The proliferation of ties between medical companies and Stanford University School of Medicine has enriched the school and fattened the personal bank accounts of many of its prestigious faculty members.

Dozens of professors moonlight for medical firms or have founded companies based on their government-funded research.

In the 2004-05 academic year alone, $38 million in royalties poured into the university from medical school discoveries -- roughly $10 million of which went directly to faculty researchers whose discoveries were patented.

Critics worry that these complex financial and ethical relationships between companies and the nation's premier research universities are corrupting science and producing overly enthusiastic portraits of new treatments.

``We had trust. We expected American academic research to be focused on improving public health,'' said Vera Sharav, founder of the Alliance for Human Research Protection and a critic of corporate influence on medical research. ``We no longer have reason to think that. . . . Money has turned academia into just another corporate entity.''

In a six-month examination of the financial ties between Stanford researchers and companies trying to market new treatments, the Mercury News found:

• The school's 700-plus faculty members last year disclosed 299 potential conflicts of interest related to their research, according to figures provided by Stanford.

• Potential conflicts occur throughout the school's ranks. More than a third of the school's administrators, department heads and other leaders -- at least 26 out of 67 reviewed by the Mercury News -- have reported outside financial interests related to their research within the last four years. These are scientists who are role models for junior faculty members and graduate students.

• Perhaps most important, seven of the 10 members of the school's conflicts of interest committee, which is responsible for enforcing the rules, have financial relationships with medical companies. Unlike a comparable committee at the University of California-San Francisco, Stanford's panel includes no outside volunteers.

What is happening at Stanford is not unique. Critics say conflicts pervade much of the nation's academic research. The rewards for researchers range widely, from a few thousand dollars in consulting fees to millions of dollars in founders stock or options.

The medical school's dean, Dr. Philip A. Pizzo, says its standards for dealing with conflicts are ``the most rigorous'' in the country. But he also says ties to industry are necessary if the university is to translate its research into practical treatments for patients.

Paul Costello, the medical school's chief spokesman, notes that consulting with industry is not necessarily a conflict. ``Stanford permits and makes time for faculty to interact with industry, but consulting with industry is not the same as a conflict,'' he said.

However, the school's rules -- which are in some ways tougher than policies at other leading research universities -- are not as simple as they appear. The school itself failed to report several large conflicts to the government as required, an error that has since been corrected.

The potential risks posed by industry ties are significant.

Financial conflicts can turn campus laboratories funded by taxpayer money into outposts of corporate research. They can divert researchers from work that might have a bigger impact on health toward research with bigger financial rewards. And in the worst cases, they can blind scientists to the dangers of treatments they are studying, resulting in injury or even death among volunteers.

Wild, wild West

With its 700-plus faculty members, Stanford University School of Medicine is small compared to other top research schools in the country. The University of California-San Francisco faculty, for example, is almost triple its size.

But as Stanford likes to point out, ``pound for pound'' it ranks among the very best, gathering more federal research funding per investigator than any other medical school, except for the much smaller University of Utah.

The university as a whole also ranks among the very best at turning faculty discoveries into cash. Stanford was third among U.S. universities in royalty and patent licensing revenue in a 2004 survey by the Association of University Technology Managers. Most of that income -- about 80 percent -- came from the medical school.

Because it is part of a private university, the medical school is not required to reveal details of its faculty's corporate relationships or the specifics of how it enforces rules on conflicts of interest. The school did, however, provide overall statistics covering a single year.

Those numbers revealed the total number of potential conflicts disclosed in the 2005 academic year and show that more than a third involved clinical trials, which include research that could pose risks to volunteers.

Of the almost 300 studies at Stanford listed on the government's clinical trials Web site, a fourth are sponsored by industry -- mostly drug giants like Pfizer, Novartis and Bristol-Myers Squibb. While that figure is larger than some of Stanford's competitors, it is in line with other top research schools like Harvard, Yale and UCLA.

Among the financial relationships pieced together from scientific articles, public presentations, company filings and federal documents are the following cases:

One researcher has founded six companies, most based on research that came out of his own lab. He is a managing partner of a venture capital firm focused on medical research and sits on the boards of several other companies. His role at the venture company was approved by the dean several years ago because he has no day-to-day management responsibilities. The researcher is a member of the school's conflict of interest committee.

One senior associate dean started a biotech company based on her federally sponsored lab work.

