The University of Utah illegally competes with private enterprise through a state-funded, tax-exempt business that supplies radioactive pharmaceuticals, charges a U.S. District Court suit filed Monday.
The suit, filed by Pharmaceutical and Diagnostic Services Inc., 3980 South Seventh East, Suite 24, seeks to put the university's Intermountain Radiopharmacy (called IRP) company out of business.The suit requests at least $2 million in damages, the cancellation of IRP's tax-exempt status, the voiding of contracts with private customers and the seizure of IRP's profits until the legal action is settled.
From June 1986 through May 1987, the suit says, IRP generated a more than $250,000 profit. It competes with Pharmaceutical and Diagnostic Services in selling radioactive pharmaceuticals.
Experts at hospitals and clinics inject these drugs into patients. The radioactive materials are then traced by sensitive devices to show areas of disease or weakness.
The plaintiff's president is William J. Baker, the founder and original director of IRP. Defendants are the State Board of Regents, the university, and the Internal Revenue Service.
Baker started the IRP in 1973, but left two years ago this December. He told the Deseret News his is the only other such company in Utah.
IRP continues to be operated through the U.'s radiology department in the School of Medicine. But the suit says its teaching aspect eventually was dropped and "research was abandoned and a profit motive substituted."
It says compensation for IRP employees was based on a percentage of profit generated, excluding academic activities entirely. According to the suit, the university sells more than 80 percent of its radio-pharmaceuticals to at least 20 commercial enterprises outside the campus.
The sales have no relation to the university's academic mission, the action says. The university does not offer a degree in nuclear pharmacy, and doesn't operate any credential program through IRP.
When he directed the IRP, Baker became "very concerned about the propriety of conducting a business within the university," the suit says.
He requested a ruling from the attorney general's office on the subject. In May 1982, he received an informal decision that the university "is not authorized to engage in money-making activities" and that the operation of a pharmacy that competes against a tax-paying enterprise seems not to conform with its tax-exempt status.
"The effect of IRP's commercial sale of radio-pharmaceuticals and related services is to unfairly compete in the commercial marketplace to the detriment of competition and private competitors," the suit says.
Saying IRP has competed unfairly against the plaintiff, the suit accuses the university of violating state and federal antitrust laws. It alleges IRP contacted the plaintiff's customers and potential customers, taking business from the private company.
The suit says IRP informed customers that the plaintiff was not financially sound or professionally qualified, that the private company would be out of business soon and that it couldn't compete with the university operation.
"IRP has illegally used its position as a state institution to gain and maintain an unlawful competitive advantage over plaintiff," the lawsuit says.