Brave New World:

Current Issues in Academic Medical Center Relationships with Industry

Eve M. Brunts

Ropes & Gray, LLP

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This paper was prepared with the assistance of Sarah Blumenthal, Patrick Hernon and Kirstin Roshelli, each an

associate with Ropes & Gray LLP.

TABLE OF CONTENTS

Page

I. Introduction ......................................................................................................................... 1

II. Interactions with Industry ................................................................................................... 1

A. AMC Perspective ....................................................................................................... 1

B. Industry Perspective ................................................................................................... 3

III. Transparency ....................................................................................................................... 5

A. Federal Sunshine Law ................................................................................................ 5

1. General Requirement ........................................................................................... 6

2. Covered Recipient ................................................................................................ 6

3. Applicable Manufacturer ..................................................................................... 6

4. Covered Drug, Device, Biological or Medical Supply ........................................ 7

5. Information Reported ........................................................................................... 7

6. Payment or Other Transfer of Value .................................................................... 7

7. Publication of Reported Information ................................................................. 10

B. Preemption, State Laws, and Atmosphere of Transparency .................................... 11

1. State Laws and Preemption ................................................................................ 11

2. Corporate Integrity Agreements ........................................................................ 12

3. Voluntary Disclosures ........................................................................................ 12

IV. Insider Trading .................................................................................................................. 12

A. Overview of Insider Trading Laws .......................................................................... 12

B. Concern .................................................................................................................... 14

C. Recent Enforcement Activity ................................................................................... 14

1. Yves M. Benhamou, M.D. ................................................................................. 14

2. Sidney Gilman, M.D. ......................................................................................... 15

D. Issues for Consideration ........................................................................................... 16

1. Researchers ........................................................................................................ 16

2. Research Institutions .......................................................................................... 16

3. Research Sponsors ............................................................................................. 17

V. Conflicts of interest in Research ....................................................................................... 18

A. PHS Financial Conflicts of Interest ......................................................................... 18

1. Institutional Responsibilities Generally ............................................................. 18

2. Disclosure of Financial Interests ........................................................................ 19

3. Institution’s Management of Financial Conflicts of Interest ............................. 20

4. Reporting Financial Conflicts of Interest ........................................................... 20

5. Enforcement ....................................................................................................... 21

B. FDA Financial Disclosure........................................................................................ 21

C. Institutional Conflicts of Interest ............................................................................. 22

EXHIBIT A ................................................................................................................................... 25

EXHIBIT B ................................................................................................................................... 32

EXHIBIT C ................................................................................................................................... 44

I. INTRODUCTION

Interactions between academic medical centers (AMCs) and the pharmaceutical and medical

device industries have historically encompassed a diverse range of interactions. These

interactions have become the subject of increasing scrutiny and financial pressures. In response,

the nature of the interactions is evolving. The evolution of the interactions is affected by the

different perspectives of AMCs and industry and is constrained by the various laws, codes and

policies applicable to AMCs and industry.

This paper provides an overview of current developments and compliance concerns raised by

interactions between AMCs and the pharmaceutical and medical device industries.

II. INTERACTIONS WITH INDUSTRY

Concerns related to financial and other interactions between AMCs and the pharmaceutical and

medical device industries have intensified over the years. The fundamental concern with such

interactions is that the objectivity of health care providers making health care decisions,

educating other health care providers or undertaking research will be compromised. As a result,

patients will be placed at risk or government health care programs defrauded.

AMC and industry expectations regarding acceptable interactions have evolved significantly in

recent years in response to such concerns. Efforts to address the concerns evidence the different

perspectives of AMCs and of the pharmaceutical and medical device industries. AMCs have

focused on interactions as potential conflicts of interest and have adopted policies based on an

ongoing dialogue within the AMC community. Industry has focused on interactions as

compliance concerns and has adopted policies based on regulatory guidance, industry codes of

conduct and government enforcement actions.

A. AMC Perspective

AMCs have long recognized the fraud and abuse concerns created by financial interactions

between their healthcare provider components and the pharmaceutical and medical device

industries. AMCs have, however, also focused on the broader conflict of interest concerns

inherent in such interactions. The seminal 2006 JAMA article, Health Industry Practices that

Create Conflicts of Interest: A Policy Proposal for Academic Medical Centers, suggested that

existing guidance from professional and industry groups as well as the government on

interactions between physicians and industry was insufficient to support a “professional

commitment to patient welfare and research integrity.” 1

Authors of the article focused on the

influence of the AMC community and its responsibilities with respect to clinical practice,

medical education, and research and urged AMCs to address the conflicts of interest. The

authors recommended that AMCs do so by adopting policies to restrict or prohibit many

interactions between physicians and pharmaceutical and medical device industries that were

common at the time. Specific recommendations made included: (i) a ban on all gifts (regardless

of value of such gifts), (ii) replacement of free drug samples with drug vouchers for low-income

patients, (iii) exclusion of physicians with financial relationships involving pharmaceutical

1 T. Brennan et al., Health Industry Practices that Create Conflicts of Interest, 295 JAMA 429, 430 (Jan. 25,

2006).

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companies from hospital formulary and purchasing committees, (iv) payment of funds to support

travel to educational or training programs to a central office for disbursement, (v) prohibition on

medical school faculty members’ participation in industry speaker bureaus and involvement in

“ghost-written” articles, (vi) establishment of a central repository within an AMC for receipt and

disbursement of educational grants, and (vii) the requirement that all consulting contracts

include specific, scientific deliverables to demonstrate the bona fide nature of the contracts.

The AAMC Task Force on Industry Funding of Medical Education subsequently considered

interactions between AMCs and industry and sought to develop general principles to guide

AMCs in “optimizing the benefits and minimizing the pitfalls of industry support of medical

education.” (AAMC Report).2 In 2008, the task force issued its report. The report identified the

need for AMCs to take action to maintain the integrity of the three core principles of medical

professionalism: autonomy, objectivity and altruism. The report adopted many of the

recommendations made in the JAMA article and also addressed issues not covered by the JAMA

article: (i) site access by industry representatives, (ii) participation in industry-sponsored

programs, (iii) educational funding for trainees, (iv) the provision of meals or other food and

purchasing practices. The AAMC recommendations have had a significant influence on the

policies and practices of many AMCs.

At the same time, financial interactions between AMCs and industry (and the potential conflicts

created by those interactions) were being questioned by Senator Grassley and subject to media

scrutiny. Senator Grassley questioned financial ties between industry and physicians associated

with the University of Cincinnati, Harvard University/Massachusetts General Hospital, Stanford

University, Emory University and Columbia University. Senator Grassley’s questions focused

on conflict of interest concerns, including the adequacy of the disclosure by physicians of

payments received from industry and physician participation in federal funding of research on

drugs manufactured by industry when financial relationships with industry existed.

During and after these developments, many AMCs have implemented or enhanced policies that

address financial interactions between AMCs and their affiliated physicians and industry. The

policies include specific policies on interactions with industry (typically interactions by

physicians). A chart summarizing the recommendations from the AAMC Report and key

components of policies adopted by AMCs that specifically address interactions with industry is

attached as Exhibit A.

Note that AMC policies relevant to interactions with industry may also include general policies

addressing individual conflicts of commitment (when outside commitments impede the ability of

an individual to meet commitments to the AMC) or individual conflicts of interest (when

personal interests may impede the ability of the individual to act objectively in fulfilling

obligations to the AMC). These policies may require disclosure, internal review and

management of potential conflicts.

2 AAMC, Industry Funding of Medical Education: Report of an AAMC Task Force, 2 (2008).

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B. Industry Perspective

The pharmaceutical and medical device industries have been subject to significant government

regulation and enforcement activity related to financial and other interactions with healthcare

providers. Activities under scrutiny have included various general categories of financial

interactions that may involve AMCs (e.g., funding for educational activities, payments for

consulting services, including serving as an author or speaker, sponsorship of research).

Scrutiny, has, however, focused on such interactions when abusive.

The Department of Health and Human Services Office of Inspector General (OIG) has identified

concerns under the anti-kickback statute with financial interactions between healthcare providers

and the pharmaceutical industry since 1994. In that year, the OIG released a Special Fraud Alert

that identified suspect pharmaceutical marketing activities under the anti-kickback statute.3 The

early fraud alert was issued in response to information received about manufacturers that were

providing: (i) product conversion payments to pharmacists, (ii) frequent flier mileage to

physicians for completing a questionnaire for new patients placed on a drug or (iii) substantial

research grants to physicians for de minimis recordkeeping tasks. The OIG later issued the OIG

Compliance Program Guidance for Pharmaceutical Manufacturers (OIG Compliance Guidance)

which provided guidance to the pharmaceutical industry on implementing an effective voluntary

compliance program.4 Focusing on the pharmaceutical industry, the OIG Compliance Guidance:

(i) addresses the basic elements of an effective compliance program; (ii) identifies risk areas; and

(iii) offers guidance on ensuring activities within those risk areas are compliant. In doing so, the

OIG Compliance Guidance identifies a number of potential concerns with respect to financial

interactions with hospitals and/or physicians, such as: (i) consulting/advisory payments for

unnecessary services or services related to the manufacturers’ promotional activities or listening

to marketing communications; (ii) provision or business courtesies and other gifts; (iii) funding

for educational or research activities if the activities are not bona fide or the payments are linked

to the purchase or promotion of a product; and (iv) product support activities that eliminate

financial risk.

Industry associations have developed voluntary codes of conduct establishing standards for

interactions with healthcare providers. The two most prominent codes are: (i) the

Pharmaceutical Research and Manufacturers of America (PhRMA) Code on Interactions with

Healthcare Professionals (PhRMA Code),5 and (ii) the Advanced Medical Technology

Association (AdvaMed) Code of Ethics on Interactions with Health Care Professionals

(AdvaMed Code).6 The PhRMA Code was first adopted in 2002, while AdvaMed Code was

first adopted in 2005. In 2009, PhRMA and AdvaMed both adopted revised codes of conduct

that further limited interactions previously permitted. The codes, and their subsequent revisions,

reflect changing industry standards that both respond to and seek to preempt government

enforcement activity. Internal compliance policies consistent with the industry codes have been

3 1994 OIG Fraud Alert, 59 Fed. Reg. 65,372 (Dec. 19, 1994).

4 See OIG Compliance Program Guidance for Pharmaceutical Manufacturers, 68 Fed Reg. 23,731 (May 5,

2003). 5 The PhRMA Code is available at: http://www.phrma.org/about/principles-guidelines/code-interactions-

healthcare-professionals. 6 The AdvaMed Code is available at: http://www.advamed.org/MemberPortal/About/code/default.htm.

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widely adopted within the pharmaceutical and medical device industries. A chart summarizing

key provisions of both codes is attached as Exhibit B.

The pharmaceutical and medical device industries have also been subject to intense government

enforcement activity focused on financial interactions with healthcare providers for over a

decade. From the TAP Pharmaceuticals settlement in 2001 to the Amgen settlement at the end

of 2012, almost every major pharmaceutical and medical device company has been involved in a

government investigation involving interactions with healthcare providers and many have

reached one or more significant settlements with the government.7 The allegations made in the

investigations as well as requirements imposed on companies through corporate integrity

agreements (CIAs) have established or informed industry best practices. Substantive allegations

relevant to interactions with healthcare providers have primarily involved anti-kickback statute

violations or off-label promotion.

Several states, including California,8 Connecticut,

9 Massachusetts,

10 Minnesota,

11 Nevada,

12

Vermont13

and West Virginia14

as well as the District of Columbia,15

have their own laws

regulating financial interactions between the pharmaceutical and medical device industry and

healthcare providers or related entities. These laws all apply directly to manufacturers rather

than to the healthcare providers with which the manufacturers interact. State laws typically take

certain forms. The laws may: (i) impose behavioral restrictions (such as bans and spending

limits on gifts, entertainment and/or meals)16

; (ii) require certain entities to adopt and enforce

compliance programs with respect to gifts and other transfers of value to certain health care

professionals that comply with industry codes (including the AdvaMed Code, the PhRMA Code,

and/or the OIG Compliance Guidance; (iii) impose limits on and require disclosure of

7 See, e.g., Abbott Laboratories (including CG Nutritionals) (2003, 2012), Allergan (2010), Amgen (2012),

AstraZeneca (2010), Bayer (2001, 2003, 2008), Biomet (2007), Boston Scientific (including Guidant) (2009,

2011), Cephalon (2008), DePuy (2007), Elan Pharmaceuticals (2010), Eli Lilly (2005, 2009), Forest

Pharmaceuticals (2010), GlaxoSmithKline (2003, 2005, 2012), Medtronic (includes Medtronic Spine) (2006,

2008, 2011), Merck (2008, 2011), Novartis (2010), Pfizer (including Parke-Davis/Warner-Lampert) (2002,

2004, 2007, 2009, 2011), St. Jude Medical (2010, 2011, 2012), Schering-Plough (2004, 2006), Serono (2005,

2011) Smith & Nephew (2007), Stryker (including Stryker Biotech), (2007, 2012), TAP Pharmaceuticals

(2001), Wright Medical (2010), and Zimmer (2007). Note that some settlements involved subsidiaries,

affiliates or acquisitions. 8 CAL. HEALTH & SAFETY CODE § 119400-119402.

