Sloan Kettering’s cozy deal with start-up ignites a completely new uproar 

This particular article was reported in addition to written in a collaboration with ProPublica, the nonprofit investigative journalism organization.

An artificial intelligence start-up founded by three insiders at Memorial Sloan Kettering Cancer Center debuted with great fanfare in February, with $25 million in venture capital in addition to the promise of which the idea might one day transform how cancer is usually diagnosed.

The company, Paige.AI, is usually one in a burgeoning field of start-ups of which are applying artificial intelligence to health care, yet the idea has an advantage over many competitors: The company has an exclusive deal to use the cancer center’s vast archive of 25 million patient tissue slides, along with decades of work by its world-renowned pathologists.

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Memorial Sloan Kettering holds an equity stake in Paige.AI, as does a member of the cancer center’s executive board, the chairman of its pathology department in addition to the head of one of its research laboratories. Three various other board members are investors.

The arrangement has sparked considerable turmoil among doctors in addition to scientists at Memorial Sloan Kettering, which has intensified within the wake of an investigation by ProPublica in addition to The completely new York Times into the failures of its chief medical officer, Dr. José Baselga, to disclose some of his financial ties to the health in addition to drug industries in dozens of research articles. He resigned last week, in addition to Memorial Sloan Kettering’s chief executive, Dr. Craig B. Thompson, announced a completely new task force on Monday to review the center’s conflict-of-interest policies.

At a staff meeting Thursday morning, Dr. Thompson in addition to others, including Dr. Lisa DeAngelis, the acting physician-in-chief who replaced Dr. Baselga, described the recent events as a disruption in addition to acknowledged of which the hospital was under a microscope, according to several people who attended. Doctors said they were concerned about a lack of communication by hospital leadership, in addition to one said patients were nervous of which their health data was being commercialized by the institution.

Hospital pathologists have strongly objected to the Paige.AI deal, saying the idea is usually unfair of which the founders received equity stakes in a company of which relies on the pathologists’ expertise in addition to work amassed over 60 years. They also questioned the use of patients’ data — even if the idea is usually anonymous — without their knowledge in a profit-driven venture.

In addition, experts in nonprofit law in addition to corporate governance have questioned whether Memorial Sloan Kettering, one of the nation’s leading cancer centers, complied with federal in addition to state law governing nonprofits when the idea set up the deal. The experts pointed out of which charitable institutions like Memorial Sloan Kettering must show of which they didn’t provide assets to insiders for less than the fair market value.

Cancer center officials said of which they acted properly in approving the deal with Paige.AI in addition to of which if successful, the venture could change the future of cancer diagnosis. “This particular is usually an incredibly expensive undertaking — the idea needs a lot of money,” Dr. Gregory Raskin, the hospital’s vice president of technology development, said in an interview. “We feel This particular is usually a actually valuable in addition to important technology to get developed.”

Officials said of which some board members invested only after early efforts to generate interest by outside companies in addition to investors had failed. however they acknowledged of which they did not seek an independent valuation of the tissue archive, nor did they put the proposal out for competitive bidding before licensing the idea to an individual company. In exchange for sharing its voluminous database, Memorial Sloan Kettering received ownership shares amounting to about nine percent within the company.

Thomas Fuchs, head of the MSK computational pathology lab in addition to a co-founder of Paige.AI.

“the idea just seems awfully coincidental of which the individuals involved happen to be people in control in addition to influence of of which asset, in addition to they ended up with an exclusive use of the idea,” said Marcus S. Owens, a Washington lawyer who ran the Internal Revenue Service division of which oversees tax-exempt organizations. “the idea seems to create a cascading series of conflicts for the operation of Sloan Kettering.”

The decision to license images of the patients’ tissue slides to a for-profit company also highlights the broader debate over the use of personal medical data, ranging by genetic information to, in This particular case, images of a person’s cells, for research in addition to commercial purposes.

After ProPublica in addition to The Times began asking questions about the arrangement, one of the founders — Dr. David Klimstra, the chairman of the pathology department — said he could divest his ownership stake.

Dr. Klimstra in addition to another co-founder, Dr. Thomas Fuchs, the head of the computational pathology laboratory, pursued the idea for Paige.AI in 2015, hospital officials said. Dr. Fuchs had previously worked for NASAdeveloping algorithms of which could teach the Mars rovers to navigate terrain, in addition to has said some of the same algorithms can differentiate cancerous tumors by benign ones. In a statement, he called the AI start-up the culmination of his “life’s work.”

Universities in addition to teaching hospitals have long sought to turn their scientific discoveries into lucrative business deals. Indeed, 10 cancer drugs approved by the Food in addition to Drug Administration originated at Memorial Sloan Kettering. however the Paige.AI arrangement is usually different because what’s being commercialized is usually not an invention, per se, however rather access to raw materials — notes in addition to slides — gathered over decades.

Paige.AI is usually among a growing number of companies, including Google in addition to Microsoft, of which are exploring ways to use artificial intelligence to improve health care. Pathology has been a focus because the idea remains a time-consuming, error-prone in addition to often subjective process, where doctors examine tissue slides to decide whether cancer is usually present, in addition to which type. various other start-ups within the field include PathAI, based in Boston, in addition to SpIntellx, which is usually working in partnership with the University of Pittsburgh.

The Paige.AI project finally took off after enlisting the help of Norman Selby, a member of the hospital board’s executive committee in addition to a longtime health care consultant, manager in addition to investor. He is usually listed as a founder in addition to executive chairman of Paige.AI in addition to holds an equity stake.

