Objectivity in Research

SUMMARY: The Public Health Service (PHS) and the Office of the

Secretary, HHS, are promulgating regulations establishing standards and

procedures to be followed by institutions that apply for research

funding from the PHS to ensure that the design, conduct, or reporting

of research funded under PHS grants, cooperative agreements or

contracts will not be biased by any conflicting financial interest of

those investigators responsible for the research.

Under the rules, investigators are required to disclose to an

official(s) designated by the institution a listing of Significant

Financial Interests (and those of his/her spouse and dependent

children) that would reasonably appear to be affected by the research

proposed for funding by the PHS. The institutional official(s) will

review those disclosures and determine whether any of the reported

financial interests could directly and significantly affect the design,

conduct, or reporting of the research and, if so, the institution must,

prior to any expenditure of awarded funds, report the existence of such

conflicting interests to the PHS Awarding Component and act to protect

PHS-funded research from bias due to the conflict of interest.

EFFECTIVE DATE: October 1, 1995.

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

Director for Extramural Affairs, National Institutes of Health,

Building 1, Room 552, 9000 Rockville Pike, MSC 0154, Bethesda, MD

20892-0154. The telephone number is (301) 496-5356 (this is not a toll-

free number).

SUPPLEMENTARY INFORMATION: On June 28, 1994 the Department of Health

and Human Services (HHS) published proposed regulations (59 FR 33242)

to ensure that PHS-funded research would not be compromised by

financial interests of investigators that could be reasonably expected

to bias the design, conduct or reporting of the research. In addition

to setting forth proposed rules requiring institutional procedures for

the disclosure and management, reduction or elimination of Significant

Financial Interests that would reasonably appear to be directly and

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

funding, the Notice of Proposed Rulemaking (NPRM) raised several

specific questions about alternatives for implementing the pertinent

statutes and for ensuring that PHS-funded research is not compromised

by any financial conflicts of interest.

The NPRM was published in the Federal Register at the same time the

National Science Foundation (NSF) published its Investigator Financial

Disclosure Policy and reflected coordination between the two agencies.

Since that time, we have continued to work closely with the NSF to

ensure that the NSF policy and our regulations do not impose disparate

requirements upon the many institutions that receive funding from both

agencies. Elsewhere in this separate part in this Federal Register, the

NSF is issuing changes in its policy necessary to maintain consistency

with this final rule, and the changes we have made to conform to the

NSF policy are referenced in the discussion that follows. The agencies

intend to continue their cooperation by working together to develop

common guidance, including a set of questions and answers, to help

institutions implement conflict of interest policies that comply with

both HHS and NSF requirements.

During the 60 day comment period that ended on August 28, 1994, the

PHS received 102 comments on the NPRM. Most of the comments were

generally supportive of giving the applicant institutions primary

responsibility for identifying and resolving financial conflicts of

interest that could directly and significantly affect the PHS-funded

research. The comments are summarized below under the headings: Changes

in the NPRM; Comments Not Resulting in Any Changes; and Responses to

Questions on Alternatives.

Changes in the NPRM

A summary of the changes made in the regulations as proposed on

June 28, 1994, follows.

1. In the section titles, Secs. 50.601, 50.602, 50.605 and several

other sections,\1\ references to ``Significant Financial Interests'' or

``Significant Financial Interests of the type described in

Sec. 50.605,'' have been changed to refer to a conflict of interest or

conflicting financial interests. This change has been made in response

to many of the comments. It was pointed out that this change will make

the HHS regulations consistent with the NSF regulations and that the

institutions can only manage the conflict, not the financial interests.

\1\ Only the sections in 42 CFR part 50 are referenced. Similar

changes have been made in the regulations at 45 CFR part 94 which

will apply to contracts.

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2. In response to several comments, the ``Purpose'' sections in the

grants and the contracts regulations have been rewritten to make them

more concise and parallel.

3. A reference to Sec. 50.604(a) has been added to the

``Applicability'' section. As explained more fully in paragraph 6

below, this change and the change in Sec. 50.604(a) clarify that the

regulations apply to Investigators carrying out the PHS-funded research

for subgrantees or contractors of the awardee institution.

4. In response to several comments, the definition of

``Investigator,'' has been amended to delete the phrase ``at the

Institution.''

5. The definition of ``Significant Financial Interest'' in

Sec. 50.603 has been changed in several respects. Clause (i) has been

split so that ownership interests are now referenced in a new clause

(ii). Some commenters felt that it was not clear whether the

requirement that an institution be an applicant under the SBIR program

modified both ownership interest and salary, royalties or other

remuneration.

The exception for financial interests in business enterprises has

been split to clarify that the per annum measurement applies only to

salary, royalties or other payments not reasonably expected to exceed

$10,000 per annum. In addition, the dollar limits have been changed

from $5,000 to $10,000 and the applicability of the alternative

measures of $10,000 in value or five percent ownership interest, has

been clarified. These changes have been made in response to a large

number of comments stating that the $5,000 limit was too low. A

majority of those comments indicated that $10,000 would be an

appropriate figure, particularly since the experience of state

universities in California, and some other universities, is that

interests up to this amount do not raise conflict of interest concerns.

The reference to determining the value of equity interests on the

basis of public prices or other reasonable measures of fair market

value was adapted from a similar provision in the proposed FDA rule on

conflict of interest (59 FR 48708 et seq., September 22, 1994).