9 Connecticut Public Act No. 10-117 (S. 428), §§ 93-94.

10 MASS. GEN. LAWS ch. 111N; 105 MASS. CODE. REGS. 970.000 et seq.

11 970 MINN. STAT. § 151.461.

12 NEV. REV. STAT. § 639.570; NEV. ADMIN. CODE § 639.616-639.619.

13 VT. STAT. tit. 18 § 4631a.

14 W. VA. CODE § 16-29H-8.

15 D.C. CODE § 48-833.01; D.C. MUN. REGS. tit. 22B, § 1800.00 et seq.

16 See, e.g. MASS. GEN. LAWS ch. 111N, § 2 (prohibiting the provision of certain meals and restricting other

payments and transfers of value to health care practitioners); 105 MASS. CODE. REGS. 970.000 et seq.

(implementing the Massachusetts statute); 970 MINN. STAT. § 151.461 (banning any manufacturer or wholesale

distributor from offering or giving any gift of value to a medical practitioner); VT. STAT. tit. 18 § 4631a

(banning certain types of gifts, meals and discounts provided to health care practitioners by pharmaceutical and

medical device manufacturers).

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promotional and advertising spending17

; and/or (iv) include disclosure requirements for financial

interactions between the pharmaceutical and medical device industry and healthcare providers or

other entities.18

III. TRANSPARENCY

Recent years have seen increased emphasis on public transparency with respect to financial

interactions between healthcare providers, including AMCs or their constituent providers, and

pharmaceutical and medical device companies. Sources of disclosure requirements include:

federal law, state laws, corporate integrity agreements, publication guidelines and the voluntary

policies of AMCs as well as pharmaceutical and medical device companies. The amount of

information available from diverse sources may increase scrutiny of AMC interactions and also

creates the possibility for conflict (actual or apparent) in the information reported and published.

A. Federal Sunshine Law

The so-called Federal Sunshine Law,19

which became law as part of the Patient Protection and

Affordable Care Act of 2010,20

seeks to promote transparency in financial interactions between

pharmaceutical and medical device manufacturers and certain healthcare providers by requiring

the manufacturers to report certain interactions to the federal government for disclosure to the

public.

As of January 18, 2013, implementation of the Federal Sunshine Law remains uncertain. The

statute required pharmaceutical and medical device manufacturers to start tracking financial

interactions on January 1, 2012. Delays in the rulemaking process, however, have postponed

implementation. The Centers for Medicare & Medicaid Services (“CMS”) released proposed

rule in December 2011.21

In May of 2012, CMS indicated that tracking of disclosures under the

Federal Sunshine Law would not begin before January 1, 2013 and that a final rule would be

released before the end of 2012.22

CMS, however, did not submit a final rule to the White House

17

See, e.g. D.C. CODE § 48-833.01 (requiring the disclosure of marketing costs); NEV. ADMIN. CODE § 639.616-

639.619 (requiring the annual disclosure of certain marketing information); W. VA. CODE § 16-29H-8 (requiring

the annual reporting of advertising costs for prescription drugs). 18

See, e.g. MASS. GEN. LAWS ch. 111N, § 6 (requiring disclosure of certain information about the value of fees,

payments, subsidies and other grants of economic value to certain health care providers and institutions); 105

MASS. CODE. REGS. 970.000 et seq. (implementing the Massachusetts statute); VT. STAT. tit. 18 § 4631a

(requiring the disclosure of certain permitted gifts and allowable expenditures). 19

42 U.S.C. § 1320a-7h. 20

Public Law 111-148, as amended by the Health Care and Education Reconciliation Act of 2010 (Public Law

111-152). 21

Medicare, Medicaid, Children’s Health Insurance Program; Transparency Reports and Reporting of Physician

Ownership or Investment Interests, 76 Fed. Reg. 78742 (Dec. 19, 2011). 22

(Posting to The CMS Blog, Information on Implementation of the Physician Payments Sunshine Act,

http://blog.cms.gov/2012/05/03/information-on-implementation-of-the-physician-payments-sunshine-act/ (May

3, 2012)).

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Office of Management and Budget (OMB) until late November and the OMB is still reviewing

the final rule.23

1. General Requirement

The Federal Sunshine Law requires “applicable manufacturers” of “covered drugs, devices,

biologicals or medical supplies” to annually report to CMS any “payment or other transfer of

value” to a “covered recipient.”24

Each year, following the receipt of these reports, CMS must

publish the information that the agency receives online in a clear, understandable and searchable

format.25

These statutory requirements, as well as certain exceptions and limitations imposed by

statute, are further elaborated below. Discussions of potential interpretations from the proposed

rule issued by CMS are also included.

2. Covered Recipient

“Covered recipients” include both physicians and teaching hospitals.26

Physicians are defined

consistent with the Medicare statute to include a licensed physician, osteopath, dentist, dental

surgeon, podiatrist, optometrist or chiropractor (but exclude an employee of a manufacturer).

Teaching hospital, however, is not defined. CMS has proposed that teaching hospitals should

include only those institutions that receive the following graduate medical education payments:

(i) direct graduate medical education (“DGME”) payments, (ii) indirect medical education

(“IME”) payments, or (iii) psychiatric IME payments.27

CMS would annually publish a list of

hospitals that qualify as covered recipients under this definition, which would include such

hospitals’ names and addresses.28

In proposing this definition, CMS acknowledged that there

may be hospitals with accredited residency programs that will not come within this definition

because the hospitals do not receive GME or IME payments.29

Even with the CMS proposal, a number of uncertainties remain regarding the scope of covered

recipients. CMS does not indicate whether and when transfers of value to representatives of

physicians and teaching hospitals would be treated as transfers to such covered recipients. Nor

does CMS address the diversity in corporate structures for teaching hospitals. While some

teaching hospitals may be organized as distinct legal entities, others operate within larger legal

entities (such as universities) that may house medical schools or other educational components.

3. Applicable Manufacturer

An “applicable manufacturer” is essentially an entity that operates in the United States and is

either: (i) engaged in the manufacturing of a covered drug, device, biological, or medical supply

(core manufacturer); or (ii) under common ownership with a core manufacturer and providing

23

Office of Information and Regulatory Affairs, Office of Management and Budget, Executive Order Submissions

Under Review (Jan. 16, 2013). 24

42 U.S.C. § 1320a-7h(a)(1)(A). 25

Id. at § 1320a-7h(c)(1)(C). 26

Id. at § 1320a-7h(e)(6). 27

76 Fed. Reg. at 78,745-46. 28

Id. at 78,746. 29

Id. at 78,745-46.

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assistance with respect to the manufacturing, distribution, sale or promotion of a covered drug,

device, biological, or medical supply (support manufacturer).30

In the commentary to the

proposed rule, CMS clarified that a manufacturer meets the definition of “applicable

manufacturer” so long as the manufacturer has (or supports a manufacturer that has) one covered

product in the United States and that any manufacturer must report all transfers of value to

covered recipients, even if the transfer of value is not associated with a covered product.31

4. Covered Drug, Device, Biological or Medical Supply

A product is only considered a “covered drug, device, biological, or medical supply” if payment

is available for such item under Medicare, Medicaid or the Children’s Health Insurance

Program.32

The proposed rule would narrow this definition to include only: (1) drugs and

biologicals that require a prescription to be dispensed; and (2) devices and medical supplies that

require premarket approval by or premarket notification to FDA.33

The proposed rule would also

clarify that a product is covered under the federal programs if the item is reimbursed separately

or under a global payment rate.34

5. Information Reported

Manufacturers must provide significant information regarding each payment or other transfer of

value: (i) the name of the covered recipient, (ii) the business address of the covered recipient,

(iii) the specialty and National Provider Number of the covered recipient, (iv) the value of the

payment or other transfer of value that was provided to the covered recipient, (v) the form of the

payment or other transfer of value (discussed below), (vi) the nature of the payment or other

transfer of value (discussed below), and (vii) the name of the covered drug, device, biological or

medical supply, if applicable, to which the payment or other transfer of value was related.35

6. Payment or Other Transfer of Value

(i) “Form” and “Nature” of Payments or Transfers of Value

Payments or other transfers of value may take the form of: (i) cash or a cash equivalent, (ii) in-

kind items or services, (iii) stock, stock options, ownership interests, dividends, and other returns

on investment, or (iv) any other form of payment that CMS may designate.36

Each form of

payment must be categorized by nature of the payment, using the following categories: (i)

consulting fees, (ii) compensation for non-consulting services, (iii) honoraria, (iv) gifts, (v)

entertainment, (vi) food, (vii) travel, (viii) education, (ix) research, (x) charitable contributions,

(xi), royalty or license, (xii) current or prospective ownership interests, (xiii) direct compensation

for serving as faculty or speaker for medical education program, or (xiv) grant.37

CMS has

30

Id. at 78,743-44. 31

Id. at 78,744. 32

42 U.S.C. § 1320a-7h(e)(5). 33

76 Fed. Reg. at 78,745. 34

Id. 35

42 U.S.C. § 1320a-7h(a)(1)(A). 36

42 U.S.C. § 1320a-7h(a)(1)(A)(v); 76 Fed. Reg. at 78,747-48. 37

42 U.S.C. § 1320a-7h(a)(1)(A)(vi); 76 Fed. Reg. at 78,768.

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proposed adding a category for “other” payments (which would mean that transfers of value that

did not fit another specific category would no longer be covered under the “gift” category).

CMS also proposed that each payment or transfer of value would be assigned one form of

payment and one nature of payment category and applicable manufacturers could submit, on a

voluntary basis, documents describing their assumptions when categorizing the nature of a

payment.38

In the proposed rule and commentary to the proposed rule, CMS clarified the scope of certain

categories. The agency indicated that a payment could only be categorized as a “charitable

contribution” if the contributions are made to an organization that is tax exempt under the

Internal Revenue Code of 1986 and could not be more specifically described by one of the other

nature of payment categories.39

CMS also narrowly defined the “research” category. Payments

and other transfers of value that can be categorized as “research” are limited to those that relate

to bona fide research activities, including clinical investigations, that are subject to both: (i) a

written agreement or contract between the applicable manufacturer and the organization

conducting the research and (ii) a research protocol.40

Special reporting requirements would apply to research-related transfers of value. These

transfers of value would be reported as either “direct” or “indirect” transfers of value. A “direct”

research transfer of value is one provided directly to a physician or teaching hospital by an

applicable manufacturer or contract research organization (“CRO”).41

An “indirect” research

transfer of value is one made either by an applicable manufacturer or CRO to a clinic, hospital or

other institution conducting research if that institution in turn pays the physician covered

recipient(s) serving as the principal investigator(s).42

A research payment to a teaching hospital

that results in payments from the teaching hospital to a physician-principal investigator would be

reported both as a “direct research” payment to the teaching hospital and as an “indirect

research” payment to the physician-principal investigator.43

(ii) Payments or Transfers of Value Excluded from Reporting

The Federal Sunshine Law includes categories of payments and transfers of value that are

excluded from reporting:

transfers of value of less than $10 unless the annual aggregate exceeds $100;

product samples that are not intended to be sold and are intended for patient use;

educational materials that directly benefit patients or are intended for patient use;

loans of a covered device for a short-term trial period to permit evaluation;

38

76 Fed. Reg. at 78,748. 39

Id. 40

Id. at 78,749. 41

Id. 42

Id. 43

Id.

