[Federal Register Volume 59, Number 123 (Tuesday, June 28, 1994)]
[Unknown Section]
[Page ]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-15500]


[Federal Register: June 28, 1994]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Public Health Service

42 CFR Part 50

Office of the Secretary

45 CFR Part 94

RIN 0905-AE01


Objectivity in Research

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

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Public Health Service (PHS) proposes to issue rules 
requiring Institutions that apply for research funding from the PHS to 
assume responsibility for ensuring that the financial interests of the 
employees of the Institution do not compromise the objectivity with 
which such research is designed, conducted, or reported.
    Under the proposed rules, investigators are required to disclose to 
an official(s) designated by the Institution a listing of Significant 
Financial Interests. The institutional official(s) will review these 
disclosures in accordance with an administrative process to be 
established by each institution. Following this review, the 
institutional official(s) will determine the acceptability of the 
reported financial interests and act to protect PHS-funded research 
from any bias that is reasonably expected to arise from those 
interests.

DATES: To ensure consideration, comments must be received at the 
address below on or before August 29, 1994.

ADDRESSES: Please address comments to: Dr. George J. Galasso, Associate 
Director for Extramural Affairs, National Institutes of Health, Shannon 
Building, Room 152, 9000 Rockville Pike, Bethesda, Maryland, 20892. The 
PHS encourages persons with disabilities to use auxiliary devices and 
services to submit comments.

FOR FURTHER INFORMATION CONTACT: Dr. George J. Galasso, Associate 
Director for Extramural Affairs, National Institutes of Health at the 
address above. The telephone number is (301)-496-5356 (this is not a 
toll-free number).

SUPPLEMENTARY INFORMATION:

Technology Transfer and Conflict of Interest

    Effective interaction between PHS-funded Institutions conducting 
research and industry is essential to ensure the rapid application of 
scientific discoveries to the health needs of the Nation and to 
maintain the international competitiveness of domestic industry. 
Nonetheless, prudent stewardship of public funds includes protecting 
Federally funded research from being compromised by the conflicting 
financial interests of any Investigator responsible for the design, 
conduct, or reporting of PHS-funded research.
    Numerous statutes and programs demonstrate the Federal interest in 
the promotion of interactions among Government, academia and industry. 
For example, the Stevenson-Wydler Technology Innovation Act of 1980 
(Public Law (P.L.) 96-480) encourages technology transfer, particularly 
through industrial-academic collaborations. The Patent and Trademark 
Act Amendments of 1980 (P.L. 96-517) allow universities and other 
funding recipients to apply for patents developed with Federal funding, 
and expressly promote collaboration between commercial concerns and 
nonprofit organizations. The Economic Recovery Tax Act of 1981 (P.L. 
97-34) is aimed at fostering research and development by small 
companies and associated university partners. The Federal Technology 
Transfer Act of 1986 (P.L. 99-502), which amended P.L. 96-480, and 
Executive Order 12592 provide similar patent and licensing authority to 
Federal laboratories, and encourage them to participate in cooperative 
research and development agreements with the private sector and 
nonprofit organizations, including universities.
    These legal authorities facilitate the movement of intellectual 
capital between the Federal Government, academic institutions, and the 
private sector. This kind of cross-fertilization is critical to the 
development of the U.S. biotechnology industry. However, these and 
other inducements for collaboration, as well as the rapid growth of the 
biotechnology industry, have created a climate in which the stewardship 
of public funding for biomedical and behavioral research is 
increasingly complex and challenging.
    The value of the results of PHS-funded research to the health and 
the economy of the Nation must not be compromised by any financial 
interest that will, or may be reasonably expected to, bias the design, 
conduct or reporting of the research. The proposed regulations seek to 
maintain a reasonable balance between these competing interests, give 
applicants for PHS research funding responsibility and discretion to 
identify and manage financial interests that may bias the research, and 
minimize reporting and other burdens on the applicants.

Background

    The proposed regulations are the result of a lengthy process of 
consideration. Throughout that process, the PHS has carefully 
considered and changed its approach in response to public comments.
    On June 27 and 28, 1989, the National Institutes of Health (NIH) 
and the Alcohol, Drug Abuse, and Mental Health Administration (ADAMHA) 
sponsored an open meeting to discuss issues related to financial 
conflict of interest. At that meeting there was general agreement that 
an Institution that receives research funds from a PHS Awarding 
Component should develop policies to identify and manage any financial 
conflict of interest in the funded research.
    On September 15, 1989, the NIH and ADAMHA published a Request for 
Comment on Proposed Guidelines for Policies on Conflict of Interest in 
the NIH Guide for Grants and Contracts (Volume 18, Number 32). Seven 
hundred fifty-one responses were received from individuals associated 
with medical schools, other academic and research institutions, 
biotechnology companies, local governments, and non-profit 
organizations; venture capitalists; attorneys; biomedical journal 
editors; Federal employees and contractors at Government facilities; 
and others. In general, those submitting comments were concerned that 
the proposed guidelines imposed undue burdens on funded institutions 
and would impede mutually beneficial research collaboration between 
universities and industry. In response to these comments, the Secretary 
determined that regulations should be developed that would address 
those concerns.
    A public meeting was held at NIH on November 30, 1990, to discuss 
further the regulation of financial conflict of interest by the PHS. 
The 18 written comments received at that time reflected views similar 
to those received earlier.
    Many respondents to earlier proposals stated that the primary 
responsibility for setting guidelines and maintaining compliance should 
rest with each awardee Institution. The present proposed rule, like PHS 
policy in other areas involving protection of the public interest (such 
as the protection of human subjects in research and the investigation 
of alleged scientific misconduct), sets standards for performance and 
assigns the primary responsibility for procedural development and 
compliance to the Institution.
    Many of those commenting on prior proposals agreed with the 
importance of disclosure, but thought that the requirement to disclose 
all financial interests, as set forth in the previously proposed 
guidelines, should be reduced in scope to prevent needless invasion of 
privacy and creation of paperwork burdens. The proposed regulations 
achieve this end by limiting the disclosures that must be made to 
``Significant Financial Interests,'' any interest of monetary value 
exceeding a defined threshold of value ($5,000) or percentage of 
ownership (five percent or more) that would reasonably appear to be 
directly and significantly affected by the research funded by PHS or 
proposed for funding. PHS specifically requests public comment on 
whether the minimum threshold for disclosure is appropriate to ensure 
that PHS-funded research projects are not biased by conflicting 
financial interests of those responsible for the design, conduct, or 
reporting of the research.
    There was a wide range of opinion among those commenting on 
previous proposals regarding which types of financial interest should 
be permissible. In these proposed rules a Significant Financial 
Interest (defined in Sec. 50.603) of the type specified in 
Sec. 50.605(a) must be managed as provided in Sec. 50.605(b) and the 
existence and management, reduction, or elimination of that financial 
interest must be certified in the application. The PHS may at any time 
request submission of, or review on site, all records pertinent to the 
certification. This procedure gives Institutions broad discretion in 
determining how to manage Significant Financial Interests that 
reasonably appear to directly and significantly affect the design, 
conduct, or reporting of the research while providing for appropriate 
PHS oversight. PHS may undertake periodic reviews of the records in 
order to assess the reliability of institutional and investigator 
certifications, and to determine whether institutional safeguards do, 
in fact, protect the integrity of PHS-funded research. In undertaking 
any such review HHS will coordinate, to the extent feasible, with the 
National Science Foundation (NSF) to ensure that institutions are not 
unnecessarily subjected to multi-agency reviews.
    Managing potential conflicts carefully; avoiding unnecessary burden 
and useless paperwork; and preserving appropriate incentives for 
productive research represent challenges individually and collectively. 
Even after we issue a final rule some unforeseen problems will 
certainly emerge. Therefore, approximately one year after the final 
rule is issued we plan to initiate an evaluation, to include a 
conference and other mechanisms to consult with investigators and 
institutions. Based on that evaluation, we would revise these rules if 
and as appropriate.
    Basis and Purpose. A more detailed discussion of the proposed 
regulations and their basis and purpose follows.

