Objectivity in Research

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Public Health Service

42 CFR Part 50

Office of the Secretary

45 CFR Part 94

RIN 0905-AE01

Objectivity in Research

AGENCY: Public Health Service and Office of the Secretary, HHS.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Public Health Service (PHS) proposes to issue rules

requiring Institutions that apply for research funding from the PHS to

assume responsibility for ensuring that the financial interests of the

employees of the Institution do not compromise the objectivity with

which such research is designed, conducted, or reported.

Under the proposed rules, investigators are required to disclose to

an official(s) designated by the Institution a listing of Significant

Financial Interests. The institutional official(s) will review these

disclosures in accordance with an administrative process to be

established by each institution. Following this review, the

institutional official(s) will determine the acceptability of the

reported financial interests and act to protect PHS-funded research

from any bias that is reasonably expected to arise from those

interests.

DATES: To ensure consideration, comments must be received at the

address below on or before August 29, 1994.

ADDRESSES: Please address comments to: Dr. George J. Galasso, Associate

Director for Extramural Affairs, National Institutes of Health, Shannon

Building, Room 152, 9000 Rockville Pike, Bethesda, Maryland, 20892. The

PHS encourages persons with disabilities to use auxiliary devices and

services to submit comments.

FOR FURTHER INFORMATION CONTACT: Dr. George J. Galasso, Associate

Director for Extramural Affairs, National Institutes of Health at the

address above. The telephone number is (301)-496-5356 (this is not a

toll-free number).

SUPPLEMENTARY INFORMATION:

Technology Transfer and Conflict of Interest

Effective interaction between PHS-funded Institutions conducting

research and industry is essential to ensure the rapid application of

scientific discoveries to the health needs of the Nation and to

maintain the international competitiveness of domestic industry.

Nonetheless, prudent stewardship of public funds includes protecting

Federally funded research from being compromised by the conflicting

financial interests of any Investigator responsible for the design,

conduct, or reporting of PHS-funded research.

Numerous statutes and programs demonstrate the Federal interest in

the promotion of interactions among Government, academia and industry.

For example, the Stevenson-Wydler Technology Innovation Act of 1980

(Public Law (P.L.) 96-480) encourages technology transfer, particularly

through industrial-academic collaborations. The Patent and Trademark

Act Amendments of 1980 (P.L. 96-517) allow universities and other

funding recipients to apply for patents developed with Federal funding,

and expressly promote collaboration between commercial concerns and

nonprofit organizations. The Economic Recovery Tax Act of 1981 (P.L.

97-34) is aimed at fostering research and development by small

companies and associated university partners. The Federal Technology

Transfer Act of 1986 (P.L. 99-502), which amended P.L. 96-480, and

Executive Order 12592 provide similar patent and licensing authority to

Federal laboratories, and encourage them to participate in cooperative

research and development agreements with the private sector and

nonprofit organizations, including universities.

These legal authorities facilitate the movement of intellectual

capital between the Federal Government, academic institutions, and the

private sector. This kind of cross-fertilization is critical to the

development of the U.S. biotechnology industry. However, these and

other inducements for collaboration, as well as the rapid growth of the

biotechnology industry, have created a climate in which the stewardship

of public funding for biomedical and behavioral research is

increasingly complex and challenging.

The value of the results of PHS-funded research to the health and

the economy of the Nation must not be compromised by any financial

interest that will, or may be reasonably expected to, bias the design,

conduct or reporting of the research. The proposed regulations seek to

maintain a reasonable balance between these competing interests, give

applicants for PHS research funding responsibility and discretion to

identify and manage financial interests that may bias the research, and

minimize reporting and other burdens on the applicants.

Background

The proposed regulations are the result of a lengthy process of

consideration. Throughout that process, the PHS has carefully

considered and changed its approach in response to public comments.

On June 27 and 28, 1989, the National Institutes of Health (NIH)

and the Alcohol, Drug Abuse, and Mental Health Administration (ADAMHA)

sponsored an open meeting to discuss issues related to financial

conflict of interest. At that meeting there was general agreement that

an Institution that receives research funds from a PHS Awarding

Component should develop policies to identify and manage any financial

conflict of interest in the funded research.

On September 15, 1989, the NIH and ADAMHA published a Request for

Comment on Proposed Guidelines for Policies on Conflict of Interest in

the NIH Guide for Grants and Contracts (Volume 18, Number 32). Seven

hundred fifty-one responses were received from individuals associated

with medical schools, other academic and research institutions,

biotechnology companies, local governments, and non-profit

organizations; venture capitalists; attorneys; biomedical journal

editors; Federal employees and contractors at Government facilities;

and others. In general, those submitting comments were concerned that

the proposed guidelines imposed undue burdens on funded institutions

and would impede mutually beneficial research collaboration between

universities and industry. In response to these comments, the Secretary

determined that regulations should be developed that would address

those concerns.

A public meeting was held at NIH on November 30, 1990, to discuss

further the regulation of financial conflict of interest by the PHS.

The 18 written comments received at that time reflected views similar

to those received earlier.

Many respondents to earlier proposals stated that the primary

responsibility for setting guidelines and maintaining compliance should

rest with each awardee Institution. The present proposed rule, like PHS

policy in other areas involving protection of the public interest (such

as the protection of human subjects in research and the investigation

of alleged scientific misconduct), sets standards for performance and

assigns the primary responsibility for procedural development and

compliance to the Institution.

Many of those commenting on prior proposals agreed with the

importance of disclosure, but thought that the requirement to disclose

all financial interests, as set forth in the previously proposed

guidelines, should be reduced in scope to prevent needless invasion of

privacy and creation of paperwork burdens. The proposed regulations

achieve this end by limiting the disclosures that must be made to

``Significant Financial Interests,'' any interest of monetary value

exceeding a defined threshold of value ($5,000) or percentage of

ownership (five percent or more) that would reasonably appear to be

directly and significantly affected by the research funded by PHS or

proposed for funding. PHS specifically requests public comment on

whether the minimum threshold for disclosure is appropriate to ensure

that PHS-funded research projects are not biased by conflicting

financial interests of those responsible for the design, conduct, or

reporting of the research.

