Expanding his medical empire is good for Patrick Soon-Shiong. But is it good for patients?

He’s spent years pushing to revolutionize health care, developing software systems for hospitals, a new genetic test for patients, and a slew of experimental cancer drugs.

Now, biotech billionaire Dr. Patrick Soon-Shiong can run real-life experiments to test his vision. One of his foundations last year took control of a nonprofit hospital in Pennsylvania, and one of his businesses this summer took over six more in California. Last week, he also opened a new cancer center in El Segundo, Calif., down the street from Los Angeles International Airport.

He has made clear that he views his new medical facilities as laboratories for his approach and his products. That’s likely to be good for Soon-Shiong. The key question: Is it also good for patients?

Take his new El Segundo cancer center. He appears to be planning to use his pricey diagnostic test, GPS Cancer, routinely there. That would help one of his companies, which has struggled to sell the test nationally. It’s less clear whether patients will benefit: There’s no published data showing if this test works better than — or even as well as — any comparable tool on the market.

His team has also laid out plans to enroll virtually every patient at his cancer center in clinical trials. But the only two trials listed on the center’s website are testing highly experimental therapies being developed through Soon-Shiong’s for-profit businesses.

Another wrinkle: The three doctors running the clinic are also employed by Soon-Shiong’s companies — the very companies that are selling the diagnostic and developing the drugs they will consider using on patients.

This isn’t how drug development normally works. Indeed, Soon-Shiong’s arrangement stands out as highly unusual. Most drug companies don’t have their own employees setting up medical clinics to treat patients with therapies that are still being investigated. Instead, they undertake a painstaking process of introducing their experimental drugs to physician-researchers across the country and seeking permission to set up trial sites at independent hospitals. Asked if Soon-Shiong’s companies will have more traditional clinical trial sites elsewhere, his spokeswoman didn’t answer.

The spokeswoman, Jen Hodson, told STAT that there should be no concern about any of the arrangements, saying that Soon-Shiong always puts patients first. But ethics experts say there’s a clear potential for multiple conflicts of interest as he moves aggressively into patient care.

For instance, the small, rural nonprofit hospital in Pennsylvania that’s controlled by Soon-Shiong’s foundation agreed last year to pay $1.2 million over three years to license software marketed by one of Soon-Shiong’s companies, NantHealth. The hospital wouldn’t say whether there was a competitive bidding process. Neither would Soon-Shiong’s team.

‘There are no conflicts’

When STAT first sent Hodson questions about how Soon-Shiong’s team is handling the potential conflicts, she responded quickly with a brief email: “There are no conflicts.”

A few days later, after more questions, Hodson directed STAT to a conflict of interest policy for the El Segundo clinic. It requires the staff to disclose their financial ties to Soon-Shiong’s businesses when they’re enrolling patients in clinical trials of Soon-Shiong’s drugs. It also says independent third parties will monitor the trials.

“We are well aware of the issues you raise, have been proactively and well advised by third parties and taken the appropriate steps to address them,” Hodson said.

Responding to some of STAT’s questions in another email, Hodson said it was “false” to suggest that the medical facilities might be improperly swayed toward using Soon-Shiong’s products. “Dr. Soon-Shiong always puts the best interest of the patient first. His decisions are, and have always been guided by what is in the patients’ best interest,” she said.

On one of the issues STAT raised in its questions, Soon-Shiong has changed course.

One of his companies, NantWorks, now owns a majority stake in the management company operating the six nonprofit hospitals in California. A press release jointly issued two weeks ago by NantWorks and the hospital chain said that Soon-Shiong would take a seat on the chain’s board of directors.

That raised some concern among medical ethics experts consulted by STAT. They noted that the board of directors is generally meant to be an independent advocate for the hospitals’ patients and mission — a body that can challenge the management company when needed. Having Soon-Shiong sit on that board and also control the management company would be atypical in the world of nonprofit hospitals, said James Orlikoff, a consultant who helps hospitals steer clear of conflicts of interest.

“From a good governance perspective, it’s questionable at best,” Orlikoff said.

Following questions from STAT, Hodson said Soon-Shiong’s plans had changed and he would no longer take a seat on the board.

Outside experts see ethical land mines

At STAT’s request, half a dozen experts in fields like hospital governance and medical ethics agreed to review publicly available information about Soon-Shiong’s expanding business interests in patient care.