I. Applicability

a. Types of Research

    The proposed regulations implement section 493A of the PHS Act, 
added by Public Law 103-43, which mandates the issuance of regulations 
defining, and setting standards for, the management of financial 
interests that will, or may be reasonably expected to, bias a clinical 
research project whose purpose is to evaluate the safety or 
effectiveness of a drug, medical device, or treatment. In addition, the 
proposed regulations implement section 924 of the PHS Act, as amended 
by Public Law 102-410, which requires the Administrator of the Agency 
for Health Care Policy and Research (AHCPR) to issue regulations 
defining the financial interests that will, or may be reasonably 
expected to, create a bias in the health care services research 
projects funded by the AHCPR. The proposed regulations are not limited 
to the implementation of these statutory authorities, however. Pursuant 
to the Secretary's authority to issue regulations governing those who 
seek or receive PHS funding, they apply broadly to all research funded 
by the PHS, whether under the authority of the PHS Act or other 
statutes, except Phase I projects under the Small Business Innovation 
Research (SBIR) Program. Very limited amounts of funding are provided 
under Phase I of the SIBR Program to plan and determine the feasibility 
of the research project for further funding under Phase II. Because 
potentially biasing financial interests will be assessed at the time of 
the Phase II application, it would be burdensome and unproductive to 
require such a review for Phase I applications. With this exception, it 
is believed that financial interests can create a bias in all types of 
research, although the likelihood of such a bias may diminish if the 
outcome of the research would have little effect on the commercial 
potential of any product, device, or other property in which the 
Investigator may have a financial interest. However, this distinction 
can not be so clearly drawn that the need to protect the integrity of 
all PHS-funded research uniformly is alleviated.

b. Individual vs. Institutional Financial Interests

    The proposed regulations provide for the disclosure and 
consideration of the financial interests of individuals involved in the 
design, conduct, and reporting of the research. Section 493A of the PHS 
Act, added by Public Law 103-43, refers to financial interests of 
entities (e.g., institutions), as well as individuals, in clinical 
research projects. We are considering the following alternatives with 
respect to the coverage of institutions that apply for clinical 
research funding under the PHS Act:
(1) Exempting Institutional Financial Interests That Would Not Bias the 
Project
    Under the statute, adoption of this alternative would be based on a 
determination that the exempted institutional financial interests would 
not be reasonably expected to bias the design, conduct, or reporting of 
PHS-funded research. This conclusion might be based on a finding that 
the limited size of the interest would preclude any biasing effect, or 
a finding that the institutional financial interest would have only an 
indirect and unpredictable effect on the project, in the absence of a 
personal financial interest on the part of those responsible for the 
design, conduct or reporting of the research. There would, of course, 
have to be a reasonable factual basis for such findings.
(2) Requiring Institutional Applicants To Certify Whether They Have 
Significant Financial Interests
    Adoption of this alternative would involve establishing a procedure 
for institutions similar to the procedure in the proposed regulation 
for individuals. This option would be based on the same rationale as 
the preceding option, i.e. that there is no need to regulate 
institutional financial interests that aren't reasonably expected to 
bias the conduct of the research. Significant Financial Interest might 
be defined for institutions as limited only to direct financial 
interests (such as a patent application on, or a financial arrangement 
with a company regarding, the product of the research).
(3) Requiring Full Disclosure to the PHS of the Financial Interests of 
Institutions
    This alternative would impose a reporting burden upon the 
institutions, but would ensure a complete PHS review of any potential 
conflict of interest prior to a funding decision.
(4) Other Alternatives
    We will also consider combinations of these three alternatives and 
other alternatives that may be suggested in the public comments. We 
will choose an alternative based on the requirements of the statute, 
and, to the extent consistent with the statute, based upon our weighing 
of the burdens on the institutions, the potential that institutional 
financial interests will bias PHS-funded research, and the potential 
adverse effect of the alternative upon technology transfer.