There was a wide range of opinion among those commenting on

previous proposals regarding which types of financial interest should

be permissible. In these proposed rules a Significant Financial

Interest (defined in Sec. 50.603) of the type specified in

Sec. 50.605(a) must be managed as provided in Sec. 50.605(b) and the

existence and management, reduction, or elimination of that financial

interest must be certified in the application. The PHS may at any time

request submission of, or review on site, all records pertinent to the

certification. This procedure gives Institutions broad discretion in

determining how to manage Significant Financial Interests that

reasonably appear to directly and significantly affect the design,

conduct, or reporting of the research while providing for appropriate

PHS oversight. PHS may undertake periodic reviews of the records in

order to assess the reliability of institutional and investigator

certifications, and to determine whether institutional safeguards do,

in fact, protect the integrity of PHS-funded research. In undertaking

any such review HHS will coordinate, to the extent feasible, with the

National Science Foundation (NSF) to ensure that institutions are not

unnecessarily subjected to multi-agency reviews.

Managing potential conflicts carefully; avoiding unnecessary burden

and useless paperwork; and preserving appropriate incentives for

productive research represent challenges individually and collectively.

Even after we issue a final rule some unforeseen problems will

certainly emerge. Therefore, approximately one year after the final

rule is issued we plan to initiate an evaluation, to include a

conference and other mechanisms to consult with investigators and

institutions. Based on that evaluation, we would revise these rules if

and as appropriate.

Basis and Purpose. A more detailed discussion of the proposed

regulations and their basis and purpose follows.

I. Applicability

a. Types of Research

The proposed regulations implement section 493A of the PHS Act,

added by Public Law 103-43, which mandates the issuance of regulations

defining, and setting standards for, the management of financial

interests that will, or may be reasonably expected to, bias a clinical

research project whose purpose is to evaluate the safety or

effectiveness of a drug, medical device, or treatment. In addition, the

proposed regulations implement section 924 of the PHS Act, as amended

by Public Law 102-410, which requires the Administrator of the Agency

for Health Care Policy and Research (AHCPR) to issue regulations

defining the financial interests that will, or may be reasonably

expected to, create a bias in the health care services research

projects funded by the AHCPR. The proposed regulations are not limited

to the implementation of these statutory authorities, however. Pursuant

to the Secretary's authority to issue regulations governing those who

seek or receive PHS funding, they apply broadly to all research funded

by the PHS, whether under the authority of the PHS Act or other

statutes, except Phase I projects under the Small Business Innovation

Research (SBIR) Program. Very limited amounts of funding are provided

under Phase I of the SIBR Program to plan and determine the feasibility

of the research project for further funding under Phase II. Because

potentially biasing financial interests will be assessed at the time of

the Phase II application, it would be burdensome and unproductive to

require such a review for Phase I applications. With this exception, it

is believed that financial interests can create a bias in all types of

research, although the likelihood of such a bias may diminish if the

outcome of the research would have little effect on the commercial

potential of any product, device, or other property in which the

Investigator may have a financial interest. However, this distinction

can not be so clearly drawn that the need to protect the integrity of

all PHS-funded research uniformly is alleviated.

b. Individual vs. Institutional Financial Interests

The proposed regulations provide for the disclosure and

consideration of the financial interests of individuals involved in the

design, conduct, and reporting of the research. Section 493A of the PHS

Act, added by Public Law 103-43, refers to financial interests of

entities (e.g., institutions), as well as individuals, in clinical

research projects. We are considering the following alternatives with

respect to the coverage of institutions that apply for clinical

research funding under the PHS Act:

(1) Exempting Institutional Financial Interests That Would Not Bias the

Project

Under the statute, adoption of this alternative would be based on a

determination that the exempted institutional financial interests would

not be reasonably expected to bias the design, conduct, or reporting of

PHS-funded research. This conclusion might be based on a finding that

the limited size of the interest would preclude any biasing effect, or

a finding that the institutional financial interest would have only an

indirect and unpredictable effect on the project, in the absence of a

personal financial interest on the part of those responsible for the

design, conduct or reporting of the research. There would, of course,

have to be a reasonable factual basis for such findings.

(2) Requiring Institutional Applicants To Certify Whether They Have

Significant Financial Interests

Adoption of this alternative would involve establishing a procedure

for institutions similar to the procedure in the proposed regulation

for individuals. This option would be based on the same rationale as

the preceding option, i.e. that there is no need to regulate

institutional financial interests that aren't reasonably expected to

bias the conduct of the research. Significant Financial Interest might

be defined for institutions as limited only to direct financial

interests (such as a patent application on, or a financial arrangement

with a company regarding, the product of the research).

(3) Requiring Full Disclosure to the PHS of the Financial Interests of

Institutions

This alternative would impose a reporting burden upon the

institutions, but would ensure a complete PHS review of any potential

conflict of interest prior to a funding decision.

