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Professional News
Schatzberg Met Disclosure Requirements, Stanford Says
Psychiatric News
Volume 43 Number 16 page 6-24

Stanford University, responding to a request for information from Sen. Charles Grassley (R-Iowa), has said that faculty member and APA President-elect Alan Schatzberg, M.D., has properly complied with its requirements for disclosure regarding his financial interest in a pharmaceutical company he cofounded and consulting fees he earned from other companies.

Grassley's staff later acknowledged that at least one charge leveled against Schatzberg about undisclosed income was in error.

Moreover, the university is "fully aware" of the extent of Schatzberg's interest in Corcept Therapeutics Inc., the company he cofounded, and has "managed the conflict of interest to ensure that it did not influence the research he was conducting," the university said.

(According to the company's Web site at<www.corcept.com>, Corcept is engaged in development of medications for treatment of severe psychiatric and metabolic diseases believed to result from, or be negatively affected by, prolonged exposure to elevated cortisol. Schatzberg is chair of the company's scientific advisors, according to the Web site.)

The allegations and request for information made by Grassley—who is the ranking Republican member of the Senate Finance Committee—is part of a number of investigations he has launched into relationships between medicine and the pharmaceutical industry. These include requests for information from APA and at least two other physician organizations (see Senator Wants APA Records of Drug-Industry Interactions).

In a letter to Stanford University President John Hennessy, and in comments on the Senate floor published in the June 23 Congressional Record, Grassley alleged that Johnson and Johnson reported paying Schatzberg $22,000 in 2002 and that in 2004 Eli Lilly reported paying him $52,000—but that neither of these payments appeared in disclosure statements made by Schatzberg.

But Stanford responded in a public statement two days later that in fact both earnings were reported; in the first case, the discrepancy appeared because the $22,000 was reported by Schatzberg as coming from Janssen, which is the wholly owned subsidiary of Johnson and Johnson that made the payment.

In the second instance, university documents show that Schatzberg disclosed three sources of compensation from Eli Lilly in 2004: less than $10,000 for an advisory board, $10,000 to $50,000 for consultation, and $10,000 to $50,000 for honoraria. "[S]o, together, this disclosure fully accounts for the 2004 payments from Lilly," according to Stanford.

A further charge by Grassley stated that Schatzberg had not disclosed receiving a payment from Eli Lilly in 2007. "That is simply an error," Stanford said in response. "Dr. Schatzberg did disclose that payment."

Grassley's staff later acknowledged the error, and a press officer for the senator told Psychiatric News that a correction would be placed in the Congressional Record. (At press time it was not known when that would appear.) When asked whether Grassley found Stanford's response to all of the charges satisfactory, the press officer said that "his investigation is continuing."

She added, "His investigation is not focused solely on Stanford, and it is not focused solely on psychiatry," but that at least 20 other institutions were also receiving requests for information from the senator.

Grassley also charged that Schatzberg did not disclose to the university the true value of his stock holdings in Corcept and did not disclose earnings from a sale of some of the company's stock in 2005.

(An SEC filing shows Schatzberg as owning 2,438,749 shares of Corcept as of March 30, 2007. On July 31, Corcept stock closed at $1.86 a share.)

Again, Stanford refuted Grassley's charge in its statement. In keeping with university requirements, Schatzberg "disclosed in writing his ownership of the Corcept stock and its actual value," the university stated." As a result, Stanford was fully aware of the value of his stock based on his disclosures to the university."

Moreover, Stanford said the stock sale was publicly disclosed through filings with the Securities and Exchange Commission (SEC).

Additionally, the university stressed that Schatzberg has not "been involved in managing or conducting any human subjects research involving mifepristone, a pharmaceutical that Corcept licenses for the treatment of psychotic major depression."

Stanford acquired a patent on mifepristone in the 1990s following NIMH-funded research, for which Schatzberg was principal investigator, on the biology of psychotic depression. The patent was then licensed to Corcept." Before the patent was issued, Dr. Schatzberg did not have any financial interest in this drug. Once he was aware he was going to have a financial interest in mifepristone, he disclosed it, and Stanford University managed the conflict of interest."

The university added, "Stanford and Dr. Schatzberg disclosed this conflict and the fact that Stanford was managing the conflict to the NIH [national Institutes of Health]. In addition, NIH reviews its data through its Data Safety and Monitoring Board structures."

Stanford also said in its statement that it had acquired "a small amount of equity in Corcept under a technology license" and that" pursuant to its policy on institutional conflict of interest, Stanford divested itself of the stock."