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items or services provided under contractual warranty, which terms are set forth in the

purchase or lease agreement;

discounts, including rebates;

in-kind items used for the provision of charity care;

dividends and profit distributions from publicly-traded securities or mutual funds;

transfer of value to covered recipient as patient

payment for non-medical professional services of licensed non-medical professional;

payment for services related to civil or criminal action or administrative proceeding;

payment by self-insured employer for health care to employees; and

transfers of value made indirectly to a covered recipient through a third party when the

applicable manufacturer is unaware of the identity of the covered recipient. 44

In the commentary to the proposed rule, CMS provides some limited guidance with respect to

certain of these exclusions. With respect to the exclusion for educational materials, CMS noted

that the exclusion would apply to materials only, and not services, and sought comments on

whether medical textbooks for the education of covered recipients should qualify for the

exclusion.45

With respect to the exclusion for in-kind items used for the provision of charity care,

CMS noted that items would be considered “for charity care” only to the extent that they are

used solely for the care of patients who are unable to pay and are not expected to pay.46

The Federal Sunshine Law’s statutory language requires applicable manufacturers to report

indirect transfers of value made to third parties at the request of or on behalf of a covered

recipient, but excludes indirect transfers of value from the reporting obligation if the applicable

manufacturer is unaware of the identity of the physician or teaching hospital on whose behalf or

at whose direction the transfer or payment was made.47

The proposed rule does not clarify when

an indirect transfer will be considered to be made at the request of or on behalf of a covered

recipient. The proposed rule does provide some guidance on the scope of excluded indirect

payments by imposing a knowledge standard that would track other health care fraud and abuse

laws. Specifically, under the proposed rule, an applicable manufacturer is aware of the identity

of the covered recipient if the manufacturer: (i) has actual knowledge, (ii) acts in deliberate

ignorance of the truth or falsity of information, or (iii) acts in reckless disregard of the truth or

falsity of the information.48

Indirect payments may play a particularly significant role in the

context of payments or other transfers of value to AMCs given the variety and complexity of

their organizational structures.

44

42 U.S.C. § 1320a-7h(e)(10)(B). 45

76 Fed. Reg. at 78,748. 46

Id. 47

42 U.S.C. § 1320a-7a(a)(1)(B). 48

76 Fed. Reg. at 78,751.

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7. Publication of Reported Information

CMS will annually publish the information reported by applicable manufacturers on a publicly

accessible website. The information must be in a searchable format that is clear and

understandable and must be easily aggregated and downloadable.49

The published information

will include the information reported by the manufacturer (other than the National Provider

Number) along with the name of the manufacturer. 50

(i) Review Period for Covered Recipients

Prior to CMS’s publication of the applicable manufacturers’ reported information, covered

recipients will have at least forty-five days to review the submitted information for accuracy.51

Under the proposed rule, CMS will notify covered recipients of the opportunity to review

submitted data.52

Covered recipients that dispute the information reported by applicable

manufacturers would be required to contact and resolve the dispute with the applicable

manufacturer and CMS would not police such disputes.53

If the covered recipient and the

applicable manufacturer are unable to resolve the dispute then both the applicable manufacturer’s

reported transfer and the covered recipient’s revised reported transfer would be publicly

reported.54

For purposes of data aggregation and analysis, CMS proposes that the covered

recipient’s revised reported transfer would be used, so as to avoid double counting a payment or

other transfer of value to a particular covered recipient.55

(ii) Delayed Publication

The Federal Sunshine Law allows for delayed publication of payments and transfers of value

made in connection with ongoing research and development activities and clinical

investigations.56

The delay seeks to protect the confidentiality of proprietary information of

manufacturers concerning products in development or under investigation. The delay continues

until the earlier of: (i) the approval, licensure or clearance of the drug, device, biological or

medical supply by the FDA, or (ii) four calendar years after the date of the payment.57

Under the

proposed rule, an applicable manufacturer could request a delay in publication of payments or

transfers of value made in relation to “bona fide research or investigation activities, which, if

made public, would damage the manufacturer’s competitive and/or proprietary interests.”58

The

burden would rest on the applicable manufacturer to notify CMS that a payment or transfer of

value is eligible for delay, and the applicable manufacturer would be required to re-disclose the

49

42 U.S.C. § 1320a-7a(c)(1)(C). 50

Id. 51

Id. at § 1320a-7a(c)(1)(D) 52

76 Fed. Reg. at 78,755. 53

Id. 54

Id. 55

Id. 56

42 U.S.C. § 1320a-7a(c)(1)(E) 57

42 U.S.C. at § 1320a-7h(c)(1)(E)(i). 58

76 Fed. Reg. at 78,756.

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payment or transfer of value each year that the delay is requested, with a continued indication to

CMS that publication should still be delayed and including any updated information.59

Under the proposed rule, payments or transfers of value made for research and development of

new covered products or new applications of covered products would be eligible for delayed

publication. Payments or transfers of value related to clinical investigations (i.e., investigations

that involve human subjects or material derived from human subjects), however, would be

eligible only if the transfers related to new covered products (and not new applications of the

covered products).60

Thus, certain payments and other transfers of value AMCs receive for their

participation in clinical research involving marketed products may not be eligible for delayed

publication.

B. Preemption, State Laws, and Atmosphere of Transparency

The Federal Sunshine Law imposes disclosure requirements on a healthcare provider community

and pharmaceutical and medical devices industries already subject to various mandatory and

voluntary disclosure obligations.

1. State Laws and Preemption

The Federal Sunshine Law will affect existing disclosure requirements in states with state

“sunshine” laws or regulations. The Federal Sunshine Law preempts any state laws that require

disclosure of the same information for the same types of entities required by the Federal

Sunshine Law.61

The Federal Sunshine Law’s preemption does not apply to information outside

of the scope of the Federal Sunshine Law’s requirements (e.g., payments from or by individuals

and entities other than those covered by the statute).62

The Federal Sunshine Law further permits

federal, state and local governmental agencies to require reporting of information for public

health surveillance, investigation, or other public health or health oversight purposes.63

Preemption by the Federal Sunshine Law may be less than complete in states that require the

reporting of financial interactions with a broader range of covered recipients (e.g., covered

recipients under Massachusetts and Vermont laws include essentially all healthcare providers

and individual practitioners if authorized to prescribe drugs) or require reporting of transactions

exempt from reporting under federal law (e.g., Massachusetts does not exclude from reporting

the value of educational items provided to covered recipients which the federal law does). Some

states affected, such as Massachusetts and Vermont, have revised or issued revised guidance on

their state reporting requirements in light of the Federal Sunshine Law.64

59

76 Fed. Reg. at 78,757. 60

Id. 61

42 U.S.C. § 1320a-7h(d)(3). 62

Id. at § 1320a-7h(d)(3)(B). The Federal Sunshine Law preempts state de minimis reporting requirements,

meaning that state reporting requirements cannot require reporting of payments or transfers of value that are less

than $10, or aggregate to less than $100, annually. Id. at § 1320a-7h(d)(3)(B)(ii). 63

Id. at § 1320a-7h(d)(3)(B)(iv). 64

See Executive Office of Health and Human Services, Pharmaceutical and Medical Device Manufacturer Code

of Conduct, http://www.mass.gov/eohhs/gov/laws-regs/dph/proposed-regulations/pharmaceutical-and-medical-

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2. Corporate Integrity Agreements

A number of pharmaceutical and medical device manufacturers are already subject to disclosure

requirements based on the provisions in the Federal Sunshine Law because the manufacturers

agreed to make such disclosures as part of a corporate integrity agreement (CIA) entered into

with the federal government to resolve government enforcement actions.65

The CIAs require the

manufacturers to post such information on public websites.

3. Voluntary Disclosures

Major pharmaceutical and medical device companies as well as prominent AMCs have also

voluntarily implemented practices to disclose financial interactions. For example, on the

pharmaceutical side, Pfizer and Eli Lilly began posting certain information on their website in

advance of CIA obligations to do so. On the medical device side, Medtronic also began posting

such information over two years ago. AMCs that post such information include: Cleveland

Clinic, Stanford University and Washington University in St. Louis.

IV. INSIDER TRADING

Recent government enforcement actions involving “insider trading” have significant implications

for AMCs. These actions focus on the scientists, physicians and other experts who are paid to

provide professional and industry insight to the investment community. Concerns about the

relationships between the investment community and the researchers or physician consultants

who have access to information about products in development are not new. The recent

aggressive enforcement activity, however, is. This activity may affect oversight of relationships

among investors, researchers, and research sponsors.

A. Overview of Insider Trading Laws

Federal securities law, as interpreted by the Securities and Exchange Commission (SEC) and the

courts, prohibits parties from purchasing or selling securities while in possession of material,

nonpublic information (MNPI) in breach of a duty to the company issuing the securities, the

company’s shareholders, or the source of the information.66

Such transactions are broadly

defined as “insider trading.”

device-manufacturer-code.html (last visited Dec. 30, 2012); Vermont Office of the Attorney General, Amended

Guide to Vermont’s Prescribed Products Gift Ban and Disclosure Law for 2012 Disclosures (June 6, 2012),

http://www.atg.state.vt.us/assets/files/Amended%20Guide%20To%20Vermonts%20Prescribed%20

Products.pdf. 65

See, e.g., Corporate Integrity Agreement between the Office of the Inspector General of the Department of

Health and Human Services and Amgen Inc. (Dec. 14, 2012), https://oig.hhs.gov/fraud/cia/agreements/

Amgen_12142012.pdf; and Corporate Integrity Agreement between the Office of the Inspector General of the

Department of Health and Human Services and Pfizer Inc. (Aug. 31, 2009),

https://oig.hhs.gov/fraud/cia/agreements/pfizer_inc_08312009.pdf. 66

Rule 10b-5, which was promulgated under Section 10(b) of the 1934 Securities Exchange Act, states:

It shall be unlawful for any person, directly or indirectly, by the use of any means or

instrumentality of interstate commerce, or of the mails or of any facility of any national

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Insider trading liability arises under one of three theories: (i) the traditional or “classical” theory;

(ii) an application of the “classical theory” to tippers/tippees; or (iii) the misappropriation theory.

Traditional Theory. The traditional or “classical” theory prohibits the most common insider

trading scenario: the employee who learns inside information about his corporation and

trades on the information.67

The theory now applies to agents of a corporation, fiduciaries of

a corporation, or other parties in whom a corporation has placed its trust and confidence68

as

well as so-called “temporary” insiders like accountants, investment bankers, and lawyers.69

Tipper/Tippee Liability. The expansion of the “classical” theory to include tipper/tippee

liability prohibits insiders (or “tippers”) from “tipping” an outsider about MNPI for the

“improper purpose of exploiting the information for [the tipper’s] personal gain.”70

The

theory also states that a tippee may inherit the insider’s duty to corporate shareholders and

subsequently violate insider trading prohibitions by trading on the information without

disclosure.71

Tippee liability exists when “a tippee assumes a fiduciary duty to the

shareholders of a corporation not to trade on material nonpublic information . . . when the

insider has breached his fiduciary duty to the shareholders by disclosing the information to

the tippee and the tippee knows or should know there has been a breach.”72

Misappropriation Theory. The “misappropriation theory” states that a person commits

insider trading “when he misappropriates confidential information for securities trading

purposes, in breach of a duty owed to the source of the information” (and therefore not in

breach of a duty owed to the corporation issuing the stock or to shareholders of the

corporation).73

A duty of confidentiality exists if the person undertaking the trading and the

source of the information share a relationship of trust and confidence.74

SEC rules state that

securities exchange, (a) to employ any device, scheme, or artifice to defraud, (b) to make any

untrue statement of a material fact or to omit to state a material fact necessary in order to make

the statements made, in light of the circumstances under which they were made, not

misleading, or (c) to engage in any act, practice, or course of business which operates or would

operate as a fraud or deceit upon any person, in connection with the purchase or sale of any

security.

See also Chiarella v. United States, 445 U.S. 222, 234–35 (1980); United States v. O’Hagan, 521 U.S. 642, 661

(1997). 67

445 U.S. at 227–29 (adopting rule from In re Cady, Roberts & Co., 40 S.E.C. 907, Release No. 34, 6668, 1961

WL 60638 (S.E.C. Release No. 1961)). 68

Donald C. Langevoort, INSIDER TRADING REGULATION, ENFORCEMENT, AND PREVENTION § 3:2 (Apr. 2010)

(citing Dirks v. Securities and Exchange Commission, 463 U.S. 646, 654 (1983) and Chiarella, 445 U.S. at 230

n.12) [hereinafter Langevoort]. 69

See Dirks, 463 U.S. at 655 n.14. 70

See id. at 659–60. 71

Id. at 660–61. 72

Id. at 660. 73

O’Hagan, 521 U.S. at 652–53. 74

See Langevoort, supra note 57, § 6:6. The Second Circuit has recently shown a willingness to expand the

misappropriation theory even to those who owe no fiduciary duty or duty of confidentiality. In SEC v.