c. Types of Interests

    The proposed regulations require disclosure of ``significant 
financial interests'' of the Investigator that would reasonably appear 
to be directly and significantly affected by the research funded by PHS 
or proposed for funding or of the investigator in an entity whose 
financial interest would reasonably appear to be directly and 
significantly affected by the PHS research. The following are examples 
of the types of significant financial interests that would fall within 
the categories in Sec. 50.605: ownership of stock, stock options, or 
any equity, debt, security, capital holding, salary or other 
remuneration, or financial consideration, or thing of value for 
services as an employee, consultant, officer, or board member in (1) 
any business enterprise, including the applicant for PHS funds (except 
SBIR applicants are not included), that owns or has applied for the 
patent, manufacturing or marketing rights to a drug, vaccine, device, 
procedure or any other product involved in or that will predictably 
result from the research described in the application or (2) a business 
enterprise that is known by the investigator to own or have applied for 
such rights in any product that can reasonably be expected to compete 
with the product or procedure that will predictably result from the 
research described in the application. We request comments on a range 
of disclosures that would on the one hand, include interests that may 
threaten objectivity; and, on the other exclude those interests that 
cannot reasonably be regulated or that are so obvious as not to warrant 
regulations. We also request comments on whether specific examples of 
biasing significant financial interests, such as those set forth above, 
should be included in the regulations.
    In particular, we request comments on whether interests in a 
business enterprise that is known by the investigator to have an 
interest in a product that competes with the product involved in the 
application should fall within the categories of significant financial 
interests described in Sec. 50.605. There may not be any reasonable way 
for an investigator either to identify all competing products or to 
determine what companies own them. For example, for most medical 
devices there may be dozens of competing products, many made by 
subsidiaries of ``Fortune 500'' conglomerates. How would an 
investigator determine just what products were ``competing''? Should we 
be concerned if an investigator owns $5,000 of stock in a company in 
which only a small fraction of revenues and profits derive from the 
competing product? We request comments on whether, and how best, to 
cover interests in competing products.
    We also request comments on whether an employee's stock or other 
non-salary financial interests in the applicant institution should be 
covered. This is of particular relevance when the grant or contract is 
with a for-profit enterprise. Specifically, should we be concerned, and 
how could we expect the company to ``manage'' against conflict, when 
the company's employees obviously stand to benefit if the product is a 
commercial success? The proposed rule includes an exemption for an 
ownership interest in the institution if it is a Small Business 
Innovation Research (SBIR) applicant. Can we justify exempting SBIR 
awards and not all other awards to both large and small profit-making 
enterprises? Should we exempt from disclosure any equity or ownership 
interest in the applicant institution? Should we exempt disclosure of 
interests other than bonuses or other compensation tied to the outcome 
of the research?

II. Burdens Upon Applicants

    The proposed regulation is intended to minimize reporting and other 
burdens upon applicants to the maximum extent feasible. Certain types 
or amounts of financial interests that cannot be reasonably expected to 
bias the research are excluded from the requirements for disclosure by 
investigators. Such interests are also excluded from the certification 
of whether these are Significant Financial Interests that must 
accompany each application. Even when there is a Significant Financial 
Interest of the type specified in the proposed rule, the institutions 
are given broad discretion in managing the conflict; details of the 
interest need not be reported to the PHS awarding component. It is the 
responsibility of that component to determine whether to review the 
institutional records relating to the disclosure and management of that 
interest.
    The Department will also seek to reduce burdens upon applicants by 
being available to provide advice and assistance as applicants 
establish the policies and procedures required by this subpart. The PHS 
Awarding Components will be available to respond to general inquiries 
regarding compliance with this subpart.
    Another way of reducing burdens upon applicants is to exempt 
certain types of applicants from the requirements or to impose 
different, less burdensome requirements on them. The proposed 
Sec. 50.602 provides that the regulations do not apply to SBIR Phase I 
applications and that where the applicant for a research grant is an 
individual, determinations of the procedures to be followed to ensure 
the objectivity of the research will be made on a case-by-case basis. 
The National Science Foundation (NSF) exempts from its Investigator 
Financial Disclosure Policy that is being published in this issue of 
the Federal Register grantees employing fifty persons or less. Comment 
on whether HHS should adopt a similar exclusion is requested. Our 
experiences with conflict of interest situations indicate that 
investigators working for small entities may be just as subject to 
conflicts of interest as investigators working at large institutions. 
The interests of appropriate coverage and of reducing burdens might 
both be served by determining the procedures to be followed by small 
entities on a case-by-case basis as is proposed for individuals.

III. Uniform Federal Policy

    We have been working closely with the National Science Foundation 
(NSF) to ensure that this Notice of Proposed Rulemaking and the policy 
published by NSF in this issue of the Federal Register will be 
consistent, and will impose the same obligations on funding recipients. 
In addition, HHS has been working with the Office of Science and 
Technology Policy, the Office Management and Budget, NSF, and other 
interested agencies to develop and propose a common Federal policy on 
investigator conflicts of interest. It is expected that this policy, 
when completed, will ensure consistent treatment of investigator 
conflicts issues by all Federal funding agencies.
    However, the statutes described above have necessitated some 
inconsistencies between these proposed regulations and the policy being 
published by the NSF. Unlike the NSF policy, there is no provision 
permitting institutions to waive the management, reduction, or 
elimination of an actual or potential conflicting interest when such 
action would be either ineffective or inequitable, and the potential 
negative impacts that might arise from the conflicting interest are 
outweighed by interests of scientific progress, technology transfer, or 
the public health and welfare. Because section 493A of the Public 
Health Service Act requires institutions conducting PHS-funded clinical 
research projects to manage or eliminate financial interests that would 
potentially bias the project, we do not believe HHS has the discretion 
to permit institutions to waive this requirement. Similarly, section 
493A necessitates the requirements for institutional notification of 
the PHS Awarding Component in Sec. 50.604(a)(7)(ii) and (8). In 
addition, the statute specifically requires the announcement, with each 
public presentation of the research, of a conflicting financial 
interest that was not managed, reduced, or eliminated, as set forth in 
Sec. 50.606(d). This requirement is limited to PHS-funded clinical 
research projects, but the requirements of institutional notification 
to the PHS have not been so limited, because we believe that such 
notification serves a useful purpose for all PHS-funded research, and 
that disparate reporting requirements for different types of research 
would cause confusion and create burdens for the institutions.
    The Department notes that ``management of a financial interest that 
could potentially bias a project'' may include recognition by the 
institution that a potential conflict exists, and monitoring progress 
of the research to insure that the financial interest does not bias the 
project. The Department specifically requests comment on whether this 
interpretation maximizes consistency between this NPRM and the NSF's 
final policy, in the light of the statutory distinctions discussed 
above. The Department seeks comment on whether this expansion of the 
statutory requirement is appropriate in the context of PHS-funded 
research and the need to minimize burden on institutions.

