[Senate Hearing 108-710]
[From the U.S. Government Publishing Office]
S. Hrg. 108-710
AVOIDING CONFLICTS OF INTEREST AT THE NATIONAL INSTITUTES OF HEALTH
=======================================================================
HEARING
before a
SUBCOMMITTEE OF THE
COMMITTEE ON APPROPRIATIONS UNITED STATES SENATE
ONE HUNDRED EIGHTH CONGRESS
SECOND SESSION
__________
SPECIAL HEARING
JANUARY 22, 2004--WASHINGTON, DC
__________
Printed for the use of the Committee on Appropriations
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__________
COMMITTEE ON APPROPRIATIONS
TED STEVENS, Alaska, Chairman
THAD COCHRAN, Mississippi ROBERT C. BYRD, West Virginia
ARLEN SPECTER, Pennsylvania DANIEL K. INOUYE, Hawaii
PETE V. DOMENICI, New Mexico ERNEST F. HOLLINGS, South Carolina
CHRISTOPHER S. BOND, Missouri PATRICK J. LEAHY, Vermont
MITCH McCONNELL, Kentucky TOM HARKIN, Iowa
CONRAD BURNS, Montana BARBARA A. MIKULSKI, Maryland
RICHARD C. SHELBY, Alabama HARRY REID, Nevada
JUDD GREGG, New Hampshire HERB KOHL, Wisconsin
ROBERT F. BENNETT, Utah PATTY MURRAY, Washington
BEN NIGHTHORSE CAMPBELL, Colorado BYRON L. DORGAN, North Dakota
LARRY CRAIG, Idaho DIANNE FEINSTEIN, California
KAY BAILEY HUTCHISON, Texas RICHARD J. DURBIN, Illinois
MIKE DeWINE, Ohio TIM JOHNSON, South Dakota
SAM BROWNBACK, Kansas MARY L. LANDRIEU, Louisiana
James W. Morhard, Staff Director
Lisa Sutherland, Deputy Staff Director
Terrence E. Sauvain, Minority Staff Director
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Subcommittee on Departments of Labor, Health and Human Services, and
Education, and Related Agencies
ARLEN SPECTER, Pennsylvania, Chairman
THAD COCHRAN, Mississippi TOM HARKIN, Iowa
JUDD GREGG, New Hampshire ERNEST F. HOLLINGS, South Carolina
LARRY CRAIG, Idaho DANIEL K. INOUYE, Hawaii
KAY BAILEY HUTCHISON, Texas HARRY REID, Nevada
TED STEVENS, Alaska HERB KOHL, Wisconsin
MIKE DeWINE, Ohio PATTY MURRAY, Washington
RICHARD C. SHELBY, Alabama MARY L. LANDRIEU, Louisiana
ROBERT C. BYRD, West Virginia (Ex
officio)
Professional Staff
Bettilou Taylor
Jim Sourwine
Mark Laisch
Sudip Shrikant Parikh
Candice Rogers
Ellen Murray (Minority)
Erik Fatemi (Minority)
Adrienne Hallett (Minority)
Administrative Support
Carole Geagley
C O N T E N T S
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Page
Opening statement of Senator Arlen Specter....................... 1
Opening statement of Senator Tom Harkin.......................... 3
Statement of Elias Zerhouni, M.D., Director, National Institutes
of Health, Department of Health and Human Services............. 4
Prepared statement........................................... 6
Statement of Senator Ted Stevens................................. 16
Prepared statement........................................... 17
Statement of Marilyn L. Glynn, Acting Director, Office of
Government
Ethics......................................................... 19
Prepared statement........................................... 21
Statement of Edgar M. Swindell, Associate General Counsel, Ethics
Division, Office of the General Counsel, Department of Health
and Human Services............................................. 27
Prepared statement........................................... 29
Statement of Ruth Kirschstein, M.D., Senior Advisor to the
Director, National Institutes of Health, Department of Health
and Human Services............................................. 31
Prepared statement........................................... 33
Statement of Stephen Katz, M.D., Ph.D., Director, National
Institute of Arthritis and Musculoskeletal and Skin Diseases,
National Institutes of Health, Department of Health and Human
Services....................................................... 40
Prepared statement........................................... 41
Statement of John Gallin, M.D., Director, Clinical Center,
National Institutes of Health, Department of Health and Human
Services....................................................... 44
Prepared statement........................................... 45
Statement of Jeffrey Schlom, M.D., Chief of the Laboratory of
Tumor, Immunology, and Biology, Center for Cancer Research,
National Cancer Institute, National Institutes of Health,
Department of Health and Human Services........................ 47
Response to the Information in the L.A. Times Article
Concerning J. Schlom....................................... 47
Statement of Ronald N. Germain, M.D., Chief, Immunology
Laboratory, Institute of Allergy and Infectious Diseases,
National Institutes of Health, Department of Health and Human
Services....................................................... 50
Prepared statement........................................... 50
Prepared Statement of Senator Mary L. Landrieu................... 57
Prepared Statement of Dr. Harold Varmus, President, Memorial
Sloan-Kettering Cancer Center.................................. 58
AVOIDING CONFLICTS OF INTEREST AT THE NATIONAL INSTITUTES OF HEALTH
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THURSDAY, JANUARY 22, 2004
U.S. Senate,
Subcommittee on Labor, Health and Human
Services, and Education, and Related Agencies,
Committee on Appropriations,
Washington, DC.
The subcommittee met at 9:33 a.m., in room SD-192, Dirksen
Senate Office Building, Hon. Arlen Specter (chairman)
presiding.
Present: Senators Specter, Stevens, and Harkin.
OPENING STATEMENT OF SENATOR ARLEN SPECTER
Senator Specter. Good morning, ladies and gentlemen. The
Appropriations Subcommittee on Labor, Health and Human
Services, and Education will now proceed with this hearing on
the issue of potential conflict of interest in the National
Institutes of Health with the consulting arrangements for the
private pharmaceutical companies.
The issue has been raised about whether there is a conflict
where employees of the National Institutes of Health consult
with private pharmaceutical companies. The employees of NIH,
like all Federal employees, have a fiduciary obligation to the
Federal Government and may not use their positions for
collateral financial gain.
There is a public policy interest in having an exchange of
ideas with the pharmaceutical companies, but that has to be
conducted in an organized, systematic way with transparency and
integrity, and the employees of the NIH are compensated on a
very modest basis, so there is some public policy interest in
having those incomes supplemented. But in reviewing the
compensation level, I find that they are higher than the
compensation of my distinguished colleague, Senator Harkin, and
other Members of Congress.
The issue of integrity is one of utmost importance. I am
pleased to report that Dr. Zerhouni has taken an active role in
moving forward to try to deal with this issue. Our staffs have
conferred. He and I have met and discussed the matter, but
there has to be a thorough public airing, and I believe there
will have to be some very substantial remedial steps taken to
make sure that the wall of separation between public duties and
private gain is maintained.
There had been in the past highly notarized situations
where researchers at a prominent university were disclosed to
have a financial interest in the company which was involved
with a medicine, and that has to be prevented.
There had been some question as to whether this hearing
would go beyond the conflict of interest issue and take up some
of the studies that the National Institutes of Health has
conducted on truck stops and sexual habits of older men and the
two spirited Indians and the arousal issues, but this hearing
is going to be very, very involved with a very large number of
witnesses and we'll be fully occupied with this subject.
The other issues have already been the subject of oversight
by this subcommittee. Staffs have already been working. Dr.
Zerhouni and I have discussed it and we are now making
inquiries as to whether there ought to be a separate oversight
hearing on that subject, and we will make that determination
after we complete the preliminary inquiry which has already
been underway.
Now, fresh back from Iowa, I am delighted to welcome my
distinguished colleague, Senator Harkin, who is the author of
the famous Harkin amendment on overtime pay--which is holding
up a $373 billion appropriations bill. When Senator Harkin
offers an amendment, he does not have an instinct for the
capillaries. He has an instinct for the jugular.
I think that he was right on his amendment. And we had a
very detailed hearing day before yesterday when we understood
Senator Harkin could not be with us because he was heavily
engaged to very late the night before in the Iowa caucuses.
I am sorry to see the provision in the bill. It is worth
just a minute. The grave difficulty is that the regulation on
overtime pay will cut back on compensation to many workers in
America, men and women, at a time when they need every dollar
they can get with a fragile economy, I think recovering but
still not fully recovered. And the new regulation which we have
analyzed is no improvement over the old regulation. There is
general agreement that we ought to make the regulation specific
to avoid litigation, but the new regulation does not do that.
In the interest of reciprocity, we had hoped that the
Secretary of Labor would accommodate a brief delay. We are not
talking about very much, just a few weeks, perhaps a few
months, less than 6 months, in the interest of reciprocity
where we try very hard to accommodate the Department of Labor's
interests.
But we are not between a rock and a hard place on this
issue. It is just a total loser. If we hold up the omnibus
appropriations bill, we have a continuing resolution, and the
overtime regulation goes into effect because there is nothing
in the continuing resolution to stop it. And if we take the
omnibus appropriations bill, the regulation goes into effect
because there is nothing in the bill to stop it. So either way
we go, we lose the issue on the regulation, and in our
subcommittee alone, we lose $3,700,000,000, a large chunk of
which would go to NIH and others, to Head Start and education.
So it is my hope that we will be able to pass the bill
today, but that remains to be seen as the political process
works out. And as Winston Churchill said, a democracy is a very
terrible system except when compared to every other system.
Senator Harkin.
OPENING STATEMENT OF SENATOR TOM HARKIN
Senator Harkin. Mr. Chairman, thank you very much for a
number of things, first, for being a really great chairman of
this very vital and important subcommittee. I can say without
any hesitation that our relationship has been one of working
together mutually for the benefit of the public policy that we
cover in this subcommittee, which covers a wide range of
different things, from health to education and labor. Someone
once described this subcommittee as the subcommittee that
defines America and what we stand for. And so I have been proud
to work alongside you now for, I guess, 15 years now I think it
has been, either as chairman or ranking member, which bounces
back and forth periodically. Of course, I always hope it
bounces my way, but that is another thing. But we have had a
great collaboration and working relationship. I thank you for
that.
I thank you for your comments regarding the overtime. We
have worked closely on that, and I know of your strong support
for ensuring that people in this country do not lose their
overtime pay protections.
I also want to thank you for calling this hearing today and
thank all the witnesses for being here.
Everyone knows how strongly we support the National
Institutes of Health. It is Senator Specter who has said many
times that it is the crown jewel of our Federal Government. I
think that is your phrase. Thanks to NIH, countless lives have
been saved and new cures and treatments developed. A thriving
biomedical research industry has been created in this country.
That is why we worked so hard to double the funding for NIH
between 1998 and 2003. We take pride in the fact that this was
a truly bipartisan effort, spanning two presidential
administrations. And when we reached the goal last year, I
think for both Senator Specter and I, it was one of our
proudest moments in the Senate.
So when I read in the press about concerns that some NIH
scientists are receiving consulting fees that may pose a
conflict of interest with their duties at NIH, I became very
concerned. I became concerned not only because of my personal
passion for NIH, but also on behalf of the taxpayers, the
advocacy groups, and researchers who lobbied so diligently to
increase funding for this agency.
As appropriators, we have a responsibility to exercise
oversight of NIH. So this hearing is not only appropriate, it
is required. We come here with open minds. We have made no pre-
judgments. I appreciate this opportunity for us to ask
questions and find out for ourselves whether there is a problem
at NIH. If so, how do we address it?
NIH is the premier biomedical research agency in the world.
It has an unparalleled reputation for honesty and integrity and
I want to make sure it stays that way.
Thank you very much, Mr. Chairman.
Senator Specter. Thank you, Senator Harkin. Thank you for
your outstanding service to the country and the Senate and this
subcommittee.
STATEMENT OF ELIAS ZERHOUNI, M.D., DIRECTOR, NATIONAL
INSTITUTES OF HEALTH, DEPARTMENT OF HEALTH
AND HUMAN SERVICES
Senator Specter. We turn now to Dr. Elias Zerhouni, the
Director of the National Institutes of Health. Prior to
becoming Director, Dr. Zerhouni was executive vice dean of John
Hopkins University School of Medicine, had the Chair of the
Russell Morgan Department of Radiology, and Martin Donner
Professor of Biomedical Engineering. He received his medical
degree from the University of Algiers School of Medicine and
completed his residency in diagnostic radiology at Johns
Hopkins. Dr. Zerhouni brings an extraordinary record to this
very, very important position.
I have had the privilege of working with him in some detail
and I find him to be very, very thoughtful, very, very
responsive, and very, very dedicated to the duties of the very
important position which he holds. And when this issue arose,
which has some potential for embarrassment, he and I agreed
immediately that we would work it through, we would let the
chips fall where they may, and we would see to it that whatever
problems existed would be corrected and corrected promptly.
Dr. Zerhouni, we again welcome you here and look forward to
your testimony.
Dr. Zerhouni. Thank you, Mr. Chairman, Senator Harkin, and
other members of the subcommittee. Thank you for the
opportunity to testify today about the implementation of ethics
rules at the National Institutes of Health.
Clearly, as Senator Harkin mentioned, NIH has historically
been successful because of its outstanding record of excellence
in independent scientific inquiry and its reputation for high
integrity. Our mission is too important to the health of this
Nation to have it undermined in any way by any real or
perceived conflict of interest. And I personally want to do
everything possible to make sure that that perception does not
persist.
I personally began reviewing ethics rules policies and
practices last July when the House Energy and Commerce
Committee raised questions about NIH employees receiving
monetary lecture awards, and based on my initial review of
policies and procedures, I announced on November 20, 2003 the
formation of a new trans-NIH ethics advisory committee in the
Office of the Director to provide independent peer review of
outside activity. I asked all senior managers to exercise great
prudence in entering into any arrangement that reflects poorly
on NIH or creates the appearance of conflict, even in cases
where the arrangements are allowed.
In addition to the questions from the House committee, a
recent press report has suggested that arrangements between our
scientists and outside organizations have potentially harmed
individual patients and tainted the integrity of administrative
decisions at NIH. There cannot be more serious allegations
against an institution, and I felt that it was imperative that
NIH tackle this issue as quickly, transparently, and
aggressively as possible.
From my experience as a an administrator at a major
institution prior to this job and my experience at NIH, there
are four fundamental tenets that we absolutely need to honor.
One is full transparency. The second is full disclosure of
these relationships, independent peer review, and active
management and monitoring of any and all relationships.
So that is why I ordered an immediate review not only of
the allegations in the press but of all existing outside
activities to ensure that there have been no breaches of
current rules and to determine the entire scope of these
activities. Pending this review, applications to receive
compensation from pharmaceutical or biotechnology companies and
payments that exceed certain thresholds will be examined
directly in the director's office by the new ethics advisory
committee. As of this date, we have not approved any agreement,
and the new committee has been formed, has met, and all of
those will be reviewed personally in my office to make sure
that indeed rules have been followed and no rules have been
broken.
Further, I have ordered that the NIH ethics system be
restructured to ensure consistency and rigorous oversight.
But my first and foremost concern as a physician was to
ascertain whether or not any patient had been harmed as alleged
or if decisions had been unduly influenced as a result of such
outside relationships. Was there a reality of conflict here
that harmed individuals or harmed our decisional processes?
I want to inform you that thus far we have not identified
any situations where patients were harmed as a result of
financial arrangements NIH employees had with outside parties.
We have not identified any situations where outside activities
resulted in undue influence on grant approvals or other
decisions. I will, however, reserve final judgment until all
internal and external reviews are completed.
Ethics standards are set by the Office of Government Ethics
which promulgates rules for the entire Federal Government.
Pursuant to new government-wide ethics regulations, NIH revised
its policies in 1995. The Acting Director of the Office of
Government Ethics is here today to testify about its role
regarding NIH.
But in regard to supplemental compensation for NIH
employees, I echo what Senator Specter said. We need to find
the balance between the public interest at large of making sure
that our knowledge gets translated into real applications and
we have the question of figuring out what should be allowed and
not allowed.
On one hand, I believe it's essential that NIH retain the
ability to recruit and retain the best scientific researchers
in the world. In order to do this, one must be able to compete
for their services. So I think it is important that our
scientists be allowed to be involved in the process of
translation.
On the other hand, the research landscape has changed since
1995. Investments in research by pharmaceutical companies have
surpassed the current budget of NIH. We have a new industry,
the biotechnology industry, that has exploded with new
companies and resources as well. There are now many more
opportunities for NIH scientists to be asked to collaborate
with the private sector to share their knowledge and help apply
it for tangible treatments.
Given these events, I have reached the conclusion that it
is appropriate for NIH and the Congress to completely review
the 1995 policy and its implementation at NIH. This is why I
have asked that a blue ribbon task force, as an adjunct to the
existing advisory committee to the Director, be formed and
review all of our ethics policies and evaluate the policy issue
of what types of collaborations are in the public interest and
which ones are not, and how do we reform our policies to make
sure that we achieve the goal of the highest integrity and
transparency possible.
I am announcing today that the panel will be co-chaired by
two distinguished individuals: Dr. Bruce Alberts, the president
of the National Academy of Sciences, and Norman Augustine,
former Chairman of Lockheed Martin and a noted government,
industry, and academic expert. They will be joined by committee
members of the highest reputation for independence and
competence.
PREPARED STATEMENT
Finally and most importantly, I have reached the conclusion
that NIH must make changes that will appropriately restrict
current practices and manage current practices to the point
where no questions will remain in anybody's mind that NIH is
deserving of the trust of the Congress and has continuously
made every attempt to make sure that the rules, first and
foremost, serve the American people and no other interests.
Thank you very much.
[The statement follows:]
Prepared Statement of Dr. Elias A. Zerhouni
Mr. Chairman, Senator Harkin, Members of the Subcommittee, thank
you for the opportunity to testify today about the implementation of
ethics rules at the National Institutes of Health.
The NIH budget doubled over a recent five-year period. This
milestone is a reflection of the trust that the American people have in
our ability to advance scientific knowledge for their benefit.
NIH has historically been successful because of its outstanding
record of excellence through independent scientific inquiry and its
reputation for high integrity. But recently, the relationships of NIH
employees with outside entities have raised the concerns of Congress
and the media about conflicts of interest. Our public health mission--
written in law--is too important to have it undermined by any real or
perceived conflicts of interest.
So I am responding to these concerns. I am applying the principles
I have learned from previous experience, that managing conflicts of
interest in science is a continuous process best served by:
transparency, full disclosure, independent review and continuous
monitoring.
I personally began reviewing ethics rules, policies and practices
last July, when the House Energy and Commerce Committee raised
questions about NIH employees receiving monetary lecture awards. I was
advised by NIH ethics officials that the receipt of lecture awards is
proper under Federal ethics regulations in specific circumstances.
Nonetheless, based on an initial review of policies and procedures, I
announced on November 20, 2003 the formation of a new trans-NIH ethics
advisory committee in the office of the director to provide independent
peer review of outside relationships and advice for improvements in our
policies and procedures. I advised all senior managers to exercise
great prudence in entering into any arrangement that could reflect
poorly on NIH or could create the appearance of conflict, even in cases
where the arrangements are permitted by law. I ask that my memorandum
be included in the hearing record.
In addition to the questions from the House Committee, recent press
reports have suggested that arrangements between our scientists and
outside organizations have potentially harmed individual patients and
corrupted the integrity of administrative decisions at NIH. There
cannot be more serious allegations against an institution. I felt that
it was imperative that NIH tackle this issue as quickly, transparently
and aggressively as possible.
I ordered an immediate review, not only of the allegations in the
press, but of all existing outside activities, to ensure that there
have not been breaches of current rules, and to determine the entire
scope of these activities.
My first and foremost concern was to ascertain whether any patient
had been harmed or if decisions had been unduly influenced as a result
of such outside relationships. I want to inform you that, thus far, we
have not identified any situations where patients were harmed as the
result of financial arrangements NIH employees had with outside
parties. Nor have we identified any situations where outside activities
resulted in undue influence on grant approvals or other decisions. I
will, however, reserve final judgment until all internal and external
reviews are completed.
Furthermore, press reports have implied that NIH and its employees
willfully used alternative federal pay systems to avoid disclosing
their outside activities. This is simply not true. Outside activities
are internally disclosed to Ethics officers and supervisors. But it is
true that federal rules sometimes do not allow public disclosure of
that information. I believe that this needs to be revisited as
transparency and full disclosure are core requirements of any viable
process of oversight of these relationships.
Clearly, even though real conflict may not have occurred, it is
obvious that our practices lead to a perception of widespread conflicts
that needs to be corrected as soon as possible.
The governing regulations are set by the Office of Government
Ethics (OGE), which promulgates rules for the entire executive branch
of the Federal Government. In 1993, the OGE promulgated executive
branch-wide Standards of Conduct regulations. Agencies were then
required to repeal their ethics regulations and follow the new OGE
regulation or propose supplemental regulations, jointly promulgated by
the agency and OGE.
Until 1995, NIH policies on outside activities were more
restrictive than they are today. Employees could earn no more than
$25,000 per year from any single outside source, and no more than
$50,000 in total annually. Payments from outside sources in the form of
stocks or stock options were prohibited. High-level NIH officials were
not allowed to accept payments from outside sources.
I was advised that NIH revised its ethics policies in 1995, after
the OGE audited NIH's implementation of federal ethics regulations and
determined that the Agency's policies were more stringent than the
existing executive branch-wide regulations. OGE offered NIH two options
at that time: either change the policies to conform to the regulations
or seek supplemental regulations from OGE.
Although I was not at NIH at that time, my understanding is that
Agency management was concerned that NIH was at a disadvantage in
competing with the private sector for the best scientists due to lower
salaries, benefits and the reduced ability to supplement incomes with
outside activities as compared to scientists in the private sector. In
light of these concerns, NIH management elected to change its ethics
policies to conform to the OGE regulations and not pursue supplemental
rules, thus easing restrictions on many outside activities. Since then,
outside activities have been approved by NIH or Department ethics
counselors in accordance with federal regulations.
What should be allowed and what should not be allowed?
On one hand, I believe it is essential that NIH retain the ability
to recruit and retain the best scientific researchers in the world. In
order to do this, we must be able to compete for their services. So, I
think it is important that our scientists be allowed to receive bona
fide awards for scientific accomplishments. NIH researchers should be
allowed to teach, write textbooks, be inventors on NIH-held patents,
and collaborate with for-profit and non-profit companies and
institutions, but with appropriate limitations. As the German
philosopher Goethe said, ``knowing is not enough, you must apply what
you know.''
On the other hand, the research landscape has changed since 1995.
Investments in research by pharmaceutical companies have surpassed the
current budget of NIH. The biotechnology industry exploded with new
companies and resources, as well. There are now many more opportunities
for NIH scientists to be asked to collaborate with the private sector
to share their knowledge and help apply it for tangible treatments.
Given these events and the passage of time, I have reached the
conclusion that it is appropriate for NIH to completely review the 1995
decision and its implementation by NIH.
This is why I have asked that a Blue Ribbon Task Force, as an
adjunct to the existing independent Advisory Committee to the Director
of NIH, review all NIH ethics practices, ponder what types of
collaborations with non-government organizations are necessary and
appropriate, and make recommendations to me on reforms of our policies
and procedures within 90 days of its formation. This panel will be co-
chaired by two prominent individuals and will be composed of members of
the highest reputation for independence and competence.