(4) Other Alternatives

We will also consider combinations of these three alternatives and

other alternatives that may be suggested in the public comments. We

will choose an alternative based on the requirements of the statute,

and, to the extent consistent with the statute, based upon our weighing

of the burdens on the institutions, the potential that institutional

financial interests will bias PHS-funded research, and the potential

adverse effect of the alternative upon technology transfer.

c. Types of Interests

The proposed regulations require disclosure of ``significant

financial interests'' of the Investigator that would reasonably appear

to be directly and significantly affected by the research funded by PHS

or proposed for funding or of the investigator in an entity whose

financial interest would reasonably appear to be directly and

significantly affected by the PHS research. The following are examples

of the types of significant financial interests that would fall within

the categories in Sec. 50.605: ownership of stock, stock options, or

any equity, debt, security, capital holding, salary or other

remuneration, or financial consideration, or thing of value for

services as an employee, consultant, officer, or board member in (1)

any business enterprise, including the applicant for PHS funds (except

SBIR applicants are not included), that owns or has applied for the

patent, manufacturing or marketing rights to a drug, vaccine, device,

procedure or any other product involved in or that will predictably

result from the research described in the application or (2) a business

enterprise that is known by the investigator to own or have applied for

such rights in any product that can reasonably be expected to compete

with the product or procedure that will predictably result from the

research described in the application. We request comments on a range

of disclosures that would on the one hand, include interests that may

threaten objectivity; and, on the other exclude those interests that

cannot reasonably be regulated or that are so obvious as not to warrant

regulations. We also request comments on whether specific examples of

biasing significant financial interests, such as those set forth above,

should be included in the regulations.

In particular, we request comments on whether interests in a

business enterprise that is known by the investigator to have an

interest in a product that competes with the product involved in the

application should fall within the categories of significant financial

interests described in Sec. 50.605. There may not be any reasonable way

for an investigator either to identify all competing products or to

determine what companies own them. For example, for most medical

devices there may be dozens of competing products, many made by

subsidiaries of ``Fortune 500'' conglomerates. How would an

investigator determine just what products were ``competing''? Should we

be concerned if an investigator owns $5,000 of stock in a company in

which only a small fraction of revenues and profits derive from the

competing product? We request comments on whether, and how best, to

cover interests in competing products.

We also request comments on whether an employee's stock or other

non-salary financial interests in the applicant institution should be

covered. This is of particular relevance when the grant or contract is

with a for-profit enterprise. Specifically, should we be concerned, and

how could we expect the company to ``manage'' against conflict, when

the company's employees obviously stand to benefit if the product is a

commercial success? The proposed rule includes an exemption for an

ownership interest in the institution if it is a Small Business

Innovation Research (SBIR) applicant. Can we justify exempting SBIR

awards and not all other awards to both large and small profit-making

enterprises? Should we exempt from disclosure any equity or ownership

interest in the applicant institution? Should we exempt disclosure of

interests other than bonuses or other compensation tied to the outcome

of the research?

II. Burdens Upon Applicants

The proposed regulation is intended to minimize reporting and other

burdens upon applicants to the maximum extent feasible. Certain types

or amounts of financial interests that cannot be reasonably expected to

bias the research are excluded from the requirements for disclosure by

investigators. Such interests are also excluded from the certification

of whether these are Significant Financial Interests that must

accompany each application. Even when there is a Significant Financial

Interest of the type specified in the proposed rule, the institutions

are given broad discretion in managing the conflict; details of the

interest need not be reported to the PHS awarding component. It is the

responsibility of that component to determine whether to review the

institutional records relating to the disclosure and management of that

interest.

The Department will also seek to reduce burdens upon applicants by

being available to provide advice and assistance as applicants

establish the policies and procedures required by this subpart. The PHS

Awarding Components will be available to respond to general inquiries

regarding compliance with this subpart.

Another way of reducing burdens upon applicants is to exempt

certain types of applicants from the requirements or to impose

different, less burdensome requirements on them. The proposed

Sec. 50.602 provides that the regulations do not apply to SBIR Phase I

applications and that where the applicant for a research grant is an

individual, determinations of the procedures to be followed to ensure

the objectivity of the research will be made on a case-by-case basis.

The National Science Foundation (NSF) exempts from its Investigator

Financial Disclosure Policy that is being published in this issue of

the Federal Register grantees employing fifty persons or less. Comment

on whether HHS should adopt a similar exclusion is requested. Our

experiences with conflict of interest situations indicate that

investigators working for small entities may be just as subject to

conflicts of interest as investigators working at large institutions.

The interests of appropriate coverage and of reducing burdens might

both be served by determining the procedures to be followed by small

entities on a case-by-case basis as is proposed for individuals.

III. Uniform Federal Policy

We have been working closely with the National Science Foundation

(NSF) to ensure that this Notice of Proposed Rulemaking and the policy

published by NSF in this issue of the Federal Register will be

consistent, and will impose the same obligations on funding recipients.

In addition, HHS has been working with the Office of Science and

Technology Policy, the Office Management and Budget, NSF, and other

interested agencies to develop and propose a common Federal policy on

investigator conflicts of interest. It is expected that this policy,

when completed, will ensure consistent treatment of investigator

conflicts issues by all Federal funding agencies.

However, the statutes described above have necessitated some

inconsistencies between these proposed regulations and the policy being

published by the NSF. Unlike the NSF policy, there is no provision

permitting institutions to waive the management, reduction, or

elimination of an actual or potential conflicting interest when such

action would be either ineffective or inequitable, and the potential

negative impacts that might arise from the conflicting interest are

outweighed by interests of scientific progress, technology transfer, or

the public health and welfare. Because section 493A of the Public

Health Service Act requires institutions conducting PHS-funded clinical

research projects to manage or eliminate financial interests that would

potentially bias the project, we do not believe HHS has the discretion

to permit institutions to waive this requirement. Similarly, section

493A necessitates the requirements for institutional notification of

the PHS Awarding Component in Sec. 50.604(a)(7)(ii) and (8). In

addition, the statute specifically requires the announcement, with each

public presentation of the research, of a conflicting financial

interest that was not managed, reduced, or eliminated, as set forth in

Sec. 50.606(d). This requirement is limited to PHS-funded clinical

research projects, but the requirements of institutional notification

to the PHS have not been so limited, because we believe that such

notification serves a useful purpose for all PHS-funded research, and

that disparate reporting requirements for different types of research

would cause confusion and create burdens for the institutions.