Dorozhko, 606 F.Supp.2d 321, 338–39 (S.D.N.Y. 2008), the defendant was a hacker who cracked a database,

found inside information, and traded on it. The District Court denied the SEC’s motion for an injunction,

reasoning that the defendant did not owe any fiduciary duty to the source of the information. The Second

Circuit reversed that decision. The court concluded that the commission of deceptive act violates Rule 10b-5

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a duty of confidentiality exists whenever: (i) “a person agrees to maintain information in

confidence”; (ii) “the person communicating the material nonpublic information and the

person to whom it is communicated have a history, pattern, or practice of sharing

confidences, such that the recipient of the information knows or reasonably should know that

the person communicating the material nonpublic information expects that the recipient will

maintain its confidentiality” or (iii) “a person receives or obtains material nonpublic

information from his or her spouse, parent, child, or sibling.”75

B. Concern

Concerns about relationships between physicians and other researchers and the investment

community have existed for a number of years. On August 7, 2005, The Seattle Times published

the investigative report entitled Selling Drug Secrets, which detailed the increasing number of

physicians discussing ongoing clinical trials with the investment community in exchange for

compensation.76

Immediately following the report, on August 8, 2005, Senate Finance

Committee Chairman Charles E. Grassley issued a letter to the U.S. Department of Justice (DOJ)

and the SEC requesting that the agencies review these findings and advise whether Congress

should consider strengthening any laws.77

In 2006, an article in JAMA highlighted the increase

in the number of physicians serving as consultants to the investment community.78

The article

identified concerns arising from the consulting arrangements related to both insider trading and

conflicts of interest (i.e., if physicians have an investment interest in the investment firm and/or a

pharmaceutical or biotechnology company whose success may be affected by the physicians’

service as consultant).

C. Recent Enforcement Activity

Over the past few years, the SEC has initiated a government crackdown on “experts” recruited

and retained by “expert network” firms to provide advice to certain investors, often hedge funds,

about their areas of expertise.79

The crackdown has included physicians who provided oversight

to clinical trials.

1. Yves M. Benhamou, M.D.

In November of 2010, the SEC brought an action for insider trading against a French physician,

Yves M. Benhamou, M.D., who was involved in an investigational drug clinical trial for a

even if the defendant did not owe a duty to the source; only a deceptive omission requires that the defendant

have a pre-existing duty. The Second Circuit remanded the case to the District Court to determine whether the

defendant gained access to the database by actively misrepresenting his identity or whether he merely exploited

a technical vulnerability. 75

See 17 C.F.R. § 240.10b5-2 (2011). 76

L. Timmerman and D. Heath, Selling Drug Secrets, SEATTLE TIMES, Aug. 7, 2005. 77

Letter from Charles E. Grassley, Chairman of the Committee on Finance of U.S. Senate, to Alberto R.

Gonzales, U.S. Attorney General and Christopher Cox, Chairman of U.S. Securities and Exchange Commission

(Aug. 6, 2005). 78

E. Topol and D. Blumenthal, Physicians and the Investment Industry, 293 JAMA 2654 (June 1, 2006). 79

See SEC Press Release, SEC Brings Expert Network Insider Trading Charges (Feb. 3, 2011), available at

http://www.sec.gov/news/press/2011/2011-35.htm. See also S. Pulliam et al., U.S. in Vast Insider Trading

Probe, WALL ST. J. (Nov. 20, 2010).

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pharmaceutical company and serving as a consultant to a hedge fund.80

The DOJ initiated

parallel criminal proceedings for securities fraud.81

Both actions were based on the alleged

provision of confidential information regarding disappointing clinical trial results to a hedge-

fund portfolio manager.

According to the allegations, the physician was involved in clinical trials conducted by Human

Genome Science, Inc. (HGSI). The clinical trials focused on a new drug then known as

Albuferon that HGSI was developing for the treatment of chronic hepatitis C. Dr. Benhamou

was a member of a five person steering committee overseeing the Albuferon clinical trial. The

physician was also the “country lead investigator” for France and other parts of Europe. Dr.

Benhamou had signed confidentiality agreements with HGSI. While acting in these capacities,

Dr. Benhamou was also retained as a consultant by the hedge-fund portfolio manager, who was

managing portfolios of health care hedge funds that had interests in HGSI. Dr. Benhamou

allegedly alerted the portfolio manager about a setback in the clinical trial. This “tip” occurred

several days before HGSI’s public announcement of the issues with the trial. In response to the

tip, the hedge funds allegedly sold HGSI stock, avoiding nearly $30 million in losses.

Dr. Benhamou and the hedge-fund portfolio manager also pled guilty to securities fraud

charges.82

The hedge fund paid a $33 million settlement without any admission of wrongdoing.83

2. Sidney Gilman, M.D.

In November of 2012, the SEC brought an action for insider trading against a professor of

neurology at the University of Michigan, Sidney Gilman, M.D., who was involved in an

investigational drug clinical trial for two pharmaceutical companies and serving as a consultant

to a hedge fund advisory firm.84

The DOJ initiated parallel criminal proceedings for securities

fraud.85

The action was based on the alleged provision of confidential information regarding

negative clinical trial results to a hedge-fund portfolio manager.

According to the allegations, Dr. Gilman served as chairman of the safety monitoring committee

overseeing a Phase II clinical trial of a potential Alzheimer’s drug being conducted by Elan

Corporation and Wyeth. Dr. Gilman allegedly provided the portfolio manager with periodic

information concerning the progress of the clinical trial. In particular, Dr. Gilman was selected to

80

The complaint filed by the SEC is available at http://www.sec.gov/litigation/complaints/2010/comp21721.pdf. 81

See DOJ Press Release, Manhattan U.S. Attorney Charges French Doctor for Insider Trading Securities Fraud

(Nov. 2, 2010), available at

http://www.justice.gov/usao/nys/pressreleases/november10/benhamouyvesarrestpr.pdf. 82

See Reuters, Two More Are Sentenced in Insider Trading Cases, NYTimes.com (Dec. 21, 2011), available at:

http://www.nytimes.com/2011/12/22/business/in-crackdown-on-insider-trading-two-more-are-

sentenced.html?pagewanted=print. 83

M. Goldstein and S. Herbst – Bayliss, Doctor-turned-trader paid cash for stock tips, Reuters, (Apr. 13, 2011),

available at:

http://mobile.reuters.com/article/healthNews/idUSTRE73C3PE20110413. 84

The SEC complaint is available at: http://www.sec.gov/litigation/complaints/2012/comp-pr2012-237.pdf. 85

See SEC Press Releases, SEC Charges Hedge Fund Firm CR Intrinsic and Two Others in $276 Million Insider

Trading Scheme Involving Alzheimer's Drug (Nov. 20, 2012), available at:

http://www.sec.gov/news/press/2012/2012-237.htm.

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present the final clinical trial results at a medical conference. The presentation would coincide

with the public announcement of the results by the two pharmaceutical companies. About two

weeks in advance of the public announcement, Dr. Gilman provided the portfolio manager with

the actual results of the clinical trial in advance of the public announcement. In response, the

portfolio manager re-positioned the hedge funds managed by the hedge fund advisory firm and

another investment advisor. The re-positioning allowed the funds to obtain profits and avoid

losses of over $276 million.

Dr. Gilman agreed to pay more than $234,000 in disgorgement and pre-judgment interests to

settle the SEC charges and also entered into a non-prosecution agreement with the DOJ to

resolve the criminal charges.

D. Issues for Consideration

The recent government enforcement activity has implications for relationships among the various

participants in clinical research. The enforcement activity highlights the increasing practice of

physicians and other parties involved in clinical trials with access to confidential information

serving as consultants to the investment community and the legal risk for such parties.

Researchers and research institutions may want to take action to identify and restrict

relationships with the investment community. Researchers and research institutions must also be

ready to respond to enhanced obligations of confidentiality imposed by research sponsors.

1. Researchers

Researchers serving as consultants to the investment community need to be aware of the

distinction between professional and industry insight that can be shared with investors and

confidential information that cannot be shared.

2. Research Institutions

Research institutions may want to implement protective measures to ensure that researchers do

not undertake to provide services to investors that could place the researcher or research

institution at risk. These protective measures can build in part on existing procedures designed

to prevent relationships with research sponsors (such as pharmaceutical and medical device

companies) from creating potential financial conflicts of interest in research. Protective

measures could include:

Educating researchers about insider trading restrictions and their application to researchers;

Requiring researchers to disclose relationships with expert networks and the investment

community;

Reviewing relationships between researchers and the investment community;

Restricting relationships between researchers and the investment community (e.g., for the

duration of a clinical trial);

Reviewing language in consultant agreements between researchers and the investment

community; and

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Communicating confidentiality provisions in clinical trial agreements and obtaining

assurances from researchers that obligations will be met.86

Research Institutions must also be ready to respond to requests from research sponsors for

enhanced confidentiality protections and know what they can reasonably accept.

3. Research Sponsors

For manufacturers and other companies conducting clinical trials as research sponsors, recent

enforcement activity highlights the potential need to enhance protection of the confidential

information available to the broad range of third parties who assist in the conduct of clinical

trials. Research sponsors may take action in response. Such action will affect AMCs and their

affiliated physicians/researchers.

Research sponsors may review procedures to ensure that all third parties with likely access to

clinical trial information during the course of the clinical trial (e.g., scientific advisors,

investigators, clinical sites, independent review board members, data monitoring committee

members, clinical research organizations, biostatisticians) are identified and agreements with

each of those third parties have confidentiality provisions or that third parties are otherwise

put on notice about the need to preserve confidentiality.

Research sponsors may review their standard confidentiality provisions in clinical trial

agreements and consider whether those provisions could be strengthened. For example,

researcher sponsors may want to include: (i) an acknowledgement that the other parties (or

their directors, officers, employees and agents) involved in the conduct of the clinical trial

may be “insiders” who have gained material, nonpublic information about the clinical trial as

a result of that involvement; and (ii) an agreement by the other parties not to engage in

transactions, or advise others to engage in transactions, involving researcher sponsor stock

until the clinical trial results are public. Researcher sponsors may also want to include

specific provisions ensuring that any employees, contractors or other agents used by the third

parties are subject to, and aware of, the particular confidentiality obligations contained in the

agreement.

Researcher sponsors may consider specifically requiring researchers and other third parties

involved in clinical trials to disclose any relationships with the investment community to the

researcher sponsor as part of the contracting process.

Researcher sponsors may seek to ensure that confidentiality obligations are discussed in

investigator meetings.

AMCs will need to be prepared for enhanced confidentiality and disclosure obligations that may

be imposed through agreements with research sponsors.

86

Certain proposed actions are based on recommendations made by Timmerman and Heath in the early JAMA

article. E. Topol and D. Blumenthal, Physicians and the Investment Industry, 293 JAMA at 2657.

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V. CONFLICTS OF INTEREST IN RESEARCH

Clinical research is a fundamental activity for most AMCs. Conflicts of interest, including the

disclosure and management of such conflicts, are a particular concern for clinical research.

Congress, government enforcement agencies, associations, and the public have displayed

concern regarding the possibility that conflicts of interest could affect the decision-making of

researchers. A conflict of interest in clinical research potentially creates an incentive for a

researcher or research institution to conduct the clinical trial without the appropriate objectivity.

The safety of subjects or potential subjects participating in the clinical trial could be

compromised or the results of the clinical trial could be biased. The bias threatens the integrity

of the data generated. To the extent that the data supports approval or clearance of a drug,

device, or biologic, such a product could be made available to the public based on biased

research and therefore without the appropriate support for its safety or efficacy.

Recent regulations issued by HHS and revised guidance issued by the FDA impose enhanced

obligations concerning the disclosure and management of financial conflicts of interest involving

researchers, research institutions, and research sponsors. These enhanced obligations

demonstrate the ongoing concern of federal agencies with conflicts of interest in research. The

regulations and guidance focus on individual conflicts of interest rather than institutional

conflicts of interest. Institutional conflicts of interest therefore remain an issue for debate.

A. PHS Financial Conflicts of Interest

Amended PHS financial conflict of interest regulations took effect on August 24, 2012.87

The

PHS financial conflict of interest regulations seek to promote objectivity in research by

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

or reporting of federally-funded research will be biased by any conflicting financial interest of an

investigator. The regulations generally mandate that research institutions that apply for, or

receive funding from, the PHS: (i) require investigators to disclose certain financial interests; (ii)

take action to manage any financial interests that constitute financial conflicts of interest; and

(iii) report to PHS any financial conflicts of interest.