And the physician who until January chaired the department of gynecology and obstetrics is a longtime director of Wyeth, which manufactures controversial hormone replacement therapy for women -- therapy she defended in 2002 when potentially serious health risks were emerging.

In each case, the faculty members publicly disclosed the relationships. But the examples show why Stanford and other California schools have been referred to as part of ``the wild West'' where conflicts are thought to be more common than at Eastern medical centers.

``There is a perception that things get looser the further West you go,'' said National Institutes of Health bioethicist, Dr. Ezekiel Emanuel, who has raised the issue in talks at Stanford.

``I'm not really sure where this wild West idea came from,'' said Dr. Harry B. Greenberg, a senior associate dean for research. ``Very early on, Stanford has been associated with a lot of entrepreneurial activity and people may have equated the ability to carry out entrepreneurial activity with lack of oversight and regulation. I really don't think that has been the case.''

Greenberg holds stock options in and is a consultant to MedImmune, which makes an influenza vaccine he is studying under a federal grant.

Rules tougher

The primary role of a medical school remains training physicians and scientists, and university teaching hospitals provide some of the highest levels of patient care. They have also become leading centers for discovery of the causes and treatment of disease.

Stanford's policy on conflicts has become tougher in recent years, going beyond the minimum required by the National Institutes of Health, which last year sent $295 million to the med school.

The new restrictions were prompted by controversies on other campuses, in particular the death of an Arizona teenager in a gene therapy experiment at the University of Pennsylvania in 1999. Both the university and a researcher had financial conflicts involving a company that stood to gain if the experiment succeeded.

Pizzo, who became dean five years ago after a long career at Harvard and NIH, also cites the controversy over the anti-arthritis drug Vioxx as an example of why Stanford and others are tightening their rules. The pill was pulled from the market by the drug company Merck in September 2004 after a study showed it increased the risk of heart attacks and strokes.

Last year, editors of the New England Journal of Medicine accused the authors of one November 2000 Vioxx study of withholding data on heart attacks -- data the authors later said fell outside their review period. All 11 university-affiliated authors of the article -- none from Stanford -- had financial ties to Merck, which they disclosed.

``At Stanford there has been a continued level of scrutiny about this,'' said Pizzo. ``We need to do all we can as an academic medical center to value and in some ways re-earn the public trust, which I think has been lost and altered over the last 20 to 30 years.''

The university limits the amount of time faculty members can devote to outside work to one day a week, requires prompt reporting of new financial conflicts, and in December 2002 decided to give up its own equity holdings in any company that tests treatments on campus.

The university bars faculty members from holding outside jobs with management responsibilities: They can't be chief executives or chief medical officers, although serving on boards of directors or advisory boards is permitted.

At the medical school, all stock holdings, options or income related to research -- no matter how small -- must be reported. This is a stricter standard than applies to the rest of the university.

``First of all, you're talking about people's lives and health as opposed to some new IT thing,'' said Stanford President John Hennessy. ``To the extent that there is any bias or inappropriate influence that enters the system, you worry about it a lot more than you might if you're talking about some information technology.''

Hennessy said he's proud that Stanford faculty member Dr. Gurkirpal Singh, a paid consultant to Merck, began pointing out the risks of Vioxx early on and that Singh's university boss, Dr. James Fries, refused to buckle under pressure from a Merck executive to silence Singh. An attorney for Merck said the company has a ``different interpretation'' of the conversation with Fries. The attorney has also said in the past that the company does not try to silence critics.

Still, Hennessy said he worries that a patient death linked to a conflict of interest, no matter where it happened, could have a chilling effect that would block academic researchers from working with companies to turn discoveries into products that help sick people.

Pizzo notes that medical schools throughout the country are under financial pressure to come up with new sources of revenue. At Stanford, medical faculty are expected to cobble together much of their own salaries from government and private grants, their work as physicians, and gifts and contributions, including money from industry.

Royalties from inventions help. After expenses, a third of that money goes to the inventors, a third goes to their departments and a third goes to the medical school. Last year, the med school netted $10 million.

``We value our faculty being entrepreneurial,'' Pizzo said. ``We value the fact that we have been able to bring discoveries that have fostered the biotechnology community around us, and we value it because that is a way of accelerating delivery of discovery from the academic community to the patients.

``I don't think we as a matter of principle believe that conflict of interest is avoidable,'' said Pizzo, echoing the faculty handbook. ``We think it's manageable.''