In the meantime, I have ordered that the NIH system for
implementing ethics regulations be restructured to ensure consistency
and a strict level of review. A new NIH Ethics Advisory Committee will
review applications to receive compensation for certain outside
activities, including payments from pharmaceutical or biotechnology
companies and payments that exceed certain dollar thresholds.
Finally, and most importantly, I have reached the conclusion that
NIH must make changes that will appropriately restrict current
practices. I will reserve judgment on specific changes until our
internal review and the work of the Blue Ribbon Task Force is
completed.
I have discussed these steps with all of the NIH Institute and
Center directors, who reaffirm that NIH's first and foremost duty is to
serve the American people. They are committed to helping me implement
all necessary measures to insure that we eliminate real and apparent
conflicts of interest. My goal is to erase any doubts that we remain
worthy of the trust and confidence you have placed in us.
Thank you for the opportunity to testify. I look forward to working
with the Congress as we move forward. I will be pleased to answer any
questions you may have.
Senator Specter. Thank you, Dr. Zerhouni.
We have a very large attendance here today. We have quite a
few chairs on the dais. Those of you who are standing in the
rear are welcome to come up and sit on the staff chairs. You
may do so without any obligations to do staff work.
After all the staff chairs are filled, you may sit where
the Senators sit and you will be subject to all the
disadvantages of being a Member of the Senate if you sit in the
Senator's chair. But you are all welcome to come up, and I
would urge you to do so so that people who are in the hall can
gain access and as many people as possible will be able to hear
what we are doing in the room.
Dr. Zerhouni, thank you for your testimony.
The funding of NIH has always been difficult. As Senator
Harkin has noted, we have more than doubled NIH funding. Since
he and I took over the joint operation of this subcommittee, it
moved from $12 billion to $28 billion. Last year we did not get
as much as we wanted, and when the opponents of additional
funding have something to look to or to pick at, it is going to
make it very difficult or perhaps impossible, so that we have
to answer these questions.
Let me take up with you, without identifying the
individuals involved or the companies, some specific cases.
One pharmaceutical company paid an NIH employee in excess
of $100,000 when the company was working on a way to produce a
cancer drug, and the individual who received the fee in excess
of $100,000 helped lead two NIH-funded studies in which the
pharmaceutical company played a crucial role.
Now, first of all, under your procedures, how does a
pharmaceutical company play a crucial role in an NIH-funded
study?
Dr. Zerhouni. There are many ways this can happen. In some
instances, the pharmaceutical company may have a reagent or
compound or drug that needs to be tested. In other cases the
disease that is under consideration is a rare disease, a
disease that needs to have trials made, and so----
Senator Specter. Let me move on to the second part. We have
a very limited amount of time and many witnesses.
In that context, is there not an inherent conflict in
having the NIH employee paid very substantially by the
pharmaceutical company and collaborate with the pharmaceutical
company in NIH-funded studies?
Dr. Zerhouni. It will be a conflict if anything that the
scientist does is related to his or her Government work or any
activities within the NIH. Those activities are forbidden. The
only activities that are allowed is when the scientist is
giving advice in an area of knowledge that is not part of his
official duties.
Senator Specter. Well, it would require a very intensive
investigation to make a determination as to whether that line
was crossed.
Dr. Zerhouni. I totally agree.
Senator Specter. Your Department nor this oversight
committee is in a position to make that kind of an intensive
investigation. So what I want you to do is to make a
determination as to whether it is realistic to have that kind
of activity undertaken.
Let me move to a second example. A certain biotech company
was engaged in gene therapy research, and an NIH investigator
became a paid consultant receiving in excess of $300,000 in
consulting fees and stock options. Now, the individual became a
shareholder in the company and for 2 years did not disclose the
holding on his annual financial report. There is no question
about that being a violation, and it was explained by the
individual saying that it was an error.
What is the consequence to an NIH employee who has this
kind of a relationship and does not make the required financial
disclosure?
Dr. Zerhouni. Senator, I am in total agreement with you. I
think you are identifying what I personally believe----
Senator Specter. No, do not be in full agreement with me.
Answer the question.
Dr. Zerhouni. No, but I agree.
Senator Specter. Answer the question. What is the
consequence of not making a financial disclosure?
Dr. Zerhouni. The consequence of not making a financial
disclosure is a violation of the rules. There is no doubt that
we need full transparency and that is why I am going forward--
--
Senator Specter. Do you know the matter that I am referring
to?
Dr. Zerhouni. I think I do.
Senator Specter. What happened to this individual who did
not make the appropriate disclosure?
Dr. Zerhouni. This is the matter that is being reviewed
fully at this time, Senator.
Senator Specter. Well, what needs to be reviewed if you
have an open and shut case that there was not a disclosure made
as required by law? Are you not in a position, knowing that, to
impose a sanction if one is appropriate?
Dr. Zerhouni. The matter is under review.
Senator Specter. My time is up, but yours is not, Dr.
Zerhouni.
Dr. Zerhouni. This matter is under review and if there is
action to be taken, I will. I think we need to have appropriate
due diligence and appropriate steps to be taken. They are being
taken.
But again, I agree with the statement that you made that we
need full transparency in these relationships and full review.
It is complex in many cases, and this is why I have empaneled
this panel to help us find out what is exactly the procedure
that we need to follow that would serve us best.
Senator Specter. My time has expired, so I am not going to
ask you why there needs to be full review on a matter so
conclusive. But I would ask you to submit promptly a written
answer to the subcommittee.
Dr. Zerhouni. I will, sir.
Senator Specter. Senator Harkin.
Senator Harkin. Thank you very much, Mr. Chairman.
I will not get into specifics of the case that Senator
Specter brought up. I think he has made it quite clear.
I am more concerned again about this idea of transparency.
I guess for some reason, I think it has come as somewhat a
surprise to a lot of people--and correct me if I am wrong on
this--that the kinds of financial arrangements that some
scientists at NIH have with outside private entities are
included in a report that goes to you or included in a filing
that they make at NIH, but that is not subject to the Freedom
of Information Act. Is that correct?
Dr. Zerhouni. That is correct for a certain category of
employee. According to our Office of Government Ethics rules,
those within certain pay bands file differently and those are
disclosed internally and to the supervisors. They are not made
publicly available. And the Office of Government Ethics
representative is here to answer those questions.
Senator Harkin. Were those made publicly available prior to
1995?
Dr. Zerhouni. No. Prior to 1995, this pay system was not
used. So prior to 1995, we had a different set of rules. The
rules changed in 1995.
Senator Harkin. I guess I am asking was there transparency
prior to 1995 on what financial arrangements scientists at NIH
might have had with outside entities?
Dr. Zerhouni. Prior to 1995, the rules limited greatly the
ability to interact.
Senator Specter. Excuse me for one moment on an
interruption.
Senator Harkin. Yes.
Senator Specter. I have to go to the Judiciary Committee
for a few moments. So would you continue with Dr. Zerhouni and
I will return as soon as I can.
Senator Harkin. Do you want me to call the next panel up?
Senator Specter. I would like you to talk to him, if you
can, if you have sufficient questions for Dr. Zerhouni. I
should be back in just a few minutes.
Senator Harkin. Okay, fine. All right. Thanks.
I was trying to figure out prior to 1995 a scientist who
had an arrangement with an outside private entity, was that
subject to transparency? When I say transparent, like Freedom
of Information. Was that changed in 1995? If so, how was that
changed?
Dr. Zerhouni. What was changed in 1995 was the ability to
have interactions with the private sector. The pay system was
changed later. There is no connection between the change in the
pay system. The pay system was changed to be able to recruit
and retain scientists.
Senator Harkin. I remember it well. Dr. Varmus was here at
the time.
Dr. Zerhouni. Right. It was independent. There is no
connection between the two.
Senator Harkin. I understand that. Ellen just told me.
Okay. Prior to 1995, the change in the pay system. I am under
the understanding that NIH scientists had to make public
disclosure of all of their financial arrangements with outside
entities.
Dr. Zerhouni. That is correct.
Senator Harkin. After 1995, now I understand it is like 94
or 95 percent of them do not have to do that.
Dr. Zerhouni. That is correct. With the change in the pay
system, unrelated to the conflict of interest issue, the rules
obligate disclosure internally of all relationships, but not
because of the type of Federal documents they are filing. Those
are not available through the FOIA.
Senator Specter. Well, how do you feel, Dr. Zerhouni? I
thought I heard your testimony and you talked about
transparency. I wrote it down here. How do you feel about that?
Dr. Zerhouni. I feel that transparency is absolutely
critical. It is needed, necessary. I think it needs to be done
appropriately. Remember, 94 percent do not file. Only less than
3 percent of our scientists are involved in any one of these
relationships. So we need to make sure that we establish rules
that are specific to NIH and human subject research. The
Federal Government rules at large, which are the ones that we
have to follow, in my opinion are not sufficient and they need
to be reviewed and improved.
Senator Harkin. Well, I commend you for appointing this
blue ribbon commission. I do not know who all the members are
going to be, but you have got the commission. What time frame
do they have? What time frame are you trying to give them?
Dr. Zerhouni. I have asked them to do this in 90 days, sir.
Senator Harkin. Are there any other steps being taken?
Dr. Zerhouni. Yes. I have established an NIH advisory
ethics committee. I have asked the Office of Government Ethics
to give us a temporary waiver so that disclosures of all
relationships for individuals at NIH with fiduciary
responsibilities like directors, deputy directors, so that that
can be disclosed.
I would like to also remind everyone that directors, no
matter of their pay system, have always publicly disclosed
their relationships. There were three institute directors that
were involved in any of those. As of this moment, no director
at NIH has any outside biotech or PhRMA relationship. Those
have been stopped.
Senator Harkin. Is it possible that private companies
benefit simply from being able to tell shareholders and board
members that they have got an NIH director or scientist as a
consultant? In other words, could NIH scientists be hired or
compensated by a private company just to give sort of a sense
that the company has the approval of NIH type of thing? I mean,
this is a big stamp of approval when you have a director or a
assistant director of one of the NIH institutes consulting with
a company.
Dr. Zerhouni. As I alluded to in my testimony, I think the
industry landscape has changed and biotechnology companies are
involved in raising investment funds. And that issue is going
to be a core issue that I am asking the panel to review because
I do believe that there may be that perception, and that is
something we need to tackle.
Senator Harkin. Do you have any idea how many NIH
scientists have received stock as compensation for consulting
work?
Dr. Zerhouni. Not the exact number, but I can tell you the
total number of current NIH scientists is about 200 scientists
who are consulting in one way or another.
Senator Harkin. But we have no idea how many are
compensated just monetarily or how many are compensated with
stock or stock options.
Dr. Zerhouni. We have that information. I do not have it
offhand, but I certainly will provide it to you. But it is
around 200 scientists, 300 agreements. A very small number of
them--I cannot tell. Maybe my staff will bring me the answer
before the end of the hearing. But the stock option or stock
ownership is limited to maybe 10 or 20. I do not know the
number, but it is a small number.
Senator Harkin. Do you believe that stock ownership in
companies with NIH-funded research presents an ongoing conflict
of interest that should be looked at differently in a code of
ethics, differently from direct compensation?
Dr. Zerhouni. Again, I do not want to prejudge what the
panel will say, but in my own experience as a dean at a medical
school, we believed very strongly that stock ownership should
be treated very differently and does present problems different
than simple compensation.
Senator Harkin. Yes. I think that also is a problem because
compensation is one thing, but having stock in a company and
you are hoping that stock goes up, in other words, goes through
the roof, that is quite another thing. And I think that raises
some real serious questions.
I have just one other question about the practice of
recusals in which scientists recuse themselves from making
decisions that involve companies that they have private
dealings with. Again, certainly we do not want them making
decisions that would cause a conflict of interest, but when
they recuse themselves too often from decisions that they ought
to be making internally at NIH, if they were not involved with
these companies, then I am concerned that they might not be
doing their main job, their NIH job. So again, if they are
working for a company and they adhere to ethics and say, okay,
I am going to recuse myself from this decision making process,
are we, the public, not being a little short-changed from
having their expertise applied at the institutes?
Dr. Zerhouni. I see your point and I agree that this is a
point that needs to be looked into. However, as I looked into
it, there are details here that we need to make sure we
understand. If it is a scientist that has authority, a
director, a deputy director, a scientific director, it is one
issue. If it is a scientist who has no authority--and remember,
scientists at NIH do not have authority over granting
decisions--then it is a different matter. So I believe that
there should be a differentiation between those who have
authority and those who do not.
For example, if you have a scientist who is asked to--he
is, let us say, a human genome expert, knows about genomics and
genetics--consult with a company that is trying to develop a
vaccine against mad cow disease, completely unrelated, would
that be allowed or not allowed? Is there any decision that that
scientist would make? If the answer is yes, there are decisions
that scientists could make that will affect that relationship,
that should not be allowed. But if the scientist is in no
position to make that decision, we do want to translate that
knowledge to fields other than the direct research of the
scientist. It is our job. I think Congress wants us to do that.
That is where the tension is. What is the balance between
what we need to do in the public's interest to give our
information, to get the best scientists to do that, while not
tainting the decisional process?
So again, it is an issue that I think needs to be resolved,
but I believe that perhaps instead of having a complete one-
size-fits-all rule, I think the rules should be different for
those who have authority from those who do not.
Senator Harkin. Well, as I look more into this and having
been on this committee now for 18 years I guess, it is a tough
problem because you cannot just say here is NIH and then here
is the private sector and all the other companies that are
translating basic research into lifesaving drugs and therapies
and interventions. There is kind of--I do not want to use the
word--a gray area sort of in there where what NIH is doing has
to be translated in the private sector.
I have said before there is a reason why NIH is called the
National Institutes of Health. It is not the National Institute
of Basic Research. It is the National Institutes of Health. It
is the make people healthier. It is to find interventions. It
is for applying, making sure that whatever basic research is
done is applied in the field. So there is not this strict wall
that you do basic research and then that is the end of it. I
think we expect more of NIH than that. We expect NIH to be
actively involved in translational research and getting the
basic research done, but also how does this apply itself to the
public in terms of healthier lives. That has always kind of
been the genius of our system. You have the NIH. You do the
basic research that the private sector really cannot afford to
do because this is basic research. It is asking fundamental
basic questions. But built upon that, the findings of that then
are translated into further applied research.
Now, where that ends and where the private sector takes up
is kind of a funny area there. You cannot just draw a hard and
fast line. I say that publicly. You cannot draw a hard and fast
line.
So I have long felt that NIH scientists and researchers
need to have some sort of crossover, cross-fertilization with
that private sector. They need to know what is happening out
there and the private sector needs to know what is happening
there. There needs to be that kind of a consultative process,
for example. But in that consultative process, the people at
NIH really need to have absolutely clean hands.
I would not mind at all--I am just speaking personally and
having viewed this for 18 years now--NIH researchers going to
whatever XYZ corporation or company talking about what is being
done at NIH, some of the new research, some of the new
findings, having them ask questions about where we are headed
in this area. I think that is all perfectly fine. But what I
get concerned about is when that same NIH scientist then is
compensated by a company, by one company to the exclusion of
other companies and other entities out there. Then that skews
the research towards one entity, not to a number of them.
Perhaps maybe that one entity that is getting that benefit of
that scientist's knowledge in that consultative process, maybe
that is not the best way for that research to be translated.
Maybe another company has a better way but they are not getting
the benefit of that.
So I guess I am approaching this and saying, well, I want
to have scientists be involved in that, but they cannot be
compensated by a company. They just cannot be because it skews
it.
Now, if a scientist at NIH at some point in his or her life
wants to leave NIH and go to the private sector, that happens
all the time. That happens with Members of the Senate and
staff. So I understand that. While they are in Government
service, whether they are here in the legislative end or the
administrative end, they just should not be getting compensated
from other companies like that. Like I said, if they want to
leave NIH and go to a private company and take their expertise,
that is life but not while they are working at NIH. So that is
just my thoughts on that, and I just wonder if you have any
response.
Dr. Zerhouni. I think you are addressing the core issue,
and NIH has thought about this for years. We should remember we
have very, very elaborate systems to prevent one company from
benefitting from another when there is a collaboration. We have
a process called CRADA, collaborative research and development
agreement. This is an open process. It is independent of the
scientist who is collaborating actually. Scientists cannot
receive compensation when they are collaborating with a
research entity or a company outside. The CRADA is competitive.
It is a bid process so that we, in fact, select what is the
better company to develop, let's say, a vaccine or any other
measures. Those have no compensation attached to them. A
collaboration between the scientist and his or her work with
any outside entity, a private company or a university, that is
not allowed.
The only things that are at issue--NIH does not allow
compensation for scientific collaborations or cooperative
research and development agreements to the scientist involved.
Those are the rules as they exist today.
However, consulting that is considered an outside activity
unrelated to the scientist's activity at NIH as reviewed by our
current system could be allowed, as in the case of someone
giving genomic information to an unrelated field of science
that is unrelated to what they do.
So in addressing the point you are making, I think we need
to make sure that those rules are well understood, that they
accomplish the goal you are seeking, which I think is the same
goal. We want to make sure that there is no such gray zone.
So any collaboration, any cooperative research and
development agreement, no scientist gets any compensation for
that. That is illegal at NIH today. However, a consultation
that is unrelated to their research which is qualified as an
outside activity, not on Government time, and not using any
Government resource or information, that is the point at issue
here.
Senator Harkin. But, Dr. Zerhouni, I understand about the
cooperative research agreements that are made. I am getting to
the point of a highly placed scientist at NIH intimately
involved with the development of a certain therapy or drug or
whatever that then consults with a company. Even though there
may be a cooperative agreement somewhere else, on the side they
are going out on their own time, I am told, and consulting with
a company on that very issue. On that very issue. So there is a
financial arrangement that could be circuitous, you know,
background.
I see Ruth shaking her head no, but I will ask you later
about that. But I am concerned about that because of a couple
of cases that have come up.
Now, it is not where a scientist at, let's say, Infectious
Diseases is consulting on heart, lung, and blood or on
something else. They are consulting on what their area of
expertise is. Is that not so?
Dr. Zerhouni. The situation you describe about a
collaborative research agreement and then the scientist taking
a consulting relationship, that is not allowed. That is
illegal. If that happens, that would be addressed.
Senator Harkin. Let me figure this one out.
Dr. Zerhouni. All right.
Senator Specter. Dr. Zerhouni, there is one other specific
case which I would like to get your view on, and that is the
situation where an individual at NIH received in excess of $1
million in fees over more than a decade and stock options for
hundreds of thousands of dollars. And the company formally
collaborates on research with his laboratory. With that general
description, are you familiar with the situation that I am
referring to?
Dr. Zerhouni. I am and we are reviewing this case in
particular. I am told that the numbers that were reported in
the press are somewhat overstated because of the ranges in
which the reports are made. That is number one.
Number two, I am very concerned that if, indeed, there was
that relationship, that would be a violation of our current
rules. However, our review to date does not show that this was
the case, that the individual performed research for those
consulting entities.
Senator Specter. We would like to get into the specifics of
that.
With the extra time on this round, may I come back to the
point of the failure to have the financial disclosure filed?
How long ago was that called to your attention?
Dr. Zerhouni. Basically this was called to my attention
this summer when the issue of lecture awards came up through
Congressman Greenwood's committee for one of our directors.
Senator Specter. Have you taken any action in response to
the clear-cut violation of not making the financial disclosure
report?
Dr. Zerhouni. Well, that is the issue that is at issue here
because there is no violation of whether or not these reports
are disclosed to the public. All scientists at NIH disclose
internally, but if they are under a certain pay system, they
are not obligated or the Federal Government rules do not allow
us to make those records public. The Acting Director of the
Office of Government Ethics is here and can comment at great
length on that issue in particular.
But our intent again is to have full transparency, and one
of the issues I am asking the blue ribbon panel to look at is
to what extent disclosure should be made without undue stress
on the system. Again, although the report says 94 percent of
our scientists do not disclose, we should remember 3 percent of
our scientists are involved in any one relationship of this
kind. So we have to be cognizant of the fact that to me what is
important is transparency, and we need to be able to do it. The
rules do not allow us to do it, not that NIH does not want to
do it.
Senator Specter. We have been joined by the distinguished
chairman of the full committee, Senator Stevens.
STATEMENT OF SENATOR TED STEVENS
Senator Stevens. Thank you very much, Mr. Chairman. My
voice is not exactly what it should be, but I am pleased to be
here today with Dr. Zerhouni. I think NIH is in very capable
hands under your leadership.
This committee has more than doubled the amount of money
that is available to NIH for basic research in the last decade,
and I think that the issues involving collaboration between NIH
scientists and biotech and pharmaceutical industries are very
important issues to all of us. We have been working to get some
of the best researchers in the world working at NIH on basic
and applied research. Without encouraging them to work together
with biotech companies and the pharmaceutical industry, the
fruits of their research might not reach the taxpayers who
really are basically funding this research.
I am disturbed that some would characterize the very
existence of contractual relationships between NIH researchers
and biotech companies as somehow or other unethical. As I
understand it, these researchers at NIH had sought and received
clearance from their superiors and had followed the agency's
procedure in entering into these relationships. Now, if that
policy of how that clearance is achieved is something that is
being criticized, then I would hope that you would review that,
and I commend you for your efforts to make this area more
transparent.
I also believe we have to encourage collaboration rather
than putting some sort of a taint on it as these researchers do
enter into such agreements. Since the mid-1980's, it has been
the policy of our Government to encourage technology transfer
from the laboratory to private companies. This allows the
results of medical research to be developed into new treatments
and therapies to benefit all Americans at the earliest possible
time. We have made this enormous investment that I have
mentioned in medical research at NIH, and I think we must
continue to press forward. With this baby boomer generation
coming at us, we must be able to apply the fruits of this
research as quickly as possible. I do not think there would be
any disagreement with this. Without collaboration between NIH
and its scientists and the biotech community, that would not be
possible.
PREPARED STATEMENT
Having been subject lately to a little criticism concerning
my own situation, I am a little sensitive to this, as a matter
of fact. I am sensitive to the fact that I do not think the
newspaper industry has transparency. I do not think they
disclose their collaboration or their contracts. We could not
mandate that because of the First Amendment. I do not know if
you know that, Dr. Zerhouni. But I think voluntarily we ought
to see some information forthcoming from the newspaper industry
to tell us who in their groups are getting paid by those who
they are reporting about. Some way or other, there should be
more balance in this society of ours, and people should
investigate and determine if the system is working before they
taint those who are working under the system.
Thank you very much, Mr. Chairman.
[The statement follows:]
Prepared Statement of Senator Ted Stevens
Thank you, Mr. Chairman. I'm pleased to welcome Dr. Zerhouni before
our panel today. I believe NIH is in excellent hands under your capable
leadership.
The issue of collaboration between NIH scientists and the biotech
and pharmaceutical industries is an important one. We have some of the
best researchers in the world working at NIH on basic and applied
research. But without encouraging them to work together with biotech
companies, the fruits of their research will not reach the taxpayers
who are funding the research.