1. Institutional Responsibilities Generally

The PHS financial conflict of interest regulations establish responsibilities for institutions.88

An

institution must maintain a written policy concerning financial conflicts of interest and make the

policy available on a publicly-accessible website. Investigators must be informed of, and trained

on, the policy. Institutions must ensure that investigators disclose significant financial interests

(which now include interests related to any institutional responsibility and not just interests that

the investigator determines relate to PHS-funded research). When an investigator discloses a

significant financial interest, the institution (rather than the investigator) now determines whether

the interest relates to PHS-funded research, and, if so, whether a financial conflict of interest

exists. A financial conflict of interest exists if a significant financial interest could directly and

87

42 C.F.R. Part 50, Subpart F. 88

42 C.F.R. § 50.604.

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significantly affect the design, conduct, or reporting of PHS-funded research.89

Institutions must

respond to identified financial conflicts of interest by managing the conflicts and reporting the

conflicts to PHS. Institutions must ensure, through a written agreement, that each subrecipient

under a PHS award complies with the institution’s financial conflict of interest policy or, if the

subrecipient is complying instead with the subrecipient’s policy, that the subrecipient’s

disclosures will still be reported by the institution. Institutions must also maintain records of all

investigator disclosures (whether or not a conflict is determined to exist) and certify that the

institution will comply with the regulations.

2. Disclosure of Financial Interests

An institution must require each investigator (which includes any person responsible for the

design, conduct, or reporting of research) to disclose “significant financial interests” held by the

investigator, his or her spouse, or dependent children to the institution if the interest appears

reasonably related to the investigator’s institutional responsibilities.90

A disclosure is required

before the submission of an application for funding and annually during the award period, as

well as within 30 days of discovering or acquiring any new significant financial interest or

acquisition.

A “significant financial interest” is defined as:

any remuneration received from either a publicly traded or non-publicly traded entity within

twelve months prior to the disclosure that, in the aggregate, exceeds $5,000;

any equity interest in a non-publicly traded entity;

income from intellectual property rights and interests (upon receipt of income from the

rights); and

reimbursed or sponsored travel, unless reimbursement or sponsorship is by a government

agency, academic institution, academic teaching hospital, medical center, or research institute

affiliated with an academic institution.91

A “significant financial interest” does not include:

salary, royalties, or other remuneration paid by the institution to a currently employed or

appointed investigator;

an ownership interest held by an investigator in the institution;

income from investment vehicles if the decision-making concerning the investment is not

directly controlled by the investigator; and

income from seminars, lectures, teaching engagements, or service on advisory committees or

review panels sponsored by a government agency, academic institution, academic teaching

hospital, medical center, or research institute affiliated with an academic institution. Id.

89

43 C.F.R. § 50.603. 90

42 C.F.R. § 50.604(e). 91

42 C.F.R. § 50.603.

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3. Institution’s Management of Financial Conflicts of Interest

When financial conflicts of interest are identified, an institution must develop and implement a

management plan prior to expending any PHS funds.92

Potential actions to manage a conflict

identified in the regulations include: (i) public disclosure of the conflict; (ii) direct disclosure to

research participants, if involved; (iii) appointment of an independent monitor capable of

protecting the research study against bias from the conflict; (iv) modification of the research

plan; (v) change of personnel or personnel responsibilities, or disqualification of personnel; (vi)

the investigator’s reduction or sale of the financial interest; and (vii) severance of the

relationships that cause the conflict. The institution is required to monitor investigator

compliance with management plans throughout the term of the PHS-funded research project.

The regulations specifically address disclosures made or new information obtained during the

course of research. Any disclosure made by an investigator who is new to an ongoing PHS-

funded research project or a new disclosure made by an existing investigator must be reviewed

and addressed by the institution within 60 days. Any significant financial interest not timely

disclosed and reviewed must, within 60 days, be reviewed by the institution and, if a conflict is

found, a management plan will be implemented. For any such conflict of interest, the institution

must complete and document a retrospective review of the investigator’s activities. If bias is

found, the institution must notify the PHS awarding component (e.g., the National Cancer

Institute) and submit a mitigation report as well as annual financial conflict of interest reports

thereafter.

Prior to expending any PHS funds awarded for a research project, an institution must make

publicly available the name and title of any senior/key personnel who disclosed a significant

financial interest that the institution has deemed a financial conflict of interest. Information on

the nature of the significant financial interest, the entity in which the interest is held, and its

dollar value (dollar ranges are permissible) must also be included. If this information is posted

on a website, the information must be updated annually.

4. Reporting Financial Conflicts of Interest

An institution must provide the PHS awarding component with a report on any financial conflicts

of interest prior to expending any PHS funds awarded for a research project, unless the conflict

has been remedied beforehand.93

If an institution has adopted a more expansive definition of

financial conflicts of interest than required by the regulations, the institution must submit reports

consistent with that definition. Required information in the report includes the name of the

investigator with the conflict, the entity with which there is a conflict, the nature and value of the

financial interest, a description of how the financial interest relates to the PHS-funded research

and the basis for the institution’s determination that there is a conflict, and a description of the

management plan. This report must be updated and provided annually.

92

42 C.F.R. § 50.605(a). 93

42 C.F.R.§ 50.605(b).

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5. Enforcement

An institution must notify the specific PHS awarding component of any corrective action taken

to address apparent bias in the design, conduct, or reporting of the PHS-funded research created

by non-compliance with disclosure requirements or a management plan.94

After considering the

situation, the PHS awarding component may take appropriate action or refer the matter to the

institution and provide directions for further action. Suspension of PHS funding is possible.

B. FDA Financial Disclosure

The FDA regulates financial conflicts of interest in clinical research subject to its jurisdiction to

ensure that bias does not exist in research submitted to the FDA in support of a marketing

application or a drug, device, or biologic product.95

The FDA does so through FDA financial

disclosure requirements.

FDA financial disclosure requirements apply to any party who submits clinical data in support of

a marketing application to the FDA (i.e., the sponsor).96

The sponsor must obtain information

from investigators regarding financial interests and disclose that information to the FDA.

Investigators include principal investigators or sub-investigators who are (or will be) listed or

identified in the application and directly involved in the treatment or evaluation of research

subjects (and their respective spouses and dependent children).

Financial interests subject to disclosure requirements include:

Any financial arrangement if the value of the compensation to the investigator for conducting

the study could be influenced by the outcome of the study (i.e., compensation that could be

higher for a favorable outcome than for an unfavorable outcome, in the form of an equity

interest in the sponsor or in the form of compensation tied to sales of the product, such as a

royalty interest);

Any significant payments (i.e., greater than $25,000) from the sponsor of the covered study,

such as a grant to fund ongoing research, compensation in the form of equipment, retainer for

ongoing consultation, or honoraria;

Any proprietary interest (i.e., any property or other financial interest in the product including,

but not limited to, a patent, trademark, copyright or licensing agreement) in the tested

product; and

Any significant equity interest (i.e., any ownership interest, stock options, or other financial

interest in a non-publicly traded corporation, or any equity interest in a publicly traded

corporation that exceeds $50,000) in the sponsor of the covered study.97

94

42 C.F.R. § 50.606. 95

21 C.F.R. Part 54. 96

21 C.F.R. § 54.2. 97

21 C.F.R. §§ 54.2 and 54.4.

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Disclosures must cover the duration of the study and one year after. Sponsors must exercise

“due diligence” in seeking to obtain the financial disclosures.98

Recent FDA guidance contains

an expanded explanation of “due diligence” that identifies the specific and extensive steps a

sponsor is expected to perform when trying to locate an investigator to obtain disclosure

information.99

These steps include, for example, making at least two telephone calls and

documenting such activity, as well as following up in writing via certified letters. If sponsors

cannot obtain the information despite these efforts, sponsors must so indicate on reports to the

FDA.100

Sponsors submit, with the marketing application, one of the following forms for each

investigator: (i) a completed FDA Form 3454 certifying that none of the applicable financial

interests exist, or (ii) a completed Form 3455 disclosing the nature of those interests. Form 3455

requires a detailed disclosure of the financial interest and steps taken by the sponsor to manage

the financial interest.

Upon receipt of a Form 3455, the FDA considers the size and the nature of the disclosed

interests, the design and purpose of the study, and whether appropriate steps have been taken in

the design, conduct, reporting, and analysis of the study to minimize any potential bias. The FDA

considers certain types of financial interests more concerning than others; for example,

arrangements in which an investigator’s compensation is dependent on the outcome of the study

are the most potentially problematic. 101

If the FDA determines that the financial interests of an

investigator raise concerns about the reliability of data generated by that investigator, the FDA is

authorized to take various actions, including auditing the data in question, requesting further

analysis of the data, requesting independent analysis of the data, or refusing to accept the data in

support of the application.102

Recent FDA guidance suggests that the FDA is poised to take a more rigorous stance on

compliance with financial disclosure requirements. Research sponsors have responded to the

draft guidance by imposing enhanced requirements on clinical sites and investigators to provide

the required disclosure.

C. Institutional Conflicts of Interest

No federal law requires research institutions, such as AMCs, to adopt institutional conflict of

interest policies. Over the past decade, there has nonetheless been widespread and ongoing

discussion among AMCs and others concerning the need to address institutional conflicts of

interest in research. Examples of such a discussion include:

The Association of American Universities (AAU) issued a Report on Individual and

Institutional Conflict of Interest (2001) that found that institutional conflicts of interest

98

Id. 99

See FDA, Guidance for Clinical Investigators, Industry, and FDA Staff: Financial Disclosure by Clinical

Investigators (May 2011). 100

Id. 101

Id. 102

21C.F.R § 54.5.

-23-

(including those of the institution and senior officials) should always be disclosed and then

either managed or prohibited.

The AAMC issued a report on Protecting Subjects, Preserving Trust, Promoting Progress II:

Principles and Recommendations for Oversight of an Institution’s Financial Interests in

Human Subjects (2002) that called for segregation of technology transfer from human

subjects research.

The AAU and AAMC issued a report Protecting Patients, Preserving Integrity, Advancing

Health: Accelerating the Implementation of COI Policies in Human Subjects Research

(2008) that outlined key issues to consider in developing an institutional conflicts of interest

policy and provided a model policy.

The Institute of Medicine (IOM) issued a report Conflict of Interest in Medical Research,

Education and Practice (2009) that called for AMCs to establish institutional conflicts of

interest policies that require disclosure and management of financial relationships with

industry.

The OIG issued a report Institutional Conflicts of Interest at NIH Grantees (2011) that

examined the adoption by NIH grantees of institutional financial conflicts of interest policies

and recommended that the NIH address institutional financial conflicts of interest and

encourage NIH grantees to adopt such policies.

Despite widespread discussion, there has not been widespread adoption of institutional conflicts

of interest policies by AMCs (as supported by the findings in the OIG report). In connection

with the revisions to the PHS financial conflicts of interest regulations, HHS had requested

comments on whether the agency should address institutional conflicts of interest, but HHS

ultimately concluded that more consideration was necessary before promulgating regulations on

this issue.103

One reason for an AMC to adopt an institutional financial conflict of interest policy is

compliance with accreditation standards for human research protection programs established by

Association for the Accreditation of Human Research Protection Programs (AAHRPP).

AAHRPP standards generally require the adoption of an institutional financial conflict of interest

policy.104

Specifically, AAHRPP requires that an accredited organization have policies and

procedures that: (1) provide a definition of organizational financial conflict of interest that

includes licensing, technology transfer, patents, investments of the organization, gifts to the

organization when the donor has an interest in the research, financial interests of senior

administrators, and other financial interests; (2) describe the process to identify or disclose

financial conflicts of interest of the organization, including policies that describe the committee

or individual(s) and process that the organization uses to evaluate and manage organizational

financial conflict of interest and incorporate examples of management strategies.105

Separate

policies addressing financial conflict of interest pertaining to technology transfer and patents or

the identification and management of financial conflicts of interest of senior administrative

officials are not required, if these topics are covered in other policies (such as the organization’s

103

76 Fed. Reg., at 53,278. 104

AAHRPP Accreditation Standards, Element I.6.A. 105

AAHRPP, Evaluation Instrument for Accreditation, 40 (Jan. 2013).

-24-

individual financial conflicts of interest policy).106

Within these requirements, organizations

have discretion in developing the policy.

AMCs that seek to develop an institutional financial conflict of interest policy for research

generally include certain fundamental components. AMC approaches to such policies have often

been based on the key issues identified and model policy developed by the AU/AAMC in its

2008 report Protecting Patients, Preserving Integrity, Advancing Health: Accelerating the

Implementation of COI Policies in Human Subjects Research (2008). A chart attached as

Exhibit C identifies common components of AMC institutional financial conflict of interest

policies and summarizes approaches both recommended by AU/AAMC and adopted by AMCs.

106

Id.