IV. Relationship to Other Laws

    Many Institutions funded by the PHS Awarding Components are State 
Institutions whose employees are subject to State laws designed to 
prevent financial conflict of interest. The proposed rules would not 
supplant these requirements and are intended to be applied in addition 
to other applicable Federal and State restrictions related to potential 
financial conflicts of interest, including Federal statutes and 
regulations that prohibit trading in securities with knowledge of 
privileged or non-public information.

V. Enforcement

    The proposed regulations provide for enforcement remedies both 
against researchers that fail to comply with institutional policies 
issued under the regulation and Institutions that fail to comply with 
the regulation. The proposed rules specifically state that the 
requirements constitute a condition of award and as such could be 
enforced through the suspension or termination of a grant or 
cooperative agreement. A Termination for Convenience or a Stop Work 
Order could be issued in accordance with the FAR if a contractor fails 
to enforce the Special Standards. Each contractor would be required to 
meet the specified responsibility requirements prior to award of a 
contract. PHS awarding components will work diligently with applicants 
to resolve compliance problems informally, to avoid the need for formal 
enforcement action.

E.O. 12866/Regulatory Flexibility Act Analysis

    Executive Order 12866 requires us to prepare an analysis for any 
rule that meets one of the E.O. 12866 criteria for a significant 
regulatory action, that is, that may--
    Have an annual effect on the economy of $100 million or more or 
adversely affect in a material way the economy, a sector of the 
economy, productivity, competition, jobs, the environment, public 
health or safety, or State, local, or tribal governments, and 
communities;
    Create a serious inconsistency or otherwise interfere with an 
action taken or planned by another agency;
    Materially alter the budgetary impact of grants, user fees, or loan 
programs or the rights and obligations of recipients thereof; or
    Raise novel legal or policy issues arising out of legal mandates, 
the President's priorities, or the principles set forth in E.O. 12866.
    In addition, we prepare a regulatory flexibility analysis, in 
accordance with the Regulatory Flexibility Act, if the rule is expected 
to have a significant impact on a substantial number of small entities.
    For reasons outlined below, we do not believe this rule is 
economically significant nor do we believe that it will have a 
significant impact on a substantial number of small entities. In 
addition, this rule is not inconsistent with the actions of any other 
agency. However, we recognize that there are potential inconsistencies 
depending on what other agencies may later propose. Several agencies 
are now considering issuing policies on what circumstances are likely 
to lead to bias in research that is funded or relied upon by the 
Federal Government.
    Any rule in this area has the potential to inhibit socially 
beneficial research, and to hamper the technological progress so 
essential to the American economy and to the advance of science. We are 
further mindful of the importance of the requirements in Executive 
Order 12866 that any new regulatory system be based on a showing that 
there is a significant problem requiring regulation, that regulatory 
priorities be based on the degree and nature of risks, and that 
regulations be designed to be cost-effective. Moreover, the Regulatory 
Flexibility Act requires us to minimize adverse effects not only on 
small businesses and individual entrepreneurs, but also on almost all 
non-profit entities including universities.
    In the hearings that preceded enactment of the requirement in the 
NIH Revitalization Act, known cases were described in which scientists 
have stood to make large sums of money contingent on the positive 
outcome of research on a particular product, where this fact was not 
known to those reviewing the research, and where bias did occur.
    We have drafted this rule to address these instances of abuse, 
while minimizing unnecessary burden to researchers. We did not consider 
any option that would routinely require all researchers to list all of 
their significant assets (unrelated to the research project), that 
would encourage searches for hypothetical or speculative conflicts, 
that would require divestiture of ownership of a product undergoing 
research, or that would discourage in any way funding grants or 
contracts to scientists to develop products with significant profit 
potential. We have not inhibited research in any way, other than 
requiring that it be managed to assure that potential bias is 
minimized. Such management methods are common in the sciences and 
impose no undue burden.
    We request comment on whether there are any provisions of the 
proposed rule that might inadvertently hamper socially desirable 
research. For example, we have proposed allowing institutions to 
require that researcher employees divest themselves of stock in 
companies owning products undergoing research. Conversely, if there are 
other types of situations in which a financial conflict of interest has 
a substantial risk of biasing research results, we will consider 
expanding the scope of the rule. We ask that commenters provide 
evidence as to magnitude and frequency of any claimed adverse effects 
or loopholes.
    We do not believe that the annual costs of implementing this rule 
will reach as much as $1,000 an institution in staff time, or as much 
as $1 million a year across all institutions. Most of the cost will 
arise from the several seconds or minutes spent certifying the absence 
of significant financial interests for individual awards. Spread across 
thousands of grantee and contractor institutions, these costs are 
infinitesimal. Therefore, we have determined that this rule would not 
create an ``unfunded mandate'' imposed on state-owned institutions and 
would not trigger the requirements of Executive Order 12875, on 
``Enhancing the Intergovernmental Partnership.''
    For these same reasons, we certify that this rule will not have a 
significant economic impact on a substantial number of small entities, 
and that a Regulatory Flexibility Analysis is not required.