6. Section 50.604(a) has been revised to clarify that the

Institution must

[[Page 35811]]

maintain an appropriate written, enforced conflict of interest policy

(this parallels NSF language) and that the Institution must make

reasonable efforts to ensure compliance with the regulations by

Investigators working for subgrantees and contractors, either by

including those Investigators in the Institution's policy or by

receiving appropriate assurances from their employers. This latter

change was recommended in several comments and is consistent with

current regulations and policies on the applicability of grant terms

and conditions to subgrantees and contractors.

7. In response to many comments, paragraph (a)(3) (redesignated as

paragraph (c)) of Sec. 50.604 has been changed from requiring the

institution to ``ensure'' that investigators have disclosed all

Significant Financial Interest to simply ``require'' disclosures by

each investigator. In addition, in response to several comments and for

uniformity with the NSF guidelines, this paragraph has been revised to

require disclosure, by the time an application is submitted to PHS, of

those Significant Financial Interests attributable to the Investigator

that would reasonably appear to be affected by the research, including

interests in entities whose financial interests would reasonably appear

to be affected by the research. This change eliminates the need to

cross-reference the description of a conflict interest in

Sec. 50.605(a). Also, the changes in this section and in

Secs. 50.604(c) and 50.605(a) will result in a slightly broader

disclosure by the Investigator than under the NPRM. The institutional

official(s) will review the disclosures and determine which disclosed

interests could directly and significantly affect the design, conduct

or reporting of the research, necessitating the management, reduction

or elimination of the conflict of interest. In addition, in response to

a significant number of comments, the reference to ``pendency'' of the

award has been changed to ``period'' of the award.

Paragraph (a)(5) of Sec. 50.604 (redesignated as paragraph (e)) has

been changed to delete the requirement that records be identifiable to

each award, and to refer to the applicable retention requirements in

the HHS grants administration regulations. The former change has been

made for conformity with the NSF policy, and the latter change

clarifies that the recordkeeping requirements of these regulations are

intended to be consistent with the HHS grants administration

regulations. The change in paragraph (f) of Sec. 50.604 (formerly

paragraph (a)(6)) has also been made for conformity with the NSF

policy.

8. In response to many comments, Sec. 50.604(a)(7)(ii), now

redesignated as (g)(2), has been revised to reduce the burden on

institutions and ensure that the application does not have to state

whether a conflict of interest has been found. Rather, the provision

now requires the applicant to certify that action will be taken, prior

to the institution's expenditure of any funds under the award, to

report to the PHS awarding component the existence of a conflicting

interest and assure that the interest has been managed, reduced or

eliminated in accordance with the regulations. The commentors felt that

review of an application would be biased if the application indicated

there was a conflict of interest and that, in any case, it would not be

feasible for an institution to review the disclosed financial interests

and determine whether a conflict of interest was present in the limited

time available prior to submission of the application.

In addition, the previous Sec. 50.604(a)(8)(i) has been

incorporated into Sec. 50.604(g)(2) with minor changes. Many commentors

felt that the 60 day period for management of a conflict of interest

found after the award should be doubled. However, the 60 day period

does not seem unreasonable, since we have clarified that it is measured

from the time the institution identifies the conflict of interest and

that only interim action is required by the end of the 60 day period.

As stated in the NPRM, section 493A of the PHS Act imposes a continuing

obligation on awardees to identify conflicts of interest in clinical

research projects and report their management, reduction or

elimination. This and other statutory requirements for clinical

research have been applied to all PHS-funded research in order to avoid

confusion and provide for uniform PHS reporting requirements. We would

not expect this reporting requirement to be burdensome, as only a few

conflicts of interest are likely to be identified after the award.

Section 50.604(a)(8)(ii) has been incorporated into Sec. 50.606(b),

because the review of records referenced in the former section is

directly related to the inquiry into actions regarding conflicts of

interest addressed in the latter section. Section 50.604(a)(8)(iii) has

been deleted as duplicative of the statement in the definition of

``Significant Financial Interest'' (Sec. 50.603), that salary,

royalties or other remuneration from the institution is not considered

a Significant Financial Interest. Under current regulations and

policies governing applications for PHS research grants, if the

applicant receives non-PHS grant support for the same project to be

supported by the PHS award, the grant must be listed in the ``Other

Support'' section of the application for PHS support.

9. Section 50.605(a) has been revised to clarify that the

institutional official(s) must identify and manage, reduce or eliminate

any conflicts of interest. Consistent with the language in the NSF

guidelines, this provision states that a conflict of interest exists

when the designated official(s) reasonably determines that a

Significant Financial Interest could directly and significantly affect

the design, conduct, or reporting of the PHS-funded research. As noted

above in the discussion of the changes to Sec. 50.604(c), Investigators

must disclose those Significant Financial Interests that would

reasonably appear to be affected by the research and the institutional

official must decide which of those interests are conflicting under the

standard prescribed in Sec. 50.605(a). This change is intended to more

clearly define and limit the types of financial interests that must be

managed, reduced or eliminated because they are considered to be

conflicting interests.

In response to a few comments, the clause introducing the examples

of methods for managing, reducing or eliminating conflicts has been

clarified by adding after ``include,'' the phrase ``but are not limited

to.''