I am disturbed that some would characterize the very existence of
contractual relationships between NIH researchers and biotech companies
as somehow tainted and unethical. As I understand these allegations,
the researchers at NIH had sought and received clearance from their
superiors and had followed agency procedure in entering into these
relationships.
I commend Dr. Zerhouni for his efforts to make these relationships
more transparent, but I also believe we need to encourage this kind of
collaboration rather than putting eminent researchers ``on trial.''
Since at least the mid-1980's it has been the policy of our
government to encourage ``technology transfer'' from the laboratory to
private companies. This allows the results of medical research to be
developed into new treatments and therapies to benefit all Americans at
the earliest possible time.
We have made an enormous investment in medical research and in
NIH--and we must continue to expand that investment. But without the
collaboration between NIH, its scientists and the biotech community, we
will not be able to translate that investment into treatments for
diseases.
I look forward to hearing your testimony and to your continued
leadership at NIH.
Senator Specter. Thank you, Mr. Chairman, Senator Stevens.
Dr. Zerhouni, at the request of Congressman Tauzin and
Congressman Greenwood and myself we have asked for the
compilation of the total number of consulting arrangements and
have been advised that there are more than 1,500. Short-term
arrangements at 579, long-term arrangements of 365, total
number of employees of 527, total number of long-term
arrangements on another category at 936. And it is obvious that
this poses a very, very substantial problem. To deal with them
on an individual basis is going to be enormously complicated to
investigate each one of these matters and make some
determination.
Do you have any plan as to what you are going to do
immediately to deal with this issue as you work through the
analysis of each one of these arrangements?
Dr. Zerhouni. The numbers you mentioned, Senator, are the
cumulative numbers over 5 years. The active agreements
currently at NIH are about 365. Of those, some are long-term,
some are short-term, 1-day consultations.
So what I did is I established a review process in my
office through a central committee that will review every
relationship and all relationships that involve any individual
with any authority at NIH, directors, deputy directors,
scientific directors, anyone who has authority over a decision,
and second, every relationship with industry will be reviewed.
Senator Specter. Are you taking any action to suspend these
arrangements while the investigation goes on?
Dr. Zerhouni. Basically we have suspended any approval
until this system is in place.
Senator Specter. Are you saying that you are suspending
these arrangements while the investigation goes on?
Dr. Zerhouni. I have to follow the rules and regulations. I
can change the process. I cannot change the rules and
regulations that govern NIH now. The review process is to
change the regulation. My process is to review and evaluate
every single relationship as they exist today for every
scientist, about 200 scientists.
Senator Specter. Are you saying that the current rules and
regulations preclude you from suspending these arrangements
until the rules and regulations are modified?
Dr. Zerhouni. The rules and regulations as they exist--and
I would like to have the Acting Director of the Office of
Government Ethics report on that, but my understanding is I
cannot change the rules without new regulations being
promulgated.
Senator Specter. How long would you expect it to take to
promulgate new rules and regulations?
Dr. Zerhouni. I am told by the Office of Government Ethics
they will collaborate with us as diligently as they can,
including if we need some help from Congress. I want the review
to be done within 90 days and the implementation of the changes
be done as soon as possible after that.
Senator Specter. Are you setting a 90-day time limit?
Dr. Zerhouni. I am setting a 90-day time limit for the
outside independent review panel to review our policies,
procedures, rules, regulations and make firm recommendations.
Senator Specter. Well, apparently you are not in the
position to say now because I have asked you and you have not
responded precisely to the question as to how long it will take
to change the rules and regulations. Would you provide the
subcommittee with a time line as to how long all of this is
going to take so we have some idea as to what is going to be
happening in the interim?
Dr. Zerhouni. I will do so, Senator, but again, that is not
necessarily all under my control, as you well know. It has
other entities----
Senator Specter. Well, would you specify what is not under
your control so that the subcommittee can make an evaluation of
that?
Dr. Zerhouni. I will do so.
Senator Specter. Okay. Thank you very much, Dr. Zerhouni.
Dr. Zerhouni. Thank you, Senator.
Senator Specter. Now I would like to call the second panel:
Ms. Marilyn Glynn, Mr. Edgar Swindell, and Dr. Ruth
Kirschstein.
Our first witness on this panel is Dr. Ruth Kirschstein who
currently serves as Special Advisor to the Director. Previously
Dr. Kirschstein had been acting Director of NIH for more than 2
years between January 2000 and May 2002, and prior to that
post, Dr. Kirschstein served as agency ethics official from
1993 to 2003. She has a long-term record of outstanding service
to NIH going back to 1956 as a medical officer in clinical
pathology, a bachelor's degree magna cum laude from Long Island
University and an M.D. from the Tulane University School of
Medicine.
Dr. Kirschstein, you have appeared before this subcommittee
many, many times. We welcome you back. The floor is yours. In
accordance with our practice, the statements will be limited to
5 minutes.
Dr. Kirschstein. Thank you, Mr. Chairman. As you said, I am
currently the Senior Advisor to the Director of NIH, and I am
going to have to get some water, if you will pardon me for a
minute.
Senator Specter. May I again invite people who are standing
in the rear of the room to come up and take the chairs which
are behind the bench here, either the staff chairs or the
Senators' chairs. You are welcome to sit down. If you come up,
you will allow more people. Whoever is the custodian of the
door, would you tell people outside who are waiting that they
can come up and take chairs that others are reticent to take?
Dr. Kirschstein, you will be glad to know we have not
started the clock yet.
Dr. Kirschstein. Thank you, sir. I am appearing today
before the committee to describe the role of the NIH Deputy
Ethics Counselor as part of the duties of the Deputy Director
of NIH. I had anticipated that Ms. Glynn and Mr. Swindell would
precede me so that they would have described some of the
process. However, I should----
Senator Specter. Would you prefer that they go first?
Dr. Kirschstein. Well, it would perhaps make the process
more transparent to you, but it is fine with me if you would
like me to go ahead.
Senator Specter. Well, if it would be more orderly to
proceed the other way. They were listed ahead of you on the
schedule.
Dr. Kirschstein. That is why I made that assumption, sir.
Senator Specter. I immediately saw you number 3 and for me
you are number 1.
Dr. Kirschstein. Thank you, sir.
STATEMENT OF MARILYN L. GLYNN, ACTING DIRECTOR, OFFICE
OF GOVERNMENT ETHICS
Senator Specter. Which was the reason I made you number 1.
That is the chairman's prerogative, but if it would be more
orderly to proceed, we will go to Ms. Marilyn Glynn first,
Acting Director of the U.S. Office of Government Ethics. She
serves in the Office of General Counsel, a position she has
held since 1977. Undergraduate from Emmanuel College in Boston,
a law degree from the Washington College of Law, the American
University in Washington, D.C. Thank you for joining us, Ms.
Glynn, and we look forward to your testimony.
Ms. Glynn. Good morning. I will try to move up to number 1
now in your estimation.
As you said, I am the Acting Director of the Office of
Government Ethics (OGE). Thanks for the opportunity to appear
today to discuss the ethics program in the executive branch and
at NIH as well. I respectfully request that my written
statement go in the record, which is rather lengthy.
Senator Specter. Without objection, it will be made a part
of the record.
Ms. Glynn. OGE is the executive agency responsible for
directing policies relating to the prevention of conflict of
interest on the part of executive branch employees. As the
supervising ethics office for the executive branch, OGE has
issued and provides guidance on standards of conduct for
executive branch employees, rules relating to financial
disclosure and the criminal conflict of interest laws.
While developing and publishing rules is an important part
of OGE's role, it is in a sense only the starting point. With
an emphasis on education and prevention, OGE works with
agencies to implement these rules by assisting agencies in
carrying out their responsibilities. The head of each agency
has the primary responsibility for the ethics program at his
agency and appoints a designated agency ethics official, or
DAEO as we call it, to manage the ethics program. OGE works
with DAEO's through one-on-one consultation, education, and
outreach and periodic program reviews.
A little history is in order to explain the evolution of
the ethics rules being looked at today. In 1989, then President
Bush created a commission to evaluate the existing ethics
program in Government. Based on the commission's
recommendations, President Bush directed my office to develop
and issue a single comprehensive set of standards of conduct
and directed agency heads to develop supplemental rules where
necessary to meet unique needs. One of the President's goals--
and this is something you touched on earlier, sir--was to
balance the need for exacting rules that ensure that employees
will act with the utmost integrity against the need to avoid
rules that are so restrictive that able people will be
discouraged from entering public service. Striking this balance
was an important factor in developing the standards of ethical
conduct and it continues to inform my office's interpretation
of the ethics rules and laws.
In 1993, when the new standards became effective, agency-
specific regulations were largely supplanted. Agencies were
expected to bring inconsistent policies into compliance with
the new standards or to issue supplemental regulations with
OGE's concurrence.
As I stated earlier, OGE monitors agency ethics programs
through periodic program reviews. In large agencies, OGE may
look at specific components rather than the entire agency.
These reviews generally focus on program elements rather than
the individual cases of misconduct.
In 1995, OGE conducted a program review at NIH looking at
three institutes. In general, we found that NIH had a good
ethics program. As part of this review, which was the first one
at NIH after the new standards came into effect, OGE found that
certain NIH policies relating to outside employment were
inconsistent with the new standards. As such, we recommended
that these policies be revised to be consistent with the new
rules. We also noted that HHS could consider proposing
supplemental rules that imposed more stringent rules on
employees of NIH if necessary. HHS did issue a supplemental
regulation in 1996 that included prohibitions on certain types
of outside activities and employment for HHS employees
generally, as well as some provisions relating to specific HHS
components, but they did not propose any special rules for NIH
employees.
In the year 2000, my office conducted another program
review, this time looking at three different institutes.
Overall, we found the programs at these institutes to be sound.
We have now initiated a 2004 review of the NIH ethics
program. This review is being performed at the Office of the
Director of the NCI, the National Institute of Allergy and
Infectious Diseases and the Clinical Center. Though this review
had long been planned for 2004, in light of recent news reports
concerning the ethics program at NIH, we moved the start date
up and tailored the focus to current concerns.
I have discussed specific rules regarding outside
activities and employment and the public financial disclosure
system in some detail in my written testimony, so I will not
repeat that here.
PREPARED STATEMENT
In closing, I want to say that I want to work with you as
well, with NIH and with HHS to address the problems that have
been identified and to ensure that the public has the highest
confidence in the important work going on at NIH.
[The statement follows:]
Prepared Statement of Hon. Marilyn L. Glynn
Mr. Chairman, Senator Harkin, and members of the subcommittee:
Thank you for the opportunity to appear today to discuss the policies
and procedures in place to avoid conflicts of interest in the executive
branch generally and at the National Institutes of Health (NIH) in
particular. Mr. Chairman, you requested that the Office of Government
Ethics (OGE) ``provide an overview of how ethics rules and regulations
are determined and implemented throughout the executive branch and the
role of the Office of Government Ethics.'' In addition, you requested
that OGE ``summarize the results of any ethics audits that the Office
of Government Ethics has conducted at the NIH within the last 10
years'' and provide documents relating to these audits.
THE EXECUTIVE BRANCH ETHICS PROGRAM AND OGE'S ROLE
Established by the Ethics in Government Act of 1978, OGE is the
executive branch agency responsible for directing policies relating to
the prevention of conflicts of interest on the part of Federal
executive branch officers and employees. As the supervising ethics
office, OGE develops rules relating to ethics and conflicts of
interests, establishes the framework for the public and confidential
financial disclosure systems, develops training and education programs
for use by executive branch ethics officials and employees, and
supports and reviews individual agency ethics programs to ensure they
are functioning properly.
While OGE provides direction and overall leadership to the
executive branch ethics program, the head of each agency has primary
responsibility for the ethics program at his agency. Each agency head
appoints a Designated Agency Ethics Official (DAEO) to manage the
ethics program and act as a liaison to OGE. The DAEO and his staff
ensure that the required ethics program elements are accomplished.
Basic elements and responsibilities of an agency ethics program include
effective collection and review of financial disclosure reports; ethics
training that meets the requirements of OGE's training regulations; an
employee counseling program; and prompt and effective action for
violations of the ethics rules. Additionally, an agency that wishes to
supplement the Standards of Ethical Conduct to meet its particular
needs may submit a proposed supplement to OGE for concurrence and joint
issuance. Through its role to provide direction and leadership to
executive branch agencies and departments, OGE supports high ethical
standards for employees and strengthens the public's confidence that
the Government's business is conducted with impartiality and integrity.
As the supervising ethics office of the executive branch, OGE has
developed and issued various executive branch-wide regulations in Title
5 of the Code of Federal Regulations, including the Standards of
Ethical Conduct for Employees of the Executive Branch (Part 2635),
rules that implement the financial reporting requirements in the Ethics
in Government Act (Part 2634), and rules that implement criminal
conflict of interest laws (Parts 2635, 2637, 2640, and 2641). Pursuant
to the Ethics in Government Act and Executive Order 12674 (as modified
by E.O. 12731), these regulations are issued after consultation with
the Attorney General and the Office of Personnel Management.
While developing and publishing rules are important and central
elements of OGE's role in providing direction and leadership to the
executive branch ethics program, it is, in a sense, only the starting
point. With an emphasis on education and prevention, OGE works with
agencies to implement these rules by assisting agencies in carrying out
their responsibilities through training of ethics officials, sponsoring
regular national and regional conferences, and communicating with
agencies through memoranda to agency ethics officials (``DAEOgrams'')
and an electronic list service. Additionally, to ensure consistency in
the interpretation of its rules, OGE issues redacted versions of
important advisory opinions it issues each year.
To ensure that DAEOs receive accurate and timely consultation on
ethics issues, OGE also provides one-on-one consultation to agencies
through its attorneys and a desk officer system in which each agency is
assigned an individual ethics specialist as a primary OGE contact. OGE
attorneys and desk officers assist agencies on a wide range of ethics
issues, including responding to questions regarding application of
specific rules in the Standards of Ethical Conduct, providing
assistance in analyzing conflict of interest questions, and responding
to questions relating to implementation of the financial disclosure
systems.
In addition to these outreach activities with agencies, OGE is
responsible for monitoring and evaluating the executive branch ethics
program. This function is accomplished through periodic program reviews
of the ethics programs at each agency. The purpose of the review is to
ensure that agencies have developed effective ethics systems and
procedures, in compliance with OGE regulations, to prevent conflicts of
interest and other violations of ethics laws and regulations.
Individual misconduct by employees is investigated by the Office of
Inspector General responsible for each agency. I will discuss our
review process in greater depth later in my testimony.
POLICIES AND PROCEDURES FOR AVOIDING CONFLICTS OF INTEREST
1. New Standards of Ethical Conduct Issued in 1993
The current Standards of Ethical Conduct, at 5 C.F.R. Part 2635,
became effective in 1993. Prior to that, ethics rules were located in
numerous sources and implemented in a decentralized, sometimes
inconsistent, manner largely by individual agencies. In 1989, President
George H.W. Bush created the President's Commission on Federal Ethics
Law Reform to evaluate the existing ethics program and make
recommendations for improvement. One of the Commission's central
recommendations was that OGE consolidate all executive branch standards
of conduct regulations into a single, uniform set of rules. The
Commission found that ``the sheer bulk of ethics statutes and rules,
inconsistent rules, and varying interpretations have contributed
greatly to making compliance difficult. To the extent that rules and
interpretations can be standardized, the rules can be more easily
understood and compliance will be facilitated.'' President's Commission
on Federal Ethics Law Reform, To Serve with Honor, p. 93 (March 1989).
In addition to a standardized set of rules, the Commission recognized
that some agencies would need to have supplemental regulations
specifically tailored to their needs. For example, owning stock in a
particular company or industry could pose a problem at one agency but
not others.
Shortly after the Commission issued its report in 1989, President
Bush announced a comprehensive ethics reform proposal and an executive
order that directed OGE to promulgate ``regulations that establish a
single, comprehensive, and clear set of executive-branch standards of
conduct that shall be objective, reasonable, and enforceable.'' Section
201(a) of Executive Order 12674 of April 12, 1989 (as modified by E.O.
12731). In addition, agency heads were directed to ``[s]upplement, as
necessary and appropriate the comprehensive executive branch-wide
regulations of the Office of Government Ethics, with regulations of
special applicability to the particular functions and activities of
that agency.'' Section 301(a) of E.O. 12674. One of the premises of
this package was the recognition of the need to balance the competing
interests of having exacting rules that ensure employees will act with
the utmost integrity with the need to avoid rules that are so
restrictive that able members of the public will be discouraged from
entering public service. Striking this balance properly was an
important factor in the development of the Standards of Ethical
Conduct, and it continues to influence OGE's interpretation of the
ethics rules and laws. Indeed, this is a continuous process, and OGE
currently has a project focused on considering how to modernize and
update the Standards with respect to outside activities, among other
issues.
At the time the Standards became effective, agency specific
regulations were largely supplanted. To the extent that agency policy
was inconsistent with the new rule, agencies were expected to bring
those policies into compliance with the executive branch-wide Standards
or issue supplemental regulations, with the concurrence of OGE, when a
determination was made that doing so was necessary and appropriate in
view of that agency's programs and operations. To allow time to issue
supplemental regulations, however, agency regulations that had
prohibited specific financial interests or specific types of outside
employment or that required prior approval for outside activities were
allowed to remain in effect, through a series of grandfather
provisions, for several years or until the agency had issued a
supplement as a replacement. To date over 35 agencies, including the
Department of Health and Human Services (HHS), have issued supplemental
regulations.
As discussed more fully later in this testimony, through a program
review conducted at HHS in 1995--the first program review at that
agency after the new Standards became effective in 1993--OGE determined
that written guidance NIH provided to employees about criteria for
permissible outside activities and employment was inconsistent with
provisions in the new Standards. As such, OGE recommended that these
policies be revised to be consistent with the new rules and noted that
HHS could consider proposing supplemental regulations that addressed,
should they determine it was necessary, more stringent criteria for
employees at NIH.
HHS did issue a supplemental regulation in 1996 that included
prohibitions on certain types of outside activities and employment
applicable to all HHS employees, including those employed at NIH.
Specifically, HHS employees may not provide compensated professional or
consultative services related to the preparation of any grant
application, contract proposals, program report, or other document
intended for submission to HHS. Additionally, HHS employees may not
participate in compensated outside activities with respect to
particular activities funded by HHS. This supplemental regulation also
contains prohibitions on outside activities and employment applicable
to employees of the Food and Drug Administration and the Office of the
Chief Counsel, and to the outside practice of law by attorneys in the
Office of the General Counsel. HHS did not propose any special
standards for NIH employees in its supplemental regulation.
2. Handling Conflicts of Interest Arising From Outside Activities
(Including Employment)
One of the major areas that can give rise to conflicts of interest
questions is employees' outside activities. Two basic issues must be
addressed when an employee proposes to engage in an outside activity:
whether the employee may participate in the outside activity and, if
permissible, what rules apply to such participation.
a. Conflicting Outside Activities and Judging Appearance
Problems
The Standards prohibit an employee from engaging in an outside
activity that conflicts with his official duties. An outside activity
will conflict with an employee's official duties if it is prohibited by
statute or an agency supplemental regulation, or if the
disqualification required to avoid a conflict of interest is so central
or critical to the performance of the employee's official duties that
his ability to perform his job is materially impaired. This provision
recognizes that even if an outside activity is not prohibited under
this standard, it may nonetheless violate other principles or standards
and therefore be prohibited. See 5 C.F.R. 2625.802. For example, even
if a proposed outside activity does not conflict with an employee's
duties, it may be prohibited if it creates the appearance that the
employee is using public office for private gain.
When an employee wishes to participate in an outside activity for
which a disqualification from certain matters is required to avoid a
conflict of interest, a determination that the resulting conflict will
materially impair that employee's ability to do his job requires a
judgment call based on a variety of facts, including the nature of the
employee's duties, the needs of the office, and the ability to reassign
projects in the office. However, whether or not a disqualification is
required, an agency should consider whether the employee's
participation in the outside activity is prohibited by any other
provision in the Standards, including if participating in the activity
would create the appearance that he is using public office for private
gain.
The Standards provide that whether ``particular circumstances
create an appearance that the law or these standards have been violated
shall be determined from the perspective of a reasonable person with
knowledge of the relevant facts.'' 5 C.F.R. 2635.101(b)(14). Agencies
are undoubtedly in the best position to determine if an outside
activity is permissible under these Standards generally, and with
respect to appearances in particular. Some things that an agency should
consider in making a decision about whether participation in an outside
activity will create the appearance that an employee is using public
office for private gain are the level of the employee's position and
the nature of his duties; the subject of the outside work and its
relation to agency programs and operations; the identity of the outside
employer and its relationship to the agency, including whether it
receives grants or contracts; and the timing of the offer of
employment.
The Standards do not contemplate direct consultation on ethics
issues between OGE and employees of other agencies. Rather, the
regulations provide that employees and their supervisors should seek
advice from their agency ethics officials and that those ethics
officials may consult with OGE as necessary. The reason for this is
clear: agencies are in a better position to know or develop the facts
necessary to understand how the issue implicates agency programs. This
is particularly true with respect to questions regarding appearances,
and OGE will generally defer to agency determinations on these
questions.
OGE's role in this process is to provide consultation, upon
request, to agency ethics officials regarding application of the
Standards and applicable laws. Such assistance may be provided through
informal consultations over the phone, in meetings, or through the
advisory opinion process. When necessary, OGE consults with the U.S.
Department of Justice when an agency presents an issue of first
impression with respect to one of the criminal conflict of interest
statutes. While the final judgment on appearances rests with the
agency, OGE has an important role in ensuring that agencies understand
the rules and are applying them consistently across the executive
branch. OGE may also provide agencies with input on these issues
through its periodic program reviews.
b. When an Outside Activity Is Approved
The Standards of Ethical Conduct provide that an employee who is
engaged in an outside activity must comply with all applicable
provisions set forth in the rules, including rules that prohibit use of
position or Government resources, information, and time in connection
with outside activities and that relate to providing representational
services on behalf of others before the Government. Particularly
relevant in the context of the present inquiry are the rules that
require employees not to participate in certain Government matters when
their own interests, or the interests of others, are affected by such
matters.
Non-participation may be required in connection with an outside
activity under one of two ethics provisions. Under 18 U.S.C. 208, a
criminal conflict of interest statute, an employee is prohibited from
participating personally and substantially in any particular matter
that would have a direct and predictable effect upon an employee's own
financial interest or upon the financial interests of her or her non-
Government employer, among others. Adherence to the statute is
accomplished by not participating in the particular matter. Under 5
C.F.R. 502 of the Standards of Ethical Conduct, an employee is also
required to recuse himself when he determines that his impartiality
would reasonably be questioned if he were to participate in a
particular matter involving specific parties where persons with whom he
has certain personal or business relationships are involved.
The obligation to recuse when necessary and to ensure that a
disqualification is observed, always remains the personal
responsibility of the individual employee subject to the
disqualification. An employee should notify his supervisor when he
becomes aware of the need to disqualify himself from certain matters
because of a potential conflict of interest. Once notified, the
employee's supervisor also has a responsibility to facilitate the
disqualification by ensuring that the employee is not assigned to work
on matters from which he is disqualified. Agency ethics officials
obviously have an important role through direct counseling to, and
education of, employees to ensure that they understand when a recusal
is required and how to effectively implement a required recusal. OGE's
role is to ensure that agency ethics officials understand the rules and
ensure that they are applied consistently across the executive branch.