Dr. Marcia Angell, a former editor in chief of the New England Journal of Medicine, disagrees. Medical researchers, she said, can avoid conflicts, but ``they can't manage them. . . . You wind up saying to the public, which generously funded the research, caveat emptor. That is not a reassuring message from people whose stock in trade is impartiality.''

Entrepreneurial history

Histories of Stanford trace the university's close ties to industry to the efforts of Frederick Terman, a professor and later dean of engineering. Among Terman's students in the 1930s were William Hewlett and David Packard, who went on to found their own company and germinate what became Silicon Valley. Terman is also credited with pushing for the university-owned Stanford Research Park, which opened in 1951. Among its early tenants was Hewlett-Packard.

For years, most researchers in the life sciences -- biology, biochemistry and medicine -- had little to do with corporations, said Stanford biochemist and Nobel laureate Paul Berg. That began to change in the 1970s when the venture capital community noticed the advances in molecular biology.

Stanford was at the center of those advances. Berg laid the foundation for genetic engineering. And Dr. Stanley Cohen, working with Herbert Boyer at UCSF, invented a relatively simple technique that allowed mass production of human proteins in bacteria and yeast -- a discovery that gave birth to the new biotechnology industry and companies like Genentech and Chiron.

Over the objections of Berg and others, Stanford in 1974 filed for patents on the Cohen-Boyer invention that ultimately brought the two schools $255 million in fees and royalties. Biological and medical discoveries had become a big-time revenue source, ushering in a new era of financial opportunities for Stanford and its scientists.

Berg never patented his discoveries. He did co-found a company, DNAX, but the work there ``was totally divorced from what research was going on in my lab,'' he said.

Retired now, he worries about the impact corporate ties can have on university researchers. ``Like anything, there's an upside and downside,'' he said. ``What's happening is that the lure of money begins to erode how careful you are guarding against the downside. . . . I myself just think that things have shifted too far toward commercialization.''

Managing conflicts

Stanford medical school has a 10-member conflict of interest committee, created in 2001 to oversee how substantial conflicts that exceed certain thresholds are handled. All faculty members are required to disclose their financial relationships at least once a year. Those reports go to the school's conflicts manager, who determines which cases must go to the committee.

The committee does its work in secret. However, Costello, the medical school's chief of communications, provided a general description of how the committee handled the 11 substantial conflicts that involved studies of patients last year:

Four faculty members dropped their research proposals rather than reduce their financial conflicts.

Three scientists reduced their future outside consulting income or speaking fees from an individual company to $10,000 or below, the level defined as ``significant'' by the federal government. Another agreed to give potential royalties to charity.

In two instances, scientists were allowed to go ahead despite conflicts for ``compelling reasons.'' Stanford did not explain the reasoning behind those decisions. But Costello did say that in both cases, safeguards were put in place, such as requiring that scientists without conflicts recruit subjects and disclosing the conflicts to participants.

(The final conflict involved an employee from a software company, who was permitted to participate in a Stanford study.)

Critics worried

Critics say such reviews don't go far enough.

``There is a focus on procedural solutions and this magical belief that disclosure is the answer as opposed to dealing with the fact that many of these things should not be allowed,'' said Barbara A. Koenig, a bioethics researcher at the Mayo Clinic and former executive director of Stanford's Center for Biomedical Ethics.

Tufts University Professor Sheldon Krimsky, author of ``Science in the Private Interest,'' argues that fields such as law have stricter conflict policies than universities. A judge, for instance, isn't allowed to have any financial relationship with a party that might benefit from a ruling.

Even some publications and medical societies have tougher standards than medical schools. The New England Journal of Medicine asks scientists seeking to publish studies to reveal conflicts going back two years, while the Journal of the American Medical Association goes back a full five. Stanford's med school asks researchers to disclose financial ties to companies over the previous 12 months.

But is disclosure enough? Being on a corporate board of directors, for example, carries a legal responsibility that can clash with the interests of students and patients, said Dr. Roy Poses, who runs the non-profit Foundation for Integrity and Responsibility in Medicine.

``I am quite surprised that there seem to be many leaders in academic medicine, who also simultaneously have clear responsibilities to protect the interests of corporations and stockholders,'' he said.

Within the university, some share his unease.

