Howard Hughes Medical Institute Business Information, Profile, and History

Company Perspectives:

The primary purpose and objective of the Howard Hughes Medical Institute shall be the promotion of human knowledge within the field of the basic sciences (principally the field of medical research and medical education) and the effective application thereof for the benefit of mankind.

History of Howard Hughes Medical Institute

The Howard Hughes Medical Institute (HHMI) is one of the largest private medical research organizations in the world. In the United States, only the federal government spends more money for medical research than the nearly $500 million received by some 330 HHMI scientists annually. The Institute's scientists conduct research in six broad areas: genetics, immunology, cell biology, neuroscience, structural biology, and computational biology. HHMI is also a major supporter of science education, awarding nearly $100 million each year to elementary and high schools, graduate and undergraduate institutions, zoos, and museums.

Benefactor Backgroung

The Howard Hughes Medical Institute owes its existence to a drill bit, patented by Howard Robard Hughes, Sr., in 1909. Within a decade, three quarters of the world's oil wells used that bit, and the Hughes Tool Company was a profitable enterprise.

In 1924, 19-year-old Howard R. Hughes, Jr., inherited the majority share of the Hughes Tool Company and quickly bought his relatives' shares to gain control. A year later he wrote a will calling for the creation of a research institution 'the objects and purposes of which shall be the prosecution of scientific research. ... [It] shall be devoted to the search for and development of the highest scientific methods for the prevention and treatment of diseases.' It would be 25 years before Hughes took any specific steps toward that goal.

In the meantime, he set about making a name for himself. He went into the movie business in 1926 and later bought RKO Studios. In 1932, he created a division of the Hughes Tool Company to design airplanes. The Hughes Aircraft Company was born in a hanger in Burbank, California, rented from the Lockheed Aircraft Corporation. Over the next 15 years, Hughes designed such wonders as the H-1 racer, in which he set a transcontinental air record (nine hours and 27 minutes from Los Angeles to Newark), the power-driven landing gear, improved machine guns used in World War II, and the 'Spruce Goose,' the largest plane ever to fly. He also created Jane Russell's uplift bra for his movie 'The Outlaw.' In 1936 he invested $15 million in Transcontinental and Western Air, a failing rail and air service, which he built into Trans World Airlines.

Moving into Medical Research: 1950s

Hughes again turned to the topic of medical research while recuperating from extensive injuries after the 1946 crash of his XF-11 experimental photo-reconnaissance plane. At the urging of Alan Gregg of the Rockefeller Foundation, Hughes chose a decentralized research model that would affiliate with university medical schools rather than distribute grants to individuals or institutions. In 1951, Hughes named six physician-scientists as Howard Hughes Medical Research Fellows, paying their salaries himself.

In December 1953, Hughes chartered the Howard Hughes Medical Institute as a public charity, with himself as the sole trustee. At the same time he chartered the Hughes Aircraft Company and transferred all 75,000 shares of stock to HHMI, with a portion of the company's profits to be used to support the Institute's research. However, the complicated transaction left HHMI saddled with $18 million in debt and no endowment. Thus, in its first decade, it had to pay back to Hughes Tool Company (thus to Howard Hughes) most of the money it received from Hughes Aircraft. During 1954, HHMI's first full year of operation, it received less than $45,000 to spend on research. Through 1963, that amount came to less than $5 million.

According to Joel Brinkley in a 1986 New York Times article, the entire transaction was a tax dodge. The U.S. Air Force was threatening to cancel its contracts with Hughes Tool Company, whose subsidiary, Hughes Aircraft, was making parts for military aircraft. The Pentagon was satisfied when a charity became the owner of the defense contractor, and Hughes turned over corporate decision making to an appointed manager. The IRS was less sanguine, and in 1955 found that HHMI was 'merely a device for siphoning off otherwise taxable income.' That decision held for less than two years. In 1957, shortly after Hughes gave Donald Nixon, the vice-president's brother, an interest-free loan of $205,000, the IRS declared HHMI a tax-exempt charity.

Meanwhile, the Institute selected Miami, Florida, as its headquarters. A Medical Advisory Board, headed by Hughes' personal physician, appointed 12 Hughes Fellows in the first year of operation, paying them grants of up to $9,000. A Scientific Advisory Board was formed in 1956.

By 1957, HHMI had 47 investigators working at eight different university medical centers, including Harvard, Yale, the University of Miami, Johns Hopkins, and the University of Southern California. Their research encompassed a wide variety of fields, including biochemistry, cardiac surgery, crystallography, endocrinology, enzymology, immunology, microbiology, organ transplantation, and physiology. In 1959, HHMI established its first Institute laboratory--r microbiology at the University of Miami. However, little was heard from the Institute for the next two decades, and the Medical Advisory Board never heard from Howard Hughes after the mid-1950s. In the 23 years between its founding and Hughes' death in 1976, HHMI provided some $63 million to support scientific research, on average less than $3 million a year.