The Department notes that ``management of a financial interest that

could potentially bias a project'' may include recognition by the

institution that a potential conflict exists, and monitoring progress

of the research to insure that the financial interest does not bias the

project. The Department specifically requests comment on whether this

interpretation maximizes consistency between this NPRM and the NSF's

final policy, in the light of the statutory distinctions discussed

above. The Department seeks comment on whether this expansion of the

statutory requirement is appropriate in the context of PHS-funded

research and the need to minimize burden on institutions.

IV. Relationship to Other Laws

Many Institutions funded by the PHS Awarding Components are State

Institutions whose employees are subject to State laws designed to

prevent financial conflict of interest. The proposed rules would not

supplant these requirements and are intended to be applied in addition

to other applicable Federal and State restrictions related to potential

financial conflicts of interest, including Federal statutes and

regulations that prohibit trading in securities with knowledge of

privileged or non-public information.

V. Enforcement

The proposed regulations provide for enforcement remedies both

against researchers that fail to comply with institutional policies

issued under the regulation and Institutions that fail to comply with

the regulation. The proposed rules specifically state that the

requirements constitute a condition of award and as such could be

enforced through the suspension or termination of a grant or

cooperative agreement. A Termination for Convenience or a Stop Work

Order could be issued in accordance with the FAR if a contractor fails

to enforce the Special Standards. Each contractor would be required to

meet the specified responsibility requirements prior to award of a

contract. PHS awarding components will work diligently with applicants

to resolve compliance problems informally, to avoid the need for formal

enforcement action.

E.O. 12866/Regulatory Flexibility Act Analysis

Executive Order 12866 requires us to prepare an analysis for any

rule that meets one of the E.O. 12866 criteria for a significant

regulatory action, that is, that may--

Have an annual effect on the economy of $100 million or more or

adversely affect in a material way the economy, a sector of the

economy, productivity, competition, jobs, the environment, public

health or safety, or State, local, or tribal governments, and

communities;

Create a serious inconsistency or otherwise interfere with an

action taken or planned by another agency;

Materially alter the budgetary impact of grants, user fees, or loan

programs or the rights and obligations of recipients thereof; or

Raise novel legal or policy issues arising out of legal mandates,

the President's priorities, or the principles set forth in E.O. 12866.

In addition, we prepare a regulatory flexibility analysis, in

accordance with the Regulatory Flexibility Act, if the rule is expected

to have a significant impact on a substantial number of small entities.

For reasons outlined below, we do not believe this rule is

economically significant nor do we believe that it will have a

significant impact on a substantial number of small entities. In

addition, this rule is not inconsistent with the actions of any other

agency. However, we recognize that there are potential inconsistencies

depending on what other agencies may later propose. Several agencies

are now considering issuing policies on what circumstances are likely

to lead to bias in research that is funded or relied upon by the

Federal Government.

Any rule in this area has the potential to inhibit socially

beneficial research, and to hamper the technological progress so

essential to the American economy and to the advance of science. We are

further mindful of the importance of the requirements in Executive

Order 12866 that any new regulatory system be based on a showing that

there is a significant problem requiring regulation, that regulatory

priorities be based on the degree and nature of risks, and that

regulations be designed to be cost-effective. Moreover, the Regulatory

Flexibility Act requires us to minimize adverse effects not only on

small businesses and individual entrepreneurs, but also on almost all

non-profit entities including universities.

In the hearings that preceded enactment of the requirement in the

NIH Revitalization Act, known cases were described in which scientists

have stood to make large sums of money contingent on the positive

outcome of research on a particular product, where this fact was not

known to those reviewing the research, and where bias did occur.

We have drafted this rule to address these instances of abuse,

while minimizing unnecessary burden to researchers. We did not consider

any option that would routinely require all researchers to list all of

their significant assets (unrelated to the research project), that

would encourage searches for hypothetical or speculative conflicts,

that would require divestiture of ownership of a product undergoing

research, or that would discourage in any way funding grants or

contracts to scientists to develop products with significant profit

potential. We have not inhibited research in any way, other than

requiring that it be managed to assure that potential bias is

minimized. Such management methods are common in the sciences and

impose no undue burden.

We request comment on whether there are any provisions of the

proposed rule that might inadvertently hamper socially desirable

research. For example, we have proposed allowing institutions to

require that researcher employees divest themselves of stock in

companies owning products undergoing research. Conversely, if there are

other types of situations in which a financial conflict of interest has

a substantial risk of biasing research results, we will consider

expanding the scope of the rule. We ask that commenters provide

evidence as to magnitude and frequency of any claimed adverse effects

or loopholes.

We do not believe that the annual costs of implementing this rule

will reach as much as $1,000 an institution in staff time, or as much

as $1 million a year across all institutions. Most of the cost will

arise from the several seconds or minutes spent certifying the absence

of significant financial interests for individual awards. Spread across

thousands of grantee and contractor institutions, these costs are

infinitesimal. Therefore, we have determined that this rule would not

create an ``unfunded mandate'' imposed on state-owned institutions and

would not trigger the requirements of Executive Order 12875, on

``Enhancing the Intergovernmental Partnership.''

For these same reasons, we certify that this rule will not have a

significant economic impact on a substantial number of small entities,

and that a Regulatory Flexibility Analysis is not required.

2. Paperwork Reduction Act

The proposed rules contain information collection requirements that

are subject to review by the Office of Management and Budget (OMB)

under the Paperwork Reduction Act of 1980. Appropriate instructions for

making certifications to the PHS Awarding Components will be issued as

an addendum to the instructions for applications for PHS research

funding. It is contemplated that the certification will be provided by

checking a box on the application. The title, description, and

respondent description applicable to the information collection are

shown below with an estimate of the annual reporting and record-keeping

burden. Included in the estimate is the time for reviewing

instructions, searching existing data sources, gathering and

maintaining the data needed, and completing and reviewing the

collection of information.