Ropes & Gray LLP

January 18, 2013

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EXHIBIT A

ACADEMIC MEDICAL CENTER POLICIES:

Interactions with Pharmaceutical and Medical Device Manufacturers

The chart below summarizes current approaches taken by various academic medical centers (AMCs) to regulating interactions between AMCs, their

representatives or their affiliated physician faculty.1 Those approaches are compared to recommended approaches set forth in the Association of American

Medical Colleges (AAMC), Industry Funding of Medical Education: Report of an AAMC Task Force (2008). The summary is not comprehensive and merely

provides an overview.

ACTIVITY AAMC RECOMMENDATIONS SAMPLE APPROACHES

Personal Gifts AMCs should prohibit the acceptance of any

gifts from industry by physicians and other

faculty, staff, students, and trainees of academic

medical centers, whether on-site or off-site.

Personal gifts from industry are generally prohibited.

Personal gifts do not include: certain meals (at or during

continuing medical education or other educational events),

educational or patient care items, items provided as part of a

research project, certain prizes and awards from industry-

supported organizations and unrestricted educational grants paid

to clinical departments.

Samples The distribution of medications in AMCs,

including samples (if permitted), should be

centrally managed in a manner that ensures

timely patient access to optimal therapeutics

throughout the health care system.

If central management is not thought to be

Permissibility of receiving drug samples varies widely:

prohibited; permitted only through centralized distribution

mechanism; permitted only if part of an approved policy;

permitted for use with low-income populations if quantity

sufficient for substantial or complete course of therapy; or

permitted if caution exercised in distributing non-formulary

1 A number of AMC policies publicly available through internet searches were reviewed in connection with the preparation of the chart, but the chart relies in

particular on the following policies as publicly posted: (1) Partners HealthCare System, Inc. policies: “Partners Policy for Interactions with Industry and Other

Outside Entities” and “Partners Policy on Interactions with Pharmaceutical and Medical Device Companies;” (2) “Policy and Guidelines for Interactions

between the Stanford University School of Medicine, the Stanford Hospital and Clinics, and Lucile Packard Children’s Hospital with the Pharmaceutical,

Biotech, Medical Device, and Hospital and Research Equipment and Supplies Industries;” (3) UMass Memorial Medical Center Policy # 1143: “Policy on

Vendor Relationships;” (4) University of Pittsburgh Medical Center policy: “Policy on Conflicts of Interest and Interactions between Representatives of Certain

Industries and Faculty, Staff and Students of the Schools of the Health Sciences and Personnel Employed by UPMC at all Domestic Locations” and

announcements on the UPMC eSample Center; (5) Yale Medical Group policy: “Policy on Interactions between Clinical Personnel of the Yale Medical Group

and Industry;” (6) University of California policy: “Health Care Vendor Policy;” (7) Boston University School of Medicine policy: “Policy for Interactions with

Industry by Faculty/Clinicians at the Boston University School of Medicine;” and (8) Johns Hopkins policy: “Johns Hopkins Medicine Policy on Interaction with

Industry.” Note that the relevant AMCs were not contacted to determine whether the policies remain in effect as posted/reviewed.

-26-

ACTIVITY AAMC RECOMMENDATIONS SAMPLE APPROACHES

feasible, or would interfere with patient access

to optimal therapeutics, AMCs should carefully

consider whether or not there are alternative

ways to manage pharmaceutical sample

distribution that do not carry the risks to

professionalism with which current practices are

associated.

samples.

Limited treatment of equipment/supply samples. Supplies or

equipment must be provided to AMC and limited to amount

necessary for education/evaluation.

Site Access Pharmaceutical

To protect patients, patient care areas, and work

schedules, access by pharmaceutical

representatives to individual physicians should

be restricted to nonpatient care areas and

nonpublic areas and should take place only by

appointment or invitation of the physician.

Involvement of students and trainees in such

individual meetings should occur only for

educational purposes and only under the

supervision of a faculty member.

AMCs should develop mechanisms whereby

industry representatives who wish to provide

educational information on their products may

do so by invitation in faculty-supervised

structured group settings that provide the

opportunity for interaction and critical

evaluation. Highly trained industry

representatives with M.D., Ph.D., or Pharm.D.

degrees would be best suited for transmitting

such scientific information in these settings.

Medical Device

Access by device manufacturer representatives

to patient care areas should be permitted by

AMCs only when the representatives are

appropriately credentialed by the center and

should take place only by appointment or

Access by industry representatives to AMC facilities is generally

restricted.

Access is prohibited unless: vendor registers, vendor is invited by

an AMC representative to attend a scheduled appointment, the

meeting is held in an area where operations are not disrupted, and

vendor wears appropriate identification.

Additional restrictions may apply if representatives (generally

medical device representatives) will access patient care areas:

patient notice/consent and confidentiality agreement from

representative/vendor, presence of AMC personnel, purpose

limited to providing needed guidance or training or

supplies/equipment, and no direct patient care activities.

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ACTIVITY AAMC RECOMMENDATIONS SAMPLE APPROACHES

invitation of the physician.

Representatives should not be allowed to be

present during any patient care interaction unless

there has been prior disclosure to and consent by

the patient, and then only to provide in-service

training or assistance on devices and equipment.

Student interaction with representatives should

occur only for educational purposes under

faculty supervision.

AMC Continuing Medical

Education AMCs offering CME programs should develop

audit mechanisms to assure compliance with

ACCME standards, including those with respect

to content validation and meals.

AMCs should establish a central CME office

through which all requests for industry support

and receipt of funds for CME activity are

coordinated and overseen.

To the extent that educational programs for

physicians are supported by any commercial

entity, including pharmaceutical, device,

equipment, and service entities, the programs

should be offered only by ACCME-accredited

providers according to ACCME standards.

All on-site industry-sponsored CME events must comply with

the Accreditation Council on Continuing Medical Education

(ACCME) Standards for Commercial Support. (Standards

require independence of educational activity including disclosure

of industry support and control by CME provider over faculty,

attendees and content.)

Specific requirements (with significant variation): written

agreement, funding provided to central/administrative office or

separate foundation, funding not restricted to specific

program/physician, single industry entity does not provide all or

significant percentage of support, information on attendees not

provided to industry sponsor.

Other AMC Educational

Events Not specifically addressed. Requirements for on-site industry-sponsored CME events

(including compliance with ACCME requirements at non-

ACCME events) are generally applied.

Additional limitations may apply to ensure independent

educational focus and no marketing influence by industry

sponsor.

Industry-Sponsored

Programs/Speakers With the exception of settings in which

academic investigators are presenting results of

their industry-sponsored studies to peers and

Participation in “speakers bureaus” is generally prohibited.

Policies otherwise address attendance/participation at off-site

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ACTIVITY AAMC RECOMMENDATIONS SAMPLE APPROACHES

Bureaus there is opportunity for critical exchange, AMCs

should strongly discourage participation by their

faculty in industry-sponsored speakers bureaus.

If AMCs allow participation of their faculty and

staff in industry-sponsored, FDA-regulated

programs, AMCs should develop standards that

define appropriate a acceptable involvement.

o AMCs should require full transparency and

disclosure by their personnel to the centers

and when participating in such programs; and

o AMCs should require that payments to

academic personnel be only at fair market

value.

AMCs should prohibit their faculty,

students, and trainees from:

Attending non-ACCME-accredited

industry events billed as continuing

medical education;

Accepting payment for attendance at

industry-sponsored meetings; and

Accepting personal gifts from

industry at such events.

events generally:

o Attendance. Attendance at events is generally permitted with

restrictions: events must have an educational focus; no

compensation, reimbursement of expenses or gifts provided in

connection with attendance; financial support of industry is

disclosed; meals provided are modest; event in a setting and

location conducive to education; speakers control content;

individuals not required to accept advice or services; and use

of AMC name limited to identifying individual’s position.

o Speaker. Service as speaker for off-site events permitted with

restrictions: written agreement exists; sponsor’s financial

support is disclosed; speaker determines content of slides

without sponsor influence; presentation promotes

educational/scientific objectives and is not promotional;

personal financial interests are disclosed; speaker states that

views are personal and not views of AMC;

compensation/reimbursement of expenses is reasonable;

frequency of speaking engagements is not excessive; and

arrangements disclosed to/approved by AMC.

Meals AMCs should prohibit industry-supplied food

and meals on-site with the exception of food

provided in connection with ACCME-accredited

programming and in compliance with ACCME

guidelines.

Policies should make clear that the same

standard of behavior should be met off-site.

Meals supplied by industry on AMC premises or at AMC-

sponsored events are generally prohibited.

Exceptions include: modest meals provided at industry-

sponsored events off AMC premises if consistent with

educational or scientific purpose of the event, meals at accredited

CME programs, meals at scientific or professional society

meeting if open to all attendees, and meals covered as expenses

in consulting arrangement or permitted training/inspection of

devices.

-29-

ACTIVITY AAMC RECOMMENDATIONS SAMPLE APPROACHES

Educational Funding AMCs should establish and implement policies

requiring that:

o All scholarships or other educational funds

from industry must be given centrally to the

administration of the academic medical

center;

o No quid pro quo be involved in any way;

and

o The evaluation and selection of recipients of

such funds must be the sole responsibility of

the academic medical center or of a

nonprofit-granting entity, with no

involvement by the donor industry.

Educational funding from industry permitted with restrictions:

written agreement, funds provided to AMC/AMC

component/separate foundation, AMC selection of

activities/individuals to receive the funding, no requirements

attached to receipt of funding, and no actual or perceived conflict

of interest.

Exceptions or streamlined process may exist for national and/or

regional merit-based fellowships.

Travel Expenses AMCs should prohibit their physicians, trainees,

and students from directly accepting travel funds

from industry, other than for legitimate

reimbursement or contractual services.

Travel expenses permitted in connection with consulting

arrangements and other permissible arrangements (e.g., certain

trips to view industry product).

Publications/Ghostwriting AMCs should prohibit physicians, trainees, and

students from allowing their professional

presentations of any kind, oral or written, to be

ghostwritten by any party, industry or otherwise.

Personnel may not engage in ghostwriting.

Personnel may not be paid for name on professional paper,

article or speech unless meaningful input.

Industry affiliations, personal financial interests and industry

support must be disclosed.

Agreements addressing authorship/editing of publications must

be reviewed/approved.

Procurement of Supplies AMCs should require any personnel who has a

financial interest (as defined by the conflict of

interest policy or applicable purchasing conflict

of interest policy) in any particular manufacturer

of pharmaceuticals, devices, or equipment, or

any provider of services, to disclose such

interests according to institutional policies and

to recuse themselves from involvement in

Individuals involved in procurement decisions must disclose or

AMC administration must determine financial interests of

individuals (or immediate family members) in vendors. If

financial interest exists, then different approaches taken:

individual must not participate in procurement decision (with

limited exception); or the transaction must be reviewed to

determine if fair and reasonable.

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ACTIVITY AAMC RECOMMENDATIONS SAMPLE APPROACHES

purchasing decisions relevant to the conflicting

interests.

If an individual’s expertise is necessary in

evaluating any product, that individual’s

financial ties to any manufacturer of that or any

related product must be disclosed to those

charged with the responsibility or making the

decision.

Research Grants Not specifically addressed. Limited treatment. Support permitted for independent and

objectively valid research (not marketing research).

Donations/Grants/

Fundraising Generally Not specifically addressed. Limited treatment. Funds may be solicited from industry if

fundraising conducted by fundraising arm, restricted AMC

physician involvement, no solicitations during contracting

process, and notice to vendors that donations do not implicate

purchasing decisions.

Industry may provide donation/grant to AMC in lieu of support

to individuals. Donation/grant must be unrestricted or AMC

have control over use/distribution.

On-Site Vendor Fairs Not specifically addressed. Limited and diverse treatment of vendor fairs: prior approval

required and promotional materials must be separate from

educational activity; display must be part of AMC organized

product symposia with directly related products; fair held

separate from clinical facilities and no gifts distributed to

attendees.

Disclosure of Industry

Relationships Not specifically addressed. Disclosure required for various audiences and/or activities:

disclosure of conflicts of interest/commitment to AMC;

disclosure to publications consistent with publication

requirements (or International Committee of Medical Journal

Editors if no specific publication requirements); disclosure to

audience for presentations (and consistent with ACCME or

professional society requirements); disclosure to patients;

disclosure to students; disclosure to the public.

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ACTIVITY AAMC RECOMMENDATIONS SAMPLE APPROACHES

Consulting Arrangements Not specifically addressed (other than service as

speaker).

Consulting arrangements are permitted if: written agreement

specifying services and compensation, fair market value

compensation (not taking into account referrals), arrangement is

appropriately disclosed (e.g., conflict of interest disclosure

statement), activities performed outside of work commitments

and don’t interfere with same/consistent with policies on outside

activities, no use of AMC resources, only reasonable and

necessary travel expenses are covered, and no use of AMC name

(other than to identify consultant position).