``When very large financial gains are realized by faculty members who form companies, the entire character of the issue changes,'' wrote former Stanford President Donald Kennedy in his 1997 book, ``Academic Duty.'' ``Something about the outcome seems wrong to people; much as Americans admire entrepreneurship and financial success, they react negatively to the professor who secures a windfall -- even if it came through a brilliant discovery that will save many human lives.''

Dr. Halsted Holman is an emeritus professor now, but is still researching less costly ways to care for those suffering from chronic illness. His views are decidedly old school.

``I feel like an ostrich,'' he joked. ``Most of my colleagues have consulting or equity interest. It's widespread.''

Discoveries in his field, rheumatology and immunology, have resulted in profitable treatments that have ``whetted the appetites'' of the investment community as well as faculty members, he said.

He believes his colleagues to be honorable. But he also believes that conflict of interest ``is a significant issue that we should be concerned about and that should be discussed in the faculty, and it isn't.''

But there are faculty members who weigh the rewards and give up financial ties to keep their research pure.

Dr. Robert Fisher is conducting clinical trials of an electrical device implanted in the brains of epileptics who do not respond to standard treatments. The study is sponsored by Medtronic, which makes the device.

Fisher says he was a paid consultant for Medtronic but gave that up in 1999 to avoid a conflict of interest: ``When I discuss this with students,'' he said, ``I tell them, `You've got to choose between cash and the glory.' ''

Dean Pizzo acknowledges that even the appearance of a conflict can be a problem, particularly for researchers with leadership responsibility. Early in his career, he did some outside consulting for companies, he said. He stopped long ago.

His position is in sharp contrast to the previous med school dean, Dr. Eugene Bauer, who as head of dermatology co-founded the dermatology product company Connetics, originally based on technology developed in a collaboration between his lab and Genentech. For most of his five years as dean, from 1995-2000, Bauer served on Connetics' board of directors. In 2000, while still dean, he earned about $20,000 in company stock and cash. He also served on the boards of two other companies. Since 1999, he has sold off 155,000 shares of Connetics stock for $2.3 million, according to Thomson Financial.

None of the company's clinical research was conducted at Stanford, Bauer said.

Stem-cell leader

Built into the way Stanford med deals with faculty conflicts is the idea that disclosure can protect patients and keep the science honest.

And no one is more up-front about his financial conflicts than Dr. Irving L. Weissman, one of the founding fathers of stem-cell biology. His lab at Stanford was the first to isolate blood-forming stem cells from animal bone marrow. Today, in addition to his own lab, he directs Stanford's Institute for Cancer/Stem Cell Biology and Medicine.

Weissman's research has made him a multimillionaire entrepreneur.

When he gives speeches, when he publishes papers, when he testifies before Congress, he lets everybody know what his outside financial interests are.

After serving on the scientific advisory boards of Amgen and DNAX, he helped launch three companies, all based on his stem-cell expertise and, in varying degrees, on the research done in his medical school laboratory.

Weissman recently recalled what led him to form the first of his companies, SyStemix.

He describes a frustrating year trying to get the facilities he would need on campus to advance his work. He finally concluded in late 1988 that he would have to start a company. He went to Kennedy, Stanford's president at the time.

A biologist who is now editor in chief of Science magazine, Kennedy had reservations. ``I didn't want faculty wandering from their homes on campus into labs thinking about money in their next offshore venture,'' he recalled.

But Weissman convinced him that he could separate his work at the company from his work in the lab. A faculty committee would look at his NIH grants every year to see, Weissman said, ``if I was starting to slant my grants in favor of topics relevant to the company.'' He and Kennedy agreed Stanford would not take shares in the company, avoiding a financial conflict for the university -- a policy later abandoned.

Today, Weissman sits on the boards of directors and scientific advisory boards of two other companies he co-founded -- StemCells Inc. and Cellerant Therapeutics. His method of handling his conflicts, primarily through disclosure, has become the standard at Stanford and other medical schools.

``The way I usually do it is, I say, `I have stock and I'm a director of this or that, so you might think I'm biased. I don't think I'm biased, but there could be unconscious bias, so you judge,' '' he said.

``You ought to be able to do whatever experiment along this line with transparency so everybody knows at every step of the way what your involvements are, what your bias might be, so you can move it forward,'' he said, referring to scientific progress. ``But I think it's morally reprehensible not to move it forward.''