However, a search of university SEC filings turned up a March 31 filing that appeared to indicate that some 47,000 shares are held in the university's name. (The SEC filing is a "13F" document that, according to the SEC's Web site, "is required of institutional investment managers who exercise discretion over $100 million or more in securities." It can be found online at<www.sec.gov/Archives/edgar/data/1315828/0001315828-08-000002.txt>.)

When Psychiatric News asked the university about its filing, the university issued a statement in which it explained that the stock is individually held by the university's investment management company as part of a fund for the graduate school of business and is not related in any way to the university's research on mifepristone.

"A Stanford Graduate School of Business [GSB] investment fund, whose purpose is to benefit the school's education programs, purchased $100,000 of stock in Corcept Therapeutics in August 2007," Stanford said in a statement. "The University does not monitor the individual holdings of its investment funds managed by the Stanford Management Company, including the GSB fund, as there is an ethical wall between the University's research and operations and investment of its endowment, so that one does not influence the other. This transaction occurred more than three years after the University had divested its entire stake in Corcept, acquired through its licensing agreement with Corcept. That sale was the result of the University's institutional conflict of interest policy, enacted in December 2002, that prohibits the University from holding any stock in a company acquired through licensing of its technology if the company has a product undergoing human subjects research at the University. Investments in publicly traded companies managed by the Stanford Management Company are not required to be divested because it is believed that these circumstances sufficiently insulate University faculty and administrators from presumed biasing effects."

Additionally, information contained in Corcept filings with the SEC—and later confirmed by Stanford's press office—indicates that Stanford also receives $50,000 annually from Corcept as a non-refundable royalty payment. The company is also obligated to pay Stanford a $50,000" milestone" payment upon the filing of a new drug application for Corlux (the company's brand name for mifepristone) for the treatment of Alzheimer's and psychotic major depression. The company will be required to pay a further $200,000 milestone payment upon FDA approval of Corlux, according to the SEC filing.

"Stanford gets no payments for any other uses of mifepristone/Corlux," a Stanford press officer told Psychiatric News. "The payments are related only to the use of the patent for Alzheimer's disease or psychotic depression; all other uses are outside of the two indications covered in the Stanford patent."

In an interview with Psychiatric News, Schatzberg characterized Grassley's investigation as an "attack" and defended his work on developing drugs for psychotic depression.

"I don't relish the publicity," Schatzberg said. "What we have done for the last 10 years is try to develop a novel treatment for one of the most serious mental illnesses. If that is going to be impugned, then it is a sad state of where we are in terms of trying to help people with severe mental illness.

"I have nothing to hide, and I am delighted that Stanford has made it clear to the public that all is OK and there were no improprieties."

As for the money from his investments and consulting activities, he said," Anytime someone makes a profit, it will generate a lot of conflicting feelings among people, including anger."

In addition, Schatzberg emphasized that the current system of drug development allows for—actually encourages—the kind of collaboration between academic medicine and the pharmaceutical industry that has existed between Stanford and Corcept.

Specifically, a 1980 change to a federal law known as the University and Small Business Patent Procedures Act (also known as the Bayh-Dole Act, after its sponsors Birch Bayh, a former senator from Indiana, and Bob Dole, a former senator from Kansas) gives U.S. universities and nonprofit organizations intellectual property rights over inventions—such as novel pharmaceuticals—that result from federal research funding.

The law was specifically enacted to speed the transfer of research discoveries to the marketplace by allowing universities to license their patents to private firms—just as Stanford did with its patent on mifepristone. Mifepristone is also known as RU486, a drug that acts as a progesterone antagonist and has for that reason been used to induce abortion.

But as Schatzberg explained, it is also a glucocorticoid antagonist." We have long had the idea that psychosis seen in depression is due to excessive production of cortisol and could potentially be treated by administering antagonists for the low affinity glucocorticoid receptor," he said.

But in part because of politics surrounding the use of the agent to induce abortion, companies did not want to invest in testing it for psychotic depression.

"If we were ever going to get the drug to the market for psychotic depression," said Schatzberg, "we were going to have to do it ourselves."

Stanford's response to Sen. Grassley's charges is posted at<http://ucomm.stanford.edu/news/conflict_of_interest_schatzberg_grassley.html>. Information on stockholders of Corcept Therapeutics Inc. is posted at<http://finance.yahoo.com/q?s=CORT>. The SEC filing by Corcept is posted at<http://sec.edgar-online.com/2004/04/14/0001193125-04-061825/Section12.asp>.

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