2. Paperwork Reduction Act

    The proposed rules contain information collection requirements that 
are subject to review by the Office of Management and Budget (OMB) 
under the Paperwork Reduction Act of 1980. Appropriate instructions for 
making certifications to the PHS Awarding Components will be issued as 
an addendum to the instructions for applications for PHS research 
funding. It is contemplated that the certification will be provided by 
checking a box on the application. The title, description, and 
respondent description applicable to the information collection are 
shown below with an estimate of the annual reporting and record-keeping 
burden. Included in the estimate is the time for reviewing 
instructions, searching existing data sources, gathering and 
maintaining the data needed, and completing and reviewing the 
collection of information.
    Title: Responsibility of Applicants for Promoting Objectivity in 
Research for which Public Health Service (PHS) Funding is Sought.
    Description: The regulations would require each applicant/offeror 
Institution to establish procedures to avoid the inappropriate 
financial interest of an Investigator involved in the design, conduct 
or reporting of the research for which PHS funding is sought.
    Description of Respondents: Public and private non-profit 
institutions, small businesses, and other for-profit organizations.

                               Estimated Annual Report and Record Keeping Burden                                
----------------------------------------------------------------------------------------------------------------
                            Applicable section    Total No.                                                     
  Applicable section of    of regulation 45 CFR       of       Hours per   Total hours  Total hours  Total hours
    regulation 42 CFR               94           respondents    response      42 CFR       45 CFR               
----------------------------------------------------------------------------------------------------------------
Reporting:                                                                                                      
    50.604(a)(8).........  (d)(1)(viii)........           20         10.0          160           40          200
    50.604(b)............  (d)(2)..............          100         10.0          850          150        1,000
    50.606(a)............  (f)(1)..............           20         10.0          160           40         200 
                          --------------------------------------------------------------------------------------
      Sub-Total..........  ....................  ...........  ...........  ...........  ...........        1,400
Record keeping:                                                                                                 
    50.604(a)(5).........  (d)(1)(v)...........        2,000        100.0      180,000       20,000      200,000
                          --------------------------------------------------------------------------------------
      Sub-Total..........  ....................  ...........  ...........  ...........  ...........      200,000
Disclosure:                                                                                                     
    50.604(a)(1).........  (d)(1)(i)...........        2,000         10.0       18,000        2,000       20,000
    50.604(a)(3).........  (d)(1)(iii).........       50,000          1.0       45,000        5,000       50,000
                          --------------------------------------------------------------------------------------
      Sub-Total..........  ....................  ...........  ...........  ...........  ...........       70,000
                          ======================================================================================
      Total Burden.......  ....................  ...........  ...........  ...........  ...........     271,400 
----------------------------------------------------------------------------------------------------------------

    In accordance with the requirements of the Paperwork Reduction Act 
of 1980, the Department of Health and Human Services will submit the 
information collection requirements cited above to OMB for review and 
approval. Organizations and individuals desiring to submit comments on 
the information collection requirements and the estimated burden should 
direct such comments to the information address cited above and to: 
NIH/PHS Desk Officer, Office of Information and Regulatory Affairs, 
OMB, New Executive Office Building, room 3208, 725 17th St., NW., 
Washington, DC 20503.

Catalogue of Federal Domestic Assistance

    The proposed rules affect all research, research and development, 
and research and development support funded by the Public Health 
Service. Questions about the proposed rules should be directed to the 
Information Contact provided above.

List of Subjects

42 CFR Part 50

    Grant programs--health; Conflict of interest; Medical research; 
Behavioral, biological, biochemical, psychological and psychiatric 
research.

45 CFR Part 94

    Government procurement.

    Dated: June 16, 1994.
Philip R. Lee,
Assistant Secretary for Health.
    Dated: June 17, 1994.
Donna E. Shalala,
Secretary.

    Accordingly, it is proposed to amend 42 CFR part 50 and 45 CFR 
subtitle A as set forth below:

42 CFR Chapter I

PART 50--[AMENDED]

    1. Subpart F is added to 42 CFR Part 50 to read as follows:
Subpart F--Responsibility of Applicants for Promoting Objectivity in 
Research for Which PHS Funding Is Sought
50.601  Purpose.
50.602  Applicability.
50.603  Definitions.
50.604  Institutional responsibility regarding Significant Financial 
Interests of Investigators.
50.605  Management of Significant Financial Interests.
50.606  Remedies.
50.607  Other HHS regulations that apply.

Subpart F--Responsibility of Applicants for Promoting Objectivity 
in Research for Which PHS Funding Is Sought

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


Sec. 50.601  Purpose.

    This subpart promotes objectivity in research by requiring that 
each Institution that applies for PHS grants or cooperative agreements 
for research ensure there is no reasonable expectation that the design, 
conduct, and reporting of the research to be funded pursuant to the 
application will be biased by any Significant Financial Interest of an 
Investigator responsible for the design, conduct, or reporting of the 
research.


Sec. 50.602  Applicability.

    This subpart is applicable to each Institution that applies for PHS 
grants or cooperative agreements for research and, through the 
implementation of this subpart by each Institution, to each 
Investigator participating in research covered by this subpart; 
provided, that this subpart does not apply to SBIR Program Phase I 
applications. In those few cases where an individual, rather than an 
institution, is an applicant for PHS grants or cooperative agreements 
for research, PHS Awarding Components will make case-by-case 
determinations on the steps to be taken to ensure that the design, 
conduct, and reporting of the research will not be biased by any 
Significant Financial Interest of the individual.


Sec. 50.603  Definitions.