10. In Sec. 50.606, the first sentence has been deleted because it

essentially duplicated the provision in proposed Sec. 50.604(a)(6). In

the next sentence, the term ``employee'' has been changed to the

defined term ``Investigator'' and, in response to a comment, the phrase

``or to be taken'' has been added at the end of the sentence. In

addition, paragraph (b) has been rewritten to incorporate

Sec. 50.604(b), because the two provisions were somewhat duplicative.

11. Many commentors were concerned about what they considered to be

a significant underestimation of the annual reporting and recordkeeping

burden. In response, burdens have been further reduced by raising the

dollar threshold for financial interests that are considered

Significant Financial Interests subject to the regulations, and by

amending Sec. 50.604(g)(2) to require the reporting of a conflict of

interest and its management, reduction or elimination only after an

award has been made (but before any expenditure of funds). In addition,

the estimated annual reporting and record keeping burden has been

recalculated in light of these changes and the public comments.

12. Many commentors urged uniformity with the NSF guidelines, but

[[Page 35812]]

indicated the pursuit of that end should not interfere with necessary

changes to the NPRM . As noted above, many of the changes result in

greater uniformity between these regulations and the NSF guidelines.

The few remaining differences between these regulations and the NSF

guidelines are based upon requirements in section 493A of the PHS Act,

42 U.S.C. 289b-1, and differences between the grant programs and

experiences under those programs.

The effective date for these regulations, October 1, 1995, is the

same as the effective date for the NSF guidelines. Although some

commentors felt that a longer lead time would be necessary to enable

institutions to prepare for implementation of the regulations, we

believe the time period provided is ample, particularly because

institutions have had since June 28, 1994, to prepare for

implementation of the similar provisions of the NSF guidelines and

because many institutions already have conflict of interest procedures.

Comments Not Resulting in Any Changes

1. Title

Two commentors felt that the title of the regulations should be

changed to focus upon investigator financial disclosure or conflict of

interest. These are not inappropriate titles, but we have chosen to

focus the title upon the desired outcome of the review of investigator

financial disclosures, that is, objectivity in the design, conduct and

reporting of the research.

2. Section 50.602 Applicability

Several commentors recommended that the regulations be limited to

clinical research. As explained in the preamble to the NPRM, experience

indicates that financial conflicts of interest can arise in all types

of research. It is expected that the risk of a conflict of interest

will be higher in clinical research than in other types of research,

but we have concluded that the latter risk is sufficiently likely that

pertinent financial interests should be disclosed and reviewed.

In response to a specific request for comments on the NSF exemption

from its conflict of interest policy for grantees employing fifty

persons or less, it was generally agreed by those responding that PHS-

funded investigators working for small entities may be just as subject

to conflicts of interest as investigators working at large

institutions. This view is consistent with the PHS experience referred

to in the preamble of the NPRM. The NSF experience has differed,

apparently because of the differences between the research funding that

is provided to small entities by HHS and NSF.

3. Section 50.603 Definitions

Investigator. There were diverse comments on the definition of the

term, ``Investigator.'' Although one commentor supported the approach

of the NPRM of leaving it to the institutions to determine who are

persons ``responsible for the design, conduct, or reporting'' of the

PHS funded research, others felt that the definition should offer more

guidance on who would fall within that category. It was recommended

that the term be limited to Principal Investigators, Co-Principal

Investigators, and faculty collaborators and that students and

technical staff be excluded. It was also recommended that

administrators be excluded by limiting the definition to the

``scientific design'' of the research. The definition of Investigator

has not been changed, except for deleting the phrase ``at the

institution,'' as explained above. The degree to which individuals are

responsible for the design, conduct, or reporting of the PHS-funded

research will vary. In some circumstances students, technical personnel

and administrators may not be ``responsible,'' but in other

circumstances, they may be, in that they are given responsibility for a

task that could have a significant effect on the design, conduct or

reporting of the research. Based on their knowledge of the specific

circumstances, we believe the institutions are in the best position to

determine who is responsible for the design, conduct or reporting of

the research to such a degree that his/her financial interests should

be reviewed.

Significant Financial Interest. As noted above, the public comments

led to several changes in this definition. There were a number of other

detailed comments that were not adopted, primarily because they would

have: Complicated the definition and its application (e.g., have

different threshold levels for publicly traded equity interests and

those not so traded, differentiate between large and small companies,

and adopt criteria for determining reasonably anticipated future

value); led to a long, cumbersome list of additional exclusions (e.g.,

exclude copyright that is not licensable, mutual funds, pensions, and

reimbursement for expenses); or were based upon a misunderstanding of

the definition and its effect (some apparently did not understand that

any remuneration an investigator receives from the applicant

institution was excluded). Some commentors questioned the exclusion of

ownership interests in SBIR applicants. No change has been made in

response to that comment because we believe such ownership interests

are apparent to PHS funding agencies based on the application.

Furthermore, the exclusion does not prohibit institutions from adopting

more rigorous standards, if they wish to do so.