All of them said they saw potential ethical land mines.

“There needs to be some clarity and transparency about what these relationships actually are,” said Dr. Bernard Lo, an internist and president of the Greenwall Foundation, which funds bioethics research. Without that information, Lo said, “you don’t know whether decisions are being made under undue influence and not in the best interests of the patient.”

The arrangements could spur the “use of services that are not medically indicated,” said Dr. Steven Joffe, a pediatric oncologist who studies medical ethics at the University of Pennsylvania. He said he’s also concerned that the nonprofit hospitals could be pressed into “choosing a service provider that is not the best and/or the least expensive.”

Questions about conflicts of interest have swirled around Soon-Shiong before. STAT reported earlier this year that Soon-Shiong’s big moonshot initiative to cure cancer has become an elaborate marketing vehicle for his GPS Cancer diagnostic tool. Another STAT investigation found that a donation from Soon-Shiong to the University of Utah brought him commercial benefit. And Politico has reported on other ways that Soon-Shiong’s philanthropy has advanced his business interests.

To be sure, Soon-Shiong is far from alone in blending business interests with patient care. And such arrangements offer potential benefit, if patients can get access to cutting-edge therapies and technologies that might not otherwise be available to them.

But studies show that such arrangements can also push patients toward expensive and unneeded treatments. For example, when men with prostate cancer get referred to a clinic where their urologist has a financial stake, they’re much more likely to get an expensive treatment known as intensity-modulated radiation therapy, even though it doesn’t work any better than cheaper alternatives, a 2013 study found.

Other studies have shown that physicians with financial interests in laboratories tend to order more tests.

Concern over such conflicts prompted Congress to enact a federal statute known as the Stark Law. First passed in 1989 and amended over the years, it bars physicians from sending patients covered by Medicaid or Medicare to undergo certain services at clinics where the doctor has a financial interest. (There are many exceptions to the Stark Law, and it’s unclear from available information whether Soon-Shiong’s new ventures could be in violation, said Joan Krause, a law professor at the University of North Carolina.)

Questions arise at a small hospital in Pennsylvania

Soon-Shiong’s first foray into the business of patient care came last year when he took control of a small hospital in the tiny town of Windber in southwestern Pennsylvania. And it’s there that some of the potential conflicts of interests identified by STAT have already surfaced.

Opened by a coal mining company more than a century ago, the hospital is in the heart of mining country — unusual territory for a cosmopolitan billionaire from Los Angeles.

But the hospital is affiliated with a research institute, and it held a treasure that reportedly caught Soon-Shiong’s eye: a repository storing tens of thousands of tissue and blood samples from patients with breast cancer and other conditions. Access to such samples could help Soon-Shiong develop diagnostic products, as well as further his team’s research into cancer therapies.

He soon came to see the local hospital, which has about 54 beds and employs about 450 people, as a showcase for his bigger ideas about reforming health care delivery.

In 2015, the Windber hospital’s board agreed to transfer control to Soon-Shiong’s NantHealth Foundation. The Pennsylvania attorney general’s office approved the transaction at the start of 2016. Soon-Shiong’s foundation now financially backs and controls the hospital. (It does not control the research institute.)

Windber Medical Center was soon renamed the Chan Soon-Shiong Medical Center at Windber — after Soon-Shiong and his wife, the former television actress Michele Chan.

It didn’t take long for Soon-Shiong to start integrating Windber into his empire: The hospital’s CEO was quoted in the press release Soon-Shiong’s team put out in January 2016 saying that Windber’s tissue bank “will be utilized as the tissue repository resource to support” the clinical trial program Soon-Shiong was launching as part of his new cancer moonshot initiative.

Also in the first year, the Windber hospital placed a three-year order for “software-as-a-service solutions” marketed by Soon-Shiong’s company NantHealth. The cost: $200,000 a year plus a one-time fee of $600,000, according to an April filing with the Securities and Exchange Commission.

It’s impossible to tell how much similar software from competitors would cost for a hospital of that size, because the SEC filing didn’t specify exactly what was purchased.

If the deal — which represented just a small chunk of NantHealth’s $58 million in reported revenue last year from that category of software — was made after a competitive bidding process and a review by hospital staffers, it certainly could be ethically sound, said Lo, the internist and bioethics expert. But it’s unclear whether that happened.