Title: Responsibility of Applicants for Promoting Objectivity in

Research for which Public Health Service (PHS) Funding is Sought.

Description: The regulations would require each applicant/offeror

Institution to establish procedures to avoid the inappropriate

financial interest of an Investigator involved in the design, conduct

or reporting of the research for which PHS funding is sought.

Description of Respondents: Public and private non-profit

institutions, small businesses, and other for-profit organizations.

Estimated Annual Report and Record Keeping Burden

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Applicable section Total No.

Applicable section of of regulation 45 CFR of Hours per Total hours Total hours Total hours

regulation 42 CFR 94 respondents response 42 CFR 45 CFR

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Reporting:

50.604(a)(8)......... (d)(1)(viii)........ 20 10.0 160 40 200

50.604(b)............ (d)(2).............. 100 10.0 850 150 1,000

50.606(a)............ (f)(1).............. 20 10.0 160 40 200

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Sub-Total.......... .................... ........... ........... ........... ........... 1,400

Record keeping:

50.604(a)(5)......... (d)(1)(v)........... 2,000 100.0 180,000 20,000 200,000

--------------------------------------------------------------------------------------

Sub-Total.......... .................... ........... ........... ........... ........... 200,000

Disclosure:

50.604(a)(1)......... (d)(1)(i)........... 2,000 10.0 18,000 2,000 20,000

50.604(a)(3)......... (d)(1)(iii)......... 50,000 1.0 45,000 5,000 50,000

--------------------------------------------------------------------------------------

Sub-Total.......... .................... ........... ........... ........... ........... 70,000

======================================================================================

Total Burden....... .................... ........... ........... ........... ........... 271,400

----------------------------------------------------------------------------------------------------------------

In accordance with the requirements of the Paperwork Reduction Act

of 1980, the Department of Health and Human Services will submit the

information collection requirements cited above to OMB for review and

approval. Organizations and individuals desiring to submit comments on

the information collection requirements and the estimated burden should

direct such comments to the information address cited above and to:

NIH/PHS Desk Officer, Office of Information and Regulatory Affairs,

OMB, New Executive Office Building, room 3208, 725 17th St., NW.,

Washington, DC 20503.

Catalogue of Federal Domestic Assistance

The proposed rules affect all research, research and development,

and research and development support funded by the Public Health

Service. Questions about the proposed rules should be directed to the

Information Contact provided above.

List of Subjects

42 CFR Part 50

Grant programs--health; Conflict of interest; Medical research;

Behavioral, biological, biochemical, psychological and psychiatric

research.

45 CFR Part 94

Government procurement.

Dated: June 16, 1994.

Philip R. Lee,

Assistant Secretary for Health.

Dated: June 17, 1994.

Donna E. Shalala,

Secretary.

Accordingly, it is proposed to amend 42 CFR part 50 and 45 CFR

subtitle A as set forth below:

42 CFR Chapter I

PART 50--[AMENDED]

1. Subpart F is added to 42 CFR Part 50 to read as follows:

Subpart F--Responsibility of Applicants for Promoting Objectivity in

Research for Which PHS Funding Is Sought

50.601 Purpose.

50.602 Applicability.

50.603 Definitions.

50.604 Institutional responsibility regarding Significant Financial

Interests of Investigators.

50.605 Management of Significant Financial Interests.

50.606 Remedies.

50.607 Other HHS regulations that apply.

Subpart F--Responsibility of Applicants for Promoting Objectivity

in Research for Which PHS Funding Is Sought

Authority: 42 U.S.C. 216, 289b-1, 299c-3.

Sec. 50.601 Purpose.

This subpart promotes objectivity in research by requiring that

each Institution that applies for PHS grants or cooperative agreements

for research ensure there is no reasonable expectation that the design,

conduct, and reporting of the research to be funded pursuant to the

application will be biased by any Significant Financial Interest of an

Investigator responsible for the design, conduct, or reporting of the

research.

Sec. 50.602 Applicability.

This subpart is applicable to each Institution that applies for PHS

grants or cooperative agreements for research and, through the

implementation of this subpart by each Institution, to each

Investigator participating in research covered by this subpart;

provided, that this subpart does not apply to SBIR Program Phase I

applications. In those few cases where an individual, rather than an

institution, is an applicant for PHS grants or cooperative agreements

for research, PHS Awarding Components will make case-by-case

determinations on the steps to be taken to ensure that the design,

conduct, and reporting of the research will not be biased by any

Significant Financial Interest of the individual.

Sec. 50.603 Definitions.

As used in this subpart:

HHS means the United States Department of Health and Human

Services, and any components of the Department to which the authority

involved may be delegated.

Institution means any domestic or foreign, public or private,

entity or organization (excluding a Federal agency).

Investigator means the principal investigator and any other person

at the Institution who is responsible for the design, conduct, or

reporting of research funded by PHS, or proposed for such funding. For

the purposes of the requirements of this subpart relating to financial

interests, ``Investigator'' includes the Investigator's spouse and

dependent children.

PHS means the Public Health Service, an operating division of the

U.S. Department of Health and Human Services, and any components of the

PHS to which the authority involved may be delegated.

PHS Awarding Component means the organizational unit of the PHS

that funds the research that is subject to this subpart.

Public Health Service Act or PHS Act means the statute codified at

42 U.S.C. 201 et seq.

Research means a systematic investigation designed to develop or

contribute to generalizable knowledge relating broadly to public

health, including behavioral and social-sciences research. The term

encompasses basic and applied research and product development. As used

in this subpart, the term includes any such activity for which research

funding is available from a PHS Awarding Component through a grant or

cooperative agreement whether authorized under the PHS Act or other

statutory authority.