The definition of Significant Financial Interest alone does not

delineate what the investigator must disclose or what the institution

must manage, reduce or eliminate. The Investigator must consider all

Significant Financial Interests, but need disclose only those that

would reasonably appear to be affected by the research proposed for

funding by the PHS, including the Investigator's financial interest in

entities whose interests would be affected. Following this disclosure,

the institutional official must determine, on the basis of the

regulatory standard, whether there are conflicting interests that need

to be managed, reduced, or eliminated. We think it is appropriate to

have a relatively broad range of financial interests considered by the

Investigator in making his/her determination of those that must be

disclosed. In this manner, broad consideration of possibly conflicting

interests is assured with minimal burdens, since only a limited number

of interests need to be disclosed and an even smaller number will need

to be managed, reduced or eliminated.

There were a number of comments recommending different thresholds

than those that were adopted, including a threshold adjusted for

inflation. The threshold amounts adopted were recommended in many

comments and seem to represent a reasonable balance between the need to

consider a broad range of financial interests and the burdens imposed

upon the investigators and the institutions.

4. Section 50.604

Many commented that the requirement for updating financial

disclosures (in Sec. 50.604(c) of these regulations) needed to be

clarified. The provision, which has not been changed, except for a

minor word change, states that financial disclosures must be updated

during the period of the award, either on an annual basis or as new

reportable Significant Financial Interests are obtained. We believe

this language is reasonably clear in conveying that the institutions

have the option of adopting either of two methods for investigators to

report changes in financial interests during the

[[Page 35813]]

period of the PHS award: reporting on an annual basis any changes in

the previously reported financial interests; or requiring investigators

to update disclosures as new reportable Significant Financial Interests

are obtained. An annual reporting requirement would serve as a reminder

for investigators to review their prior disclosures, but it might be

burdensome if in fact there are no changes and it could result in

delayed reporting as compared to the alternative. This burden would be

eliminated by the other reporting alternative, but there would be no

annual reminder to investigators to review and update their

disclosures. The weighing of these factors and the decision are left to

the institutions. The reference to ``new reportable Significant

Financial Interests'' is intended to include financial interests that

become reportable due to an increase in value that meets the reporting

threshold, as well as the acquisition of new interests that are

reportable. Of course, both types of interests are subject to

disclosure by the investigator only if they meet the criteria in

Sec. 50.604(c).

It was recommended that the requirement in Sec. 50.604(g)(2) for

the reporting to the PHS Awarding Component of the existence of a

conflicting interest be changed to conform with the NSF approach that

requires such reporting only ``if the institution finds that it is

unable to satisfactorily manage an actual or potential conflict of

interest.'' As stated in the NPRM, section 493A of the Public Health

Service Act requires that institutions report conflicting interests for

clinical research projects. To avoid disparate requirements for

clinical and nonclinical research, the regulations apply this reporting

requirement to all PHS-funded research.

5. Section 50.606

One commentor felt that the notification required in paragraph (a)

should go to HHS, rather than to the PHS Awarding Component. Because

PHS Awarding Components are responsible for the award and have

delegated authority, it is appropriate for those components to receive

notifications and to act on them. On the other hand, paragraph (b)

refers to HHS inquiries into institutional procedures and actions

because such audit type activities may be conducted by HHS components

other than the awarding agencies. As is made clear in the definitions,

the term HHS encompasses all components of the Department, including

the PHS Awarding Components.

A number of commentors objected to the requirement for submission

of records to the HHS, fearing that the confidentiality of such records

could not be assured. 45 CFR 74.53 already gives the HHS a right of

access to all records pertinent to grants, which would include the

records relating to financial conflicts of interest of investigators

carrying out the PHS-funded research. It is expected that the PHS

funding agencies will not often require the submission of records or

retain copies from audits at the institution, but when that occurs the

records will be maintained confidentially. In addition, although a few

commentors objected to the reference to suspension of funding pending

the resolution of a conflicting interest determined by the PHS awarding

agency as biasing the objectivity of the research, that provision has

been retained and a reference to the regulatory authority for the

suspension has been added. Such suspension action would be necessary to

protect Federal funds only in unusual situations, but we believe

awardees subject to the regulations should be notified of the potential

for such action.

Responses to Questions on Alternatives

The NPRM requested specific comments on the following issues: (1)

Whether the regulations should address institutional conflicts of

interest, as well as individual conflicting interests and, if so, how;

(2) what types of financial interests should be disclosed; (3) whether

the disclosed financial interests should include financial interests in

products that would compete with the product or potential product of

the PHS-funded research; (4) whether an employee's equity or other

nonsalary financial interests in an applicant institution should be

excluded from the definition of Significant Financial Interest; and (5)

whether there should be an exemption for all compensation other than

that tied to the outcome of the research. Most of the commentors

addressed at least some of these issues. Those comments are summarized

below.

Institutional Conflicts

Those addressing this issue were nearly unanimous in concluding

that the regulations should not address the institutional conflict of

interest issue because of the need to carefully consider that issue

through a separate process. We agree with that conclusion. The comments

on the alternatives for addressing institutional conflicts of interest

will be considered separately from this rulemaking.

Competing Products

Over 30 commentors opposed any requirement for disclosing financial

interests in entities or products that would compete with the PHS-

funded research. Twelve commentors supported investigator disclosure of

such competing entities or products, but some felt that the disclosure

should be limited to those financial interests in competitors or

competing products known to the investigator. As revised, the

regulation would not specifically require the disclosure of such

interests, but, depending upon the circumstances, those interests might

come within the definition of the financial interests that must be

disclosed. In clinical research, it is probable that a financial

interest in a product that competes with the product being evaluated

could reasonably appear to be affected by the PHS-funded research. Such

a relationship is much less probable where the PHS funding is for basic

research.