NIH informed

Since 1995, federal rules have required that the medical school promptly notify NIH of significant conflicts. Between 2002 and February 2006, the medical school reported 14 separate grants in which researchers or staff members had interests of more than $10,000 or 5 percent in a company. Three of Weissman's grants were among them.

Costello noted that that is roughly 2 percent of the grants considered for funding or renewal during the same period.

The 14 letters and a few accompanying documents provide virtually no detail about the size or nature of the conflicts or how they were handled. They name the principal investigator and the title of the grant.

However, one of those cases shows how difficult it can be to resolve conflicts. Dale M. Edgar, an associate professor of psychiatry, walked away from his position at Stanford to join a company. Edgar took a leave of absence in 2000 to join Hypnion, a sleep medication company he co-founded in Massachusetts that was using technology he developed at Stanford. Edgar would become the new company's chief science and technology officer.

In a letter to the National Institute of Drug Abuse, which was funding Edgar's grant at Stanford, he explained that working with the new company would benefit the work in his laboratory, as well as ``afford me and my family a level of financial security that will stabilize my career research objectives at Stanford University.''

``As a professor at Stanford there was a wall I couldn't get past to create real viable treatments for people,'' said Edgar recently. ``I didn't want to be perceived as having conflicts.''

But while Edgar's decision eliminated his conflict, it did not resolve what would happen to a related federal grant he was leaving behind at Stanford. Edgar asked to have the job of principal investigator transferred to Dr. Emmanuel Mignot, a co-investigator on the grant and an expert in sleep disorders. Mignot is also a co-founder of Hypnion and a member of its advisory board. As required, Stanford reported Mignot's conflict to NIH.

However, despite rules requiring prompt reporting of substantial conflicts, Stanford failed to report six grants to NIH until after the Mercury News asked NIH and Stanford earlier this year for documentation of conflicts. Med school spokesman Costello said the failure was an administrative error and that all the scientists followed Stanford's disclosure rules.

One of those six grants involves Greenberg, a senior associate dean for research and chairman of the school's conflict of interest committee.

Greenberg is an expert on vaccines. In late 2000, he took a two-year leave from Stanford to become vice president of research at Aviron, now MedImmune Vaccines, where he helped develop the Mountain View company's nasal flu vaccine, FluMist. While there, he made the case for FDA approval of FluMist to the agency's vaccine advisory committee, which he had chaired just nine months before.

Today, Greenberg remains a paid member of MedImmune's scientific advisory board and holds stock options issued while he was employed by Aviron. He said the options are ``still underwater,'' meaning that exercising them would cost him more than the stock is currently worth. ``I had a great time at Aviron, but becoming filthy rich was not part of it, unfortunately,'' he said.

Flu vaccine

He is also one of three Stanford scientists now working on a federal grant to compare MedImmune's FluMist vaccine and Fluzone, a more traditional, injectable vaccine from Aventis Pasteur. Both vaccines have been approved by the FDA and are commercially available.

The principal investigator on the NIH-funded grant, which was worth $3.1 million last year, is Dr. Ann Arvin, the Stanford-wide associate dean for research -- a position with responsibility for faculty conflict of interest issues across the university.

For the past several years, she, like Greenberg, has been a paid member of MedImmune's scientific advisory board and holds stock options in the company.

The husband of a third researcher, Dr. Elizabeth Mellins, was vice president for clinical research at MedImmune Vaccines and helped bring FluMist to market. Mellins says she has no direct involvement in the clinical trial.

To deal with these conflicts, all work with volunteers, including selecting patients, administering vaccines and drawing blood samples, has been turned over to Dr. Cornelia Dekker, medical director for the vaccine program at Lucile Salter Packard Children's Hospital at Stanford. The conflicted scientists will analyze anonymous blood samples, but without knowing which vaccine was given.

As in all clinical trials, each volunteer had to sign a consent form outlining risks, which in this case involves little more than receiving an approved vaccine. On Page 8 of the 10-page form, participants are specifically told that Greenberg, Arvin and Mellins have financial ties to MedImmune. But there is no explanation of why this could be a concern or what steps were taken to ensure the study is not biased.

Arvin, who specializes in pediatric diseases, said she did not consider giving up a position on MedImmune's scientific advisory board, which would have ended her conflict.

Responding to questions by e-mail, she wrote, ``I consult for MedImmune and other companies because I am interested in contributing to the development and improvement of vaccines and anti-viral drugs for children.''