    As used in this subpart:
    HHS means the United States Department of Health and Human 
Services, and any components of the Department to which the authority 
involved may be delegated.
    Institution means any domestic or foreign, public or private, 
entity or organization (excluding a Federal agency).
    Investigator means the principal investigator and any other person 
at the Institution who is responsible for the design, conduct, or 
reporting of research funded by PHS, or proposed for such funding. For 
the purposes of the requirements of this subpart relating to financial 
interests, ``Investigator'' includes the Investigator's spouse and 
dependent children.
    PHS means the Public Health Service, an operating division of the 
U.S. Department of Health and Human Services, and any components of the 
PHS to which the authority involved may be delegated.
    PHS Awarding Component means the organizational unit of the PHS 
that funds the research that is subject to this subpart.
    Public Health Service Act or PHS Act means the statute codified at 
42 U.S.C. 201 et seq.
    Research means a systematic investigation designed to develop or 
contribute to generalizable knowledge relating broadly to public 
health, including behavioral and social-sciences research. The term 
encompasses basic and applied research and product development. As used 
in this subpart, the term includes any such activity for which research 
funding is available from a PHS Awarding Component through a grant or 
cooperative agreement whether authorized under the PHS Act or other 
statutory authority.
    Significant Financial Interest means anything of monetary value, 
including but not limited to, salary or other payments for services 
(e.g., consulting fees or honoraria); equity interests (e.g., stocks, 
stock options or other ownership interests); and intellectual property 
rights (e.g., patents, copyrights and royalties from such rights). The 
term does not include:
    (1) Salary, royalties, or other remuneration from the institution; 
or any ownership interests in the institution, if the institution is an 
applicant under the SBIR Program;
    (2) Income from seminars, lectures, or teaching engagements 
sponsored by public or nonprofit entities;
    (3) Income from service on advisory committees or review panels for 
public or nonprofit entities; or
    (4) Financial interests in business enterprises or entities if the 
value of such interests do not exceed $5,000 per annum if salary, fees 
or other continuing payments or represent more than a 5% ownership 
interest for any one enterprise or entity when aggregated for the 
investigator and the investigator's spouse and dependent children.
    Small Business Innovation Research (SBIR) Program means the 
extramural research program for small business that is established by 
the Awarding Components of the Public Health Service and certain other 
Federal agencies under Public Law 97-219, the Small Business Innovation 
Development Act, as amended. For purposes of this subpart, the term 
SBIR Program includes the Small Business Technology Transfer (SBTT) 
Program, which was established by Public Law 102-564.


Sec. 50.604  Institutional responsibility regarding Significant 
Financial Interests of Investigators.

    (a) Each Institution must:
    (1) Inform each Investigator of the Institution's policy for 
identifying and managing Significant Financial Interests, the 
Investigator's reporting responsibilities, and of this subpart.
    (2) Designate an institutional official(s) to solicit and review 
financial disclosure statements from each Investigator who is planning 
to participate in PHS-funded research.
    (3) Ensure that Investigators have provided to the designated 
official(s) a listing of Significant Financial Interests that ensures 
disclosure of all Significant Financial Interests of the type described 
in Sec. 50.605(a) prior to the time an application is submitted to PHS. 
All financial disclosures must be updated during the pendency of the 
award, either on an annual basis, or as new reportable Significant 
Financial Interests are obtained.
    (4) Provide guidelines consistent with this subpart for the 
designated official(s) to identify Significant Financial Interests of 
the type described in Sec. 50.605(a) and take such actions as necessary 
to ensure that any such financial interest will be managed, reduced, or 
eliminated.
    (5) Maintain records, identifiable to each award, of all financial 
disclosures and all actions taken by the Institution with respect to 
each Significant Financial Interest of the type described in 
Sec. 50.605 for at least three years beyond the termination or 
completion of the award, or until resolution of any action by the HHS 
involving the records, whichever is longer.
    (6) Establish procedures for resolving any alleged violation of the 
financial conflict of interest policy of the Institution and establish 
appropriate enforcement action for failure to comply.
    (7) Certify, in each application for the funding to which this 
subpart applies, that;
    (i) There is in effect at that Institution a written and enforced 
administrative process to identify and manage, reduce or eliminate 
Significant Financial Interests of the type described in Sec. 50.605(a) 
with respect to all research projects for which funding is sought from 
the PHS,
    (ii) The Institution either has, or has not found a Significant 
Financial Interest of the type described in Sec. 50.606 and, where such 
interest is found, certify that actions will be taken prior to the 
award of funding to manage, reduce or eliminate that interest in 
accordance with this subpart; and that the Institution will notify the 
PHS Awarding Component of such action prior to issuance of the Notice 
of Grant Award.
    (iii) The Institution agrees to make information available, upon 
request, to the HHS regarding all Significant Financial Interests 
identified by the Institution of the type described in Sec. 50.605 and 
how those interests have been managed, reduced, or eliminated to 
protect the research from bias;
    (iv) The Institution will otherwise comply with this subpart.
    (8) (i) Notify the PHS Awarding Component of the identification and 
management, reduction or elimination of any Significant Financial 
Interest of the type described in Sec. 50.605 that originates or 
becomes known to the institution after the grant or cooperative 
agreement has been awarded, within sixty days of its becoming aware of 
that interest.
    (ii) The HHS may at any time request submission of, or review on 
site, all records pertinent to these certifications. To the extent 
permitted by law, all records of financial interests will be maintained 
confidentially.
    (iii) An investigator may participate in a PHS-funded research 
project that is being simultaneously supported by an organization that 
has a commercial interest in the finding of the research project. 
However, the research support must be provided through the PHS awardee 
Institution. Any direct compensation or payment to the Investigator 
under that support is considered a financial interest under this 
subpart.


Sec. 50.605  Management of Significant Financial Interests.

    (a)(1) Institutions applying for PHS funding for research shall 
ensure that the following types of Significant Financial Interests 
attributable to an Investigator are managed, reduced, or eliminated, in 
accordance with paragraph (b) of this section, prior to award of the 
grant:
    (i) Any Significant Financial Interest of the Investigator that 
would reasonably appear to be directly and significantly affected by 
the research funded by PHS, or proposed for funding; and
    (ii) Any Significant Financial Interest of the Investigator in an 
entity whose financial Interest would reasonably appear to be directly 
and significantly affected by the research funded by PHS, or proposed 
for funding.
    (2) In addition to the types of Significant Financial Interests 
described in this paragraph that must be managed, an Institution may 
require the management of other financial interests as the Institution 
deems appropriate.
    (b) The designated official(s) must review all financial 
disclosures, determine whether Significant Financial Interests could 
affect the design, conduct, or reporting of the research activities 
funded by PHS, or proposed for such funding, and determine what 
conditions or restrictions, if any, should be imposed by the 
institution to manage such interests. Examples of conditions or 
restrictions that might be imposed to manage actual or potential 
conflicts of interest include:
    (1) Public disclosure of significant financial interests;
    (2) Monitoring of research by independent reviewers;
    (3) Modification of the research plan;
    (4) Disqualification from participation in all or a portion of the 
research funded by the PHS;
    (5) Divestiture of significant financial interests; or
    (6) Severance of relationships that create actual or potential 
conflicts.