Types of Financial Interests Disclosed

Most of the comments on this issue are summarized above in the

discussion of comments on the definition of Significant Financial

Interests and on the financial interest that must be disclosed. The

financial interests to be disclosed must be known to the investigator

and determined by him/her to be a financial interest that would

reasonably appear to be affected by the PHS-funded research or to be a

financial interest in an entity whose financial interest would

reasonably appear to be affected by the research. This criterion would,

in most cases, require that the financial disclosure be relevant to

biomedical research or health care, as was recommended by one

commentor, but the disclosure would not necessarily be limited to those

fields, because other types of financial interests could reasonably

appear to be affected by the PHS-funded research.

Exclusion of Financial Interests

There were few specific comments on the questions relating to the

exclusion from the definition of Significant Financial Interest of

equity interests in, or compensation from, the applicant institution.

The general comments on the definition emphasized the need for limiting

disclosures to financial interests related to the research proposed for

PHS funding. We are retaining the exclusion for all remuneration paid

to an investigator by an applicant institution and the exclusion of any

ownership interest in the applicant institution if it is an

[[Page 35814]]

applicant under the SBIR or STTR program. We have not expanded the

exclusion for ownership interests to encompass all institutions,

because we believe there may be situations in which an ownership

interest in a for-profit applicant could be in conflict with the

investigator's responsibility for the conduct of the PHS-funded

research and that ownership interest should be subject to appropriate

institutional review. Experience under the regulations may prove this

reasoning to be incorrect. If so, we will consider appropriate

amendments to the regulations.

Regulatory Impact

The Department has concluded that this rule is not economically

significant under Executive Order 12866 and that it thus does not

require the development of a comprehensive benefit-cost analysis. While

we agree with comments received that the initial estimate of

implementation costs was low, none of these comments indicated that the

costs would exceed $100 million annually; in addition, changes made in

the final regulations will reduce implementation costs. Commentors did

not provide any evidence that the rule will hamper desirable research

or otherwise have an adverse effect on the conduct of research under

PHS-funded grants or on the consequent technological progress that is

so important to the Nation's economy.

Executive Order 12866 requires that the Office of Management and

Budget (OMB) review all regulations that may create a serious

inconsistency with or otherwise interfere with an action taken or

planned by another Federal agency. This rule was thus reviewed by OMB

and coordinated with the policy of the NSF on this subject (see the

notice of technical changes in NSF policy published elsewhere in this

separate part of this Federal Register.

The Department prepares a regulatory flexibility analysis, in

accordance with the Regulatory Flexibility Act of 1980 (5 U.S.C.

chapter 6), if a rule is expected to have a significant impact on a

substantial number of small entities. Although we have not followed the

NSF approach of exempting entities with 50 or fewer employees, we have

concluded that the regulation will not have a significant impact on

small entities. Any such effect is mitigated by the provisions of the

regulations and the fact that the regulations impose obligations

primarily on those receiving grants that can be used, in part (amounts

for indirect costs), to offset the costs of compliance with the

regulatory requirements. The regulations do not apply to SBIR and STTR

Phase I applications. These programs are for small businesses and the

Phase I grants are for limited amounts. Phase II grants are for larger

amounts and thus more funds would be available for meeting the costs of

compliance. Furthermore, we have changed the regulations to reduce

burdens and costs of compliance for all entities subject to the

regulations by eliminating more financial interests from consideration

and by reducing burdens upon institutions through changes in the

certification requirements. Institutions do not have to take action to

identify, report and manage conflicting interests until after being

notified by the PHS Awarding Agency of its decision to award funds.

For the same reasons, this rule will not create an unfunded mandate

on State-owned institutions and thus would not trigger the requirements

of Executive Order 12875 on ``Enhancing the Intergovernmental

Partnership.'' The proposed rule has been changed to significantly

reduce burdens on institutions and, as noted above, institutions will

be able to use amounts awarded for indirect costs to meet the costs of

implementing the regulations.

Paperwork Reduction Act

The final rules contain information collection requirements that

are subject to review by OMB under the Paperwork Reduction Act of 1980.

The title, description, and respondent description applicable to the

information collection are shown below with an estimate of the annual

reporting and recordkeeping burden. These estimates have been revised

in light of the comments on the proposed rules and the changes in the

regulations. Consistent with the comments and a thorough consideration

of the potential burdens imposed by the reporting, recordkeeping and

disclosure requirements of the regulations, the statement of the burden

has been reduced from that stated in the NPRM, based upon changes in

the regulations that will significantly reduce the burdens on

institutions and upon more accurate estimates of the burdens imposed by

specific requirements.

The mean hours per response for initial reports of conflicts of

interest have been significantly increased to account for the review by

the institution of all the financial disclosures relating to an award.

Although not more than 200 reports of conflicts of interest are

expected, the institutions will need to review all financial

disclosures associated with PHS funding awards to determine whether or

not any conflicts of interest exist. Thus, the total burden of 16,000

hours is based on estimates that it will take, on the average, four-

fifths of an hour to review each of the 20,000 financial disclosures

associated with PHS funding awards. If the number of disclosures is

reduced because of the increase in the amount of the threshold for

significance, the burden may be an overestimate.

