Dr. Paul Offit of the Children’s Hospital of Philadelphia (CHOP) took home a fortune of at least $29 million as part of a $182 million sale by CHOP of its worldwide royalty interest in the Merck Rotateq vaccine to Royalty Pharma in April of last year, according to an investigation by Age of Autism. Based on an analysis of current CHOP administrative policies, the amount of income distributed to Offit could be as high as $46 million.
There is nothing improper about receiving compensation for a patented innovation; but the extraordinary valuation placed on CHOP’s patents raises concerns over Offit’s use of his former position on the CDC’s Advisory Committee on Immunization Practices to help create the market for rotavirus vaccine -- to effectively vote himself rich.
Offit has steadfastly refused to say how much he made from the vaccine.
Based on the income distribution guidelines set forth in CHOP’s
current administrative policy manual (HERE) entitled “Patent
and Intellectual Property Policy,” Offit’s share of this
transaction -- the “inventor’s share of net income”
-- would have earned him a personal distribution of 30%. In a Moody’s
report dated June 2008, CHOP reported net proceeds from the Rotateq
transaction of $153 million, a deal basis that would put the value
of Offit’s 30% share at $45.9 million.
Although the royalty transaction amounts and current CHOP inventor
shares are publicly known, several factors complicate a precise calculation
of Offit’s income. Royalty Pharma paid $182 million for the
Rotateq royalty stream, but CHOP reported proceeds of only $153 million.
Since most universities calculate income based on net royalties, the
lower number might more closely reflect the basis for calculating
Offit’s income. If CHOP applied an inventor share of 30% to
a transaction value of $153 million they would have then been required
to distribute $45.9 million to Offit.
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CHOP’s 30% policy for inventor share is consistent with the current practices of other children’s hospitals. But depending on what standard was in effect when the patents were filed and how it was applied to Offit’s proceeds, the amount could be lower. For example, the $29 million difference between the payment made by Royalty Pharma and the proceeds received by CHOP comprises 15.9% of the Royalty Pharma payment (15% is the lowest inventor share percentage we uncovered in our investigation) and could reflect the distribution to Offit,
So although it is clear that Offit’s personal share of CHOP’s royalty transaction was large, the exact amount could range from as little as $29 million to as much as $55 million. Age of Autism chose to feature the smaller amounts in this report.
CHOP spokeswoman Rachel Salis-Silverman, contacted by Age of Autism about Offit’s income from the vaccine, first said, “I don’t even know. That’s not public information.” She initially refused to provide an e-mail to which Age of Autism could send a detailed account of how it determined Offit’s income, but subsequently sent an e-mail saying she was expecting the information.
“We are declining comment to your questions,” she then
replied after receiving our inquiry. Offit did not respond to an e-mail
sent to his Children’s Hospital address.
While refusing to disclose his personal profit from this transaction,
Offit told Newsweek reporter Claudia Kalb last year that he got a
“small percentage” of the payment and confessed that “it’s
like winning the lottery.”