It is worth noting that agencies do have discretion with respect to
whether a disqualification will be approved as an appropriate remedy
for a potential conflict of interest. In other words, the Standards
permit a supervisor to disapprove a request for approval of an outside
activity if the required disqualification is unworkable because other
employees in the office cannot readily be assigned to work on the
matter from which the requesting employee would be disqualified if he
were permitted to pursue the proposed outside employment. See 5 C.F.R.
2635.403(b).
3. Financial Disclosure
The financial disclosure systems implemented by OGE for the
executive branch are one of the ways that potential conflicts of
interest may be identified and handled. The Ethics in Government Act
requires senior officials in the executive, legislative and judicial
branches to file public reports of their finances as well as other
interests outside the Government. The theory of public financial
disclosure is rooted in post-Watergate concepts of ``Government in the
Sunshine,'' which aims to promote public confidence in the integrity of
Government officials. Congress also sought ``to strike a careful
balance between the rights of individual officials and employees to
their privacy and the right of the American people to know that their
public officials are free from conflicts of interest.'' H. Rep. No.
800, 95th Cong., 1st Sess. 18 (1977). OGE has no authority to alter the
statutory requirements. OGE's regulation and the public financial
disclosure report (SF 278) format reflect the law's mandates and its
dual purpose: avoiding conflicts of interest through analysis of
disclosures and ensuring public confidence in Government through
disclosure as an end in itself.
The statute specifies which officials in the executive branch file
a SF 278. Employees in statutorily-specified positions must file the SF
278; neither the employees nor their agencies have the discretion to
determine that they may be exempted from this requirement. Among the
positions specified as subject to this filing requirement are the
President, Vice President, certain commissioned White House appointees,
senior postal service employees, Presidential nominees requiring Senate
confirmation, other political appointees, and members of the Senior
Executive Service. Congress specified that a senior employee paid under
an alternative pay systems must file when his position's rate of basic
pay is equivalent to or greater than 120 percent of the minimum rate of
basic pay for GS-15.
Additionally, the Director of OGE was granted the authority to
designate additional positions for filing SF 278s if OGE determines
that those positions are equivalent to others that normally require
filing, generally referred to as an ``equal classification''
determination. OGE gives careful consideration to requests that a
position be subject to the public financial disclosure requirements
based on an ``equal classification'' argument, paying special attention
to Congress' concern that the right balance be struck between the
employee's right to privacy and the public's right to know public
officials are free of conflicts of interest.
A variety of factors are considered in making equal classification
determinations, but it is important to keep in mind that the amount of
compensation paid to an employee is not the crucial factor in
determining whether an employee is in a position covered by the public
reporting requirements. The law contemplates that the quality and level
of responsibility must be considered. While the amount of pay may, in
many cases, be commensurate with responsibility, in recent years
Congress has developed pay plans that provide relatively high levels of
compensation to recruit and retain employees who are highly skilled and
qualified in their fields, such as doctors.
Concerns have been raised about the positions at NIH for which
public disclosure is not required. Specifically, a recent news report
asserts that, based on a 1998 OGE opinion, officials at NIH are
``allowing'' senior employees to avoid public financial disclosure
requirements. The article suggests that NIH as an agency, and its
employees individually, have improperly exercised discretion in this
area. This is simply not true. Indeed, as noted above, neither NIH nor
its employees have discretion in this area.
I would like to take this opportunity to explain how certain
determinations were made with respect to positions covered by the
public financial disclosure system at HHS generally, including NIH. In
late 1997, the DAEO at HHS requested OGE's opinion on what was meant by
the term ``rate of basic pay'' when determining, among other things,
whether employees under a particular pay system are required to file
public financial disclosure reports. At that time, the Secretary of HHS
had been empowered to appoint a number of employees in the ``Senior
Biomedical Research Service'' under a new pay system in which pay was
determined by the Secretary in an amount not less than the minimum rate
payable for a GS-15 and not more than the rate of pay for level I of
the Executive Schedule. Under this system there were no steps or grades
within the range; it was one broad ``pay band.''
Under the statutory requirements for filing, employees in ``pay
band'' systems would be subject to the public financial disclosure
reporting requirement only if their ``rate of basic pay'' was equal to
or greater than 120 percent of the rate of basic pay for a GS-15. In an
opinion issued in early 1998, OGE determined that, based on previous
opinions interpreting both the statutory language and legislative
history of the Ethics in Government Act, the term ``rate of basic pay''
means the lowest step authorized for a position's pay grade. For ``pay
band'' systems in which the minimum allowable pay is less than 120
percent of the basic rate of pay for a GS-15, and where there are no
intermediate steps or grades, this means that no employee compensated
under that ``pay band'' system is required to file a public financial
disclosure report, regardless of the actual amount they are
compensated. As a practical matter this mean that some employees at NIH
who had been required to file a public financial disclosure report
because they had previously been in the Senior Executive Service were
no longer required to do so. HHS has recently requested that OGE
consider whether a number of positions at NIH meet the criteria for
filing a public financial disclosure report under an equal
classification analysis.
OGE PROGRAM REVIEWS AT NIH
As I stated earlier, OGE conducts systemic reviews of all executive
branch department and agency ethics programs to determine whether
agencies have developed effective ethics systems and procedures, in
compliance with OGE's regulations, to prevent conflicts of interests.
OGE currently conducts reviews of 35 agencies annually, with major
agencies being reviewed approximately every 5 to 6 years. Agencies are
selected for review based on the length of time since their last
review, OGE staff concerns about an agency's program, and news media
reports of ethical concerns.
These reviews generally focus on several ethics program elements,
including the structure and staffing of the ethics program, the
financial disclosure systems, the ethics education and training
program, the advice and counseling services, the outside activity
approval process, ethics systems for advisory committees, acceptance of
travel payments from non-Federal sources under 31 U.S.C. 1353, ethics
staff relations with the Office of Inspector General, and ethics issues
unique to that agency. In large agencies or departments, OGE may look
at how the ethics program is managed in its individual components
rather than the entire agency. The reviews do not typically look at
individual employee cases of conflict. On occasion concerns about an
individual employee will arise in the course of a review, and OGE will
consider the facts giving rise to the concern and make appropriate
recommendations.
Once a program review report is issued, the agency is required to
report, within 60 days, on any actions it will take to address issues
raised in the report. OGE conducts a six-month followup to check on the
agency's progress in addressing these issues. In rare cases, where we
find programs that are extremely deficient, we will send a Notice of
Deficiency to the agency requiring them to correct certain matters,
usually within a specified period of time.
Since 1990, OGE has performed three program reviews at NIH and has
a fourth review underway. In 1991, we conducted a review focusing on
the National Cancer Institute (NCI), the National Heart, Lung and Blood
Institute (NHLBI), and the National Institute of Allergy and Infectious
Diseases (NIAID). This review focused in part on the NIH outside
activity approval process as it related to scientists and doctors. Our
recommendations focused on the need to improve the criteria and process
for approving outside activities, particularly in the area of teaching,
speaking, and writing. Our main concerns were that some activities
appeared to be approved without adequate documentation. We also
observed that a large proportion of outside activity requests were
being considered and approved after the activity had already taken
place. It is important to note that the 1991 program review was
conducted prior to the issuance of the new executive branch-wide
Standards of Ethical Conduct.
Following the 1991 review we met with the Director of NIH and the
HHS DAEO to discuss our concerns. We recommended that HHS assist NIH in
establishing an Office of Ethics on site at NIH and that clear
policies, consistent with OGE regulations, concerning outside
activities be developed. We also again recommended that HHS correct its
department-wide standards of conduct regulations to reflect the correct
standards for outside speaking and writing activities. Following the
1991 review, HHS established a satellite ethics office at NIH and
issued interim guidance to NIH on the correct standards for approving
teaching, speaking and writing activities.
In 1995, OGE conducted a program review at NIH looking at NCI,
NHLBI, and NIAID. While OGE will normally review different components
in a large agency like NIH, it was felt that a follow-up at these three
institutes was appropriate given the results of the previous review. We
were pleased to find that NIH had put much time and effort into
developing its guidance on outside activities, and in implementing a
much improved system for approving outside activities.
As noted previously, the new executive branch-wide Standards of
Ethical Conduct became effective prior to the 1995 review. After the
Standards went into effect some NIH policy guidance on outside
activities--though consistent with our 1991 recommendations--was
superseded. Following the 1995 review, NIH did rescind its guidance on
outside activities, and HHS issued supplemental regulations, though, as
previously noted, HHS did not propose any special standards for NIH
employees in its supplemental regulation.
In 2000, OGE conducted a program review at NIH of the National
Institute of Arthritis and Musculoskeletal and Skin Diseases (NIAMSD),
the National Institute of Child Health and Human Development (NICHHD),
and the National Institute of Diabetes and Digestive and Kidney
Disorders (NIDDKD). Recommendations included ensuring that proper
determinations are made before issuing statutory conflict of interest
waivers to special Government employees on Federal advisory committees,
and recommendations to NIDDKD in particular regarding the procedure for
approval to engage in outside activities. The latter recommendation
arose primarily from the fact that a new ethics official at NIDDKD
could not locate the approvals granted before he took the position.
Through our normal follow-up procedures, we concluded that NIH took
actions to implement these recommendations.
OGE has initiated a 2004 review of the NIH ethics program. This
review will be performed at the Office of the Director, NCI, NIAID, and
the Clinical Center, and it will focus on the structure and staffing of
NIH's ethics program, the public financial disclosure system, the
criteria and process for approving outside activities, the criteria and
process for approving the acceptance of awards, and other basic ethics
systems.
CONCLUSION
In closing, I would like to emphasize that OGE stands ready to work
with you, the Committee, HHS, and NIH to ensure that the public has the
highest confidence in the important work of all the components at NIH.
I would be happy to answer any questions you may have.
STATEMENT OF EDGAR M. SWINDELL, ASSOCIATE GENERAL
COUNSEL, ETHICS DIVISION, OFFICE OF THE
GENERAL COUNSEL, DEPARTMENT OF HEALTH AND
HUMAN SERVICES
Senator Specter. Thank you, Ms. Glynn.
We now turn to Mr. Edgar Swindell, Chief Ethics Officer for
the Department of Health and Human Services. He has held that
position since 1997. He also serves as Associate General
Counsel in charge of the Ethics Division of the Office of the
General Counsel. Prior to joining HHS in 1983, he was in the
private practice of law. Both his degrees, a bachelor's and law
degree, come from the University of Tennessee.
Thank you for joining us, Mr. Swindell, and we look forward
to your testimony.
Mr. Swindell. Thank you, Mr. Chairman. As you have
indicated, I am the Associate General Counsel for Ethics at the
Department of Health and Human Services and my principal role
there is to advise the Secretary and the General Counsel on
ethics and political activity issues within the Office of the
Secretary.
Concurrently I serve at the designated agency ethics
official, or DAEO, for the Department. In this capacity, I am
the point of contact with the Office of Government Ethics and I
exercise general superintendence over a decentralized
departmental ethics program through the appointment of deputy
ethics counselors. These are DEC's and they operate in the Food
and Drug Administration, the Centers for Disease Control and
Prevention, the National Institutes of Health, and other
operating divisions of the Department.
The DEC's administer an ethics program within their
respective components and are responsible for establishing a
system for reviewing public and confidential financial
disclosure forms, considering outside activity requests,
providing ethics advice to the individual employees, initiating
ethics education and training programs, and ensuring that
violations of the conflict statutes or the conduct standards
are reported to investigatory authorities and, where
appropriate, disciplinary action is taken. My office has
similar responsibilities within the Office of the Secretary and
staff lawyers within my Ethics Division are available to
provide guidance to the DEC's.
The DEC's are senior officials within each component and
they have staff who assist them in carrying out the ethics
functions, either as collateral duties or as members of an
ethics program office. Within the NIH, a DEC in the Office of
the Director coordinates the ethics program for that operating
division. The NIH DEC also serves as the ethics official for
senior NIH staff, and in addition, DEC's in each institute and
center administer the ethics programs for their respective
employees.
The committee has asked that I briefly recount the process
and applicable law that governs the approval of outside
activities, and it is rather complicated, so I will try to be
brief about it.
HHS employees are required by our supplemental ethics
regulation to get prior approval for professional or
consultative activities, teaching, speaking, and writing, and
board service. They submit an HHS Form 520 that solicits
detailed information about the proposed activity and each
operating division may specify various levels of review which
may start with the supervisor and end with the DEC.
Approval requires an assessment of whether the proposed
outside activity violates any statute or regulation, including
the OGE standards for ethical conduct of employees of the
executive branch or the HHS supplemental ethics regulation.
Included in those OGE standards is the requirement that the
proposed activity cannot create an actual or apparent conflict
that would result in recusals that would materially impair an
employee's ability to do his job.
In evaluating conflicts, the reviewer must address two
provisions that form the core of Federal ethics law. A criminal
statute, 18 U.S.C., section 208, deals with an actual conflict
due to the employee's own or imputed financial interest in the
resolution of a Government matter. And a regulatory provision
in the OGE standards principally addresses disqualifications
called for when an appearance of a conflict arises from a
covered relationship.
Under section 208 of the criminal code, to avoid a conflict
of interest that results, for example, from stock ownership or
outside employment, a Federal employee must not participate
personally and substantially in a particular matter that, to
his knowledge, directly and predictably affects his own
financial interest or that of his outside employer.
To prevent an appearance of a conflict that results from
serving in a role short of employment, for example, as an
advisor, consultant, or other type of independent contractor
compensated with fees and expenses, a different rule applies.
Under section 502 of the regulations, if a reasonable person
with knowledge of the relevant facts would question the Federal
employee's impartiality, he must recuse, but only from
particular matters involving specific parties. These are things
like grants, contracts, audits, lawsuits, clinical trials, new
drug applications that involve the very company to which he is
providing consulting services as a party or representative of a
party.
It is key to point out that both sections are
disqualification provisions in that they do not prohibit the
acquisition of an asset or relationship. Rather, they bar
actual participation in a potentially conflicting matter,
either personally or through the direct and active supervision
of the participation of a subordinate. However, neither section
is triggered by the mere knowledge of or official
responsibility for a particular matter. In short, if an
employee can recuse appropriately and still be able to do his
job, then an outside activity shall be approved under the
regulations, provided there are no other statutory or
regulatory impediments. And there are quite a few that have to
be reviewed.
PREPARED STATEMENT
I must finish my statement here. What I would like to add,
just to let you know, is that the FDA within our Department
does have a regulation that prohibits certain outside
activities and the ownership of certain types of stock. This
perhaps might serve as a model for NIH. However, of course, FDA
is a regulatory agency and NIH has a different function, but my
office is committed to providing legal assistance to Dr.
Zerhouni's body that will be reviewing these policy issues and
to the NIH as it deals with these matters. If supplemental
regulations prove the best option, my office is available to
assist them in promptly drafting regulations for submission to
OGE.
[The statement follows:]
Prepared Statement of Edgar M. Swindell
Mr. Chairman, Senator Harkin, and members of the subcommittee: I am
Ed Swindell, Associate General Counsel for Ethics at the Department of
Health of Human Services (HHS). My principal role is to advise the
Secretary and the General Counsel on ethics and political activity
issues within the Office of the Secretary. Concurrently, I serve as the
Designated Agency Ethics Official (DAEO) for the Department. In this
capacity, I am the point of contact for liaison with the Office of
Government Ethics (OGE) and exercise general superintendence over a
decentralized Departmental ethics program through the appointment of
Deputy Ethics Counselors (DECs) chosen by each operating division, such
as the Food and Drug Administration (FDA), the Centers for Disease
Control and Prevention (CDC), and the National Institutes of Health
(NIH).
The DECs administer an ethics program within their respective
components and are responsible for establishing a system for reviewing
public and confidential financial disclosure forms, considering outside
activity requests, providing ethics advice to individual employees,
initiating ethics education and training programs, and ensuring that
violations of the conflicts statutes or the conduct standards are
reported to investigatory authorities and where appropriate,
disciplinary action is taken. My office has similar responsibilities
within the Office of the Secretary, and staff lawyers within the Ethics
Division are available to provide guidance to the DECs. The DECs are
senior officials within each component, and they have staff who assist
them in carrying out the ethics functions, either as collateral duties
or as members of an ethics program office. Within the NIH, a DEC in the
Office of the Director coordinates the ethics program for that
operating division. The NIH DEC also serves as the ethics official for
senior NIH staff. In addition, DECs in each NIH Institute and Center
administer the ethics program for their respective employees.
The committee has asked that I briefly recount the process and
applicable law that govern the approval of outside activities. HHS
employees are required by an agency supplemental regulation to seek
prior approval for professional or consultative activities, teaching,
speaking, or writing, and board service. They submit an HHS Form 520
that solicits detailed information about the proposed activity, and
each operating division may specify various levels of review, which may
start with the supervisor and end with the DEC.
Approval requires an assessment of whether the proposed outside
activity violates any statute or regulation, including the OGE
Standards of Ethical Conduct for Employees of the Executive Branch or
the HHS supplemental ethics regulation. Included in the OGE Standards
is the requirement that the proposed activity cannot create an actual
or apparent conflict that would result in recusals that would
materially impair an employee's ability to do his job.
In evaluating conflicts, the reviewer must address two provisions
that form the core of Federal ethics law. A criminal statute, 18 U.S.C.
208, deals with an ``actual conflict'' due to the employee's own or
imputed financial interest in the resolution of a government matter. A
regulatory provision in the OGE Standards, 5 C.F.R. 2635.502,
principally addresses disqualifications called for when an ``appearance
of a conflict'' arises from a ``covered relationship.''
Under section 208 of the criminal code, to avoid a conflict of
interest that results, for example, from stock ownership or outside
employment, a federal employee must not participate personally and
substantially in a particular matter that, to his knowledge, directly
and predictably affects his own financial interest or that of his
outside employer. To prevent an ``appearance of a conflict'' that
results from serving in a role short of employment, for example, as an
advisor, consultant, or other type of independent contractor
compensated with fees and expenses, a different rule applies. Under
section 502 of the regulations, if a reasonable person with knowledge
of the relevant facts would question the federal employee's
impartiality, he must recuse, but only from ``particular matters
involving specific parties,'' such as grants, contracts, audits,
lawsuits, clinical trials, or new drug applications, that involve the
company to which he is providing consulting services as a party or
representative of a party.
Both sections are disqualification provisions in that they do not
prohibit the acquisition of an asset or relationship, rather they bar
actual ``participation'' in a potentially conflicting matter, either
personally or through the direct and active supervision of the
participation of a subordinate. However, neither section is triggered
by mere knowledge of, or official responsibility for, a particular
matter. In short, if an employee can recuse appropriately and still be
able to do his job, then an outside activity shall be approved,
provided there are no other statutory or regulatory impediments.
In addition, a number of statutes and regulations do preclude
certain outside activities. For example, if an employee sought approval
to be a lobbyist, the anti-representation statutes, 18 U.S.C. 203
and 205, would be implicated. If the activity were clearly one that
should be done as an official duty, then approval would be denied,
under 18 U.S.C. 209, as an improper salary supplementation. If the
circumstances would create an appearance that the employee has used his
official position to obtain an outside compensated business opportunity
or would create the further appearance of using his public office for
the private gain of the outside company, then under the principles in
the OGE Standards, 5 C.F.R. 2635.101(b), and the rules governing
misuse of position, 5 C.F.R. 2635.702, the outside activity may be
denied. An example would be where an employee was recently instrumental
in formulating industry standards and would again be so involved. If an
affected company offers a consulting contract to the employee to render
advice to the company about how it can restructure its operations to
comply with the very industry standards that the employee has just
drafted, the consulting arrangement should not be approved even though
the employee lacks any current assignments affecting the industry, and
even though the outside consulting can be finished before he again
works on such matters.
Another regulation, 5 C.F.R. 2635.807, precludes compensation,
subject to certain exceptions, if an employee wants to teach a course,
deliver a speech, or write a book that relates to his official duties.
(Consulting, technically, is not covered by this section, but the
analysis does provide guidance in evaluating many outside activities.)
The ``relatedness'' test evaluates, among other factors, the subject
matter of the activity. For career employees, compensation is precluded
if the teaching, speaking, or writing deals in significant part with
any current assignment (or one completed within the last year) or any
ongoing policy, program, or operation of the agency. However, the
provision has an important exception. A career employee may receive
compensation for ``teaching, speaking, or writing on a subject within
the employee's discipline or inherent area of expertise based on his
educational background or experience even though the [activity] deals
generally with a subject within the agency's areas of responsibility.''
As noted earlier, outside activities must also comply with
applicable provisions governing the avoidance of actions creating an
appearance of violating the ethical standards, including the
prohibition against use of official position for an employee's private
gain or for the private gain of any person with whom the employee has
employment or business relations or is otherwise affiliated in a
nongovernmental capacity.
As can readily be seen, supervisors, ethics program officers, and
the DECs, in particular, have difficult assessments to make when
reviewing outside activity requests. Even when the activities are
approved, individual employees remain personally responsible for
abiding by their recusal obligations and avoiding violations of any
other applicable provisions. These responsibilities are exacerbated by
mergers, acquisitions, joint ventures, partnerships, and even name
changes, within industry that, on any given day, may make it difficult
to know whether one has a conflict to avoid.
One HHS component, the Food and Drug Administration (FDA), has
dealt with these difficult issues by regulation for over two decades.
When the OGE Standards became effective in 1993, FDA had prohibited
holdings and outside activity regulations that were ``grandfathered''
for a certain period. The OGE Standards allow agencies to promulgate,
with OGE concurrence, supplemental ethics regulations deemed
``necessary and appropriate'' to address issues unique to an agency's
programs and operations. FDA requested that the Department seek to
preserve FDA's pre-existing rules. Accordingly, the HHS supplemental
ethics regulation issued in 1996 prohibits FDA employees from holding
financial interests in significantly regulated companies, subject to
limited exceptions for lower level employees. In addition, FDA
employees whose positions require them to file public or confidential
financial disclosure forms are barred, subject to certain exceptions,
from engaging in employment or consulting with a significantly
regulated company or ``any self-employed business activity for which
the sale or promotion of FDA-regulated products is expected to
constitute 10 percent or more of annual gross sales or revenues.''
FDA, of course, is a regulatory agency that, according to some
estimates, directly affects 25 percent of the American economy. FDA's
supplemental prohibitions may or may not provide the best model for
non-regulatory agencies. NIH clearly interacts with universities and
medical research organizations, as well as the health, biotechnology,
and pharmaceutical industries, but primarily through intramural
research and clinical trials and extramural funding of similar
pursuits. Individual assessment of an employee's proposed outside
activity under the extant, albeit recondite, standards may remain the
appropriate course. NIH Director Elias Zerhouni will be forming a Blue
Ribbon Panel to consider these policy options. My office is committed
to providing legal assistance to that body and to NIH as it deals with
these difficult issues. If supplemental regulations prove the best
option, we will work with NIH in drafting regulations for Departmental
approval and submission to OGE. Our collective goal is to ensure public
confidence in agency programs and operations through whatever means
will best accomplish that objective.