Neither Hodson nor the Windber hospital would say how the decision was made. (The hospital’s spokeswoman, Natalie Bombatch, referred nearly all of STAT’s questions to Soon-Shiong’s team.)

Hodson offered only a general statement that transactions between the Windber hospital and Soon-Shiong’s companies “will be reviewed and approved by disinterested directors and officers in accordance with their respective conflict of interest policies.”

Control of the Windber hospital has also opened a new market for another one of Soon-Shiong’s products, GPS Cancer, which recommends treatments based on the genetics of a patient’s cancer. It’s not clear how many patients at Windber have taken the GPS Cancer test. But at least one patient told the local newspaper, The Tribune-Democrat, that she got it last fall — at a time when there were few other takers for the test, which analysts estimate costs about $11,000.

STAT reached out to several oncologists at the Windber hospital seeking to talk about whether Soon-Shiong’s control affected clinical practice. The only one who responded said she wasn’t in a position to comment.

Soon-Shiong’s team touts GPS Cancer as backed by clinical evidence, but there are no published data comparing it in head-to-head trials with other diagnostic tools. And, in part because the test has only been on the market for about a year, there are no published studies showing whether it extends patients’ lives.

In one study that Soon-Shiong’s team has touted, Indiana University researchers looked at 139 patients who took the GPS Cancer test and found that 83.5 percent of them got clinically useful information — though just 26 percent of that smaller group actually received a therapy matched to their tumor genetics.

The study did not look at whether the test’s unique qualities — it analyzes protein expression as well carrying out more run-of-the-mill genetic sequencing — yielded any actionable information above and beyond what patients could have gotten from cheaper genetic tests on the market.

The Indiana researchers presented the study this spring as a poster at the big annual gathering of the American Society of Clinical Oncology, and are now preparing it for publication.

Using hospitals for the poor as ‘an experiment at scale’

Soon-Shiong didn’t hold back earlier this month when describing his plans for the investment that gave him control of the six California hospitals that make up the nonprofit chain known as Verity Health.

“I’ve spent the last decade of my life quietly building this infrastructure,” he told the Los Angeles Times. (He owns a stake in the newspaper’s parent company.) “This [hospital] system will provide an experiment at scale.”

Those words raised alarm bells for Dr. Jeff Smith, the executive of Santa Clara County, which is home to two of the Verity hospitals that, like the rest of the chain, mostly serve low-income patients.

“If Dr. Soon-Shiong is focused on entrepreneurship and profitability and high intervention experimental procedures, there’s no way that that can be done at these two hospitals without basically tossing the poor people out of the queue,” said Smith, who trained as a family practitioner. (His county unsuccessfully tried to buy the two hospitals a few years ago.)

The Verity hospitals are not now using products made by Soon-Shiong’s companies, according to Hodson.

Soon-Shiong has pledged to invest in the hospitals and expand cancer care, as well as orthopedic and cardiology services. He doesn’t like referring to Verity facilities as “safety net hospitals,” he said at an event broadcast online last week, pledging to ensure that the low-income patients have “as much care, and state of the art care, as if they came from Beverly Hills.”

Asked how Verity is handling the potential conflicts of interest associated with Soon-Shiong’s investment, the hospital chain’s spokeswoman, Jane Brust, initially referred all questions to Soon-Shiong’s team.

Later, Brust said the chain has policies in place “to allow our Board of Directors and management to identify and evaluate potential conflicts of interest.” She didn’t respond to STAT’s questions about what those policies entail and how they might be applied in this case, given that the management company making decisions is owned by Soon-Shiong.

Promising treatment so new, it hasn’t even been tested in humans

Ever the showman, Soon-Shiong has set sky-high expectations for his new cancer clinic in El Segundo. He’s said that Los Angeles lacks a world-class cancer center and suggested that his new facility will change that.

And at a ribbon-cutting ceremony last week, Soon-Shiong pronounced the new center “the American Red Cross of cancer” — a reference to his claim that his team can grow an unlimited supply of “natural killer” cells to build the experimental therapies he’s now testing.

For one formulation of the natural killer cell therapy, Soon-Shiong promised his crowd, “the first-in-human studies will be done right here.”