Royalties not paid to AMC on products sold to AMC (unless

approval to donate royalties to third party charity).

No compensation permitted for attendance at industry events or

listening to presentation by industry representative.

Ropes & Gray LLP

January 18, 2013

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EXHIBIT B

COMPARISON OF VOLUNTARY CODES:

Interactions between Healthcare Professionals and Health-Related Industries

This chart compares the provisions of two major industry codes of ethics: the Pharmaceutical Research and Manufacturers of America (PhRMA) Code on

Interactions with Healthcare Professionals and the Advanced Medical Technology Association (AdvaMed) Code of Ethics on Interactions with Health Care

Professionals.

PhRMA Code on Interactions with Healthcare Professionals AdvaMed Code of Ethics on Interactions with Health Care

Professionals

Scope Interactions between research-based pharmaceutical and

biotechnology companies and healthcare professionals with

respect to marketed products and related pre-launch activities.

Interactions between medical technology companies and health

care professionals (defined broadly to include all individuals and

entities involved in the provision of health care services/items to

patients that purchase, lease, recommend or use medical

technology).

General Principles Member relationships with healthcare professionals are

intended to benefit patients and to enhance the practice of

medicine. Interactions should be focused on informing

healthcare professionals about products, providing scientific

and educational information, and supporting medical

education.

Members should not provide or offer grants, scholarships,

subsidies, support, consulting contracts, or educational or

practice related items to a healthcare professional in exchange

for prescribing products or for a commitment to continue

prescribing products.

Member interactions should promote the advancement of

technology, enhance the safe and effective use of medical

technology, encourage research and education, and foster

charitable donations and giving.

Product Training

and Education Members may present scientific and clinical information to

healthcare professionals during their working day, including

mealtimes.

Members may provide modest meals in connection with the

educational presentation or discussion.

See Meals.

Setting should be conducive to the effective transmission of

information (and may include the healthcare professional’s

location).

Hands-on training should be at training facilities, medical

institutions, laboratories, or other appropriate facilities.

Training staff should have proper qualifications and

expertise.

Members may provide modest meals and refreshments in

connection with the programs if modest in value and

-33-

PhRMA Code on Interactions with Healthcare Professionals AdvaMed Code of Ethics on Interactions with Health Care

Professionals

subordinate in time and focus to the program.

Members may reimburse health care professionals for

reasonable travel and modest lodging costs if objective

reasons support the need for out-of-town travel.

Members should not reimburse for health care professionals’

guests or any person who does not have a bona fide

professional interest in the meeting.

See Meals.

Meals Members may offer occasional meals as a business courtesy in

connection with informational presentations or discussions to

the healthcare professionals and staff attending presentations

if: (1) presentations provide scientific or educational value;

and (2) the meals are modest as judged by local standards, are

not part of an entertainment or recreational event, and are

provided in a manner conducive to informational

communication.

Meals offered in connection with informational presentations

made by field sales representatives or their immediate

managers should be limited to in-office or in-hospital settings.

Members should not include a healthcare professional’s

spouse or guest.

Members should not provide take-out meals or meals to be

eaten without a company representative present.

Members may offer modest and occasional meals as a

business courtesy in connection with informational

presentations or discussions to healthcare professionals.

Meals should be incidental to the informational

presentation/discussion and provided in a manner conducive

to the presentation of such information. They should not be

provided as part of an entertainment or recreational event.

Meals should be provided in a setting conducive to bona fide

scientific, educational, or business discussions. Meals may

occur at the healthcare professional’s place of business.

Meals may occur at other settings if: (1) the place of

business is a patient care setting that is not available for, or

conducive to, such discussions; or (2) it is impractical or

inappropriate to provide meals at the place of business (e.g.,

medical technology cannot easily be transported).

Members should provide a meal only to health care

professionals who actually attend the meeting.

Members should not include a healthcare professional’s

spouse or guest or any other person who does not have a

bona fide professional interest in the information being

shared at the meeting.

Members should not provide take-out meals or meals to be

eaten without a company representative present.

Continuing Medical Members should provide financial support for continuing See Third Party Educational or Professional Meetings.

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PhRMA Code on Interactions with Healthcare Professionals AdvaMed Code of Ethics on Interactions with Health Care

Professionals

Education medical education (CME) only to the CME provider, which

can use the money to reduce the overall CME registration fee

for all participants.

Members should respect the independent judgment of the

CME provider and should follow standards for commercial

support established by the Accreditation Council for

Continuing Medical Education (ACCME) or other entity that

may accredit the CME.

Responsibility for and control over the selection of content,

faculty, educational methods, materials, and venue belongs to

the organizers of the conferences or meetings in accordance

with their guidelines. Members should not provide any advice

or guidance to the CME provider, even if asked by the

provider, regarding the content or faculty for a particular CME

program funded by the member.

Financial support should not be offered for the costs of travel,

lodging, or other personal expenses of non-faculty healthcare

professionals attending CME, either directly to the individuals

participating in the event or indirectly to the event’s sponsor

(except as permitted for scholarships). Funding should not be

offered to compensate for the time spent by healthcare

professionals participating in the CME event.

Members should not provide meals directly at CME events,

except that a CME provider at its own discretion may apply

the financial support provided by a member for a CME event

to provide meals for all participants.

Members should: (1) separate CME grant-making functions

from sales and marketing departments; and (2) develop

objective criteria for making CME grant decisions to ensure

that the program funded by the company is a bona fide

educational program and that the financial support is not an

inducement to prescribe or recommend a particular medicine

or course of treatment.

Third Party

Educational or A conference or meeting is a gathering, held at an appropriate

location, and primarily dedicated, in both time and effort, to

Members may provide educational grants to conference

sponsors to reduce legitimate expenses for bona fide

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PhRMA Code on Interactions with Healthcare Professionals AdvaMed Code of Ethics on Interactions with Health Care

Professionals

Professional

Meetings

promoting objective scientific and educational activities and

discourse (one or more educational presentation(s) should be

the highlight of the gathering). The main incentive for

bringing attendees together is to further their knowledge on

the topic(s) being presented.

Members may provide financial support for third-party

scientific and educational conferences or professional

meetings. Support should be given directly to conference

sponsor.

Financial support should not be offered for the costs of travel,

lodging, or other personal expenses of non-faculty healthcare

professionals attending the conference, either directly to the

individuals participating in the event or indirectly to the

event’s sponsor (except as permitted for scholarships).

Funding should not be offered to compensate for the time

spent by healthcare professionals participating in the

conference.

independent, educational, scientific and policymaking

conferences. The gathering should be primarily dedicated to

promoting objective scientific and educational activities and

discourse and sponsored by an organization with a genuine

educational purpose or function.

Grants should comply with applicable standards of

conference sponsor and any accrediting organization.

Members may provide funding to conference sponsor to

support meals and refreshments.

Members may provide modest meals or receptions directly

to attendees if subordinate in time to and clearly separate

from educational activities. Meals must be provided to all

attendees. Meals and receptions should be provided in a

manner consistent with applicable standards of conference

sponsor and any accrediting organization

Members may provide funding to sponsors for reasonable

honoraria, travel, lodging, and modest meals for conference

faculty.

Members may purchase advertisements and lease booth

space for company displays at conferences.

Scholarships Members may offer financial assistance for scholarships or other

educational funds to permit medical students, residents, fellows,

and other healthcare professionals in training to attend carefully

selected educational conferences so long as the selection of

individuals who will receive the funds is made by the academic or

training institution. “Carefully selected educational conferences”

are generally defined as the major educational, scientific, or

policymaking meetings of national, regional, or specialty medical

associations.

Members may offer financial assistance for scholarships or other

educational funds to permit medical students, residents, fellows,

and other healthcare professionals in training to attend

conferences primarily dedicated to promoting objective scientific

and educational activities and discourse so long as the selection

of individuals who will receive the funds is made by the

academic or training institution.

See Third Party Educational or Professional Meetings and Grants

and Charitable Donations, which address educational grants.

Sales and

Promotional

Meetings

Not addressed. (Principles on Meals should be applied.) Members may meet with health care professionals to discuss

product features, contract negotiations, and sales terms.

Members may provide occasional modest meals and

receptions for meeting attendees in connection with the

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PhRMA Code on Interactions with Healthcare Professionals AdvaMed Code of Ethics on Interactions with Health Care

Professionals

meeting.

Members may reimburse health care professionals for

reasonable, necessary travel costs (e.g., for plant tours or

demonstrations of non-portable equipment).

Members should not reimburse health care professionals’

guests or any person who does not have a bona fide

professional interest in the meeting.

See Meals.

Consultants Members may offer reasonable, fair market value

compensation to consultants providing genuine services and

may reimburse consultants for reasonable travel, lodging, and

meal expenses.

Token consulting arrangements do not justify compensation.

Factors that support the existence of a bona fide consulting

arrangement:

written contract specifies services and basis for

payment;

a legitimate need for services has been clearly

identified in advance of requesting services and

entering into arrangements with consultants;

criteria for selecting consultants are directly related

to the identified purpose and the persons responsible

for selecting the consultants have the expertise

necessary to evaluate whether the particular

healthcare professionals meet those criteria;

number of healthcare professionals retained is not

greater than the number reasonably necessary to

achieve the identified purpose;

member maintains records concerning and makes

appropriate use of the services provided by

Members may offer fair market value compensation to

consultants providing bona fide consulting services if the

services are intended to fulfill a legitimate need and do not

constitute an unlawful inducement.

Consulting arrangements should comply with the following

standards:

written agreement describes all services to be

provided (and written protocol exists if clinical

research services provided);

a legitimate need for the services is identified in

advance and documented;

the selection of a consultant is made on the basis of

the consultant’s qualifications and expertise to meet

the defined need;

the compensation is consistent with fair market

value in an arm’s length transaction for the services

provided and should not be based on the volume or

value of the consultant’s past, present or anticipated

business;

payment is made only for documented, reasonable

and actual expenses incurred by a consultant that

are necessary to carry out the consulting

arrangement, such as costs for travel, modest meals,

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PhRMA Code on Interactions with Healthcare Professionals AdvaMed Code of Ethics on Interactions with Health Care

Professionals

consultants;

venue and circumstances of any meeting with

consultants are conducive to the consulting services

and activities related to the services are the primary

focus of the meeting (i.e., resorts are not appropriate

venues).

Members should not provide recreational or entertainment

events in conjunction with these meetings.

Members should not pay honoraria, travel or lodging expenses

to non-faculty and non-consultant attendees at member-

sponsored meetings, including attendees who participate in

interactive sessions.

and lodging;

venue for meetings with consultants should be

appropriate to the subject matter of the consultation

and conducive to the effective exchange of

information;

meals and refreshments provided in conjunction

with a consultant meeting should be modest in

value and should be subordinate in time and focus

to the primary purpose of the meeting;

recreation or entertainment should not be provided

in conjunction with these meetings; and

sales personnel may provide input about the

suitability of a proposed consultant, but sales

personnel should not control or unduly influence

the decision to engage a particular healthcare

professional.

Member should enter into royalty arrangements only if

healthcare professional is expected to make or has made a

novel, significant, or innovative contribution to the

development of a product, process, or method at issue. Any

substantial contribution of intellectual property should be

appropriately documented. Calculation of royalties payable

should be based on factors that preserve the objectivity of

medical decision-making and avoid the potential for

improper influence (e.g., royalty agreement should not

require the consultant to purchase, order or recommend any

member product or to market the product upon

commercialization, and may exclude from the calculation of

royalties the number of units purchased, used, or ordered by

the consultant or associates).

Product Sample Members may provide product samples for patient use in

accordance with the Prescription Drug Marketing Act. Members may provide reasonable quantities of products at

no charge for evaluation or demonstration purposes.

Evaluation. Members may provide consumable products

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(e.g., disposables) and multiple use/capital products to allow

healthcare professionals to assess the appropriate use and

functionality of the product and determine whether and when

to use, order, purchase, or recommend the product in the

future. Evaluation products are typically expected to be used

in patient care. The number of consumable products

provided at no charge should not exceed the amount

reasonably necessary for the adequate evaluation of the

product under the circumstances. Multiple use products

provided for evaluation purposes should be furnished under

a written agreement only for a period of time that is

reasonable under the circumstances to allow an adequate

evaluation. Members should have a process in place for

promptly retrieving such multiple use products at the

conclusion of the evaluation period unless the healthcare

professional purchases or leases the product.