Significant Financial Interest means anything of monetary value,

including but not limited to, salary or other payments for services

(e.g., consulting fees or honoraria); equity interests (e.g., stocks,

stock options or other ownership interests); and intellectual property

rights (e.g., patents, copyrights and royalties from such rights). The

term does not include:

(1) Salary, royalties, or other remuneration from the institution;

or any ownership interests in the institution, if the institution is an

applicant under the SBIR Program;

(2) Income from seminars, lectures, or teaching engagements

sponsored by public or nonprofit entities;

(3) Income from service on advisory committees or review panels for

public or nonprofit entities; or

(4) Financial interests in business enterprises or entities if the

value of such interests do not exceed $5,000 per annum if salary, fees

or other continuing payments or represent more than a 5% ownership

interest for any one enterprise or entity when aggregated for the

investigator and the investigator's spouse and dependent children.

Small Business Innovation Research (SBIR) Program means the

extramural research program for small business that is established by

the Awarding Components of the Public Health Service and certain other

Federal agencies under Public Law 97-219, the Small Business Innovation

Development Act, as amended. For purposes of this subpart, the term

SBIR Program includes the Small Business Technology Transfer (SBTT)

Program, which was established by Public Law 102-564.

Sec. 50.604 Institutional responsibility regarding Significant

Financial Interests of Investigators.

(a) Each Institution must:

(1) Inform each Investigator of the Institution's policy for

identifying and managing Significant Financial Interests, the

Investigator's reporting responsibilities, and of this subpart.

(2) Designate an institutional official(s) to solicit and review

financial disclosure statements from each Investigator who is planning

to participate in PHS-funded research.

(3) Ensure that Investigators have provided to the designated

official(s) a listing of Significant Financial Interests that ensures

disclosure of all Significant Financial Interests of the type described

in Sec. 50.605(a) prior to the time an application is submitted to PHS.

All financial disclosures must be updated during the pendency of the

award, either on an annual basis, or as new reportable Significant

Financial Interests are obtained.

(4) Provide guidelines consistent with this subpart for the

designated official(s) to identify Significant Financial Interests of

the type described in Sec. 50.605(a) and take such actions as necessary

to ensure that any such financial interest will be managed, reduced, or

eliminated.

(5) Maintain records, identifiable to each award, of all financial

disclosures and all actions taken by the Institution with respect to

each Significant Financial Interest of the type described in

Sec. 50.605 for at least three years beyond the termination or

completion of the award, or until resolution of any action by the HHS

involving the records, whichever is longer.

(6) Establish procedures for resolving any alleged violation of the

financial conflict of interest policy of the Institution and establish

appropriate enforcement action for failure to comply.

(7) Certify, in each application for the funding to which this

subpart applies, that;

(i) There is in effect at that Institution a written and enforced

administrative process to identify and manage, reduce or eliminate

Significant Financial Interests of the type described in Sec. 50.605(a)

with respect to all research projects for which funding is sought from

the PHS,

(ii) The Institution either has, or has not found a Significant

Financial Interest of the type described in Sec. 50.606 and, where such

interest is found, certify that actions will be taken prior to the

award of funding to manage, reduce or eliminate that interest in

accordance with this subpart; and that the Institution will notify the

PHS Awarding Component of such action prior to issuance of the Notice

of Grant Award.

(iii) The Institution agrees to make information available, upon

request, to the HHS regarding all Significant Financial Interests

identified by the Institution of the type described in Sec. 50.605 and

how those interests have been managed, reduced, or eliminated to

protect the research from bias;

(iv) The Institution will otherwise comply with this subpart.

(8) (i) Notify the PHS Awarding Component of the identification and

management, reduction or elimination of any Significant Financial

Interest of the type described in Sec. 50.605 that originates or

becomes known to the institution after the grant or cooperative

agreement has been awarded, within sixty days of its becoming aware of

that interest.

(ii) The HHS may at any time request submission of, or review on

site, all records pertinent to these certifications. To the extent

permitted by law, all records of financial interests will be maintained

confidentially.

(iii) An investigator may participate in a PHS-funded research

project that is being simultaneously supported by an organization that

has a commercial interest in the finding of the research project.

However, the research support must be provided through the PHS awardee

Institution. Any direct compensation or payment to the Investigator

under that support is considered a financial interest under this

subpart.

Sec. 50.605 Management of Significant Financial Interests.

(a)(1) Institutions applying for PHS funding for research shall

ensure that the following types of Significant Financial Interests

attributable to an Investigator are managed, reduced, or eliminated, in

accordance with paragraph (b) of this section, prior to award of the

grant:

(i) Any Significant Financial Interest of the Investigator that

would reasonably appear to be directly and significantly affected by

the research funded by PHS, or proposed for funding; and

(ii) Any Significant Financial Interest of the Investigator in an

entity whose financial Interest would reasonably appear to be directly

and significantly affected by the research funded by PHS, or proposed

for funding.

(2) In addition to the types of Significant Financial Interests

described in this paragraph that must be managed, an Institution may

require the management of other financial interests as the Institution

deems appropriate.

(b) The designated official(s) must review all financial

disclosures, determine whether Significant Financial Interests could

affect the design, conduct, or reporting of the research activities

funded by PHS, or proposed for such funding, and determine what

conditions or restrictions, if any, should be imposed by the

institution to manage such interests. Examples of conditions or

restrictions that might be imposed to manage actual or potential

conflicts of interest include:

(1) Public disclosure of significant financial interests;

(2) Monitoring of research by independent reviewers;

(3) Modification of the research plan;

(4) Disqualification from participation in all or a portion of the

research funded by the PHS;

(5) Divestiture of significant financial interests; or

(6) Severance of relationships that create actual or potential

conflicts.

Sec. 50.606 Remedies.