Sec. 50.606  Remedies.

    (a) Each Institution that applies for research funding from the PHS 
must include in its policy for the identification and management of 
Significant Financial Interest procedures for enforcement action 
against employees who do not comply with the Institution's policy. If 
the failure of an employee to comply with the policy of the Institution 
has biased the design, conduct, or reporting of the PHS-funded 
research, the Institution must promptly notify the PHS Awarding 
Component of the corrective action taken. The PHS Awarding Component 
will consider the situation and, as necessary, take appropriate action, 
or refer the matter to the Institution for further action, which may 
include directions to the Institution on how to maintain appropriate 
objectivity in the funded project.
    (b) The HHS may inquire into the Institutional procedures and 
actions regarding financial interests in PHS-funded research, including 
the disposition of a particular financial interest. Such inquiry may be 
initiated based on information obtained by the HHS under this subpart, 
from an award-related document (application, progress report, 
publication of results), or any other source. Based on a specific 
inquiry, the HHS may decide that a particular Significant Financial 
Interest of the type described in Sec. 50.606 will bias the objectivity 
of the PHS-funded research to such an extent that further corrective 
action is needed or that the Institution has not managed a Significant 
Financial Interest described in Sec. 50.606 in accordance with this 
subpart. The PHS may determine that suspension of funding is necessary 
until the matter is resolved.
    (c) In any case in which the Department determines that a PHS-
funded project of clinical research whose purpose is to evaluate the 
safety or effectiveness of a drug, medical device, or treatment has 
been designed, conducted, or reported by an Investigator with a 
Significant Financial Interest that was not disclosed or managed as 
required by this subpart, the Institution must require disclosure of 
the financial interest in each public presentation of the results of 
the research.


Sec. 50.607  Other HHS regulations that apply.

    Several other regulations and policies apply to this subpart. They 
include, but are not necessarily limited to:

42 CFR Part 50, Subpart D--Public Health Service grant appeals 
procedure
45 CFR Part 16--Procedures of the Departmental Grant Appeals Board
45 CFR Part 74--Administration of grants
45 CFR Part 76--Government-wide debarment and suspension (non-
procurement)
45 CFR Part 92--Uniform Administrative Requirements for Grants and 
Cooperative Agreements to State and Local Governments

45 CFR SUBTITLE A

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

45 CFR Part 94--Responsible Prospective Contractors

94.1  Purpose.
94.2  Applicability.
94.3  Definitions.
94.4  Institutional Assurance and Responsibility regarding 
Significant Financial Interests of Investigators.
94.5  Management of Significant Financial Interests.
94.6  Remedies.

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


Sec. 94.1  Purpose.

    This part promotes objectivity in research by establishing special 
standards for each Institution to ensure that the design, conduct, and 
reporting of research to be performed are not compromised by any 
Significant Financial Interest of an Investigator responsible for the 
design, conduct, or reporting of the research.


Sec. 94.2  Applicability.

    This section is applicable to each Institution that seeks PHS 
funding for research and, through the implementation of this section, 
to each Investigator who participates in such research; provided that 
this section does not apply to SBIR Program Phase I applications.


Sec. 94.3  Definitions.

    As used in this part:
    Contractor means an entity that provides property or services for 
the direct benefit or use of the Federal Government.
    HHS means the United States Department of Health and Human 
Services, and any components of the Department to which the authority 
involved may be delegated.
    Institution means any public or private entity or organization 
(excluding a Federal agency) that:
    (1) Submits a proposal for a research contract whether in response 
to a solicitation from the PHS or otherwise, or
    (2) Assumes the legal obligation to carry out the research required 
under the contract.
    Investigator means the principal investigator and any other person 
at the Institution who is responsible for the design, conduct, or 
reporting of a research project funded by PHS, or proposed for such 
funding. For the purposes of the requirements of this section relating 
to financial interests, ``Investigator'' includes the Investigator's 
spouse and dependent children.
    PHS means the Public Health Service, an operating division of the 
U.S. Department of Health and Human Services, and any components of the 
PHS to which the authority involved may be delegated.
    PHS Awarding Component means an organizational unit of the PHS that 
funds research that is subject to this part.
    Public Health Service Act or PHS Act mean the statute codified at 
42 U.S.C. Sec. 201 et seq.
    Research means a systematic investigation designed to develop or 
contribute to generalizable knowledge relating broadly to public 
health, including behavioral and social-sciences research. The term 
encompasses basic and applied research and product development. As used 
in this part, the term includes any such activity for which funding is 
available from a PHS Awarding Component, whether authorized under the 
PHS Act or other statutory authority.
    Significant Financial Interest means anything of monetary value, 
including but not limited to, salary or other payments for services 
(e.g., consulting fees or honoraria); equity interests (e.g., stocks, 
stock options or other ownership interests); and intellectual property 
rights (e.g., patents, copyrights and royalties from such rights). The 
term does not include:
    (1) Salary, royalties, or other remuneration from the institution; 
or any ownership interests in the institution, if the institution is an 
applicant under the SBIR program;
    (2) Income from seminars, lectures, or teaching engagements 
sponsored by pubic or nonprofit entities;
    (3) Income from service on advisory committees or review panels for 
public or nonprofit entities; or
    (4) Financial interests in business enterprises or entities if the 
value of such interests do not exceed $5,000 or represent more than a 
5% ownership interest for any one enterprise or entity when aggregated 
for the investigator and the investigator's spouse and dependent 
children.
    Small Business Innovation Research (SBIR) Program means the 
extramural research program for small business that is established by 
the awarding components of the Public Health Service and certain other 
Federal agencies under Public Law 97-219, the Small Business Innovation 
Development Act, as amended. For purposes of this part, the term SBIR 
Program includes the Small Business Technology Transfer (SBTT) Program, 
which was established by Public Law 102-564.


Sec. 94.4  Institutional Assurance and Responsibility Regarding 
Significant Financial Interests of Investigators.