Thank you for the opportunity to speak with you today. I would be
pleased to answer any questions that you may have.
STATEMENT OF RUTH KIRSCHSTEIN, M.D., SENIOR ADVISOR TO
THE DIRECTOR, NATIONAL INSTITUTES OF
HEALTH, DEPARTMENT OF HEALTH AND HUMAN
SERVICES
Senator Specter. Thank you very much, Mr. Swindell.
We now turn to Dr. Kirschstein. With that preliminary
definition as to some of the rules and regulations and legal
procedures, the floor is yours, Dr. Kirschstein.
Dr. Kirschstein. Yes, sir. Thank you for allowing them to
go first. I think you understand now why I suggested that.
I do explain in my written statement also the evolution of
the programs at NIH since the inception of these rules in 1978.
At that time, I was the Director of the National Institute of
General Medical Sciences and immediately became the Deputy
Ethics Counselor of that institute. So I have been doing this
kind of activity for many, many years.
There has been an evolution. Over the years, during the
times of the audits, NIH has taken the statements and the
reports very seriously and has amended and changed its manual
issuance on the conductance of outside activities accordingly
after each of the three audits. There have been four, but we
have not changed anything after the fourth.
I do want to tell you about the duties of a deputy ethics
counselor. They are to provide assurances that the activities
of, in the case of the deputy ethics counselor for NIH, in the
case of the institute and center directors, as well as the
senior staff in the Office of the Director, that these were
performed properly both in regard to their official duties that
involve outside organizations, as well as and even more
importantly any outside activity such as lecturing, editing,
and consulting, and no activities can be undertaken without the
approval of the Deputy Ethics Counselor. In addition, the
Deputy Ethics Counselor does the final review and certification
of the financial disclosure reports filed by these employees.
It is also the responsibility of the Deputy Ethics Counselor to
assure that each official receives the appropriate annual
ethics training.
In regard to activities related to outside organizations,
the procedure has been as follows, that the official's request
for outside activity was first reviewed by the Office of Human
Resources Management and in consultation with the DHHS Special
Counsel for Ethics to ensure that all the documents met the
applicable executive branch standards of conduct and the
regulations and applicable standards of the NIH and DHHS. The
Deputy Ethics Counselor then performs the final review.
In general, I approved activities that were recommended,
but if necessary, I discussed the activity with the individual
involved and on occasion did not give my approval. However,
based on the consultation, the majority were approved.
When I became Deputy Ethics Counselor of NIH in 1993,
outside work by high-level officials was significantly limited
and consulting with outside activities was prohibited by the
most senior people.
However, the decision by Dr. Varmus, based on the 1995
audit, to change the context of everything that was done
because it allowed high-level officials, defined as NIH deputy
directors, associate directors, institute and center directors,
deputy directors, to perform exactly the same type of outside
activities as all other NIH employees and provided that any
outside activity requests submitted should be reviewed for any
conflict of interest based on the employee's job rather than
the position of the individual. Monetary limits were no longer
allowed, nor was the time spent prohibited.
Now, the Deputy Ethics Counselor has another important task
which goes with being the senior official, and that is to have
an in-depth knowledge of the duties of these high-level
officials so that one can make a determination whether, by the
need for a recusal or disqualification because of the person's
relationship with an outside entity, the individual involved
can still perform his duties. And if the time imposed and the
recusals are of such significance that the person cannot
perform his duties, it is the Deputy Ethics Counselor's duty to
prevent those activities and not approve them.
PREPARED STATEMENT
Mr. Chairman, I believe that the NIH ethics program has
followed the principles set forth by the executive branch
Office of Government Ethics as they have evolved over the past
25 years, but I also believe that like all activities, there is
a need for greater oversight of the entire NIH program. In
that, like many activities, there is room for improvement. I
completely and strongly endorse the proposals made by Dr.
Zerhouni, and I would be pleased to answer any questions.
[The statement follows:]
Prepared Statement of Dr. Ruth Kirschstein
Mr. Chairman, members of the Committee, I am Ruth Kirschstein. I am
currently the Senior Advisor to the Director of the National Institutes
of Health (NIH). Today, I am appearing before this committee to
describe the role of the NIH Deputy Ethics Counselor, as part of the
duties of the Deputy Director of NIH. I will also discuss the evolution
of the ethics program at NIH.
HISTORY
In 1978, the Ethics in Government Act established the U.S. Office
of Government Ethics (OGE) as part of the Office of Personnel
Management. Each department or agency of the Executive Branch of the
Government was given the responsibility for its own ethics program. The
Department (at that time) of Health, Education and Welfare, in turn,
delegated much of the responsibility for ethics program activities to
its agency heads. In turn, the Director of NIH delegated the individual
responsibility for ethics activities to the heads of the various
institutes, centers and divisions.
And so, in 1978, as Director of the National Institute of General
Medical Sciences (NIGMS), one of my responsibilities was to serve as
the Deputy Ethics Counselor of that Institute. In the early days of the
new ethics laws, the Deputy Ethics Counselors of the Institutes worked
closely with the ethics officials of the Department and the OGE to
establish the applicable rules and regulations. We also received
considerable training about the new law and its implementations.
For fifteen years, from 1978 until 1993, as Director of NIGMS, I
personally reviewed all the financial disclosure forms that were filed
by Institute staff. I ensured that annual ethics training was given to
all such employees and participated, with the other Deputy Ethics
Counselors (the Directors of the other Institutes and Centers) and with
Department officials, in the evolution of the ethics activities both at
NIH and in the executive branch generally.
OFFICE OF GOVERNMENT ETHICS (OGE) AUDITS
Over the years, the ethics program at NIH has evolved, based on the
experiences of NIH and the Department staff in its operation, and more
recently, on periodic audit reports by the Office of Government Ethics.
This evolution resulted in a number of revisions and reissuances of the
NIH Policy Manual Chapter 2300-735-4, which sets out NIH policies on
activities involving outside entities. Since 1987, there have been four
OGE Audit Reports submitted and each has had a different perspective.
Three have resulted in a careful revision of the NIH Policy Manual
Issuance Chapter cited above.
1991 Audit
The 1991 Audit Report recommended that NIH establish an Office of
Ethics. In response, the Office of the Special Counsel for Ethics,
within the Office of General Counsel, Department of Health and Human
Services (HHS), established a satellite office on the campus of NIH.
This individual reported to the Ethics Division but worked very closely
with NIH ethics staff.
ROLE OF THE NIH DEPUTY ETHICS COUNSELOR
In 1993, when I was appointed the Deputy Director of NIH by Harold
Varmus, then NIH Director, both he and the HHS Designated Agency Ethics
Official at that time appointed me as Deputy Ethics Counselor for NIH.
As I said previously, responsibilities for the ethics programs for
the various Institutes and Centers were, and still are, delegated to
those organizations. The NIH Deputy Director/Deputy Ethics Counselor
provided assurance that the activities of the Institute and Center
Directors as well as the senior staff in the Office of the Director
were performed properly, both in regard to their official duties that
involved outside organizations, as well as, and even more importantly,
any other outside activities such as lecturing, editing and consulting.
No activities could be undertaken by these senior level officials
without the approval of the Deputy Ethics Counselor. In addition, the
final review and certification of the financial disclosure reports
filed by these employees was performed and certified by the Deputy
Ethics Counselor. The procedure that was followed regarding outside
activities is outlined in the NIH Policy Manual Chapter as follows:
--The employee (in this case, the IC Director or senior staff member)
submitted a request of approval for either an official duty or
on outside activity to the Office of Human Resources Management
(OHRM). For an outside activity a special form (520) is
submitted. Each form was reviewed by OHRM and forwarded to the
HHS Office of Special Counsel for Ethics for consultation as
needed. (It became standard practice to forward all requests
relating to Institute and Center Directors to this office.)
--The HHS Office of Special Counsel for Ethics reviewed the paperwork
and additional information provided to ensure that all required
information was supplied, and, at times, alerted the Deputy
Ethics Counselor to potential issues related to the request. If
this review presented no problems, the material was sent back
through the OHRM Office to the NIH Deputy Ethics Counselor for
final review and recommendation.
In general, I approved activities that were recommended, but, if
necessary, I discussed the activity with the individual involved. Based
on legal advice provided and knowledge of the surrounding facts and
underlying science, the majority of such requests were approved. In
1993, outside work by high-level NIH officials was significantly
limited, and consulting with outside entities that had been, or were
likely to be, recipients of NIH grants or contracts was prohibited.
Besides formal requests, the Deputy Ethics Counselor discussed many
requests informally with officials and provided advice, which often led
to decisions not to make formal requests.
In addition, the Deputy Ethics Counselor had to ensure that each
employee received annual training in ethics and, when required,
disqualified (recused) him/herself from issues in which there is a
conflict of interest.
Recusals
A Deputy Ethics Counselor also must assess the information provided
in the financial disclosure form or in the Request for Approval of
Outside Activity (form 520) as to the application of the conflict of
interest statutes and regulations and must attempt to resolve actual or
potential conflicts or the appearance of a loss of impartiality. In
regard to a proposed outside activity, a determination must be made as
to whether it conflicts with official duties and whether the recusals
that would ensue in the Federal workplace as a result of the particular
outside activity would require the employee's disqualification from
matters so central or critical to the performance of his or her
official duties that the employee's ability to perform the duties of
the Federal position would be materially impaired. If conflicts are of
such magnitude that official duties would be impaired, the outside
activity must be denied.
If a disqualification can resolve the conflict, then a written
memorial of the promise to recuse is prepared and signed by the
employee and the Deputy Ethics Counselor and sent to the official at
the next highest level, who can act instead of the employee. All other
employees in the official chain of command must be informed of the fact
that, as long as the agreement or need to recuse pertains, the official
must disqualify him/herself from any actions covered by the promise.
1995 Audit
The June 1995 report of the audit review of the NIH ethics program
was transmitted to the then HHS Designated Agency Ethics Official and
the NIH. The report stated that, ``[t]he ethics program demonstrates a
commitment to ensuring that violations of ethics statutes and
regulations do not occur. OGE's recommendations are made with a view
toward further refining an already estimable program.''
In terms of financial disclosure systems, the report further
stated:
``NIH has effectively implemented practices and procedures to
ensure that financial disclosure reports are filed and reviewed
according to applicable statutes and regulations. NIH's accomplishment
of administering sound financial disclosure systems demonstrates its
commitment to ensuring that violations of ethics statutes and
regulations do not occur.''
Regarding approval of outside activities, the report stated:
``NIH has documented its internal guidance on the policies and
procedures governing outside activities in the NIH Policy Manual
Chapter 2300-735-4, `Outside Work, Financial Interest and Related
Activities' (the Manual). The Manual, which was reissued on August 30,
1993, reflects changes implemented by the new executive branch
standards, NIH Policy, and recommendations made in OGE's 1991 ethics
program review report.
``It is evident that much skill, time, and effort were devoted to
developing the Manual. While the Manual accomplishes its purpose to
explain the executive branch standards (and HHS' preserved standards),
we identified several restrictions and limitations that are broader in
scope than provided by the executive branch standards, including those
sections on prohibited source criteria for outside activities, outside
activity compensation and service limitations, and outside activities
performed by high-level officials. If NIH wished to continue these
prohibitions and limitations, HHS should consider including them in the
agency's proposed supplemental regulation and obtaining concurrence
from OGE. (emphasis added).
``(1) NIH's prohibited source criteria for outside activities
are broader in scope than the executive branch standards in two
aspects. First, NIH's criteria for outside activities by
intramural employees (scientists who perform research in-house
at NIH) and extramural employees (scientists who administer
grants and contracts with outside sources who perform research
outside of NIH) generally states that intramural employees are
prohibited from engaging in outside activities with outside
entities that do business with the employees laboratory/branch;
and extramural employees are prohibited from engaging in
outside activities the employee's ICD.
``(2) NIH provides two outside activity compensation and
service limitations, which are more restrictive than the
executive branch standards. First, the Manual provides that
total compensation from any one outside organization is limited
to $25,000 per year, with some exceptions. It also states that
total service time for all compensated activities is limited to
500 hours per year. However, there is no dollar limit on the
amount of outside employment income from all sources, except
for certain Presidential appointees. There is also no
limitation of service time for compensated outside activities,
per se. Therefore, if HHS wished to restrict outside activity
and service time, the limitations would also require inclusion
in HHS' supplemental regulations. (emphasis added).
``Second, the Manual states that employees may not consult as
an outside activity with companies in which they (or their
spouses or dependent children) own stock and may not accept
stock or stock options as compensation. The executive branch
standards also do not contain this restriction.
``(3) The Manual is also broader in scope than the executive
branch standards regarding outside activities performed by
high-level officials. The Manual states that because of their
national prominence and professional achievement, the NIH
Director and certain other high-level officials are limited to
performing only certain outside activities such as editing and
writing. However, absent a specific regulation that is being
violated, we do not recommend that NIH subjectively restrict
certain outside activities.''
1995 NIH POLICY
Based on the OGE 1995 Audit Report, NIH management undertook to
consider and analyze the pros and cons of seeking supplemental
regulations versus implementing the government-wide Standards of
Ethical Conduct in light of the nature of the work done at the NIH. On
November 3, 1995, Dr. Varmus notified the Directors and OD Staff that:
--High-Level Officials--defined as NIH Deputy Directors and Associate
Directors, and ICD Directors and Deputy Directors--may perform
the same type of outside activities as all other NIH employees,
but any outside activity request submitted by any employee
should be reviewed for any conflict based on the employee's
actual job duties and not on the position of the employee.
--Intramural employees may now engage in activities for any outside
organization except those with whom they have direct official
business dealings as government employees.
--Extramural employees may engage in activities with outside
organizations provided they do not manage a portfolio that
includes grants or contracts from one or more of these outside
organizations.
--Employees may accept stock as payment for approved outside
activities.
--There is no longer a dollar limit on the amount of income that can
be received from activities performed for one or more outside
activities.
--Employees may no longer be limited in the amount of time they
devote to activities performed for outside organizations. If it
is determined that the amount of work for outside entities will
impinge on the performance of NIH duties, the request should be
denied.
As of the issuance of that memorandum for all outside activities,
the sequential procedures for approving outside activity requests were
as follows:
1. The outside activity request must be approved by the supervisor.
2. Analysis of the proposed activity must be performed by the NIH
OHRM.
3. As necessary, consultation was sought with the lawyers in the
Office of Special Counsel for Ethics of the OGC.
4. Based on the information provided by 1-3 above, I, as the Deputy
Ethics Counselor, in turn, reviewed the activity and in general, would
approve. However, on occasion, there was a need for further discussion
and an activity would be disapproved, even though no issues warranting
disapproval were raised by the previous reviewers.
5. A recusal, if needed, was prepared and provided to the
appropriate official so that a required action could be referred to the
next subordinate level of authority. (Recusals for activities with
which the official has a ``covered relationship'' (i.e., is a Director,
Officer, consultant or employee or spouse of an employee of the outside
organization) last for a year beyond the end of the relationship.)
Mr. Chairman, I believe that the NIH Ethics Program has followed
the principles set forth by the Executive Branch Office of Government
Ethics as they have evolved over the past 25 years. I also believe that
there is need for greater oversight of the entire program and, like
many activities, room for improvement. I completely and strongly
endorse the proposals made by Dr. Elias Zerhouni, the NIH Director. I
would be pleased to answer any questions that you may have.
Senator Specter. Thank you very much, Dr. Kirschstein.
Ms. Glynn, is there present authority or could there be a
suspension of consulting arrangements at this time until there
is inquiry into all of the specific matters to see if there is
a conflict of interest?
Ms. Glynn. It might be difficult to do that in many cases.
Presumably these arrangements----
Senator Specter. I am not talking about many cases. I am
talking about a blanket suspension of consulting arrangements
until there can be an inquiry as to all the pending matters to
see if there is an actual conflict of interest.
Ms. Glynn. The permission to engage in those outside
activities was done under the standards in effect right now.
Presumably if the standards were applied correctly, the NIH
found that there was no actual or apparent conflict of interest
in performing those activities. I would be loathe to say that
there could be a blanket suspension based on----
Senator Specter. There could be?
Ms. Glynn. I would be loathe to say there could be a
blanket suspension.
Senator Specter. As a matter of law, there could not be a
blanket suspension.
Ms. Glynn. Yes, sir, as a matter of reading the regulation
and applying it correctly. If they are correctly applying the
regulation as it is written now, it would be rather counter-
intuitive to withdraw that approval now. However, I think they
could look at individual cases and say maybe we should have
looked at this factor or that factor and not given approval in
the first place.
Senator Specter. Obviously, there can be an inquiry into
each individual case to see, on the facts of that individual
case, whether there is a violation of the rules and
regulations. But on the surface on the cases which we have
looked at, I would say it is more than questionable as prima
facie conflict, but if they have to be examined one by one, so
be it.
Mr. Swindell, do you think there ought to be any change in
the statute?
Mr. Swindell. Well, actually what we could do is do it by
regulation as they do at FDA. They could----
Senator Specter. So you are saying there need not be a
change in the statute? That was my question.
Mr. Swindell. The statute itself?
Senator Specter. That is my question.
Mr. Swindell. There would be no need to deal with the
statute because the agency would have the power to submit to
the Office of Government Ethics a regulation that is more
focused on the problems at NIH, depending upon----
Senator Specter. The agency would have the authority to do
so?
Mr. Swindell. Yes. It would have the authority to submit a
regulation to the Office of Government Ethics and then the
Office of Government Ethics has to concur before it can be put
into effect.
So the FDA has one of these types of regulations. In FDA,
for example, employees are not permitted to hold stock in
significantly regulated organizations.
Senator Specter. How long would it take to have a change in
regulation?
Mr. Swindell. Well, it is the usual issue with time of
drafting. We do have a model from FDA, obviously, which would
indicate that we could proceed more quickly.
Senator Specter. How long would it take?
Mr. Swindell. Well, I would think that Dr. Zerhouni would
want us to wait to hear the results from the blue ribbon panel
as to what the recommendations would be about----
Senator Specter. Suppose this subcommittee did not want you
to wait. How long would it take you to draft a regulation?
Mr. Swindell. We would move as expeditiously as we could
and put it through the process. Of course, some things----
Senator Specter. Well, it is apparent I am not going to get
an answer. So will you think about it and submit an answer in
writing please?
Mr. Swindell. Yes, sir. I will be happy to do that.
Senator Specter. Ms. Glynn, in 1996 NIH requested that all
members of the Senior Biomedical Research Service be required
to file the public financial disclosure form. At the time the
Office of Government Ethics ruled that NIH could not require
those employees to fill out the public financial disclosure
form. This was because the bottom of the pay scale fell below a
certain threshold. However, the top of that pay scale is
$200,000. Is there any reason why a governmental employee
making as much as the Vice President should not be required to
fill out a public financial disclosure form?
Ms. Glynn. Yes, there is, and that reason is that the basis
for filing the public financial disclosure form is not how much
you make but rather the level of the responsibility that you
have in Government. Public financial disclosure is really for
people who have broad responsibilities.
But there are people in that pay band that do have those
broad responsibilities and it is possible that those folks
should be required to file. HHS can and actually has submitted
to us already a request for----
Senator Specter. How do you define those broad
responsibilities? Congress appropriates $28 billion to NIH. It
seems to me that the NIH employees have those broad
responsibilities.
Ms. Glynn. The statute, which is the Ethics in Government
Act, that requires public financial disclosure for high-level
people actually specifies certain positions like the President,
the Vice President, and so on. Members of the Senior Executive
Service are another example of people who have to file.
Senator Specter. The statute makes those determinations?
Ms. Glynn. Yes, sir.
Senator Specter. So you think we might need a statutory
change?
Ms. Glynn. No, I do not think we do because I think if NIH
would like to specify which positions are essentially
equivalent, for example, to the SES positions, those people can
be ordered, in effect, to file after a determination by my
office that it is an appropriate place to draw the line for
those folks.
Senator Specter. Where you have a record of NIH employees
owning stock and taking consulting fees and doing research
which directly relates to the specific company and not filing
financial disclosures, why should those employees, who are paid
more than Members of the Senate, not be required to make a
public disclosure as Senators are?
Ms. Glynn. Well, first, I cannot say for that fact that my
office has any information that folks at NIH are receiving fees
for consulting on work that is directly related to the work
that they do----
Senator Specter. If you accept the facts as I have stated
them, would people in that category not be fairly asked to file
public financial disclosure forms?
Ms. Glynn. I really think they have to be treated as two
separate issues. One is the issue of whether they should be
permitted to do that consulting work to begin with. The second
issue is public financial disclosure.
Remember, folks that do not file publicly are required to
file confidential financial disclosure forms. So that
information should be disclosed to the agency so that they can
determine some potential conflict of interest.
Really, once again, it is the level of responsibility of
the position that dictates whether you file a public financial
disclosure form.
Senator Specter. Well, the agencies do not appear to be
moving with much dispatch on it.
Mr. Swindell, in 1998 you requested a ruling regarding the
Senior Biomedical Research Service. The Office of Government
Ethics ruled that they could not be required to file public
financial disclosure forms. Was there any attempt made to
appeal that decision?
Mr. Swindell. I am not sure what appeal process there would
be. The Office of Government Ethics is the interpreter of those
regulations.
Senator Specter. Is there no appeal process from what the
Office of Government Ethics rules?
Mr. Swindell. I am not aware of any, Senator.
Senator Specter. Ms. Glynn, on January 12 of this year, Mr.
Swindell wrote to you requesting that NIH institute directors,
deputy directors, and scientific and clinical directors be
classified so that they would have to file public financial
disclosure forms. Would not at minimum those individuals fit
into the category of the kind of responsibilities which would
warrant public disclosures?
Ms. Glynn. I am assuming the answer to that is yes, sir. We
are seeking additional information from NIH specifying exactly
what positions are being asked for. At OGE, we are not as
familiar with the terminology used in Mr. Swindell's letter as
perhaps your committee is. But yes, I think the answer is yes.
I think at a minimum those people would fall within the
criteria.
Senator Specter. Mr. Swindell, would you take a look at the
positions generally and make a determination from your point of
view as to whether that is adequate or how far down you could
go in meeting the standards which Ms. Glynn identifies?
The Congress really does not want to get into this, if we
do not have to, to micro-manage what you are doing, but I think
that there are really major problems here. The first line is to
have transparency with a public disclosure so that people can
see what is going on.
You have got an enormous job taking up several hundred
cases of individual investigations, and this subcommittee is
prepared to do it if you do not and we are prepared to get into
the changes of law if you do not come up with something which
is adequate.
Dr. Kirschstein, after the Office of Government Ethics
issued its audit report in 1995 and found that the NIH outside
activities compensation guidelines were ``broader in scope''
than provided by the executive branch standards, what role, if
any, did you play in setting new NIH policies regarding
consulting arrangements?
Dr. Kirschstein. Mr. Chairman, at the time there were two
deputy ethics counselors in the Office of the Director. One was
the Director of the Office of Human Resources Management and
the other one was I. The report went to the Director of the
Office of Human Resources Management who worked with Dr. Varmus
and presented to him some options and some decision points as
to whether or not the NIH could ask for some supplemental
regulations or enforce what the Office of Government Ethics
requested. And Dr. Varmus made the decision to go forward. I
was not involved in that decision.