1976: Where There's Not a Will ...

Hughes' death, without a valid will, initiated a long, convoluted court battle over his estate. Heirs, trustees, and executives fought over Summa Corporation, the holding company for Hughes Airwest, Hughes Helicopters, and the tycoon's real estate holdings, casinos and hotels. Texas claimed he was a resident; the State stood to gain $355 million in inheritance tax. Nevada's claim (with no inheritance tax) was supported by Summa Corp. and the relatives.

The big prize was Hughes Aircraft, with over $1 billion in annual sales. HHMI held all the stock, but Howard Hughes had not designated anyone to succeed him as trustee. Who would control the Institute, and thus Hughes Aircraft? Who would pick the new trustees to replace Howard Hughes? By default, the decision fell to the State of Delaware, where Hughes Aircraft was incorporated.

As the case slowly moved through the Delaware Court of Chancery, HHMI's budget began to grow, from $4 million in 1975 to $15 million in 1978. The staff also increased. Headquarters moved into a 12-acre estate in Coconut Grove, Florida, and the Scientific Advisory Committee was reconstituted as the Scientific Review Board, becoming more active in reviewing scientific progress.

1984-87: 'A Complete Reformation'

Following Hughes' death, the Institute gradually organized its research agenda into four areas: genetics, immunology, cell biology, and neuroscience. HHMI spending continued to increase&mdashø $18 million in 1981, $39.5 million in 1982 and $56 million in 1983.

In January 1984, the judge in Delaware ruled that the Attorney General of Delaware could choose four members of the new board of trustees, the Institute could choose four, and the new board would then choose a ninth member. The result was a group that included a Hughes relative, the president of the University of Chicago, a long-time Hughes employee, the retired chairman of Morgan Stanley & Co., and the former chairman of DuPont. At its first meeting, the board selected one of its members, Donald S. Fredrickson, a distinguished researcher and former director of the National Institutes of Health, to become HHMI's first full-time president. As a consultant to HHMI, Fredrickson had revamped the process for selecting researchers, replacing reliance on the 'old-boys' network' with a rigorous search process. He had also designed the new position of president.

Still, the Institute was involved in a battle with the IRS going back over a decade. Under the federal tax laws, a not-for-profit medical research organization had to spend the equivalent of 3.5 percent of its assets annually on medical research in conjunction with a hospital. The issues with the IRS included not only HHMI's net worth but whether it was a charity or a foundation, and if the latter, whether HHMI labs at MIT and CalTech, which were not affiliated with a hospital, should be included in that formula.

Fredrickson set about to resolve these issues with the IRS as well as to smooth relations the medical schools where HHMI had labs. In 1985, HHMI sold Hughes Aircraft to the General Motors Corporation for more than $5 billion, making HHMI the largest private foundation in the country. In 1986, HHMI moved from Florida to Bethesda, Maryland, and in 1987 the Institute reached a settlement with the IRS.

The sale of Hughes Aircraft finally established HHMI's net worth, determining the amount that must be spent annually on medical research. Under the settlement, HHMI made a direct payment of $35 million to the federal government and agreed to spend $500 million in the next decade on top of the 3.5 percent of assets going to medical research. In 1988, the Institute's operating budget was $230 million.

1987-2000: Moving Outside the Laboratories

The next 13 years would be a period of tremendous growth, diversification, and achievement. Leading the Institute was Purnell W. Choppin, who became president in 1987. The IRS agreement meant HHMI was now free to move into areas beyond laboratory research. Science education was the area the Institute chose to concentrate on outside the laboratory.

HHMI established a grants program for graduate, undergraduate, and precollege science education that grew into the largest private science education initiative in U.S. history. At the graduate level, HHMI established three fellowships for graduate students in the biomedical sciences. At the undergraduate level, grants were made to colleges and universities to update science courses, curricula, and laboratories; to engage undergraduates in research projects; to create faculty positions in emerging areas of science; and to strengthen science outreach programs to elementary, middle, and high school students and teachers. Between 1988 and 1999, the Undergraduate Biological Sciences Education Program awarded more than $425 million to 224 universities and colleges.

During the 1990s, the grants program expanded to unique national research organizations and medical schools as well as to what the Institute called 'informal educational institutions' such as science museums and aquariums. In 1991, HHMI sponsored research outside the United States for the first time, providing five-year grants to biomedical scientists and funding for conferences and workshops.

