Aggregate Therapeutics and Profit from Publicly Funded Research

What do private companies owe the public when they profit from public subsidy or tax-dollar investment?

This question has been especially salient in health-related industries. Drug companies, for example, have been accused of charging the public twice for pharmaceuticals: citizens pay once for drugs through public investment in research, and then again at the pharmacy counter. But it’s not just pharma, of course: this criticism could be leveled against any company in any industry that benefits from substantial investment from government.

Grad students Matthew Herder and Jennifer Dyck Brian have commented on this in detail, in their paper “Canada’s Stem Cell Corporation: Aggregate Concerns and the Question of Public Trust.” [Abstract] The biotech company in question — Aggregate Therapeutics — is unique in that it was created not by private entrepreneurs, but by the Canadian Stem Cell Network (part of Canada’s federally-funded Networks of Centres of Excellence). The company brings together under one virtual “roof” the research — and intellectual property — of key research scientists and labs from across Canada. The idea is that many individual labs and individual researchers, on their own, don’t have the resources to bring key stem cell research to fruition. But joined together as Aggregate Therapeutics, they have enormous potential. Essentially, the company is an attempt to achieve economies of scale in an otherwise small and fragmented Canadian stem cell research community.

One of Matthew and Jennifer’s key worries about Aggregate Therapeutics is that the governance structure of the company does nothing to guarantee its supposed purpose, namely to push stem-cell research forward for the benefit of all Canadians. Set up as a private corporation, Aggregate Therapeutics will naturally seek profit for shareholders, and Matthew and Jennifer point out that those backing the company have little to say about what would happen in circumstances where the interests of shareholders failed to coincide with the interests of Canadians more generally. So, the owners of the company will benefit from aggregating publicly-funded research, without ensuring any return on investment for the public that funded it.

I’m not entirely convinced by this argument: governments invest public money in research (or in other kinds of infrastructure) because they believe — rightly or wrongly — that doing so is in the public interest. It’s not obvious that there’s a problem when companies that benefit from such investments fail to guarantee a specific return on that public investment — after all, typically none is promised. If government invests in education in Computer Science, for example, the result is high-quality employees for computer companies. No one expects computers to be sold any cheaper, though.

But this point is certainly debatable, and ought to be open for debate. And Matthew and Jennifer are certainly right that the lack of transparency here is appalling. Chances are that very, very few Canadians have even heard of the company. The website for Aggregate Therapeutics is a single-page thing that gives very few details. A few more details are available in various newsy and PR pieces online, such as this one. And so far, the media has failed to take notice of this strange new company, and to ask the kinds of tough questions that Matthew and Jennifer are asking.

(To find out more about their research, you can contact Matthew, at mherder@stanford.edu. Jennifer can be found here.)
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(Full disclosure: Matthew and Jennifer’s paper is part of a Special Issue that I edited for the Journal of Business Ethics, dedicated entirely to ethical issues in the biotechnology industry. So, I’m not an unbiased commentator on their work.)

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