It’s not clear who owns the private clinic, which is named for Soon-Shiong and his wife; Hodson said last month that Soon-Shiong is not the owner. Soon-Shiong has said on Twitter that he’s a co-director; he’s also the only member of the center’s board of trustees listed on its website.

The three other doctors running the center are all employees of various Soon-Shiong businesses.

Co-directors Dr. John Lee and Dr. Leonard Sender both work for NantKwest, which is developing the natural killer cell therapy. Dr. Sandeep Reddy also holds down a job as NantHealth’s chief medical officer, overseeing clinical trials for GPS Cancer.

The cancer center’s conflict of interest policy, which Hodson said has been in place “from the outset,” allows clinical investigators to have disclosed financial interests with medical companies “only if it furthers and enhances” the cancer center’s mission. The policy also states that clinical trials will be monitored by independent third parties — a clinical research organization and a data and safety review board. Those are routine features of clinical trials.

Lo, the internist and bioethics expert, reviewed the policy at STAT’s request and said it lacks several crucial components that would “considerably strengthen it and provide greater assurance that [conflicts of interest] are being appropriately managed.”

It doesn’t, for example, say who will review financial disclosures to determine if further steps need to be taken. Nor does it say whether clinical trial protocols will be peer reviewed by other scientists beyond the necessary stamps of approval from the Food and Drug Administration and institutional review board.

Though Soon-Shiong has suggested the center will be a world-class facility, it’s unclear whether it will offer any routine treatments such as chemotherapy, radiation, or surgery. Hodson did not answer STAT’s questions about the center’s services.

Sender, one of the cancer center’s co-directors, told the local newspaper, the Daily Breeze, that his goal is to get close to 100 percent of patients enrolled in clinical trials.

That raises a big question of how the clinic plans to make money; it’s uncommon and widely considered unethical to charge patients to participate in clinical trials. Hodson would not answer questions about the clinic’s business model.

Another question: Whether the center will send patients to big hospitals, such as the academic medical centers in Los Angeles, to get access to a broad range of trials, or whether the doctors will focus on enrolling patients just in the two trials listed on the clinic’s website — both of which are sponsored by Soon-Shiong’s companies to test their experimental drugs.

One of those trials is a Phase 1 study of natural killer cell therapy; it will test whether the therapy is safe in patients with advanced solid tumors.

The second trial will test combination therapies involving experimental vaccines in patients with pancreatic cancer that has progressed despite first-line treatment. It will start out testing the safety of the combination therapy and then evolve into testing whether it works.

One of the vaccines being used in the trial has shown encouraging early results in patients with advanced colorectal cancer; another vaccine in 2012 failed a mid-stage trial where it was combined with a type of chemotherapy and used in pancreatic cancer patients.

The center’s website doesn’t explicitly mention Soon-Shiong’s GPS Cancer, but it suggests that the product will be central to treatment decisions. The center’s philosophy, after all, is to make “molecularly informed decisions” by analyzing both the genetics and the expressed proteins of a tumor. That’s exactly how GPS Cancer is marketed. The website seems to suggest that the test might be used multiple times in a single patient, to track “spatiotemporal tumor evolution” and to direct treatment decisions.

And a recent press release trumpeting plans for the pancreatic cancer trial stated that GPS Cancer will be used to “molecularly inform” the combination therapy’s design, which will also involve approved chemotherapies, natural killer cells, and another experimental compound.

Whether patients considering seeking care at Soon-Shiong’s cancer center will understand the highly experimental nature of the drugs being tested is not clear.

This past March, Soon-Shiong repeatedly retweeted a video put out by one of his companies that described his natural killer therapy this way: “NEW BREAKTHROUGH HELPS PATIENTS KILL CANCER.” The video appeared to violate federal regulations barring the promotion of drugs that haven’t yet been approved by the FDA.

After STAT raised questions about the video, it was taken down from social media and re-edited multiple times to tone down the banner headline and delete suggestions that the therapy had cured at least one patient.

More recently, Soon-Shiong retweeted his new cancer center’s pledge to deliver “unique Natural Killer cell and immunologically based treatment to our patients.”

He and the center also turned to Twitter to circulate a link to a TV news story about the center’s opening from the local CBS affiliate. Above a chyron referencing “killer cells,” the reporter proclaims that “this state of the art institute” is “the only place in the U.S.” to use this new approach to fighting cancer.

Not mentioned: The approach is nowhere near being approved by the FDA.