The Institute also undertook its own education activities. In 1990, it began publishing a series of reports, including Blood: Bearer of Life and Death and Seeing, Hearing, and Smelling the World, to bring research results to the general public, particularly to science teachers. It also pushed for safety in its own laboratories, establishing an Office of Laboratory Safety, and developing a training video entitled Practicing Safe Science, which it made available to academic and research institutions around the world. In 1993, the Institute opened its new headquarters in Chevy Chase, Maryland. The 22.5-acre campus, with offices, libraries, meeting rooms, and housing for visitors, quickly became a center for meetings and conferences on issues in biomedical sciences.

The bulk of HHMI's annual spending, however, was used to employ research scientists called 'investigators.' The influx of money from the Hughes Aircraft sale did not alter HHMI's original decentralized structure of employing biomedical researchers (as well as technicians and junior scientists) at major academic research institutions and stocking laboratories. The funds did allow HHMI to increase the number of researchers and labs, especially those in emerging fields such as structural biology and computational biology. During Choppin's tenure, HHMI's endowment grew to nearly $12 billion.

Investigators did not apply directly to HHMI. Rather, scientists were recommended by their institution and then underwent a rigorous selection process. The scientists were hired by HHMI for five to seven years and remained on the faculty of their host institution, where they could continue some teaching or administrative work (up to one-quarter of their time). In 1988, the Institute employed 130 investigators at 33 research centers and universities. By 1992 that number had nearly doubled, to 223 scientists in 53 institutions, and by the late 1990s there were 330 investigators at 72 sites.

With its vast amount of money, HHMI could move into a field quickly, providing resources for projects no one else, including the National Institutes of Health, could or would finance. In the mid-1980s it added structural biology to its existing four areas of concentration (genetics, cell biology, immunology and neuroscience), and spent $3.2 million to build an X-ray beam line at the Brookhaven National Laboratory on Long Island exclusively for researchers in that field.

In the area of genetics, in 1986, the Institute helped organize several international meetings. It also supported several computerized databases available to any scientist, augmenting a government database. These efforts led to the creation of the human genome project, mapping and analyzing the estimated 100,000 genes in the human body.

Hughes investigators were the elite of the biomedical world. They were well paid, and their research requirements were supported comfortably. HHMI did not tell them what to research, only that they were expected to break new ground and to produce. Their work was evaluated for refunding every five years.

The process had its questioners, however. Some thought the investigators would have received significant funding even without HHMI. Others cited jealousies created among non-Hughes researchers at affiliated research centers.

2000 and Beyond

In 2000, Thomas R. Cech (pronounced 'check') became the third president of the Institute. Cech, a Nobel chemistry laureate and HHMI investigator since 1988 at the University of Colorado in Boulder, appeared to be looking at ways HHMI could be more adventurous. One consideration, according to a 1999 New York Times article, was to cap the number of investigators at 350 and to finance special initiatives in emerging fields such as using computer programs to locate genes in the genome (bioinformatics) and figuring out what the genes do (functional genomics). He also moved to allow investigators to take their Hughes award with them if they moved to another institution.

Early in 2001, HHMI announced plans to build a $500 million research complex and conference center across the river in Virginia. 'We wanted to make a place that in 2031, people will say, `There's something we'd like to do and here's a place--and the space&mdashø do it,' an Institute spokesperson explained to the Washington Post.

As a powerhouse in biomedical research, HHMI would hardly be recognized by its founder. The Institute, through its support for top-notch, pioneering research, has contributed significantly to the advancement of basic biomedical research. Through its fellowships and science education efforts, it is creating a pipeline of biomedical scientists, some of whom may well become Hughes investigators.

Principal Competitors: National Institutes of Health.

Chronology

• Key Dates:

• 1924: Howard Hughes inherits the Hughes Tool Company.
• 1925: Early Hughes' will provides for the creation of an institution to support medical research.
• 1932: Hughes starts the Hughes Aircraft Company and begins research on military aircraft.
• 1951: First Howard Hughes Medical Research Fellows appointed.
• 1953: Howard Hughes Medical Institute (HHMI) and Hughes Aircraft Company chartered, with HHMI owning all the shares of the company.
• 1976: Hughes dies.
• 1985: HHMI sells Hughes Aircraft Company to General Motors Corporation for $5.2 billion.
• 1987: HHMI and the IRS reach settlement on tax status; HHMI initiates science education grants program and begins Affiliated Investigator Program.
• 1991: Institute first sponsors research outside the United States.
• 1993: HHMI inaugurates new headquarters in Chevy Chase, Maryland, and awards first grants to informal educational institutions, such as zoos and museums.
• 2000: Thomas Cech assumes presidency of HHMI.