Senator Specter. Have you completed your answer, Dr.
Kirschstein?
Dr. Kirschstein. Yes.
Senator Specter. Thank you.
Well, thank you very much. There are many, many more
questions. We may submit more inquiries in writing. We have
another panel and we are about to have a vote on the cloture on
the omnibus appropriations bill at noon. So that will conclude
panel two. Thank you all very much.
We now call panel three: Dr. Stephen Katz, Dr. John Gallin.
STATEMENT OF STEPHEN KATZ, M.D., Ph.D., DIRECTOR,
NATIONAL INSTITUTE OF ARTHRITIS AND
MUSCULOSKELETAL AND SKIN DISEASES, NATIONAL
INSTITUTES OF HEALTH, DEPARTMENT OF HEALTH
AND HUMAN SERVICES
Senator Specter. Dr. Katz was appointed Director of the NIH
Arthritis and Musculoskeletal and Skin Diseases in 1995. He
joined NIH in 1974 as a senior investigator at the Dermatology
Branch. A bachelor's degree from the University of Maryland,
M.D. from Tulane University Medical School, and Ph.D. in
immunology from the University of London in England. Dr. Katz,
we welcome you here and look forward to your testimony.
Dr. Katz. Thank you very much, Mr. Chairman. As you said, I
am the Director of the National Institute of Arthritis and
Musculoskeletal and Skin Diseases and a senior investigator in
the Dermatology Branch of the National Cancer Institute. I am a
dermatologist, an immunologist, and a research scientist.
I have devoted almost 32 years, my entire medical and
scientific career, to public service and believe that I have
done so in a manner that reflects the highest integrity.
The issue of the relationship of the NIH and its senior--
indeed, all of its scientists to private industry is important
for public reflection and discussion. I share Dr. Zerhouni's
view that the NIH must uphold the highest standards for
scientific excellence and ethical practices.
I have prepared a written statement that addresses
specifically and in detail the allegations and insinuations
that were contained in the LA Times story and request that it
go into the record.
I want to emphasize that I have always conducted myself in
full compliance with NIH's rules and regulations, that I have
always sought and received official Government permission to
undertake these consultations, that I properly and in writing
recused myself from contacts with the companies with which I
consulted, that as an NIH employee, I made no decisions
affecting any company for which I consulted, that I fully and
publicly reported all income earned from outside consulting,
and that Government-supported research was not influenced as a
consequence of my consulting agreements.
It is in this context that the allegations presented in the
LA Times article must be considered. These allegations of
misconduct on my part are misleading, grossly inaccurate, and
filled with false innuendo. The manner in which the story
misrepresented my actions deliberately led the reader to an
entirely false impression about my conduct. Indeed, the
Associated Press, as well as other news media, were misled by
the manner in which the article described my actions. They
issued apologies, corrections, and/or letters in response to my
identifying the misleading nature of the LA Times story.
With respect to my consultation with Schering AG's Center
of Dermatology in Berlin, Germany, the LA Times story
identified a gap in the NIH recusal process. Although I had
recused myself from all matters relating the Schering AG, NIH
had no mechanism in place to identify subsidiaries or
affiliated entities to the companies from which NIH staff had
recused themselves.
Then, when a drug supplied by Berlex, a U.S. subsidiary of
Schering AG, was used in the lupus study, no one at NIH,
including myself, linked U.S.-based Berlex to its German
parent, Schering AG, for purposes of applying the recusal
process. As a consequence, the usual procedures which prevented
anything identified as a matter related to Schering AG from
reaching me failed to operate with respect to issues related to
Berlex.
As I said earlier, I have discussed the three instances in
which I had contact with this lupus trial in my written
testimony.
PREPARED STATEMENT
Notwithstanding this gap in the recusal system and despite
the sensational and wholly inaccurate impression the LA Times
sought to create, I did not make any substantive decisions
which affected the Berlex company or the lupus trial conducted
under its sponsorship.
I do appreciate the opportunity to appear before this
committee to set the record straight, and I am happy to answer
any of your questions.
[The statement follows:]
Prepared Statement of Dr. Stephen I. Katz
Mr. Chairman, Senator Harkin, and Members of the Committee: I am
Stephen I. Katz, M.D., Ph.D., Director of the National Institute of
Arthritis and Musculoskeletal and Skin Diseases (NIAMS) and Senior
Investigator in the Dermatology Branch of the National Cancer Institute
(NCI). I am a dermatologist, an immunologist and a research scientist.
My research has been focused on basic and clinical studies related to
the skin and the immune system.
I have devoted my entire medical and scientific career to public
service and have done so, I believe, in a manner that reflects the
highest integrity, first in the U.S. Army and, for almost the last 30
years, at the NIH. For 24 of these years, I was Chief of the
Dermatology Branch of NCI and for six of these years, I served as both
Dermatology Branch Chief and Director, NIAMS. During 12 of these years
(1983-1995), I also served as the Marion Sulzberger Professor and
Acting Chair of Dermatology at the Uniformed Services University of the
Health Sciences.
During my nearly 32 years of public service, I have focused my
research efforts on enhancing our understanding of how skin functions
as an immunologic and inflammatory organ system and how it becomes a
target for autoimmune diseases. I have trained more than 60 research
dermatologists, almost half of whom now serve as Deans of medical
schools or Professors and Chairs of Dermatology Departments in leading
centers in the United States, Europe, and Asia. I have received many
awards and honors from both governmental and non-governmental
organizations, including the President's Distinguished Executive Award
of the Senior Executive Service.
In my role as a physician, scientist and leader at the NIH, I have
had numerous interactions with scientists in the private and public
sectors, including those in industry, and have always abided by
governmental rules regarding such contacts. I have consulted with
industry at various times beginning in 1986, when such interactions
between government and industry were encouraged by then President
Reagan to promote technology transfer from government to the private
sector.
When I became Director of the NIAMS in 1995, I conferred with NIH
ethics officials and, on their advice, stopped all of my consulting
activities. In late 1995, I was informed that a new policy had been
adopted by the NIH, initiated by then Director Harold Varmus, which
again permitted such consulting arrangements. Thereafter, I began to
accept consulting relationships on a limited basis. However, recently,
in response to Dr. Zerhouni's outside activity approvals memo of
November 20, 2003, and in keeping with the spirit in which it was
written, I elected to terminate my one remaining outside consulting
agreement.
These consultations utilized my global knowledge as both a
dermatologist and a basic scientist and, as required, were conducted
outside of my government work schedule. The consultations dealt with a
broad range of subjects, but were most often focused on my critiquing
the activities that the company was undertaking to address a given
clinical or basic science issue and suggesting new or varied
approaches. In no instance did I ever discuss, with any company for
which I was consulting, any research that it might be conducting with
the NIH or any application it had submitted to the NIH for funding.
Although I had many opportunities for consulting, I undertook such
consultations only if the issues were of intellectual interest to me, I
felt that I could contribute scientifically and the agreements would
not create unavoidable conflicts of interest that might interfere with
my duties at NIH. These consultations provided me with an in-depth
knowledge of how industry functions knowledge that has helped me in
carrying out my responsibilities at the NIH and especially as NIAMS
Director.
I wish to emphasize that I have always conducted myself in full
compliance with NIH's rules and regulations; that I have always sought
and received official government permission to undertake these
consultations; that I properly and, in writing, recused myself from
contacts with the companies with which I consulted; that, as an NIH
employee, I made no decisions affecting any company for which I
consulted; that I fully and publicly reported all income earned from
outside consulting; and that government-supported research was not
influenced as a consequence of my consulting agreements.
It is in this context that the allegations presented in the LA
Times December 7, 2003, article must be considered. These allegations
of misconduct on my part are misleading, grossly inaccurate, and filled
with false innuendo. The manner in which the story misrepresented my
actions deliberately led the reader to an entirely false impression
about my conduct. Buried within the innuendos are the facts--that I
always conducted myself in accordance with government regulations; that
I recused myself where appropriate; that I made no decisions regarding
the companies for which I consulted; and that I reported all outside
income. However, the carefully crafted story paints a very different
and entirely inaccurate picture.
Within days of the article's publication, Slate Magazine took the
LA Times to task for ``choosing to furtively prod the reader'' to
conclusions about my conduct that were not justified by the facts. Even
as sophisticated a reader as The Associated Press was misled by the way
the article described my actions and was required to issue a formal
correction of its story on the article. In addition, other newspapers,
such as the Charleston, W. Va. Gazette and the Pittsburgh Post Gazette,
picked up the LA Times story, were also misled by the way it was
written, and they issued apologies, corrections or letters in response
to my identifying the misleading nature of the LA Times story.
The LA Times story raised questions about my relationship with two
companies, Advanced Tissue Sciences and Schering AG.
On the matter relating to Advanced Tissue Sciences, I had recused
myself and made no decisions regarding their application or grant. In
keeping with NIH policies, the recusal was sent to the Deputy Director
for Extramural Research at NIH, who had responsibility for making
decisions regarding this company.
With respect to my consultation with Schering AG, the LA Times
story identified a gap in the NIH recusal process. Although I had
recused myself from all matters relating to ``Schering AG,'' NIH had no
mechanism in place to identify subsidiaries or affiliated entities to
the companies from which NIH staff had recused themselves. Then, when
Berlex, a U.S. subsidiary of Schering AG, undertook to help support a
lupus study, no one at NIH linked U.S.-based Berlex to its German
parent company Schering AG for purposes of applying the recusal
policies. As a consequence, the usual procedures which prevented
anything identified as a matter related to Schering AG from reaching my
desk, failed to operate with respect to issues related to Berlex.
Notwithstanding this gap in the system, and despite the sensational
and wholly innacurate impression the LA Times sought to create, I did
not make any substantive decisions which affected Berlex or the lupus
trial conducted with its drug.
Because of the misleading emphasis given by the LA Times to my
three contacts with the lupus trial, I will review these in detail for
the record:
1. I signed a form letter acknowledging a gift to the NIAMS from
Berlex: As Director, I routinely sign such thank you notes drafted by
others. This gift was negotiated by another NIAMS employee without my
knowledge or involvement, and followed the usual administrative
clearance procedures through the NIH technology transfer experts.
Significantly, at the time I signed the letter, neither I nor any NIH
staff handling my recusal were aware that the thank you note was
addressed to a subsidiary of a company for which I was consulting. I
was consulting for Schering AG's Center of Dermatology in Berlin,
Germany--the subsidiary company had a different name (Berlex) and, at
that time, did not have anything to do with dermatology or products
related to the skin. In fact, I did not become aware that it was a
Schering AG subsidiary that had supplied one of the drugs used in the
lupus trial until the LA Times made inquiries to me about these issues.
2. With regard to the lupus nephritis trial, I had no role in
conceiving, initiating or overseeing the trial. I made no decisions
about how the results were to be reported or what the NIH's response
should be to the patient's death. When the patient died, as Director, I
was notified by the NIAMS Clinical Director, Dr. Jack Klippel, who told
me that actions were being taken to determine the cause(s) of death.
Standard NIAMS procedure following an adverse event required the
Clinical Director, not the Institute Director, to make all necessary
decisions and take any actions required subsequent to the event. As the
most knowledgeable person about the trial, Dr. Klippel was the
appropriate person to take action. Of importance for our purposes here,
is the fact that at that time, neither he nor I discussed or focused
upon who had manufactured the drug utilized in the trial, let alone
whether it was provided by a subsidiary of a company for which I was
consulting. Consistent with NIH procedures, no decisions were made by
me during that conversation. The author of the LA Times article knew
this and that is why he included only that ``Steve Katz was notified
almost immediately,'' without expanding on what he (the author) learned
in his conversation with Dr. Klippel. In fact, and also known to the LA
Times, studies using the drug in question for lupus nephritis had been
undertaken at the NIH, and by the NIAMS in particular, long before I
ever became Director of the NIAMS.
3. In April 2000, Dr. Peter Lipsky (the NIAMS Scientific Director)
told me that there was going to be a newspaper report on the death of
the patient in the lupus nephritis trial, and that in his opinion,
possible litigation might follow. We thereupon met with Dr. Ruth
Kirschstein, then Acting Director of NIH, who told us to refer all
calls to the Office of General Counsel. At that meeting, none of us
discussed the company that had manufactured the drug in question, and
certainly not that it bore any relationship to a company for which I
was consulting. Most importantly, no decisions were made by either Dr.
Lipsky or myself at that meeting.
Thus, notwithstanding that the recusal process failed to exclude me
from three contacts with a matter related to Berlex, most important to
this hearing, is that no substantive decisions related to this lupus
trial were made by me, despite the misleading insinuations contained in
the LA Times story.
In sum, in my three brief contacts with this trial, I was unaware
that it bore any relationship to a company with which I was consulting.
I had no role in the conception or initiation of the lupus nephritis
study, was not advised that it was ongoing, and had no role in
overseeing its conduct or in how the results were reported or in what
the NIH's response should be to the patient's death. All decisions were
made in accordance with established procedures by people other than me.
Of note, in preparing my response to the LA Times article, I
learned that Dr. Michael Gottesman, NIH Deputy Director for Intramural
Research, was informed by the NIH Office of Human Subjects Research
that the death of the patient in the lupus trial was properly reported
to regulatory authorities by the NIAMS and promptly reported to the
Food and Drug Administration and to the National Institute of Allergy
and Infectious Diseases (NIAID) Institutional Review Board, the review
group that was overseeing this study. Decisions regarding the
notification of other patients in the study and whether the study
should be continued or not were solely those of the principal
investigators and the NIAID Institutional Review Board. In addition,
the DHHS Office for Human Research Protections (OHRP), on February 27,
2002, reported that, upon examination of this study, it found no
evidence that the investigators and the NIAID Institutional Review
Board failed to ensure the safety of the research subjects, as required
by DHHS regulations.
I share Dr. Zerhouni's view that the NIH must uphold the highest
standards for scientific excellence and ethical practices, and believe
that my career in government service has been exemplary in this regard.
While the issue of the relationship of the NIH and its senior
scientists to private industry is an important topic for public
reflection and discussion and while this is a legitimate and
appropriate issue for debate in the media, I believe that it is
entirely improper and unfair of the LA Times to have maligned my
character and misrepresented my actions in focusing attention on this
topic.
I am pleased to have had the opportunity to appear before the
Committee to publicly set this record straight and will be happy to
answer any questions you may have.
STATEMENT OF JOHN GALLIN, M.D., DIRECTOR, CLINICAL
CENTER, NATIONAL INSTITUTES OF HEALTH,
DEPARTMENT OF HEALTH AND HUMAN SERVICES
Senator Specter. Thank you very much, Dr. Katz.
We now turn to Dr. John Gallin, Clinical Center Director,
and NIH Associate Director for Clinical Research in 1994. Prior
to his appointment, he served as Director of the Division of
Intramural Research at the National Institute of Allergy and
Infectious Disease. A graduate of Amherst College, M.D. from
Cornell University Medical School.
I am advised that we have present with us today Dr. Ronald
Germain and Dr. Jeffrey Schlom. While they were not originally
listed as witnesses, if they care to speak, they will be
welcome to do so at the conclusion of Dr. Gallin's testimony.
Since there had not been any prior notice, there is no
requirement that they speak, but if they want an opportunity to
testify, the subcommittee would be glad to hear them.
Dr. Gallin, thank you for joining us, and we look forward
to your testimony.
Dr. Gallin. Thank you, Mr. Chairman.
As you said, I am a physician and it has been my privilege
to be an employee at the NIH for now over 31 years, and as you
said, I am currently the Director of the Clinical Center.
I have submitted my full statement for the record, if that
is okay with you.
Senator Specter. That will be made a part of the record in
full.
Dr. Gallin. Thank you. I would like to briefly summarize
it.
As Director of the Clinical Center, my job is to ensure
that the Clinical Center provides a safe environment for
patients volunteering to serve in our clinical research
studies. My personal research has focused on children and
adults with inherited abnormalities of the white blood cells.
Our work has included developing new therapies for our
patients. One therapeutic approach of our laboratory is gene
therapy, to put a normal gene in our patients' cells and
correct the defect.
The December 7, 2003 LA Times article by David Willman
included a side bar about me. Unfortunately, a key aspect of
this side bar showed a fundamental misunderstanding of the
relevant facts. In his article, Mr. Willman claims a conflict
of interest existed between my laboratory activities related to
a gene therapy study and a company called Cell Genesys. Mr.
Willman ignored important historical and chronological
information that I provided to him on two occasions. Let me
briefly review the historical facts.
In October 1994, we initiated a contract with a company
called Somatix to develop a viral vector to carry a normal gene
into our patients' cells. The vector was made and the last
patient received the treatment in December 1995. The patients
were then followed for a year.
A manuscript describing our findings was completed in June
1997 and submitted for publication on July 1997, ending our
relationship with Somatix.
In June 1997, 18 months after we administered gene therapy
to our last patient and after our manuscript was ready for
submission for publication, Somatix was bought by Cell Genesys.
Cell Genesys' leadership insisted that we recognize their
company in our manuscript even though the research project was
completed before they acquired Somatix. Because we were
informed that we were obligated legally to honor their request,
Cell Genesys was recognized in the front of the paper. In
protest, however, we added a footnote at the end of the paper
which stated that the industrial collaborator in the project
was Somatix Therapy Corporation.
The committee should know that these facts were shared with
Mr. Willman before he wrote his December 2003 research article.
In September 1997, I was asked to join the scientific
advisory board of a new company, Abgenix, a spinoff of Cell
Genesys. I should emphasize again that Somatix and Cell Genesys
were not affiliated at any time during our gene therapy study.
Therefore, there was no conflict between my consulting work for
Abgenix and my laboratory's clinical research study done with
Somatix.
My consulting for Abgenix was the first and only time
during my 31 years at NIH that I agreed to serve on a
scientific advisory board for a company. Importantly, all my
activities were approved by the senior NIH leadership as
compatible with NIH policy.
PREPARED STATEMENT
To conclude, Mr. Chairman, I am proud of my service at NIH.
I am proud of the progress we are making at the Clinical
Center. The December 2003 LA Times article strongly implied
that my consulting relationship with Abgenix was a conflict
with Cell Genesys because of my laboratory's relationship with
a third company Somatix. As I have explained above, I want the
committee to know that Somatix was acquired by Cell Genesys
well after my laboratory completed studies using the Somatix
viral vector. There was simply no connection between my
membership on the scientific advisory board of Abgenix and the
gene therapy study.
Thank you for the opportunity to testify today and to
clarify the facts.
[The statement follows:]
Prepared Statement of Dr. John I. Gallin
Mr. Chairman and Members of the Committee: I am Dr. John I. Gallin.
I am a physician and it has been my privilege to be employed by the
National Institutes of Health for over 31 years. Thank you for inviting
me here today to discuss important issues related to NIH.
During my career at NIH I have served 8 years as Scientific
Director of the National Institute of Allergy and Infectious Diseases
(NIAID) and ten years as Chief of the Laboratory of Host Defenses of
NIAID.
In 1994, I was invited by the then Director of NIH to be Director
of the Warren G. Magnuson Clinical Center. As Director of the NIH
Clinical Center my job is to assure that the NIH Clinical Center
provides a safe environment for patients volunteering for our research
studies and that the necessary resources are available for the NIH
institutes to carry out their intramural clinical research programs.
Let me emphasize, I have no responsibility for the awarding or
oversight of grants to the extramural community, including industry.
My research has focused on children with inherited abnormalities of
the white blood cells called phagocytes. In addition to my
administrative and research activities, I continue to care for children
and adults with these rare diseases. Our work has ranged from the
description of newly discovered diseases to defining their genetic
basis and recently to developing new therapies. One therapeutic
approach of our laboratory is gene therapy that attempts to correct the
inherited defects in the patients' white blood cells.
On December 7, 2003 the Los Angeles Times published an article
``Stealth Merger: Drug Companies and Government Medical Research'' by
David Willman that included a sidebar about me. Unfortunately, a key
aspect of this sidebar showed a fundamental misunderstanding of the
relevant facts. In his article Mr. Willman claims a conflict of
interest existed between my laboratory activities related to a gene
therapy study and a company called Cell Genesys. Mr. Willman ignored
important historical and chronological information that I provided to
him on two occasions.
A brief review of the historical facts follows.
In October 1994, my Deputy Laboratory Chief established a
cooperative research and development agreement with a company called
Somatix Therapy Corporation. This new biotechnology company specialized
in designing viral vectors; we needed a viral vector to carry a normal
gene into the adult stem cells of our patients. Specifically, the
cooperative research and development agreement with Somatix Therapy
Corporation was required to implement a protocol designed to correct
the defect in children with a rare and devastating disease called
Chronic Granulomatous Disease of Childhood. In early 1995, a vector
prepared by Somatix Therapy Corporation was ready to give to patients
and in spring 1995 the first patient with Chronic Granulomatous Disease
was given gene therapy. In December 1995, the last patient in our study
received gene therapy. The patients were followed for over a year to
evaluate the response to the gene therapy.
In February 1997, my laboratory Deputy drafted the manuscript
describing the findings. I was the last author of that paper. Like all
NIH manuscripts, the draft paper went through intense internal review
at NIH and was completed in June 1997. The manuscript was submitted for
publication in the Proceedings of the National Academy of Sciences, USA
early July 1997. In June 1997, eighteen months after we administered
gene therapy to our last patient and after our manuscript was ready for
submission for publication, Somatix Therapy Corporation was purchased
by Cell Genesys. Following the purchase of Somatix Therapy Corporation,
Cell Genesys leadership insisted that we recognize their company in our
manuscript even though the research project was completed before Cell
Genesys had acquired Somatix Therapy Corporation. Because we were
informed that we were obligated legally to honor their request, Cell
Genesys was recognized in the front of the paper. In protest, however,
we added a footnote at the end of the paper, which stated the
industrial collaborator in the project was Somatix Therapy Corporation.
Again, the Committee should know that these facts were shared with Mr.
Willman before he wrote his December 2003 article.
In September 1997, because of my general expertise in immunology
and inflammation, I was asked to join the Scientific Advisory Board of
a new company called Abgenix Inc., a spin off of Cell Gensys. At the
time I was asked to consult for Abgenix Inc. I was not aware that there
was some degree of ownership by Cell Genesys. But, I should note again
that Somatix Therapy Corporation and Cell Genesys were not affiliated
at any time during our gene therapy study. Therefore, there was no
conflict between my consulting work for Abgenix Inc. and the clinical
research study that my laboratory did with Somatix Therapy Corporation.
This was the first and only time during my career at NIH that I
agreed to serve on a Scientific Advisory Board for a company. I agreed
to serve on the Abgenix Inc. Scientific Advisory Board for several
reasons: I thought Abgenix Inc. had an exciting vision; I was very
impressed by the outstanding quality of the other scientists from the
extramural community invited to serve on the Board; and, I thought
serving on the Board would broaden my perspective in my area of
scientific expertise and enrich and enhance my service to the NIH.
