to discern how many trustees have made such investments. And the organization declined to say how many trustee investors there are.

But this is not an abstract question for the health care system: One MGB trustee’s venture fund has invested more than $5 million in a hospital startup, a Globe review found, and at least nine other MGB trustees help run investment firms that back health care startups and could be asked to consider investing in MGB spinoffs.

Rather than create a new ethics policy, on the model of Dana-Farber, to address such potential conflicts, Scott Sperling, chairman of the MGB board and co-CEO of the investment firm THL, said MGB felt its current general ethics rules protect the institution.

Scott Sperling, chairman of the Mass General Brigham board and co-president of the investment firm THL.REUTERS

“Mass General Brigham has very clear policies that require that any MGB-affiliated person — including a Board Member — to recuse themself from any discussions, recommendations or decision-making regarding companies or transactions where they have a significant financial interest,” Sperling said in an e-mail.


Sperling declined an interview request, but in his e-mailed statement he also praised entrepreneurs as playing a key role in developing “new products and technologies that benefit patients everywhere.”

Meanwhile, Boston Children’s Hospital is among the nation’s top hospitals that has sought to limit such trustee investments, as has Cedars-Sinai Medical Center in Los Angeles and Memorial Sloan Kettering Cancer Center in New York.

Some medical ethicists and nonprofit experts say allowing trustees to invest in hospital startups may undermine public trust, especially if not policed with robust public disclosure policies and oversight. Nonprofit hospitals are considered public charities, and their tax-exempt status requires that trustees act in the public good.

These organizations are “generously subsidized by the public and their work should be in the public interest. And whenever private gain becomes embedded within a publicly supported institution, it demands a higher level of accountability,” said Joshua Humphreys, who studied trustee conflicts of interest at Massachusetts universities while at the Tellus Institute in Cambridge and now heads a think tank in North Carolina.

Mass General Brigham, which includes flagships Massachusetts General Hospital and Brigham and Women’s Hospital, has generated five times the number of biotechnology companies as Dana-Farber — roughly 300 compared to about 60 — and has one of the highest outputs of licenses and startups of any hospital system in the country.


Trustee investments have raised ethical concerns at other leading hospitals amid worries that trustees might use their community-service role to learn about investment opportunities or that their personal financial interests could conflict with their duty of loyalty to the hospital.

However, in a search of publicly traded companies, the Globe found at least one Massachusetts General Hospital trustee has invested in a hospital startup.

KPC Venture Capital, the family venture fund of Mass. General Hospital board chair Jonathan Kraft, invested $5.3 million in Spero Therapeutics, a company based on Mass. General research that develops drugs to treat serious bacterial infections, between June 2015 and March 2017. Spero became a public company in 2017, and its stock value has increased about 50 percent since then.

A Kraft family spokesman declined to comment on whether the family has profited from the investment or whether it still holds shares in Spero.

Sperling defended Kraft’s investment, saying it was unrelated to Jonathan Kraft’s board service. A Spero executive made an independent e-mail solicitation for an investment in March 2015, Sperling said, using the general e-mail address on the Kraft Group’s website.

“Any suggestion that this investment was in some way connected with Jonathan Kraft’s role on the MGH Board is simply inaccurate,” Sperling wrote.

Ethical concerns about trustee investments in startups have arisen at a time when Boston has emerged as one of the nation’s top hubs for biomedical discovery — and its elite hospitals have become a coveted source of profitable intellectual property.


Since 2010, Harvard’s top five affiliated hospitals alone have issued licenses to more than 2,500 medical discoveries, and around 225 startups have been formed to commercialize those discoveries, according to a Globe analysis of data from the Association of University Technology Managers.

Massachusetts General Hospital and Brigham and Women’s Hospital account for about half of those startups, many of which are launched in the greater Boston area.

Simultaneously, the venture capitalists and private equity managers who help finance biotech companies have become a dominant force on many hospital boards. Ten of 19 Mass General Brigham trustees have leadership roles at companies that invest in or acquire biotech companies and other health care startups, according to a Globe survey. The number for Massachusetts General Hospital is 9 of 18 trustees, while for Brigham and Women’s, it’s 11 of 27 trustees.

Having trustees who help lead such companies can offer a resource of expertise but also potentially raise ethical issues. Dana-Farber’s new rules explicitly say that trustees must ensure that any investments in startups by their firms “are made completely independent of information learned from their service” as a trustee.

The Globe found that, beyond the seven Dana-Farber trustees who invested personal funds, 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.

One Brigham trustee, Dr. Krishna Yeshwant, could fall into that category of an indirect investor. He is a managing partner at GV, formerly Google Ventures, the venture capital arm of Alphabet Inc., and has been lead partner in deals with more than 50 biotechs, including at least four MGB spinoffs. GV began investing in all but one of those companies before Yeshwant joined the Brigham board in 2020. But he remains on the board of directors for two of those biotech companies, Verve Therapeutics and Rome Therapeutics.


Yeshwant and GV declined the Globe’s request for comment.

The Spotlight investigation into Dana-Farber focused largely on Marc Cohen, a longtime trustee, technology entrepreneur, and venture capitalist.

Cohen 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 of those companies that Cohen launched, C4 Therapeutics, the value of his shares had gone up by roughly $85 million as of late September.

Cohen resigned from the Dana-Farber board after the policy change last month, as did another Dana-Farber trustee, Malcolm Salter, who is on the board of three of Cohen’s startups.

Dana-Farber now prohibits trustees from sitting on the boards of its startup companies, or working as executives.

A number of top research hospitals nationwide have grappled with the attraction — and drawbacks — of trustee investors.

In New York City, Memorial Sloan Kettering Cancer Center now bars trustees from newly investing in its startup companies, following a controversy in 2018 over investments by trustees and executives into an artificial intelligence startup. In the same city, Mount Sinai Health System also bars its trustees from investing in startups.

And in Los Angeles, a spokesperson for Cedars-Sinai Medical Center said that the hospital “has a long-standing practice and expectation” that board members aren’t permitted to invest in startups.

Lawyers who specialize in nonprofit law and medical ethicists said hospitals need to have robust policies around these issues.

“If trustees see one of the perks of being a trustee is getting to know about potential investments at an early stage, that does strike me as problematic and should be avoided,” said Dr. Aaron Kesselheim, a Brigham doctor who teaches bioethics at Harvard Medical School.

However, David Schizer, dean emeritus of Columbia Law School and a specialist in nonprofits and tax law, said he opposes outright banning trustee investments.

“Somebody who is already involved in a hospital and therefore has a sense of the talent and possibilities of the researchers who were there, and also has capital, is potentially a very valuable funder for these initiatives,” he said.

But, Schizer said, hospitals must police the practice closely, including ensuring trustees are not getting a better deal on investments than the public would.

“Obviously we don’t want these hospitals to just become vehicles to make money,” he said.

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