A dentist with a new idea for dental implants approaches an academic medical center about conducting a one-site study. Sounds like an ordinary arrangement. It was anything but.

Almost two decades later, the dentist and the university are still embroiled in a legal fight so bitter and complicated that it took an entire hour-and-a-half session at the annual Drug Information Association (DIA) conference this year to outline the particulars. 

Those details are illuminating. Recalling Jarndyce v. Jarndyce in Dickens, the unfinished saga of Sargon Enterprises vs. the University of Southern California offers lessons for those both funding and conducting trials.

The festivities were described by two innocent bystanders who are not connected with the case: David M. Vulcano, director of clinical trials for Franklin, Tenn.-based Psychiatric Solutions; and J. Andrew Lemons, an attorney with the Memphis firm Baker, Donelson, Bearman, Caldwell & Berkowitz.

Honeymoon Period

Everything started innocently enough. Dentist and businessman Sargon Lazarof, owner of Sargon, approached the nearby University of Southern California (USC), his beloved alma mater, about conducting the trial. He wanted a prestigious thought leader. To get things started, Sargon donated $100,000 to USC. USC agreed to do the study, with a budget of $200,000. Sargon said he planned to donate $15 million to the school at a later date.

All parties swung into action. USC put 40 dental implants into 23 patients. After about a year of follow-up, Sargon and folks from USC flew to Monte Carlo to glowingly present information from the ongoing study. Soon after that, though, things unraveled—badly, explained Vulcano.

A Disputed Report

Sargon, according to Volcano, became unhappy when USC didn’t produce the detailed annual report it had promised. When the company finally did get the document, it was reportedly not up to snuff. Then, a revised version contained more adverse events than the first version had. Sargon complained. USC refused to give Sargon access to patient records, nor would it let him be present during research procedures. Sargon then had the hand-written study data analyzed and found that many entries had been backdated.

Sargon also alleged that patients who weren’t appropriate for participation in the study were included anyway. In addition, Sargon asserted, USC released the not-so-bang-up results of the study to one of Sargon’s competitors, and then to the public—without letting Sargon see them first. (The competitor had donated $300,000 to USC.)

Then USC let the Sargon study’s institutional review board (IRB) approval lapse. At this point, a company that was considering partnering with Sargon called it off. Sargon claimed the study’s principal investigator (PI) had waged a smear campaign against his implant.

The Battle Begins

Sargon sued USC and the PI for breach of contract, claiming the company had been injured, alleging it had lost business and credibility in the industry. Sargon asked for injunctive relief as well as $40 million in lost profits—the amount the company had expected to make from the partnership that suddenly ceased to happen. USC’s response was that research is inherently noncommercial, and thus it couldn’t be held responsible for Sargon’s claimed loss of profits.

USC counter-sued. Sargon, unable to amend its original suit, filed extra suits against USC. The university agreed to settle for $501,000. Sargon rejected that figure and asked for $803,000. Sargon tried to sue for $300 million in lost profits, though no proof of lost profits was produced. The judge threw that out, allowing the company to sue for breach of contract only.

Sargon, Take Me Away

They went into court, with USC employees at that point having admitted that they backdated the data. After nine depositions and 11 days in court in front of a jury of ordinary Americans, Sargon won. For a moment. The company was awarded $433,000 in damages—$499,156 after legal costs were added in. But in a bizarre twist of the nuances of the California legal system, USC was ultimately declared the victor, and Sargon became liable for USC’s legal bills. They exceeded $700,000.

Surprise for Sargon

Appalled, Sargon appealed. And won. Sort of. He didn’t get $300 million. He was awarded $1.8 million in legal fees, and the judge told him he was free to go back and sue for lost profits and fraud. USC then tried to take an appeal to the California Supreme Court, arguing that if Sargon were allowed to prevail, then no organization would undertake clinical trials for fear of being sued for lost profits if the results of a study aren’t favorable to the sponsor. Alas, the state’s high court refused to look at the case. Still on the table? Sargon’s lost profits case against USC, as well its fraud case. The former will be heard in court this summer.

What does all this mean to the industry? Vulcano says it raises a host of important questions. Was the study botched, or did it just produce unexpected results? Does misconduct of research support claims for lost profits? If so, how can the court determine how much profit was lost? Is research noncommercial or commercial? Would things have been better if Sargon had contracted with multiple sites instead of just one? If Sargon wins its lost-profits case, will sites live in fear of reporting adverse events? These issues can be delicate, Vulcano said.

Normal Contract

One scary thing about this case, said Lemons, is that the contract Sargon had with USC was basic and straightforward. “There was nothing bad about the agreement. There was nothing particularly good about the agreement. It was a typical, standard clinical trial agreement,” Lemons said. What was odd about Sargon/USC contract, he added, was that it didn’t include any mention of the study’s protocol. Most clinical trial authorizations (CTAs) contain generic language such as, “The study will be performed in accordance with the protocol.” That omission left Sargon vulnerable, Lemons said.

Vulcano’s advice to both sponsors and sites: “Read your CTA repeatedly,” he says. Also, sites should consider adding a clause stating that the site is not responsible for any lost profit, nor does the site represent that the drug or device will become commercially exploitable, Lemons suggests.

—by