The burden for subsequent reports of conflicts (made during the

twelve month period after the initial report) is significantly less,

because we do not expect many additional reportable conflicts and there

will be only a limited number of disclosures to review.

We have significantly reduced the respondent number for reporting

that failure of an investigator to comply with the institution's

conflict of interest policy has biased the design, conduct or reporting

of the research (Sec. 50.606(a)). We have estimated there will be no

more than five such instances and we think that is a generous estimate.

For recordkeeping, we have listed the number of files expected to

be necessary, rather than the number of institutions, because it will

result in a more accurate estimation. The 20,000 figure is based upon

35,000 awards annually, reduced to account for those investigators who

will not have any disclosures (no files are required to be established)

and those investigators with more than one award. We have estimated it

will take four hours, on the average, for the establishment and

maintenance of each file. Although we believe this to be a very

generous estimate, we note that it will include the time of both

administrative and clerical personnel.

The burden figures for informing each investigator of the

institution's policy are based upon 2,000 recipient institutions and 20

hours for the performance of this function. This time burden could be

reduced even further if institutions choose to inform investigators

through a notice in the grant application procedures. This method of

notification would be acceptable because the regulations do not specify

the method of notification.

The financial disclosures burden estimate (Sec. 50.604(c)) is based

upon an investigator figure of 35,000 with an average response time of

one hour. We believe experience may show that the number of disclosures

will be significantly less because of the increases in the reporting

threshold. Note that we have not attempted to calculate the overall

hours spent by the institution to establish the necessary

administrative mechanisms to comply with the regulations. The estimates

are for burdens imposed by disclosure,

[[Page 35815]]

reporting and recordkeeping requirements, not all activities of an

institution that may result from the regulations.

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 identify and manage, reduce, or

eliminate any conflicting 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 business, and other for-profit organizations and

investigators working for such institutions, businesses and

organizations.

Estimated Annual Reporting and Recordkeeping Burden

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

Applicable

Applicable section of section of Total Mean hours Total hours Total hours

regulation 42 CFR regulation 45 number of per 42 CFR 45 CFR Total hours

CFR respondents response

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

Reporting:

50.604(g)(2) (initial 94.4(g)(2) 200 80.0 14,000 2,000 16,000

report of conflict of

interest).

50.604(g)(2) (subsequent 94.4(g)(2) 30 2.0 54 6 60

reports of conflict of

interest).

50.606(a)................. 94.6(a) 5 10.0 40 10 50

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

Total................... ............... ........... ........... ........... ........... 16,110

Recordkeeping:

50.604(e)................. 94.4(e) 20,000 4 72,000 8,000 80,000

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

Total................... ............... ........... ........... ........... ........... 80,000

Disclosure:

50.604(a)................. 94.4(a) 2,000 20.0 36,000 4,000 40,000

50.604(c)................. 94.4(c) 35,000 1 31,600 3,400 35,500

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

Total................... ............... ........... ........... ........... ........... 75,000

Total Burden............ ............... ........... ........... ........... ........... 171,110

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

In accordance with the requirements of the Paperwork Reduction Act

of 1980, the Department of Health and Human Services has submitted 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 10235, 725 17th Street NW.,

Washington, DC 20503.

Catalogue of Federal Domestic Assistance

The rule will affect all extramural research, research and

development, and research and development support funded by the Public

Health Service. Questions about the rule should be directed to Dr.

George J. Galasso, Associated Director for Extramural Affairs, National

Institutes of Health, Building 1, Room 552, 9000 Rockville Pike, MSC

0154, Bethesda, MD 20892-0154. The telephone number is (301) 496-5356

(this is not a toll-free number).

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: March 13, 1995.

Philip R. Lee,

Assistant Secretary for Health.

Approved: May 17, 1995.

Donna E. Shalala,

Secretary.

Accordingly, 42 CFR part 50 and 45 CFR subtitle A are amended as

set forth below:

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

Sec.

50.601 Purpose.

50.602 Applicability.

50.603 Definitions.

50.604 Institutional responsibility regarding conflicting interests

of investigators.

50.605 Management of conflicting interests.

50.606 Remedies.

50.607 Other HHS regulations that apply.

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

Subpart F--Responsibility of Applicants for Promoting Objectivity

in Research for Which PHS Funding Is Sought

Sec. 50.601 Purpose.

This subpart promotes objectivity in research by establishing

standards to ensure there is no reasonable expectation that the design,

conduct, or reporting of research funded under PHS grants or

cooperative agreements will be biased by any conflicting financial

interest of an Investigator.

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 such research (see Sec. 50.604(a));

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

conflicting financial interest of the individual.

[[Page 35816]]

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

who is responsible for the design, conduct, or reporting of research

funded by PHS, or proposed for such funding. For 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 applicant

institution;

(2) Any ownership interests in the institution, if the institution

is an applicant under the SBIR Program;

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

sponsored by public or nonprofit entities;

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

public or nonprofit entities;

(5) An equity interest that when aggregated for the Investigator

and the Investigator's spouse and dependent children, meets both of the

following tests: Does not exceed $10,000 in value as determined through

reference to public prices or other reasonable measures of fair market

value, and does not represent more than a five percent ownership

interest in any single entity; or

(6) Salary, royalties or other payments that when aggregated for

the Investigator and the Investigator's spouse and dependent children

over the next twelve months, are not expected to exceed $10,000.