Participating on the Abgenix Inc. Scientific Advisory Board did not
represent a conflict of interest and I believed that it was consistent
with other outside activities I participated in during my career at
NIH. These other activities have included serving on the Scientific
Advisory Board of the Rockefeller Brothers/Culpepper Foundation to
select young medical scientist investigator awardees, volunteer service
on the Medical Center Operating Board of the University of Virginia
Hospital, serving as a co-editor of three editions of a text book
Inflammation,or editing the text Principles and Practice of Clinical
Research. Importantly, all my outside activities, including serving on
the Scientific Advisory Board for Abgenix Inc., were reviewed by senior
NIH leadership and approved as compatible with NIH Policy.
To conclude Mr. Chairman, I am proud of my service at NIH. I am
proud of the progress we are making at the Clinical Center. The Los
Angeles Times article, strongly implied that my consulting relationship
with Abgenix Inc. was a conflict with Cell Genesys because of my
laboratory's relationship with Somatix Therapy Corporation. As I have
explained above, I want the Committee to know that Somatix Therapy
Corporation was acquired by Cell Genesys well after my laboratory
completed studies using the Somatix Therapy Corporation's viral vector.
There was simply no connection between my membership on the Scientific
Advisory Board of Abgenix Inc. and the gene therapy study.
Thank you for the opportunity to testify today about this important
topic. I would be pleased to answer your questions.
Senator Specter. Thank you very much, Dr. Gallin.
We have asked Dr. Germain and Dr. Schlom if they would care
to testify and both have responded in the affirmative. Would
you gentlemen come forward?
STATEMENT OF JEFFREY SCHLOM, M.D., CHIEF OF THE
LABORATORY OF TUMOR, IMMUNOLOGY, AND
BIOLOGY, CENTER FOR CANCER RESEARCH,
NATIONAL CANCER INSTITUTE, NATIONAL
INSTITUTES OF HEALTH, DEPARTMENT OF HEALTH
AND HUMAN SERVICES
Senator Specter. We will start with Dr. Schlom. Thank you
for joining us. Staff had contacted both of you gentlemen
yesterday asking for statements, and we had them. It seemed to
me appropriate, since you were here, to give you an opportunity
to speak, if you wish to do so. There are two other doctors who
were not available when staff made efforts to contact, so of
course, they cannot be included.
But we will turn now to you, Dr. Jeffrey Schlom, Chief of
the Laboratory of Tumor, Immunology, and Biology at the Center
for Cancer Research at the National Cancer Institute.
Dr. Schlom.
Dr. Schlom. Thank you. I just found out at 5 o'clock last
night that I would be asked to be here, and I had not prepared
any statement. I prepared something last night and early this
morning at 6 a.m.
Senator Specter. When we saw exactly what was happening, it
seemed to me appropriate to give you an opportunity. Again, I
repeat, we are not asking you to. We are just making it a
matter for your discretion.
Dr. Schlom. Fine.
I did prepare a detailed response to the allegations in the
LA Times, which I had given to the NIH and NCI ethics officers.
I do not know whether this has been forwarded to the committee.
I have many copies here.
Senator Specter. We would be glad to make those a part of
the record, if you request it.
Dr. Schlom. Yes.
I would just like to say that the allegations were
misleading, grossly inaccurate, and there were many, many false
innuendoes in the LA Times article. I have addressed each of
these in this document which I can give you for the record.
[The information follows:]
Response to the Information in the L.A. Times Article Concerning J.
Schlom
This is in response to allegations of ``potential conflict of
interest'' made against me by Mr. Willman of the L.A. Times in his
sidebar article of December 7, 2003. I provide below details of the
inaccuracies in the article, as well as corroborating information from
individuals involved in this matter which substantiates that I was
wrongfully accused of a real, or even perceived, conflict of interest
involving the use of the drug Taxol.
1. I was a consultant for Cytoclonal from June 1992 to March 2002.
I filed all the appropriate NIH Outside Activity forms and subsequent
disclosure information as a then member of the SES and now a Title 42
employee. The approved HHS 520 Form stated, ``Cytoclonal
Pharmaceuticals Inc. is interested in becoming involved in the area of
biotechnology and the use of monoclonal antibodies for the diagnosis
and therapy of a range of human cancers. Dr. Schlom is being asked for
advice and to evaluate their present and proposed programs in these
areas.'' That is exactly what I did.
2. There were never any discussions concerning the drug Taxol, or
the recombinant microbial form that I believe they were trying to
develop at Cytoclonal. Personnel at Cytoclonal knew that that was not
my expertise and it never once came up in all the years of my
consulting for Cytoclonal.
3. In his e-mail to me of November 27, 2003, Mr. Willman states,
``As a member of the SAB, you were privy to Cytoclonal's research and
development program.'' He obviously drew his incorrect conclusions
before I had a chance to respond. I immediately responded to Mr.
Willman that I never attended a meeting of the Scientific Advisory
Board and had absolutely nothing to do with their drug development
program. He chose to ignore that in his article.
4. My only involvement with Cytoclonal was to give advice on
immunotherapy reagents such as monoclonal antibodies, spending on
average one-half day every 2 years working from my home on annual
leave. Thus my contact with Cytoclonal was minimal.
5. The above items 2, 3, and 4 can be corroborated by Dr. Arthur
Bollon, who was CEO of Cytoclonal for virtually the entire time I was a
consultant. His e-mail address is [email protected]
and his telephone number is 469-585-7613. In
a phone conversation with Dr. Bollon after the appearance of the L.A.
Times article, he informed me that I was never under a confidentiality
agreement concerning their recombinant ``Taxol'' development program,
and therefore could not have had any conversations regarding it. This
is corroborated by Dr. Bollon in an accompanying e-mail of December 15,
2003.
6. I never had stock in Cytoclonal, so the failure or success of
any drug developed by the company would not have been of benefit to me.
The following involves the clinical trials side of the story.
7. My lab at NCI, NIH and I have had a long-standing and fruitful
collaboration with one of the premier oncologists and Cancer Center
Directors in the United States--Dr. Albert LoBuglio, Director of the
University of Alabama at Birmingham Comprehensive Cancer Center. We
have published 19 papers together from 1991 to 2003 involving
monoclonal antibodies developed in my lab and experimental and clinical
studies conducted at the University of Alabama at Birmingham
Comprehensive Cancer Center. As a research immunologist, my input in
these studies involved the development of the antibodies. The clinical
research designs and conduct of the trials were done by Dr. LoBuglio
and his colleagues at the University of Alabama at Birmingham
Comprehensive Cancer Center.
8. Taxol is an FDA-approved drug that is widely used throughout the
world as a therapeutic for many different kinds of cancers. I had
nothing to do with the clinical design of the studies whose results
were published in the two papers cited by Mr. Willman in his L.A. Times
article. These two studies used two different forms of a radiolabeled
monoclonal antibody developed in my laboratory and various combinations
of Paclitaxel/Carboplatin and Interferon [Clin. Cancer Res. 8:2806-
2811, 2002] and Interferon/Taxol [Cancer Biother. Radiopharm.
16:305315, 2001]. In his L.A. Times article, Mr. Willman stated,
``Schlom helped lead two NIH funded studies in which Taxol played a
crucial role.'' This is another inaccuracy. I was not the Principal
Investigator on either of these studies and I was neither the first
author nor the last author on the publications involving either of
these studies. I informed Mr. Willman that my role was minimal, as
stated above, yet Mr. Willman chose to ignore it and indeed reported on
it inaccurately. Dr. LoBuglio can be contacted to corroborate the
above; his e-mail address is [email protected]
and his telephone number is 205-934-
5077. Also see the accompanying e-mail of December 15, 2003, from Dr.
LoBuglio.
9. Mr. Willman, in his L.A. Times article, neglected to mention the
clinical benefit to patients reported in the papers cited. I wish I
could take credit for this, but it goes to Dr. LoBuglio and his
colleagues at the University of Alabama at Birmingham Comprehensive
Cancer Center. Mr. Willman also chose to ignore the fact that I am an
intramural NCI scientist, and I am not involved in any extramural
policy decisions.
10. In the opening sentence of his article, Mr. Willman states,
``Jeffrey Schlom has built a busy outside career as a consultant.'' The
inference here is that I am spending a lot of time as a consultant.
This is also inaccurate. My consulting for all companies usually totals
no more than 2 to 4 days per year, during which I take annual leave. I
always have many days and sometimes weeks of unused annual leave at the
end of the year. I work 10-12 hours per day and at home evenings and
weekends on my NIH duties. Any inference that I am not an extremely
dedicated NIH employee is thus also unfounded.
11. Another point for consideration: The ``Taxol'' agent that was
being developed by Cytoclonal was in some sort of microbial vector (I
am still not clear what they were actually doing). However, if this
agent was ever to be a drug, it would have to be analyzed as a
different form of ``Taxol'' in terms of toxicity, pharmacology, and
clinical activity. That drug would then actually be a competitor with
``Taxol'' as it is now known. Thus, the drug that would be developed by
Cytoclonal would actually be a competitor with the drug(s) used in the
University of Alabama at Birmingham Comprehensive Cancer Center study.
How Mr. Willman conjured an even perceived conflict of interest here
thus defies logic, unless there is a predefined agenda.
12. Finally, I welcome a complete review of this matter and a
report of its conclusions. I will be happy to meet with any NIH
official regarding this matter at any time. I feel it is extremely
important to clarify the inaccuracies and innuendos in the Willman
article, which is all over the Internet. Where do I go to get my
reputation back?
Jeffrey Schlom, Ph.D.
December 15, 2003.
______
From: Arthur Bollon [[email protected]]
Sent: Monday, December 15, 2003 3:54 P.M.
To: Schlom, Jeffrey (NIH/NCI)
Subject: Bollon
Jeffrey Schlom: I received your e-mail concerning the LA times
article. To clarify, I can confirm without any question that your
consultation with Cytoclonal was for advice on immunology and
monoclonal antibodies since we had several monoclonal antibodies under
development for diagnosis and/or treatment of cancer. You were not
involved in the Taxol program of the company which was focused on an
improved way to make it and was not related to your expertise.
Furthermore we had a confidential relationship with a phrmaceutical
company for this program and you were not included. You did not receive
options for your services and you consulted by phone conversations or
individual meetings. You did not participate in group advisor meetings.
Arthur P. Bollon, Ph.D.,
Former President & CEO, Cytoclonal Pharmaceutics, Inc.
______
From: Lobuglio, Albert
Sent: Monday, December 15, 2003 5:11 PM
To: Schlom, Jeffrey (NIH/NCI)
Subject: Jeffrey Schlom/UAB Collaborations
To Whom It May Concern: The Targeted Immunotherapy Program, which I
direct at the University of Alabama at Birmingham Comprehensive Cancer
Center, has had a longstanding collaboration with Dr. Jeffrey Schlom of
the National Cancer Institute. This collaboration has involved studies
relevant to the use of monoclonal antibodies as therapeutic agents in
patients with cancer. Dr. Schlom has originated a variety of antibodies
that we have been able to take into phase I and phase II clinical
trials.
Regarding the recent LA Times article regarding potential conflict
of interest, the clinical trials referred to involve phase I/II trials
in patients with ovarian cancer at our Cancer Center. These trials, as
well as preceding clinical protocols, have involved the therapy of
patients with recurrent ovarian cancer using the intraperitoneal
administration of radiolabeled CC49 monoclonal antibody. This antibody
was derived by Dr. Schlom's laboratory at the National Cancer
Institute, and he has played a pivotal role in our development of this
antibody through his knowledge of the pre-clinical and molecular
studies carried out in his laboratory. Because of his interaction with
us regarding this antibody, we have routinely included him as a co-
investigator on our clinical protocols, as well as co-author on
manuscripts utilizing the reagent.
As indicated in the LA Times article, our most recent two protocols
utilized a single administration of Taxol in addition to the
radiolabeled antibody to take advantage of its well known radiation
sensitizing effects. The decision to embark on this additional
component of the therapeutic regimen was derived from discussions
within our own research group and did not involve Dr. Schlom. Dr.
Schlom did not provide any leadership regarding these two funded
studies and had no role in our internal discussions regarding the
choice of a radio-sensitizing drug. His inclusion as a co-author
reflected his long-term participation in our CC49 studies.
I have no insight or knowledge of Dr. Schlom being a consultant to
Cytoclonal Pharmaceutics Inc or the same company under other names and
have never heard any discussion from Dr. Schlom regarding either the
company or its products. I do not believe that there is any credibility
to the proposition that Dr. Schlom influenced our clinical trials to
use Taxol for the purpose of enhancing any company's business plan or
commercial development. My longstanding interaction with Dr. Schlom has
reflected a highly professional and ethical approach to laboratory and
clinical research.
Albert F. LoBuglio, M.D.,
Director, Comprehensive Cancer Center.
STATEMENT OF RONALD N. GERMAIN, M.D., CHIEF, IMMUNOLOGY
LABORATORY, INSTITUTE OF ALLERGY AND
INFECTIOUS DISEASES, NATIONAL INSTITUTES OF
HEALTH, DEPARTMENT OF HEALTH AND HUMAN
SERVICES
Senator Specter. Dr. Germain, Chief of Immunology
Laboratory at the NIH Institute of Allergy and Infectious
Diseases. Dr. Germain, we would be pleased to hear from you,
but again, it is a matter of your choice as to whether you
would like to say some things about the allegations.
Dr. Germain. Thank you for the opportunity, Mr. Chairman. I
will not take much of the committee's time. I concur with all
of my colleagues about the level of inaccuracies and
innuendoes, and I will provide a written document for the
committee and for the record.
But since you also specifically mentioned earlier a
particular matter having to do with my case, I think I do want
to address that very briefly here.
The LA Times article indicated that I accepted funds for
the research of my laboratory at NIH from companies with whom I
had a consulting and paid arrangement. That is absolutely
false. Those monies went to other independent tenured
investigators in the larger department in which I work. I had
no connection to the receipt of those funds, and they had
nothing to do with my NIH activities.
[The statement follows:]
Prepared Statement of Dr. Ronald N. Germain
In response to the opportunity afforded me by the Chairman of the
Committee on Appropriations, Subcommittee on Labor, Health and Human
Services, Education, and Related Agencies, I am submitting this
document for the record in connection with the Committee's questions
arising from the December 7, 2003 article in the LA Times regarding
consulting activities by NIH employees.
For the past 21 years I have been a scientist at the National
Institute of Allergy and Infectious Diseases (NIAID), leading a
research team investigating the basic functioning of the immune system
at the cellular and biochemical levels. During this time I was
appointed Chief of the Lymphocyte Biology Section within the Laboratory
of Immunology (LI) of the NIAID and in 1994, also took on the role of
Deputy Chief of the LI. During my time at NIH, I have received the NIH
Directors Award (1986), the PHS Superior Service Award (1989), the DHHS
Distinguished Service Award (1994), and the Meritorious Rank Award,
Senior Executive Service (2000). These were received in recognition of
both the substantial fundamental research accomplishments of my
laboratory and the larger institutional contributions I have made in
support of the NIH and DHHS mission.
In addition to the direct contribution to biomedical knowledge
arising from the research program I lead at NIH, other mechanisms
permit me to use my scientific insight to help improve human health. As
I wrote in response to the initial reporter inquiry leading to the LA
Times article at issue here, outside consulting ``. . . allows me to
use my overall/general scientific expertise [not the specific findings
of my lab at NIH] to further biomedical progress in ways that I cannot
do within my own laboratory. I conduct only basic research using mouse
model systems, which is what my training and experience best equips me
to do . . . my general insight into immunology and related biomedical
sciences can be used to help develop new drugs and treatments for
Americans through the work of private biotechnology companies for whose
R and D programs I provide advice. It [also] allows me to gain insight
into the practical issues involved in clinical research and drug
development, matters that I would know nothing about if my only frame
of reference were my NIH laboratory . . . This perspective is different
from that of either purely basic investigators or of clinical
investigators--the former lack the first-hand knowledge of how
development proceeds that I acquire when I consult and the latter have
a vested interest in the process that I do not, allowing me a more
objective position during discussions.''
Based on this rationale, I have engaged in outside consulting
activities with drug companies and biotechnology firms as permitted by
existing NIH and Federal rules and regulations, providing review of and
guidance for translational research programs that seek to create new
treatments for human disease, in a manner that will not tarnish the
well-deserved reputation of NIH.
It is in this context that the article published in the LA Times on
December 7, 2003 is especially disturbing. The section of the article
dealing with my conduct in inaccurate, misleading, and makes charges or
contains implications that are completely false. The author was well
aware of the true circumstances related to the issues raised in the
article, but either ignored these facts or presented them in a manner
that leads the reader to draw highly erroneous conclusions. Beyond the
information available to the author from public records, I also
provided detailed answers to his questions that pointed out how NIH and
other applicable regulations had been followed in all my activities,
and I also volunteered to vet the draft article for accuracy, an offer
that was declined. The result was a set of allegations of improper
behavior that were not based on the true facts of the relevant matters
and a report containing a number of substantial inaccuracies about my
income from these activities.
The most serious of the allegations state that I have ``. . . taken
fees from a company collaborating formally on research with his
laboratory. In 2001, Genetics Institute and Germain's lab entered a
formal collaboration called a cooperative research and development
agreement, or CRADA, to study the effect that genes have on the immune
system.'' It also states that ``Alexion collaborated with Germain's lab
from 1993 to 1997 under a CRADA. Germain became a paid consultant to
Alexion in 1998, about a year after his lab finished collaborating with
the company.'' These charges that I received both support for research
conducted at NIH and personal consulting fees from the same outside
entity are false and specifically crafted to be misleading. In both of
these cases, the indicated research agreements (CRADAs) were with other
scientists who headed independent research programs within the
Laboratory of Immunology at the NIAID. The article similarly disguises
the reality that other cited ``relationships'' between my Institute
(NIAID) and various companies for which I consulted involved either
independent investigators in different departments or the award of
extramural funding, which is completely separate from the activities of
intramural researchers such as me.
The article also leaves the impression that I recently chose to
remove my consulting activities from public view. In fact, the change
in my financial reporting automatically accompanied a shift in my
employment position between Government pay systems, and I learned of
this change only after the reassignment. The implication that I took
direct action to hide my finances from public scrutiny is thus a clear
misrepresentation, as I made the change without consideration of
whether or not public reporting of my finances continued. I have never
objected to, nor do I now object to the appropriate public disclosure
of my outside activities or associated income.
Finally, while it is correct that I have earned a substantial
amount in aggregate over many years through consulting (always done in
accord with NIH regulations and with what I believe are benefits for
U.S. public health), the numbers cited in the article for this income
are inaccurate and inflated. In the interest of full financial
disclosure (which the article quite wrongly implies NIH and its
scientists seek to avoid), I was instructed by the NIAID Deputy Ethics
Officer to report not just the previous calendar year's income, but all
income earned up the time of filing, typically late May of the
subsequent year. The latter amount was of course included again on the
following year's form as part of the preceding calendar year's income.
Because this contemporaneous reporting is not strictly required by the
instructions accompanying the 278 disclosure form, and because the
author of the article failed to accept my offer to check the accuracy
of the article, the putative cash compensation reported in the story is
based on counting a substantial fraction of my income twice for the 11
years examined. The result is the inflation of the correct amount by
hundreds of thousands of dollars. These same errors affect the specific
claims made in the article about income in any given year or in
aggregate from a particular company. Furthermore, the amount suggested
as the value of stock options is also inaccurate, apparently arising
from the assumption that all such options were fully vested and sold at
the market peak for each stock. This is far from the truth, and in this
case, the actual amount realized to date from the exercise of such
options is only about one-fourth of the figure cited. By these two
routes the article exaggerated my total realized outside compensation
by nearly $1 million, a serious matter when the headline for my section
of the article is intended to get the reader's attention specifically
because of the dollar amount involved.
It is one thing to legitimately raise concerns about possible
conflicts of interest in the outside activities of some NIH employees,
sharing as I do with Dr. Zerhouni the view that the conduct of all NIH
employees much be of the highest standard and visible for public
scrutiny. It is another to use sensationalism at the expense of truth.
I have worked hard for over 30 years to help medical science gain a
deeper understanding of the immune system, earning during this time
what I believe is a well-justified reputation for scientific as well as
personal honesty and integrity. It is difficult to understand how a
newspaper like the LA Times did not feel compelled to better vet the
factual elements in its stories and prevent the unjustified tarnishing
of something as valuable as a reputation. A similar concern also
extends to the unwarranted general disparagement of NIH and its
employees that such misleading reporting engenders. I note that my
attempts to get the LA Times to correct the inaccuracies in its
reporting were rebuffed.
I thank the Chairman and the Committee for the opportunity to
comment on this important matter and to correct the substantial
misinformation contained in the newspaper article about my conduct as a
Federal employee at the NIH.
Senator Specter. Thank you, Dr. Germain.
Dr. Gallin, where there is an arrangement for consultation
with a company and there are payments made for being a
consultant and the interests of the company touch on research
which a doctor does at NIH and the doctor, further, is a
shareholder, which I believe you were of Cell Genesys, how do
you structure the arrangement to avoid either a conflict of
interest or the appearance of a conflict of interest on those
facts?
Dr. Gallin. Let me try to respond to that.
Senator Specter. I am going to ask the same question for
each of you gentlemen.
Dr. Gallin. In my case I did not think there was a conflict
of interest because, as my written statement shows, my serving
as a consultant to Abgenix was unrelated to Cell Genesys. I
never had a relationship with Cell Genesys. The Somatix project
on gene therapy occurred before Cell Genesys bought Somatix.
Senator Specter. Did any of the research which you had done
touch on work which the company was interested in?
Dr. Gallin. Not to my knowledge. Only in the broad sense of
my expertise in immunology and inflammation, not in my
individual laboratory's activities.
Senator Specter. So there was nothing you did for NIH which
was of value to the company for which you were paid as a
consultant?
Dr. Gallin. Not to my knowledge.
Senator Specter. Dr. Katz, in a context of being a
consultant where NIH pays a doctor, a research specialist, how
can you avoid the issue of conflict or at least the issue of
appearance of conflict?
Dr. Katz. So my commitment, in terms of consulting, has
always been to provide advice. I have never done any research,
never been engaged in research with any of the companies that I
have consulted for, and that advice is based on my global
knowledge of dermatology and basic science.
Now, it is incumbent upon each of us not to provide
companies any knowledge that is of a privileged nature. So that
knowledge has to be gleaned from the public domain, and
basically whatever is in the public domain is permissible to
use as an assessment of what a company is doing or as a
critique of what their laboratory programs are or of an
assessment of whether something may relate to a clinical
problem or not. So it was the global knowledge and advice that
I provided to these companies. That you could say is quite
different than my specific job, particularly my job in the NCI
laboratory dealing with specific research endeavors that dealt
with a cell called the Langerhans' cell and how it interacts
with the immune system.
Senator Specter. Dr. Germain, here again, since you did not
have a notice in advance, I am not pressing you to respond, but
giving you an opportunity to respond if you choose to do so.
What is your view of how you avoid a conflict or at least the
appearance of conflict from the--or how do you put the wall
between your fiduciary duties at NIH and what you may be asked
by a company for whom you are a paid consultant?
Dr. Germain. To reiterate what Dr. Katz just said, NIH has
made it very clear to all its employees that we are forbidden
from transmitting any private information coming from our own
laboratory work to any of these companies, and all companies
with whom I have any relationships are made very well aware of
that not only in writing, but directly by me repeatedly. And it
is very clear that those are not topics for conversation.