Jim Breyer, the early Facebook investor in addition to venture capitalist, also agreed to invest. At a completely new York Times conference in February on artificial intelligence, he said Paige’s goal could be “to provide predictive data in addition to help to cancer physicians around the country — as second opinions, in many cases as well, because not everyone of course has access to a Sloan Kettering.”

The three various other hospital board members who became investors are Stanley Druckenmiller, Alexander T. Robertson in addition to Marie-Josée Kravis, according to Richard Beattie, honorary chairman of the cancer center’s board in addition to a member of its executive committee. “We were desperate,” he said in an interview. “This particular is usually more risky than most transactions, in addition to we couldn’t find investors.”

The board investors in Paige.AI, in addition to Mr. Breyer, either declined to comment or did not return calls in addition to emails. Mr. Selby has pledged to donate some of his profits to the hospital, Mr. Beattie said.

Experts in nonprofit law in addition to corporate governance questioned whether Memorial Sloan Kettering, which is usually a charity, acted properly in what is usually known as a related party transaction with the founders of Paige.AI.

While federal law does not specifically require seeking bids by competitors or independent appraisals of the assets in such a transaction, nonprofit groups of which make deals with companies associated with board members or employees must demonstrate of which they have taken steps to ensure of which insiders don’t get preferential treatment. If nonprofits are found not to have complied, they or the individuals involved could face tax repercussions.

Mr. Beattie said the hospital relied on some investors to set a value for licensing the slides, with guidance by hedge fund leaders on its board. A law firm, which he did not identify, evaluated the documents in addition to said the idea was a Great deal.

Nell Minow, vice chair of ValueEdge Advisors who has written books about corporate governance, said the center’s process was “inadequate.”

“They could be throwing a dart at the wall to figure out what the valuation is usually,” she said. “They’re accepting somebody’s word for the idea in addition to of which’s very, very risky.”

Mr. Beattie said the cancer center could follow I.R.S. rules requiring the idea to list the transaction on financial forms, which won’t be public until next year. He also said the hospital had set up plans to manage conflicts for the three company founders. All four members who are invested, including Mr. Selby, must recuse themselves by any board actions about the company, Mr. Beattie said. A review of the hospital’s I.R.S. filings does not show any similar transactions in recent years.

In two meetings This particular month, staff pathologists confronted hospital leaders over the cancer center’s relationship with Paige.AI, some of them angered by the deal of which could allow others to profit by their work.

At a tense meeting Sept. 12, some pathologists said they only learned about the deal online after the idea was announced, two people in attendance said.

As for how the deal came about, Dr. Klimstra told colleagues of which Google had twice approached the hospital about securing access to the pathology slides in addition to was turned down. Mr. Beattie said there were never serious conversations with Google. A spokeswoman for Google declined to comment.

Doctors also expressed concerns about whether patients had consented to have images of their tissue used in This particular way.

Dr. Klimstra told them the project had been approved by an institutional review board, which considers ethical issues involving patients. Patients who had not given their consent to having their readings shared could have all personal health information stripped by the images in addition to notes, he said. Dr. Raskin said of which between 30 to 40 percent of patients typically do not consent.

in addition to Paige.AI will not have exclusive access to slides of which resulted by federally funded research, he added.

Alexander Capron, a professor who teaches medical ethics at the University of Southern California, said courts have generally ruled against patients in disputes over ownership of human tissue, however of which institutions should be as transparent as possible with patients.

Internal concerns about the deal in addition to how patients could perceive the idea escalated after Dr. Klimstra wrote an email in August informing the pathology staff of his involvement. the idea elicited a mocking response by Dr. Marc K. Rosenblum, a neuropathologist in addition to former chairman of the department, who suggested in a reply of which the center was auctioning its expertise to the highest bidder. The email included a tongue-in-cheek fight song. “To PAIGE I pledge my self entire in addition to promise to be true,” he wrote within the email. “I had a thing for MSK however currently of which thing is usually THROUGH!”

the idea then says, “(contemplate consulting fees, repeat with feeling.)”

In an interview last week, Dr. Rosenblum said he wasn’t seeking financial compensation, however felt “the leadership had not been particularly transparent with us about the founding of This particular company, in addition to I feel of which we were not sufficiently credited with what had been our intellectual input in This particular.”

Kathryn Martin, the hospital’s chief operating officer, said the cancer center did not anticipate the pathologists’ objections. “I think we could have done a better job communicating the idea,” she said in an interview.

Dr. Klimstra said in a statement of which the project represented a “quantum leap” within the pathology field.

“various other than my family, there is usually nothing more important to me than running my department,” he said, in addition to added, “I sincerely regret the fact of which my equity ownership in Paige has served as a distraction to my primary leadership role at M.S.K.”

Dr. Fuchs, the head of the computational pathology lab, defended his role in a separate statement. “Computer scientists like myself very seldom get the chance to actually help patients,” he said.

Details for distributing any profits or proceeds by Paige.AI have not been worked out, officials said. Ms. Martin suggested of which if the deal is usually successful, some funds could be set aside for the pathology department to finance research projects.

For currently, much of the talk is usually theoretical — the company is usually years away by selling a finished product, using a staff of fewer than 20 employees.

The roster of various other key advisers also appears to be in flux. Until recently, Dr. Baselga was listed as the chairman of Paige’s scientific advisory board. however his name disappeared by the company’s website last week, the day after he resigned by Memorial Sloan Kettering. He also recently resigned by board positions at the pharmaceutical company Bristol-Myers Squibb in addition to Varian Medical Systems, a radiation equipment some sort of.

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