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 Pub. L. 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 (STTR)

Program, which was established by Pub. L. 102-564.

Sec. 50.604 Institutional responsibility regarding conflicting

interests of investigators.

Each Institution must:

(a) Maintain an appropriate written, enforced policy on conflict of

interest that complies with this subpart and inform each Investigator

of that policy, the Investigator's reporting responsibilities, and of

these regulations. If the Institution carries out the PHS-funded

research through subgrantees, contractors, or collaborators, the

Institution must take reasonable steps to ensure that Investigators

working for such entities comply with this subpart, either by requiring

those Investigators to comply with the Institution's policy or by

requiring the entities to provide assurances to the Institution that

will enable the Institution to comply with this subpart.

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

financial disclosure statements from each Investigator who is planning

to participate in PHS-funded research.

(c)(1) Require that by the time an application is submitted to PHS

each Investigator who is planning to participate in the PHS-funded

research has submitted to the designated official(s) a listing of his/

her known Significant Financial Interests (and those of his/her spouse

and dependent children):

(i) That would reasonably appear to be affected by the research for

which PHS funding is sought; and

(ii) In entities whose financial interests would reasonably appear

to be affected by the research.

(2) All financial disclosures must be updated during the period of

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

Financial Interests are obtained.

(d) Provide guidelines consistent with this subpart for the

designated official(s) to identify conflicting interests and take such

actions as necessary to ensure that such conflicting interests will be

managed, reduced, or eliminated.

(e) Maintain records of all financial disclosures and all actions

taken by the Institution with respect to each conflicting interest for

at least three years from the date of submission of the final

expenditures report or, where applicable, from other dates specified in

45 CFR 74.53(b) for different situations.

(f) Establish adequate enforcement mechanisms and provide for

sanctions where appropriate.

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

subpart applies, that:

(1) There is an effect at that Institution a written and enforced

administrative process to identify and manage, reduce or eliminate

conflicting interests with respect to all research projects for which

funding is sought from the PHS,

(2) Prior to the Institution's expenditure of any funds under the

award, the Institution will report to the PHS Awarding Component the

existence of a conflicting interest (but not the nature of the interest

or other details) found by the institution and assure that the interest

has been managed, reduced or eliminated in accordance with this

subpart; and, for any interest that the Institution identifies as

conflicting subsequent to the Institution's initial report under the

award, the report will be made and the conflicting interest managed,

reduced, or eliminated, at least on an interim basis, within sixty days

of that identification;

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

request, to the HHS regarding all conflicting interests identified by

the Institution and how those interests have been managed, reduced, or

eliminated to protect the research from bias; and

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

[[Page 35817]]

Sec. 50.605 Management of conflicting interests.

(a) The designated official(s) must: Review all financial

disclosures; and determine whether a conflict of interest exists and,

if so, determine what actions should be taken by the institution to

manage, reduce or eliminate such conflict of interest. A conflict of

interest exists when the designated official(s) reasonably determines

that a Significant Financial Interest could directly and significantly

affect the design, conduct, or reporting of the PHS-funded research.

Examples of conditions or restrictions that might be imposed to manage

conflicts of interest include, but are not limited to:

(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.

(b) In addition to the types of conflicting financial interests

described in this paragraph that must be managed, reduced, or

eliminated, an Institution may require the management of other

conflicting financial interests, as the Institution deems appropriate.

Sec. 50.606 Remedies.

(a) If the failure of an Investigator to comply with the conflict

of interest 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 or to

be 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 at any time inquire into the Institutional

procedures and actions regarding conflicting financial interests in

PHS-funded research, including a requirement for submission of, or

review on site, all records pertinent to compliance with this subpart.

To the extent permitted by law, HHS will maintain the confidentiality

of all records of financial interests. On the basis of its review of

records and/or other information that may be available, the PHS

Awarding Component may decide that a particular conflict of interest

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, reduced, or eliminated the conflict of interest in

accordance with this subpart. The PHS Awarding Component may determine

that suspension of funding under 45 CFR 74.62 is necessary until the

matter is resolved.

(c) In any case in which the HHS 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 conflicting

interest that was not disclosed or managed as required by this subpart,

the Institution must require the Investigator(s) involved to disclose

the conflicting 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--Uniform Administrative Requirements for Awards and

Subawards to Institutions of Higher Education, Hospitals, Other Non-

Profit Organizations, and Commercial Organizations; and Certain

Grants and Agreements with States, Local Governments and Indian

Tribal Governments

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

procurement)

45 CFR Part 79--Program Fraud Civil Remedies

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

Cooperative Agreements to State and Local Governments

2. A new part 94 is added to 45 CFR, subtitle A, to read as

follows:

PART 94--RESPONSIBLE PROSPECTIVE CONTRACTORS

Sec.

94.1 Purpose.

94.2 Applicability.

94.3 Definitions.

94.4 Institutional Responsibility Regarding Conflicting Interests

of Investigators.

94.5 Management of Conflicting 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

standards to ensure there is no reasonable expectation that the design,

conduct, or reporting of research to be performed under PHS contracts

will be biased by any conflicting financial interest of an

Investigator.

Sec. 94.2 Applicability.