My interactions with them are very similar to Dr. Katz. I
provide general advice often in areas that are very unrelated
to the specific work of my very basic science laboratory. I do
not conduct any clinical research. I do not do any drug
research. My work has to do with cell biology and biochemistry
in mice and not in humans, but I do help these companies with
advice about moving the basic findings that exist in immunology
into the clinic in exactly the ways that Dr. Zerhouni has
pointed out, as a benefit to U.S. public health.
Senator Specter. We will give an opportunity to others who
were identified publicly to submit statements and be included
in this record.
Now, Dr. Germain, how do you view this issue of conflict
and appearance of conflict? Dr. Schlom? Here again, your
response is purely up to you.
Dr. Schlom. Well, my wife told me before I came here not to
say anything I did not have to.
I just feel compelled to say the following things.
Senator Specter. In that event, Dr. Schlom, I withdraw the
question.
Dr. Schlom. Are you serious?
Senator Specter. Was your wife serious?
Dr. Schlom. Yes, she was.
Senator Specter. Then so am I.
Dr. Schlom. Okay.
Senator Specter. Go ahead, Dr. Schlom.
Dr. Schlom. I think it is really important to emphasize
that the consulting that I have done--and by the way, I have
never held stock in any company. It's just been a fee for
services--has really taken only two forms, and it is to
evaluate the scientific program of a given company or to
evaluate a given technology that they are interested in. So I
just give them advice on these issues.
This does not interfere in any way or overlap in any way
with my official duties at the NIH, and I do not disclose to
the organization any work or data that is conducted in my
laboratory until it has been public for 1 year because that is
the regulation. And the industrial organization has no
proprietary interest in any of the work that I have ever done,
and my laboratory has never ever worked on any agents developed
by any organization that I have consulted with. I have been
very, very careful in being very diligent in following these
regulations.
Again, I probably should not say this, but I will say it
anyway. Perhaps we should not believe everything we read in the
newspapers.
Senator Specter. Dr. Gallin, do you think it would be
appropriate to ask a man in your position to file a public
financial disclosure statement?
Dr. Gallin. Absolutely.
Senator Specter. Dr. Katz, would you think it appropriate
for a person in your position to have a public disclosure of a
financial statement?
Dr. Katz. I have always disclosed publicly my income from
all sources, including when my children were dependents, I have
always disclosed their incomes as well.
Senator Specter. Do you think, Dr. Katz, it would be
appropriate to ask researchers in the NIH who are paid
consultants or hold stock in companies to have public financial
disclosure statements?
Dr. Katz. Sir, I believe in openness and transparency. I
could not agree more with Dr. Zerhouni. Of course, one does not
want to anticipate what the blue ribbon panel would come up
with, but if you are asking for my personal opinion, I think
that if one makes outside income, it should be transparent, and
if you do not want to make it transparent, you should not do it
in the first place.
Senator Specter. Dr. Germain, do you think it would be
appropriate to ask researchers at NIH who are consultants who
own stock in pharmaceutical companies to make public financial
disclosure statements?
Dr. Germain. I would just reiterate what Dr. Katz and Dr.
Gallin have already said. All of us, to my knowledge, have
always done that. I always have until very recently when the
regulations changed, and I would be perfectly happy to do it
again. I think that is true across the board.
Senator Specter. Dr. Schlom.
Dr. Schlom. The same.
Senator Specter. Dr. Gallin, do you think there would be a
significant loss of researchers at NIH if there was a blanket
prohibition against consulting fees or owning stock in a
pharmaceutical company?
Dr. Gallin. That is a very difficult question to answer. In
my opinion, it would not be a favorable decision. But I believe
that there should be some parity between the investigators who
work at the NIH and investigators who work under NIH grants and
the universities. I think the blue ribbon committee will have
to think long and hard about that.
Could I just make a response to your previous question?
Senator Specter. Sure.
Dr. Gallin. In your case reports, you were referring to me
I believe about an example of a failure to disclose for 2 years
on a stock, and I just would like, if it is okay, to tell you
about that.
Senator Specter. Well, I did not so identify, but if you
would care to comment, you are welcome to do so.
Dr. Gallin. Thank you.
This referred to my wife's ownership of the Cell Genesys
stock, and as I told Mr. Willman, the failure to disclose it--
and as you pointed out--was in error. I just want to point out
that the stock was purchased for my wife through a separate
management account that was managed by a financial advisor who
bought and sold stocks in her name. I did not realize back in
1999 that this stock was in her portfolio. When it became clear
to me that it was in the portfolio, I disclosed it. That was in
2001. And it was an error and I totally apologize for it, but
that's the facts.
Senator Specter. Thank you, Dr. Gallin, for that
clarification.
Dr. Germain, do you think it appropriate to have somebody
in your position or everybody at NIH--the issue which I want
your opinion on is not that one now, but whether if there was a
requirement for a prohibition against consulting fees or owning
stock, would that cause NIH to lose their research scientists
in a significant way?
Dr. Germain. I do not think it is possible for me to
predict how many people would leave, but I will comment on the
fact that I think psychologically it will make many NIH
scientists feel, in the way that Dr. Gallin has pointed out,
second class citizens to some of their academic colleagues. And
also more importantly, I believe it will deprive many NIH
employees of the ability to participate in a productive way in
furthering health care development in the ways that Dr.
Zerhouni has outlined previously.
Senator Specter. Dr. Schlom, what is your view on that?
Dr. Schlom. I agree with what Dr. Germain said. I also
think it would inhibit recruitment of new scientists because
they have the ability to work at universities, obtain
Government grants, and do consulting, and I think they would
look at this as one more reason not to come to the NIH. I think
these rules need transparency, need strengthening, et cetera,
but I think it would be a mistake for a complete prohibition.
Senator Specter. Well, I think the hearing has been very
productive. I believe that there has been a concurrence on the
basic point about financial disclosures, which would be much
broader than are currently required.
Dr. Katz, do you want to make another comment?
Dr. Katz. Well, I did not know whether it was significant
that you skipped over me in terms of providing an opinion about
what would happen at NIH if we were not allowed to consult in
terms of scientists.
Senator Specter. I just wanted to see how anxious you were
to weigh in on that.
Dr. Katz. I think it is really important to understand----
Senator Specter. It is not easy to run all these hearings
without a scorecard, and we do not work on a text.
Dr. Katz. Betty Lou and I had some eye contact.
Senator Specter. I noticed that.
So every now and then we give you a break by not asking a
question, but since you do not want a break, go ahead.
Dr. Katz. So I just wanted to weigh in on that issue
because it does get to the crux of what passion that many of
the NIH scientists have, whether they are M.D.'s or whether
they are Ph.D.'s. There are many Ph.D. scientists who have a
passion to see what they are doing come to fruition for the
betterment of humankind, and one of the ways that that actually
happens is through some of these consultant agreements.
To draw a barrier, a Chinese wall, between Government and
industry would, in my view, not be a good thing even forgetting
about the consultant fees, but thinking about the importance of
that translation and all of the brain power we have at NIH to
provide some impetus for moving clinical medicine along in the
translation of basic science into the betterment of humankind.
Senator Specter. Well, I am very much interested in your
views on that as an evaluation which we are going to have to go
into greater depth on as to the public policy advantages of
having that kind of collaboration and interaction, also the
factor of losing scientists. We will have to structure a system
which maintains the wall of separation, fiduciary
responsibility for the compensation.
But as I had started to say, I think the hearing has been
very useful in covering the consensus on public disclosure
without any complex definitions by the Office of Government
Ethics, which I think has had too constrained a view.
Now we have the job of making individual inquiries, and we
are a society which believes in individual rights and every
individual has to be protected with a unique inquiry as to what
has gone on. That is going to be a painstaking process.
But NIH has a very high level of respect in the United
States and in the world, and we have shown you our high regard
for you by financing, which is different for you than any other
governmental agency. You have gotten more money because you are
on the cutting edge of discoveries in Alzheimer's and
Parkinson's and heart disease and cancer and all the other
serious maladies. But these allegations will give fuel to
people who want to cut back on your funding. So all of these
questions have to be answered, and the subcommittee will be
pursuing the matter further.
We are glad to hear what Dr. Zerhouni has said, and I am
pleased to see that Dr. Zerhouni, unlike some lead
professionals, has stayed through the hearing to be able to
digest what we have worked on. But we will work hard to see to
it that whatever conflicts exist or appearances exist we
rectify to maintain public confidence in NIH so you can
continue to do your outstanding work.
Thank you all very much.
ADDITIONAL PREPARED STATEMENTS
We have received the statements of Senator Mary L. Landrieu
and Dr. Harold Varmus, president, Memorial Sloan-Kettering
Cancer Center. They will be made part of the record at this
time.
[The statements follow:]
Prepared Statement of Senator Mary L. Landrieu
Mr. Chairman, I would like to take this opportunity to thank you
for holding this important hearing. I have been proud to support this
Committee's goal of doubling the NIH budget over the last five years
because, like you, I recognize the great need for continued innovation
in medical treatment that the NIH's scientific research facilitates.
However, some questionable practices have come to Congress' attention
that must be addressed to ensure the continued success of the NIH and
its programs. It is important that we do all that we can as a Committee
to ensure that individuals' own interests do not taint the NIH research
and that it is founded solely on the soundest, most accurate science.
I appreciate Dr. Zerhouni's cooperation with this Committee and the
House Committee on Energy and Commerce throughout this investigation
and commend his ongoing efforts to address unethical behaviors in the
NIH. By taking steps to make NIH scientists' outside work more
transparent, Dr. Zerhouni has begun to take the first steps in
addressing this important issue. The Ethics Advisory Committee that Dr.
Zerhouni has initiated at the NIH is a strong step towards implementing
a system of peer review that will promote more accountability among NIH
scientists. I support greater oversight both internally and by Congress
to create a process that will not allow the integrity of the NIH
clinical research to be compromised, while avoiding over-regulation
that will impose unintended costs and limit the ability of scientists
to perform innovative research.
It is important to note that clinical research is not the only
source of NIH funding that is apparently open for compromise based on
outside influence or financial considerations. The competitive grant
process has also been found to be at risk. The former Director of the
National Cancer Institute is alleged to have participated in the
decision to award funding to a grantee while he was being considered
for employment by an institution affiliated with this grantee. Clearly,
something must be done to be sure that the outcomes of these
competitive grant processes are based solely on the competitiveness of
the grants themselves.
Sadly enough, the opportunity for favoritism in the competitive
grant process is not limited to the NIH. Although the details of the
competitive grant process differ between federal agencies and between
grants within one agency, my experience has shown me that as the
competition for federal funding becomes tighter, the awarding of
federal grants is becoming less competitive and more open to outside
influences.
The competitive grant process is intended to award funding to
states and organizations that meet defined criteria, sometimes defined
by legislation and sometimes defined by the federal agency awarding the
grant. This process was developed to be a fair and consistent way to
provide federal funding to states and organizations. If we allow these
competitions to be left open to inappropriate influences, we are
thereby discrediting the very purposes and people for which these
funding streams exist. As we are requesting greater transparency of the
NIH practices, we should also consider the need for greater
transparency in the competitive grants process of all federal agencies
to ensure that this process is fair.
I have personally witnessed some of the breakdowns in the
competitive grants process when assisting some of my constituents in
their pursuit for federal assistance. As you all know, most grant
proposals are scored based on certain criteria through a peer review
process. Yet as the competition for funding in certain areas increases,
many grant proposals receive a perfect score of 100 and do not receive
funding. Often this is because there are more meritorious, well planned
proposals than there is funding. In speaking with staff of some of the
federal agencies, I have found that the criteria for choosing between
proposals that receive a peer review score of 100 are often undefined,
leaving room for the discretion and bias of a few individuals to decide
the final award.
Our greatest attention must be given to whether the process
employed by all of our federal agencies currently is allowing money to
get to those that demonstrate the greatest need or the greatest
promise. This hearing is an important step in that direction. It is my
hope that we will conduct future hearings on exploring the factors that
influence grant awards at NIH and other federal agencies. I look
forward to the testimony of our distinguished panelists. Thank you.
______
Prepared Statement of Dr. Harold Varmus, President, Memorial Sloan-
Kettering Cancer Center
Mr. Chairman and Subcommittee Members: I am grateful for the
opportunity to offer my views about the relationships between not-for-
profit and for-profit research organizations in the conduct of
contemporary biomedical research and about the conflicts of interest
those relationships can present for individuals and institutions,
especially at the National Institutes of Health (NIH).
I have encountered these issues from different perspectives in
three phases of my career--as a faculty member at the University of
California, San Francisco from the early 1970's to the early 1990's,
during the birth and growth of the biotechnology industry; as Director
of the National Institutes of Health, from November 1993 to December
1999; and now as the President of Memorial Sloan-Kettering Cancer
Center in New York City. Over the past thirty years, the interactions
between scientists in the non-profit sector (academic and governmental
institutions) and for-profit organizations (mainly pharmaceutical and
biotechnology companies) have become increasingly numerous and complex,
influenced by at least three factors: (i) expanding opportunities to
transform biological discoveries into practical benefits (such as
devices, diagnostic tools, drugs, vaccines, and other health care
products); (ii) the prospects of financial returns to industry (through
product development) and to non-profit institutions and individuals
(through patenting and licensing of intellectual property in exchange
for royalties, consulting with industry for honoraria, and equity
holding by not-for-profit scientists or their institutions); and (iii)
Federal legislation, passed in the 1980's, that encourages academic and
government laboratories to pursue commercialization of their research
findings through the private sector, with the goals of advancing public
health and transferring knowledge more effectively to the U.S. business
community.
There are many positive aspects to interactions between the
industrial and the non-profit research sectors. The exchanges can
provide important practical perspectives to scientists engaged in basic
research, they can bring supplemental funding to academic and
government institutions through sponsored research agreements and from
royalties paid on licensed technologies, and they can help assure the
public that the expertise and scientific knowledge that scientists in
the not-for-profit sector possess is being transformed effectively into
products that can prevent and treat disease.
We have also come to recognize that these relationships are not
without risks. Some of these risks arise from conflicts of interests--
situations in which the objective pursuit of new knowledge by
individuals or institutions in the not-for-profit sector may be
influenced by financial interests in a commercial entity. Such
conflicts are especially worrisome when they involve the conduct of
clinical research, since they have the potential to influence decisions
that affect the health of human subjects.
In the most widely discussed instance of a conflict of interest--
the circumstances surrounding the death of Jesse Gelsinger, a young man
participating in a clinical trial at the University of Pennsylvania--it
was reported that the investigator responsible for the clinical trial,
as well as the institution in which the research was conducted, held
equity in a company that stood to benefit from the treatment being
tested. This raised questions about whether the investigators involved
or the institution itself could be completely unbiased in running and
interpreting the study. It also raised questions about the safety of
people participating in the trial. Under such circumstances, even the
appearance of a conflict of interest can have a detrimental effect on
public confidence in the conduct of research.
As a result of what has been learned from this case and a few
others, many leading academic institutions that conduct medical
research now regularly review and revise the rules and mechanisms that
guide the behavior of their investigators and those who represent the
institutions. Extensive recent deliberations about the management of
conflicts of interest affecting research on human subjects can be found
in an article appearing in The New England Journal of Medicine (Volume
347, pages 1371-1375) and committee reports distributed by the American
Association of Medical Colleges (http://www.aamc.org/members/coitf/
start.htm).
Although most of the attention given to conflicts of interest has
been focused on academic institutions, where funding from the for-
profit sector is becoming an increasingly large fraction of research
support, such conflicts are also an important issue at Federal
agencies, such as the NIH, that conduct extensive laboratory and
clinical research programs, nearly exclusively with Federal funds.
Government scientists, like their counterparts in academia, possess
scientific expertise that is valuable to the commercial sector, and
agencies like the NIH often hold intellectual property that can be
turned into benefits for the public. Over the past twenty years,
Congress and the Executive Branch have recognized the importance of
closer interactions between government scientists and their colleagues
in industry. In fact, legislation such as the Federal Technology
Transfer Act specifically encourages agencies like the NIH to protect
and license intellectual property so that it can be turned into
benefits for the public, much as the Bayh-Dole Act has guided academic
institutions that receive Federal funding. (A few examples of the many
technologies licensed from the NIH as a result of these actions include
HIV test kits marketed by several companies; Videx or ddI, a drug
marketed by Bristol-Myers Squibb for the treatment of HIV/AIDS; and
Fludara, manufactured by Berlex as a treatment for chronic lymphocytic
leukemia.) The law allows government scientists to pursue some of the
opportunities available in the academic community, including rights to
receive royalty payments, albeit capped, for intellectual property
patented and licensed by the Federal agency, to work in collaboration
with industrial partners that provide research support under
Collaborative Research and Development Agreements, and to serve as
consultants to industry and receive honoraria for that service. These
measures are especially important because the intellectual vigor of
government science agencies like the NIH requires an environment that
can attract and retain excellent scientists, and such people are likely
to demand a stimulating atmosphere that encourages innovation and
exchange of information with colleagues around the world, including
those employed in the commercial sector.
Many of the concerns about conflicts of interest in the academic
sector, especially with regard to research with human subjects, also
apply to government agencies, such as the NIH, that conduct both
laboratory and clinical research. For that reason, in conjunction with
the Office of Government Ethics and the Department of HHS, the NIH has
rules governing the ethical conduct of research, and ethics officers
are charged to oversee the adherence of NIH personnel to those rules.
Unlike many other government agencies (such as the FDA), the NIH is
not a regulatory agency; nevertheless, it has characteristics that
differentiate it from academic institutions. For example, the
Institutes and Centers of the NIH make grants and contracts to
thousands of institutions across the country, including some private
companies; leading scientists and scientific administrators are often
involved in the formulation of public health policies and the
development of research programs; the directors of NIH Institutes and
Centers bear the responsibility for distribution of appropriated funds
for intramural and extramural research programs; and the salaries and
most of the research support for NIH employees comes directly from the
Federal budget. For these reasons, it is appropriate to expect an
especially high level of integrity and openness in any dealings between
NIH personnel and the private sector.
Concerns that such standards may not be universally applied at the
NIH were raised recently by articles in the Los Angeles Times, alleging
that consultation fees paid to some senior NIH scientists may have
interfered with objectivity in making decisions about particular
clinical studies. The article did not provide direct evidence that
there was any wrongdoing, that rules were purposely broken, or that
harm was done to any patient or volunteer in a clinical study as a
consequence of conflicts of interest. Nevertheless, it did raise some
important questions, particularly about how industry-NIH interactions
are approved and monitored and about whether financial arrangements
between NIH scientists and the private sector, albeit within regulatory
guidelines, should be more open to public scrutiny.
The NIH Director, Elias Zerhouni, has initiated a sensible response
to these allegations by convening a panel of members of his Advisory
Committee, augmented by other outside experts, to review the existing
NIH system for oversight of outside relationships and to make
recommendations for improvements. He has also started a review of all
outside activities of NIH investigators since January 1999 to ensure
that appropriate procedures were followed in the approval of these
activities. In academia, where there is more extensive experience with
the commercial sector, a few unfortunate cases of real or apparent
conflicts of interest have resulted in communal study of the issues and
generated improved policies, including a commitment to periodic re-
evaluation of the rules and procedures for oversight and management of
such conflicts The NIH and other government science agencies should be
able to take advantage of that experience.
Without prejudging the outcome of Dr. Zerhouni's timely review of
outside activities and conflicts of interest at the NIH, I would like
to recommend that special attention be given to three topics:
(i) Consider the use of multi-disciplinary committees to review
selected cases of possible conflicts of interest.--In the past few
years, many academic institutions have established committees composed
of faculty members, administrators, public representatives, lawyers,
and other individual experienced in ethical decision-making to review
the outside activities of professional staff members whose disclosure
statements reveal potential for conflicts. This mechanism removes the
responsibility for making very difficult decisions from the shoulders
of a single administrative officer, such as an ethics officer, and
transfers it to a group with a varied set of experiences, views, and
loyalties. Although the number of cases requiring referral usually
constitutes a very small proportion of the academic staff, the problems
are often complex, and the group evaluation process helps to make fair
decisions and to guide the evolution of institutional policy.
(ii) Consider exempting some senior staff from the opportunity to
perform outside activities with for-profit entities.--Under current
regulations, virtually all senior managers at the NIH save the two
Presidential appointees (the NIH Director and the Director of the
National Cancer Institute), may obtain approval to receive compensation
for work with a variety of outside entities, including biotechnology
and pharmaceutical companies. These individuals are not regulatory
officials and may even be considered of relatively low rank in the
Federal system, one or a few grades below the least prominent
Presidential appointees (such as Deputy Assistant Secretaries of
Departments). Nevertheless, they may have important roles in
formulating health policy, developing scientific programs, and awarding
Federal grants--ctivities that can present significant conflicts of
interest, even when they do not directly affect an institution or
business concern with which the individuals have a financial
relationship.
Sometimes an effort is made to avoid such conflicts by use of a
recusal. (A recusal is essentially a pledge from the individual that he
or she will not be informed about or make decisions about government
matters involving a potential conflict of interest, such as a program
involving a company with which he or she has financial ties.) But
recusals may not be fully honored or implemented and are difficult to
monitor.
For these reasons, the forthcoming review of NIH policies should
include an assessment of whether directors of NIH Institutes and
Centers and perhaps a few other high-ranking officials, such as those
responsible for development of extramural research programs, should be
excluded de facto from certain outside activities.
(iii) Consider changes to existing rules to guarantee public access
to information about outside activities of all NIH scientific staff.--
Under current government rules, many senior staff at the NIH are
directed to file financial disclosure reports (known as OGE-450 forms)
that are reviewed only by selected administrative staff and released,
upon request, only to Chairs of congressional committees, but not
available to the public through the Freedom of Information Act. It is
difficult to understand the basis on which the reporting requirements
for these individuals are distinguished from others--not just from NIH
Institute Directors but also from many in comparable positions with
similar or even lower salaries. The review of current policies and
regulations and their implementation at the NIH should evaluate the
options for normalizing access to financial disclosure forms, so that
the public can be confident that relationships that might create
conflicts for government scientists are not hidden from public view.
To restate my views in summary: I believe that interactions between
the not-for-profit and for-profit scientific sectors are important for
achieving the maximum health benefits from research performed by
government scientists, as well as by academic scientists using
government funds. Such interactions have the potential to create
conflicts of interest that can distort scientific judgment, or give the
appearance of doing so, and thereby undermine public trust in science.
Effective, if still imperfect, methods for oversight and management of
real and perceived conflicts have been developed over the past decade
or two. The NIH has responded to recent criticisms of its management of
outside activities by initiating a thorough review. That review should
consider, among other things, the advantages of supplementing the
activities of NIH ethics officers with conflict of interest committees,
exempting some senior staff from certain outside activities, and
insuring public access to the financial disclosure forms of all
scientific staff.
I want to thank the Subcommittee for the opportunity to express
these views.
CONCLUSION OF HEARING
Senator Specter. Thank you all very much for being here.
That concludes our hearing.
[Whereupon, at 11:32 a.m., Thursday, January 22, the
hearing was concluded, and the subcommittee was recessed, to
reconvene subject to the call of the Chair.]