(a) Each Institution that applies for research funding from the PHS

must include in its policy for the identification and management of

Significant Financial Interest procedures for enforcement action

against employees who do not comply with the Institution's policy. If

the failure of an employee to comply with the policy of the Institution

has biased the design, conduct, or reporting of the PHS-funded

research, the Institution must promptly notify the PHS Awarding

Component of the corrective action taken. The PHS Awarding Component

will consider the situation and, as necessary, take appropriate action,

or refer the matter to the Institution for further action, which may

include directions to the Institution on how to maintain appropriate

objectivity in the funded project.

(b) The HHS may inquire into the Institutional procedures and

actions regarding financial interests in PHS-funded research, including

the disposition of a particular financial interest. Such inquiry may be

initiated based on information obtained by the HHS under this subpart,

from an award-related document (application, progress report,

publication of results), or any other source. Based on a specific

inquiry, the HHS may decide that a particular Significant Financial

Interest of the type described in Sec. 50.606 will bias the objectivity

of the PHS-funded research to such an extent that further corrective

action is needed or that the Institution has not managed a Significant

Financial Interest described in Sec. 50.606 in accordance with this

subpart. The PHS may determine that suspension of funding is necessary

until the matter is resolved.

(c) In any case in which the Department determines that a PHS-

funded project of clinical research whose purpose is to evaluate the

safety or effectiveness of a drug, medical device, or treatment has

been designed, conducted, or reported by an Investigator with a

Significant Financial Interest that was not disclosed or managed as

required by this subpart, the Institution must require disclosure of

the financial interest in each public presentation of the results of

the research.

Sec. 50.607 Other HHS regulations that apply.

Several other regulations and policies apply to this subpart. They

include, but are not necessarily limited to:

42 CFR Part 50, Subpart D--Public Health Service grant appeals

procedure

45 CFR Part 16--Procedures of the Departmental Grant Appeals Board

45 CFR Part 74--Administration of grants

45 CFR Part 76--Government-wide debarment and suspension (non-

procurement)

45 CFR Part 92--Uniform Administrative Requirements for Grants and

Cooperative Agreements to State and Local Governments

45 CFR SUBTITLE A

2. A new Part 94 is added to 45 CFR subtitle A to read as follows:

45 CFR Part 94--Responsible Prospective Contractors

94.1 Purpose.

94.2 Applicability.

94.3 Definitions.

94.4 Institutional Assurance and Responsibility regarding

Significant Financial Interests of Investigators.

94.5 Management of Significant Financial Interests.

94.6 Remedies.

Authority: 42 U.S.C. 216, 289b-1, 299c-3.

Sec. 94.1 Purpose.

This part promotes objectivity in research by establishing special

standards for each Institution to ensure that the design, conduct, and

reporting of research to be performed are not compromised by any

Significant Financial Interest of an Investigator responsible for the

design, conduct, or reporting of the research.

Sec. 94.2 Applicability.

This section is applicable to each Institution that seeks PHS

funding for research and, through the implementation of this section,

to each Investigator who participates in such research; provided that

this section does not apply to SBIR Program Phase I applications.

Sec. 94.3 Definitions.

As used in this part:

Contractor means an entity that provides property or services for

the direct benefit or use of the Federal Government.

HHS means the United States Department of Health and Human

Services, and any components of the Department to which the authority

involved may be delegated.

Institution means any public or private entity or organization

(excluding a Federal agency) that:

(1) Submits a proposal for a research contract whether in response

to a solicitation from the PHS or otherwise, or

(2) Assumes the legal obligation to carry out the research required

under the contract.

Investigator means the principal investigator and any other person

at the Institution who is responsible for the design, conduct, or

reporting of a research project funded by PHS, or proposed for such

funding. For the purposes of the requirements of this section relating

to financial interests, ``Investigator'' includes the Investigator's

spouse and dependent children.

PHS means the Public Health Service, an operating division of the

U.S. Department of Health and Human Services, and any components of the

PHS to which the authority involved may be delegated.

PHS Awarding Component means an organizational unit of the PHS that

funds research that is subject to this part.

Public Health Service Act or PHS Act mean the statute codified at

42 U.S.C. Sec. 201 et seq.

Research means a systematic investigation designed to develop or

contribute to generalizable knowledge relating broadly to public

health, including behavioral and social-sciences research. The term

encompasses basic and applied research and product development. As used

in this part, the term includes any such activity for which funding is

available from a PHS Awarding Component, whether authorized under the

PHS Act or other statutory authority.

Significant Financial Interest means anything of monetary value,

including but not limited to, salary or other payments for services

(e.g., consulting fees or honoraria); equity interests (e.g., stocks,

stock options or other ownership interests); and intellectual property

rights (e.g., patents, copyrights and royalties from such rights). The

term does not include:

(1) Salary, royalties, or other remuneration from the institution;

or any ownership interests in the institution, if the institution is an

applicant under the SBIR program;

(2) Income from seminars, lectures, or teaching engagements

sponsored by pubic or nonprofit entities;

(3) Income from service on advisory committees or review panels for

public or nonprofit entities; or

(4) Financial interests in business enterprises or entities if the

value of such interests do not exceed $5,000 or represent more than a

5% ownership interest for any one enterprise or entity when aggregated

for the investigator and the investigator's spouse and dependent

children.

Small Business Innovation Research (SBIR) Program means the

extramural research program for small business that is established by

the awarding components of the Public Health Service and certain other

Federal agencies under Public Law 97-219, the Small Business Innovation

Development Act, as amended. For purposes of this part, the term SBIR

Program includes the Small Business Technology Transfer (SBTT) Program,

which was established by Public Law 102-564.

Sec. 94.4 Institutional Assurance and Responsibility Regarding

Significant Financial Interests of Investigators.