    (a) Each Institution must:
    (1) Inform each Investigator of the Institution's policy for 
identifying and managing Significant Financial Interests, the 
Investigator's reporting responsibilities, and of this part.
    (2) Designate an institutional official(s) to solicit and review 
financial disclosure statements from each Investigator who is planning 
to participate in PHS-funded research.
    (3) Ensure that Investigators have provided to the designated 
official(s) a listing of Significant Financial Interests that ensures 
disclosure of all Significant Financial Interests of the type described 
in paragraph (e)(1) of this part, prior to the time an application is 
submitted to PHS. All financial disclosures must be updated during the 
pendency of the award, either on an annual basis, or as new reportable 
Significant Financial Interests are obtained.
    (4) Provide guidelines consistent with this subpart for the 
designated official(s) to identify Significant Financial Interests of 
the type described in paragraph (e)(1) of this part and take such 
actions as necessary to ensure that any such financial interest will be 
managed, reduced, or eliminated.
    (5) Maintain records identifiable to each award of all financial 
disclosures and all actions taken by the Institution with respect to 
each Significant Financial Interest of the type described in Sec. 94.5 
for at least three years beyond the termination or completion of the 
contract, or until resolution of any action by the HHS involving the 
records, whichever is longer.
    (6) Establish procedures for resolving any alleged violation of the 
financial conflict of interest policy of the Institution and establish 
appropriate enforcement actions for failure to comply.
    (7) Certify, in each contract proposal, that:
    (i) There is in effect at that Institution a written and enforced 
administrative process to identify and manage, reduce or eliminate 
Significant Financial Interests of the type described in paragraph 
(e)(1) of this part with respect to all research projects for which 
funding is sought from the PHS.
    (ii) The Institution either has, or has not found a Significant 
Financial Interest of the type described in paragraph (e)(1) of this 
part and, where such interest is found, certify that actions have been 
taken to manage, reduce or eliminate that interest in accordance with 
this part.
    (iii) The Institution agrees to make information available, upon 
request, to the HHS regarding all Significant Financial Interests 
identified by the Institution of the type described in paragraph (e)(1) 
of this part and how those interests have been managed, reduced, or 
eliminated to protect the research from bias;
    (iv) the Institution will otherwise comply with this part.
    (8) (i) Notify the PHS Awarding Component of the identification and 
management, reduction or elimination of any Significant Financial 
Interest, of the type described in Sec. 94.5(a) of this Part that did 
not exist or was not known at the time of the proposal, within sixty 
days of its becoming aware of that Interest.
    (ii) HHS may at any time request submission of, or review on site, 
all records pertinent to these certifications. To the extent permitted 
by law, the PHS will maintain all records of financial interests 
confidentially.
    (iii) An investigator may participate in a PHS-funded research 
project that is being simultaneously supported by an organization that 
has a commercial interest in the outcome of the project. However, the 
research support must be provided through the PHS awardee Institution. 
Any direct compensation or payment to the Investigator under that 
support is considered a financial interest under this part.


Sec. 94.5  Management of Significant Financial Interests.

    (a) Institutions seeking PHS funding for research shall ensure that 
the following types of Significant Financial Interests attributable to 
an Investigator are managed, reduced, or eliminated, in accordance with 
paragraph (b) of this section, prior to award of the contract:
    (i) Any Significant Financial Interest of the Investigator that 
would reasonably appear to be directly and significantly affected by 
the research funded by PHS, or proposed for funding; and
    (ii) Any Significant Financial Interest of the Investigator in an 
entity whose financial interest would reasonably appear to be directly 
and significantly affected by the research funded by PHS, or proposed 
for funding.
    (b) In addition to the types of Significant Financial Interests 
described in this paragraph that must be managed, an Institution may 
require the management of other financial interests as the Institution 
deems appropriate.
    (c) The designated official(s) must review all financial 
disclosures, determine whether Significant Financial Interests could 
affect the design, conduct, or reporting of the research activities 
funded by PHS, or proposed for such funding, and determine what 
conditions or restrictions, if any, should be imposed by the 
institution to manage such interests. Examples of conditions or 
restrictions that might be imposed to manage actual or potential 
conflicts of interest include:
    (1) Public disclosure of significant financial interests;
    (2) Monitoring of the research by independent reviewers;
    (3) Modification of the research plan;
    (4) Disqualification from participation in all or a portion of the 
research funded by the PHS;
    (5) Divestiture of significant financial interests, or;
    (6) Severance of relationships that create actual or potential 
conflicts.


Sec. 94.6  Remedies.

    (a) Each Institution that submits a research contract proposal must 
include in its policy for the identification and management of 
Significant Financial Interest procedures for enforcement action 
against employees who do not comply with the Institution's policy. If 
the failure of an employee to comply with the policy of the Institution 
has biased the design, conduct, or reporting of the PHS-funded 
research, the Institution must promptly notify the PHS Awarding 
Component of the corrective action taken. The PHS Awarding Component 
will consider the situation and, as necessary, take appropriate action 
or refer the matter to the Institution for further action, which may 
include directions to the Institution on how to maintain appropriate 
objectivity in the funded project.
    (b) The HHS may inquire into the Institutional procedures and 
actions regarding financial interests in PHS-funded research, including 
the disposition of a particular financial interest. Such inquiry may be 
initiated based on information obtained by the HHS under this part, 
from a procurement-related document (proposal, progress report, 
publication of results) or any other source. Based on a specific 
inquiry, the HHS may decide that a particular Significant Financial 
Interest of the type described in section 4 Sec. 94.4 is so sensitive 
that the issuance of a Stop Work Order by the Contracting Officer may 
be necessary until the matter is resolved.
    (c) In any case in which the Department determines that a PHS-
funded project of clinical research whose purpose is to evaluate the 
safety or effectiveness of a drug, medical device, or treatment has 
been designed, conducted, or reported by an Investigator with a 
Significant Financial Interest that was not disclosed or managed as 
required by this part, the Institution must require disclosure of the 
financial interest in each public presentation of the results of the 
research.

[FR Doc. 94-15500 Filed 6-27-94; 8:45 am]
BILLING CODE 4140-01-P