This part is applicable to each Institution that seeks PHS funding

for research and, through the implementation of this part, to each

Investigator who participates in such research (see Sec. 94.4(a));

provided that this part 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)

(1) That submits a proposal for a research contract whether in

response to a solicitation from the PHS or otherwise, or

(2) That assumes the legal obligation to carry out the research

required under the contract.

Investigator means the principal investigator and any other person

who is responsible for the design, conduct, or reporting of a research

project funded by PHS, or proposed for such funding. For purposes of

the requirements of this part 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.

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

42 U.S.C. 201 et seq.

PHS Awarding Component means an organizational unit of the PHS that

funds research that is subject to this part.

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

[[Page 35818]]

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 applicant

institution;

(2) Any ownership interests in the institution, if the institution

is an applicant under the SBIR program;

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

sponsored by public or nonprofit entities;

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

public or nonprofit entities;

(5) An equity interest that when aggregated for the Investigator

and the Investigator's spouse and dependent children, meets both of the

following tests: Does not exceed $10,000 in value as determined through

reference to public prices or other reasonable measures of fair market

value, and does not represent more than a five percent ownership

interest in any single entity; or

(6) Salary, royalties or other payments that when aggregated for

the investigator and the investigator's spouse and dependent children

over the next twelve months, are not reasonably expected to exceed

$10,000.

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 (STTR) Program,

which was established by Public Law 102-564.

Sec. 94.4 Institutional responsibility regarding conflicting interests

of investigators.

Each Institution must:

(a) Maintain an appropriate written, enforced policy on conflict of

interest that complies with this part and inform each Investigator of

that policy, the Investigator's reporting responsibilities, and of

these regulations. If the Institution carries out the PHS-funded

research through subcontractors, or collaborators, the Institution must

take reasonable steps to ensure that Investigators working for such

entities comply with this part, either by requiring those Investigators

to comply with the Institution's policy or by requiring the entities to

provide assurances to the Institution that will enable the Institution

to comply with this part.

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

financial disclosure statements from each Investigator who is planning

to participate in PHS-funded research.

(c)(1) Require that by the time an application is submitted to PHS,

each Investigator who is planning to participate in the PHS-funded

research has submitted to the designated official(s) a listing of his/

her known Significant Financial Interests (and those of his/her spouse

and dependent children):

(i) that would reasonably appear to be affected by the research for

which PHS funding is sought; and

(ii) in entities whose financial interests would reasonably appear

to be affected by the research.

(2) All financial disclosures must be updated during the period of

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

Financial Interests are obtained.

(d) Provide guidelines consistent with this part for the designated

official(s) to identify conflicting interests and take such actions as

necessary to ensure that such conflicting interests will be managed,

reduced, or eliminated.

(e) Maintain records of all financial disclosures and all actions

taken by the Institution with respect to each conflicting interest for

three years after final payment or, where applicable, for the other

time periods specified in 48 CFR part 4, subpart 4.7.

(f) Establish adequate enforcement mechanisms and provide for

sanctions where appropriate.

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

(1) there is in effect at that Institution a written and enforced

administrative process to identify and manage, reduce or eliminate

conflicting interests with respect to all research projects for which

funding is sought from the PHS;

(2) prior to the Institution's expenditure of any funds under the

award, the Institution will report to the PHS Awarding Component the

existence of any conflicting interest (but not the nature of the

interest or other details) found by the Institution and assure that the

interest has been managed, reduced or eliminated in accordance with

this part; and, for any interest that the Institution identifies as

conflicting subsequent to the Institution's initial report under the

award, the report will be made and the conflicting interest managed,

reduced, or eliminated, at least on an interim basis, within sixty days

of that identification.

(3) the Institution agrees to make information available, upon

request, to the HHS regarding all conflicting interests identified by

the Institution and how those interests have been managed, reduced, or

eliminated to protect the research from bias; and

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

Sec. 94.5 Management of conflicting interests.

(a) The designated official(s) must: Review all financial

disclosures; and determine whether a conflict of interest exists, and

is so, what actions should be taken by the institution to manage,

reduce, or eliminate such conflict of interest. A conflict of interest

exists when the designated official(s) reasonably determines that a

Significant Financial Interest could directly and significantly affect

the design, conduct, or reporting of the PHS-funded research. Examples

of conditions or restrictions that might be imposed to manage conflicts

of interest include, but are not limited to:

(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.

(b) In addition to the types of conflicting financial interests

described in this paragraph that must be managed, reduced, or

eliminated, an Institution may require the management of other

conflicting financial interests, as the Institution deems appropriate.

Sec. 94.6 Remedies.

(a) If the failure of an Investigator to comply with the conflict

of interest 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 or to

be 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.

[[Page 35819]]

(b) The HHS may at any time inquire into the Institutional

procedures and actions regarding conflicting financial interests in

PHS-funded research, including a review of all records pertinent to

compliance with this part. HHS may require submission of the records or

review them on site. To the extent permitted by law HHS will maintain

the confidentiality of all records of financial interests. On the basis

of its review of records and/or other information that may be

available, the PHS Awarding Component may decide that a particular

conflict of interest 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, reduced, or eliminated the

conflict of interest in accordance with this part. 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 HHS 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 conflicting

interest that was not disclosed or managed as required by this part,

the Institution must require disclosure of the conflicting interest in

each public presentation of the results of the research.

[FR Doc. 95-16799 Filed 7-10-95; 8:45 am]

BILLING CODE 4140-01-M