(a) Each Institution must:

(1) Inform each Investigator of the Institution's policy for

identifying and managing Significant Financial Interests, the

Investigator's reporting responsibilities, and of this part.

(2) Designate an institutional official(s) to solicit and review

financial disclosure statements from each Investigator who is planning

to participate in PHS-funded research.

(3) Ensure that Investigators have provided to the designated

official(s) a listing of Significant Financial Interests that ensures

disclosure of all Significant Financial Interests of the type described

in paragraph (e)(1) of this part, prior to the time an application is

submitted to PHS. All financial disclosures must be updated during the

pendency of the award, either on an annual basis, or as new reportable

Significant Financial Interests are obtained.

(4) Provide guidelines consistent with this subpart for the

designated official(s) to identify Significant Financial Interests of

the type described in paragraph (e)(1) of this part and take such

actions as necessary to ensure that any such financial interest will be

managed, reduced, or eliminated.

(5) Maintain records identifiable to each award of all financial

disclosures and all actions taken by the Institution with respect to

each Significant Financial Interest of the type described in Sec. 94.5

for at least three years beyond the termination or completion of the

contract, or until resolution of any action by the HHS involving the

records, whichever is longer.

(6) Establish procedures for resolving any alleged violation of the

financial conflict of interest policy of the Institution and establish

appropriate enforcement actions for failure to comply.

(7) Certify, in each contract proposal, that:

(i) There is in effect at that Institution a written and enforced

administrative process to identify and manage, reduce or eliminate

Significant Financial Interests of the type described in paragraph

(e)(1) of this part with respect to all research projects for which

funding is sought from the PHS.

(ii) The Institution either has, or has not found a Significant

Financial Interest of the type described in paragraph (e)(1) of this

part and, where such interest is found, certify that actions have been

taken to manage, reduce or eliminate that interest in accordance with

this part.

(iii) The Institution agrees to make information available, upon

request, to the HHS regarding all Significant Financial Interests

identified by the Institution of the type described in paragraph (e)(1)

of this part and how those interests have been managed, reduced, or

eliminated to protect the research from bias;

(iv) the Institution will otherwise comply with this part.

(8) (i) Notify the PHS Awarding Component of the identification and

management, reduction or elimination of any Significant Financial

Interest, of the type described in Sec. 94.5(a) of this Part that did

not exist or was not known at the time of the proposal, within sixty

days of its becoming aware of that Interest.

(ii) HHS may at any time request submission of, or review on site,

all records pertinent to these certifications. To the extent permitted

by law, the PHS will maintain all records of financial interests

confidentially.

(iii) An investigator may participate in a PHS-funded research

project that is being simultaneously supported by an organization that

has a commercial interest in the outcome of the project. However, the

research support must be provided through the PHS awardee Institution.

Any direct compensation or payment to the Investigator under that

support is considered a financial interest under this part.

Sec. 94.5 Management of Significant Financial Interests.

(a) Institutions seeking PHS funding for research shall ensure that

the following types of Significant Financial Interests attributable to

an Investigator are managed, reduced, or eliminated, in accordance with

paragraph (b) of this section, prior to award of the contract:

(i) Any Significant Financial Interest of the Investigator that

would reasonably appear to be directly and significantly affected by

the research funded by PHS, or proposed for funding; and

(ii) Any Significant Financial Interest of the Investigator in an

entity whose financial interest would reasonably appear to be directly

and significantly affected by the research funded by PHS, or proposed

for funding.

(b) In addition to the types of Significant Financial Interests

described in this paragraph that must be managed, an Institution may

require the management of other financial interests as the Institution

deems appropriate.

(c) The designated official(s) must review all financial

disclosures, determine whether Significant Financial Interests could

affect the design, conduct, or reporting of the research activities

funded by PHS, or proposed for such funding, and determine what

conditions or restrictions, if any, should be imposed by the

institution to manage such interests. Examples of conditions or

restrictions that might be imposed to manage actual or potential

conflicts of interest include:

(1) Public disclosure of significant financial interests;

(2) Monitoring of the research by independent reviewers;

(3) Modification of the research plan;

(4) Disqualification from participation in all or a portion of the

research funded by the PHS;

(5) Divestiture of significant financial interests, or;

(6) Severance of relationships that create actual or potential

conflicts.

Sec. 94.6 Remedies.

(a) Each Institution that submits a research contract proposal must

include in its policy for the identification and management of

Significant Financial Interest procedures for enforcement action

against employees who do not comply with the Institution's policy. If

the failure of an employee to comply with the policy of the Institution

has biased the design, conduct, or reporting of the PHS-funded

research, the Institution must promptly notify the PHS Awarding

Component of the corrective action taken. The PHS Awarding Component

will consider the situation and, as necessary, take appropriate action

or refer the matter to the Institution for further action, which may

include directions to the Institution on how to maintain appropriate

objectivity in the funded project.

(b) The HHS may inquire into the Institutional procedures and

actions regarding financial interests in PHS-funded research, including

the disposition of a particular financial interest. Such inquiry may be

initiated based on information obtained by the HHS under this part,

from a procurement-related document (proposal, progress report,

publication of results) or any other source. Based on a specific

inquiry, the HHS may decide that a particular Significant Financial

Interest of the type described in section 4 Sec. 94.4 is so sensitive

that the issuance of a Stop Work Order by the Contracting Officer may

be necessary until the matter is resolved.

(c) In any case in which the Department determines that a PHS-

funded project of clinical research whose purpose is to evaluate the

safety or effectiveness of a drug, medical device, or treatment has

been designed, conducted, or reported by an Investigator with a

Significant Financial Interest that was not disclosed or managed as

required by this part, the Institution must require disclosure of the

financial interest in each public presentation of the results of the

research.

[FR Doc. 94-15500 Filed 6-27-94; 8:45 am]

BILLING CODE 4140-01-P