The latest U.S. research in genetic engineering may wind up illegally in the hands of a foreign company for its exclusive use through the recent $50 million deal between Massachusetts General Hospital and a West German chemical company, according to a just-released report by the General Accounting Office.

The report, which reviewed the huge, precedent-setting deal between the Hoechst company and the hospital, the biggest genetic engineering arrangement yet, is part of a growing resistance to such collaboration between industry and research hospitals and universities. Hoechst agreed to give the hospital $50 million over 10 years in return for the right to exclusive patent licenses on any research coming out of the hospital.

The GAO report said that under the contract it may be possible for Hoechst to "gain title, in violation of the [law], to inventions that have been partially funded with federal dollars."

Hospital officials say that the two funding sources will be kept separate so no conflict can arise, and that the contract is written so as to be fully within the federal regulations.

They also hoped that their contract with Hoechst would become a model for other university-industry deals, because it allows researchers to publish their Hoechst-funded research freely after a 30-day review by the German company. It also allows the hospital to have full control over all research done under the Hoechst grant.

Joseph Martin, acting director general of the hospital, said he thought the GAO's report was generally very favorable on the contract and that the hospital had made a clear separation between research funded by Hoechst and research funded with federal dollars.

A lawyer who worked on the contract said there probably will be some difficulties when Hoechst researchers work on projects with federally funded researchers. But those difficulties cannot be prevented by the wording of a contract unless it forbade Hoechst-paid researchers from even talking to other researchers at the hospital.

The GAO further said that the possible conflict of interest between federal money and foreign corporate money should be spelled out in detail before any more federal health research dollars go to Massachusetts General.

"What is so offensive about the Massachusetts General-Hoechst arrangement is that taxpayers are paying five times as much as Hoechst to support the hospital, $25 million a year versus $5 million a year," said Rep. Albert Gore (D-Tenn.), whose subcommittee asked for the GAO study.

Despite this, some of the patents that come out of work at the hospital will be licensed for the exclusive use of Hoechst under its contract with the hospital, Gore noted.

"It would be unfair for corporations, particularly foreign corporations, to 'skim the cream' from the research base we have created," Gore said.

"To argue that there can be a clean separation between the two piles of money is simply a fiction," he said. "It is clear from the wording of the contract that Hoechst was anticipating with relish the opportunity to leverage the massive public support we give to Massachusetts General."

The action by Gore and the GAO is only part of an apparently growing backlash in academia against the wave of corporate dollars flowing into universities to gain a piece of the promising gene engineering work. Guidelines on such arrangements are being written at universities, and conflict of interest charges in one deal at the University of California at Davis have stopped a research gift there.

There are now eight or more such arrangements being negotiated or already in place at universities around the country, totaling more than $200 million.