On the eve of its trial in federal court, the University of Minnesota has agreed to pay $32 million to settle allegations that it illegally profited from the sales of an unlicensed drug invented by one of its star professors.
It's the largest amount ever recovered by the government in a case involving the mismanagement of grants from the National Institutes of Health, the U.S. Justice Department said.
The case is part of a federal crackdown on the misuse of health grants. In March the University of Chicago paid $250,000 to settle charges that it misspent federal grant money for cancer research (March 9, p. 8).
While the state-run University of Minnesota admits to some of the accusations, it hotly denies that the government found out about the problems from a whistleblower.
In fact, university officials claim they conducted their own investigation in 1992 and 1993 and subsequently disclosed their findings in good faith to the government-only to become the target of a federal False Claims Act lawsuit brought by the government and a whistleblower.
"This lawsuit was prompted by our self-disclosure of tens of thousands of documents to the federal government," said Mark Rotenberg, university general counsel.
James Zissler, a tenured professor of microbiology at the university's medical school, filed a whistleblower suit against the university in February 1995, after the university disclosed its findings to the government, it said.
"Zissler, in our opinion, is not a bona fide whistleblower," Rotenberg said. "He didn't uncover anything. We disclosed this ourselves."
Zissler is still on the university's payroll but has been on disability leave, Rotenberg said.
Under the False Claims Act, whistleblowers are entitled to receive a minimum of 15% of a settlement amount as a reward for tipping off the government. Zissler, however, received only 4.7%, or $1.5 million.
The government alleged that for more than two decades, from 1969 to 1992, the university took in more than $85 million from the gross sales of an experimental drug that the U.S. Food and Drug Administration had not approved.
Proponents of the drug, called antilymphocite globulin, or ALG, claim that it helps patients accept organ transplants.
The university sold the drug to more than 200 hospitals and clinics internationally and did not report its profits to the NIH, the government claimed. The university said the government knew it was selling ALG and disputed only the amount coming in from the sales.
The university also was charging salaries and supplies to 29 NIH grants that did not cover those research projects. Rotenberg said the school has installed a system to safeguard against future abuses.
The university's investigation also found that the surgery department, where ALG was used, was keeping two sets of billing records, which revealed the mismanagement of the grants.
"We weren't proud of that (practice), and four people have left the employ of the university as a result," university spokesman Bill Brady said.
The university did operate a hospital, 1,362-bed University Medical Center, which was not a defendant in the case. The university sold the hospital to Fairview Hospital and Healthcare Services last year.
U.S. District Judge Richard Kyle accepted the settlement Nov. 17, the day a trial was set to begin.