OBJECTIVITY IN RESEARCH

NIH GUIDE, Volume 24, Number 25, July 14, 1995



P.T. 34



Keywords:

  Grants Administration/Policy+ 



Public Health Service



The following is a reprint of the final rule on "Objectivity in

Research," which was published in the Federal Register of July 11,

1995 with an effective date of October 1, 1995.  The National Science

Foundation has published a similar policy in the same issue of the

Federal Register.  The requirements are almost identical.



ACTION:  Final rule.



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 152, 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 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.  Only the sections in 42 CFR Part 50 are

referenced.  Similar changes have been made in the regulations at 45

CFR 94 which apply to contracts.



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

other sections, references to "Significant Financial Interests" or

"Significant Financial Interests of the type described in  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.



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  50.604(a) has been added to the "Applicability"

section.  As explained more fully in paragraph 6 below, this change

and the change in  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  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 commentors 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 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  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  50.605(a).  Also, the changes

in this section and in  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 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 50.604 (formerly paragraph (a)(6)) has

also been made for conformity with the NSF policy.



8.  In response to many comments,  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  50.604(a)(8)(i) has been incorporated

into  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  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" ( 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  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  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  50.606, the first sentence has been deleted because it

essentially duplicated the provision in proposed  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 

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  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

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.   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.   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.   50.604.



Many commented that the requirement for updating financial

disclosures (in  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 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 

50.604(c).



It was recommended that the requirement in  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.   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 interests 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 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 issue of the 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 the Office of Management and Budget (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 record-

keeping 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 ( 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 ( 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, 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



42CFR          45CFR           #     Hrs        Hrs      Hrs      tot

                            Rspdnts  p/rsp     42CFR    45CFR



Reporting:



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

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

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

St., N.W., 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, Associate Director for Extramural Affairs,

National Institutes of Health, Building 1, Room 152, 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:



Philip R. Lee, M.D.

Assistant Secretary for Health



Approved:



Donna E. Shalala, Ph.D.

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



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.



 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.



 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  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.



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



 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 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 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.



 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.



 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.



 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:



45 CFR Part 94--Responsible Prospective Contractors

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.



 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.



 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  94.4(a));

provided that this part does not apply to SBIR Program Phase I

applications.



 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

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 pubic 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.



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.



 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

if 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.



 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.



(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.



.


Return to 1995 Index

Return to NIH Guide Main Index


Office of Extramural Research (OER) - Home Page Office of Extramural
Research (OER)
  National Institutes of Health (NIH) - Home Page National Institutes of Health (NIH)
9000 Rockville Pike
Bethesda, Maryland 20892
  Department of Health and Human Services (HHS) - Home Page Department of Health
and Human Services (HHS)
  USA.gov - Government Made Easy


Note: For help accessing PDF, RTF, MS Word, Excel, PowerPoint, Audio or Video files, see Help Downloading Files.