Demonstration. Demonstration products are typically: (1)

unsterilized single use products or mock-ups of such

products that are used for healthcare professional and patient

awareness, education, and training; and (2) not intended to

be used in patient care. Demonstration products also are

typically identified as not intended for patient use.

Members should provide healthcare professionals with

documentation and disclosure regarding the no-charge status

of evaluation and demonstration products.

Gifts Members may, if permitted by law, occasionally offer items

designed primarily for the education of patients or healthcare

professionals. Gifts should not have substantial value (i.e., the

value should be $100 or less).

Members should not provide items capable of personal use by

healthcare professionals.

Members may not offer non-educational gifts even if gifts are

practice-related items of minimal value.

Members should not offer gifts in the form of cash or cash

Members may offer occasional gifts to health care

professionals if they benefit patients or serve a genuine

educational function. Gifts should have a fair market value

of less than $100 unless they are medical textbooks or

anatomical models used for educational purposes.

Members should not provide items capable of personal use

by healthcare professionals.

Members may not provide any type of non-educational

branded promotional items of minimal value even if the

items are of minimal value and are related to the health care

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PhRMA Code on Interactions with Healthcare Professionals AdvaMed Code of Ethics on Interactions with Health Care

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equivalents.

Members should not offer gifts intended for the personal

benefit of healthcare professionals.

professional’s work.

Members should not offer gifts such as cookies, wine,

flowers, chocolates, gift baskets, holiday gifts, cash or cash

equivalents.

Entertainment and

Recreation Members should not provide any entertainment or recreational

items.

Such entertainment or recreational items should not be

offered, regardless of (1) the value of the items; (2) whether

the company engages the healthcare professional as a speaker

or consultant; or (3) whether the entertainment or recreation is

secondary to an educational purpose.

Members should not provide or pay for any entertainment or

recreational event/activity.

Such entertainment or recreational items should not be

offered, regardless of (1) the value of the items; (2) whether

the company engages the healthcare professional as a

speaker or consultant; or (3) whether the entertainment or

recreation is secondary to an educational purpose.

Provision of

Reimbursement and

Other Economic

Information

Not addressed. Members may provide health care professionals with

accurate and objective coverage, reimbursement, and health

economic information.

Members may collaborate with healthcare professionals,

patients and organizations representing their interests, to

achieve government and commercial payor coverage

decisions, guidelines, policies, and adequate reimbursement

levels that allow patients to access its products.

Members may not interfere with a healthcare professional’s

independent clinical decision-making or provide coverage,

reimbursement and health economics support as an unlawful

inducement (e.g., free services that eliminate an overhead or

other expense that a healthcare professional would otherwise

of business prudence or necessity have incurred as part of its

business operations).

Members may not suggest mechanisms for billing for

services that are not medically necessary, or for engaging in

fraudulent practices to achieve inappropriate payment.

Grants and

Charitable

Donations

Not addressed, except to state that members may not offer grants in

exchange for prescribing products. (Principles on Third Party

Educational Conferences and Continuing Medical Education may

apply to certain grants.)

General

Members may provide research and educational grants and

charitable donations if not provided as an unlawful

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PhRMA Code on Interactions with Healthcare Professionals AdvaMed Code of Ethics on Interactions with Health Care

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inducement.

Members should: (1) adopt objective criteria for providing

grants and donations that do not take into account the

volume or value of business; (2) implement appropriate

procedures to ensure that grants and donations are not used

as an unlawful inducement; and (3) ensure that all such

grants and donations are appropriately documented. Sales

personnel may provide input about the suitability of a

proposed grant or charitable donation, but should not control

or unduly influence the decision.

Research Grants

Members may provide research grants to support

independent medical research with scientific merit. Such

activities should have well-defined objectives and milestones

and may not be linked directly or indirectly to the purchase

of products.

Educational Grants

Members may provide educational grants for legitimate

purposes to conference sponsors or training institutions (but

not individual healthcare professionals).

Members may make grants to support the genuine medical

education of (1) trainees in programs that are charitable or

have an academic affiliation, or (2) other medical personnel.

Members may make grants for the purpose of supporting

education of patients or the public about important health

care topics.

Charitable Donations

Members may make monetary or product donations for a

charitable purposes.

Donations should be motivated by bona fide charitable

purposes and made only to charitable organizations or, in

rare instances, to individuals engaged in genuine charitable

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PhRMA Code on Interactions with Healthcare Professionals AdvaMed Code of Ethics on Interactions with Health Care

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activities for the support of a bona fide charitable mission.

Members should exercise due diligence to ensure the bona

fide nature of the charitable organization or mission.

Speaker Training

Meetings Members may offer reasonable and fair market value

compensation for time and reimbursement for reasonable

travel, lodging, and meal expenses to healthcare professionals

participating in speaker training programs when:

participants receive extensive training on member’s

drug products and on FDA regulatory requirements

for communications about such products,

training will result in participants providing valuable

service to member, and

participants meet criteria for consultants.

Speaker training sessions should be held in venues that are

appropriate and conducive to informational communication

and training about medical information, which does not

include resorts.

Speaker programs may include modest meals offered to

attendees and should occur in a venue and manner conducive

to informational communication.

Members should, individually and independently, cap the total

amount of annual compensation it will pay to an individual

healthcare professional in connection with all speaking

arrangements.

Members and speakers should be clear that speaker programs

are not CME. Speakers and their materials should clearly

identify the company that is sponsoring the presentation, the

fact that the speaker is presenting on behalf of the company,

and that the speaker is presenting information that is

consistent with FDA guidelines.

Members should provide all speakers with appropriate

training and periodically monitor speaker programs for

Not specifically addressed.

See Consultants, which includes within its scope of consulting

arrangements health care professionals who give presentations at

member-sponsored trainings.

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PhRMA Code on Interactions with Healthcare Professionals AdvaMed Code of Ethics on Interactions with Health Care

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compliance with FDA regulatory requirements for

communications on behalf of the company about its

medicines.

Clinical or Other

Information

Promotional materials provided to healthcare professionals by or

on behalf of a company should: (1) be accurate and not misleading;

(2) make claims about a product only when properly substantiated;

(3) reflect the balance between risks and benefits; and (4) be

consistent with all other Food and Drug Administration (FDA)

requirements governing such communications.

Not addressed.

Prescriber Data Members that use non-patient identified prescriber data to

facilitate communications with healthcare professionals

should use data responsibly.

Members should: (1) respect the confidential nature of

prescriber data; (2) develop policies regarding the use of the

data; (3) educate employees and agents about those policies;

(4) maintain an internal contact person to handle inquiries

regarding the use of the data; and (5) identify appropriate

disciplinary actions for misuse of this data.

Members should respect and abide by the wishes of any

healthcare professional who asks that his or her prescriber

data not be made available to company sales representatives

(e.g., by following the rules of voluntary programs that

facilitate prescribers’ ability to make this choice).

Not addressed.

Formulary or

Clinical Practice

Guidelines

Committee

Members

Members should require any healthcare professional who is a

member of a committee that sets formularies or develops

clinical guidelines and also serves as a speaker or commercial

consultant for the company to disclose to the committee the

existence and nature of his or her relationship with the

company. This disclosure requirement should extend for at

least two years beyond the termination of any speaker or

consultant arrangement.

Healthcare professionals making disclosures should be

required to follow the procedures set forth by the committee

of which they are a member, which may include recusing

Not addressed.

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themselves from decisions relating to the medicine for which

they have provided speaking or consulting services.

Adherence/

Certification

Annual certification signed by the Chief Executive Officer and

Chief Compliance Officer.

Annual certification by the Chief Executive Officer and Chief

Compliance Officer, or individuals with equivalent

responsibilities within the certifying organization.

Ropes & Gray LLP

January 18, 2013

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EXHIBIT C

INSTITUTIONAL CONFLICTS OF INTEREST IN RESEARCH:

Options for Key Elements in Policy

The chart is intended to facilitate the development of an institutional conflicts of interest (COI) in research policy by identifying the key elements of such a

policy and describing recognized or common options for such key elements. The options are derived from the following sources:

model policy from the American Association of Medical Colleges/Association of American University (AAMC/AAU) report Protecting Patients,

Preserving Integrity, Advancing Health: Accelerating the Implementation of COI Policies in Human Subjects Research (2008) (AAMC/AAU Report);

publicly available policies specifically addressing institutional conflicts of interest in research from major research institutions, including Cleveland Clinic,

Emory University, Stanford University, and University of Southern California;1 and

third party summaries of reviews of a number of institutional conflict of interest policies, such as the HHS Office of Inspector General (OIG) report on

Institutional Conflicts of Interest at NIH Grantees (2011).

Comments on key elements are included as appropriate. Note that a review of institutional policies suggests that various institutions have utilized concepts,

provisions or approaches from the AAMC/AAU Report and the model policy in the report to a greater or lesser extent. The AAMC/AAU model policy is

therefore used as a baseline. Options from sources other than the AAMC/AAU Report are identified in italics.

ELEMENT KEY DECISION POINT/

COMMENTS OPTIONS

Definition:

Institutional Conflict

of Interest

The policy should define the scope of institutional

conflicts of interest recognized by the institution.

The definition of institutional conflicts of interest

informs the scope of the interests or relationships that

give rise to a potential conflict of interest.

The AAMC/AAU model policy definition is similar to

definition for Public Health Service (PHS) individual

financial conflicts of interest.

An institution may have a COI in human subjects research

whenever the financial interests of the institution, or of an

institutional official acting within his or her authority on behalf

of the institution, might affect, or reasonably appear to affect,

institutional processes for the design, conduct, reporting,

review, or oversight of human subjects research.

An institution may have a COI in human subjects research

when the institution’s own financial interests or those of its

senior officials pose risks of undue influence on decision’s

involving the institution’s research.

1 This chart has been produced based only on publicly available documents obtained through internet searches. The institutions have not been contacted to

determine whether other relevant policies exist and/or to confirm whether these policies remain in effect as reviewed. Policies reviewed included only policies

specifically addressing institutional conflicts of interest in research.

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ELEMENT KEY DECISION POINT/

COMMENTS OPTIONS

An institution may have a COI when a financial interest of the

institution has the potential to bias research conducted by

employees or students or creates an unacceptable risk to

human subjects.

Definition: Potential

Institutional

Conflicts of Interests

The policy should define the relationships or interests

that give rise to a potential conflict of interest. These

are the relationships that may be subject to

prohibitions/limitations and will need to be disclosed.

Policies may deem or treat certain types of interests as

conflicts of interest requiring elimination or

management without further review. Other interests

may require review to determine if there is a need for a

response.

The institution may want to maintain a central list of

those companies: (1) that sponsor research or

manufacturer a product under investigation at/by

institution; and/or (2) in which institution has an equity

interest; from which institution receives

royalties/license fees; or from which institution has

received a substantial gift.

Institution

Equity interest or entitlement to equity (including options

or warrants) of any amount from technology licensing

activities or investments related to such activities in a

non-publicly traded company that sponsors research at

institution or manufactures a product under investigation

at/by institution

Equity interest or entitlement to equity (including options

or warrants) in excess of specified amount technology

licensing activities or investments related to such

activities in a publicly traded company that sponsors

research at institution or manufactures a product under

investigation at/by institution

Potential to receive significant milestone payments and/or

royalties from the sales of an investigational product that

is the subject of research

Material participation by researcher/research

administrator in a procurement or purchasing decision

involving a major purchase/supply arrangement with a

company that sponsors research at institution or

manufactures product under investigation at/by institution

Substantial gifts from a company that sponsors research

at the institution or manufactures a product under

investigation at/by institution

Institutional Official

Equity interest or entitlement to equity (including options

or warrants) of any amount in a non-publicly traded

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ELEMENT KEY DECISION POINT/

COMMENTS OPTIONS

company that sponsors research at institution or

manufactures a product under investigation at/by

institution

Equity interest or entitlement to equity (including options

or warrants) in excess of specified amount in a publicly

traded company that sponsors research at institution

Consulting fees, advisory board fees, remuneration,

honoraria, gifts or other emoluments, or “in kind”

compensation from a company that sponsors research at

institution or manufactures a product under investigation

at/by institution that in the aggregate exceeds a specified

amount

An appointment to serve in a fiduciary role (e.g., officer

or director) for a company that sponsors research at

institution or manufactures product under investigation

at/by institution whether or not payment received for the

service

An appointment to serve on the scientific advisory board

of a commercial sponsor of research conducted at/by the

institution, unless the official has no current significant

financial interest in the sponsor or the investigational

product and agrees not to hold such an interest for a

certain period after completion of the research

Payments related to research outside of a research

contract

Service as officer or member of board of directors of a

sponsor

Scope: Covered

Institutional Official

The policy should define: (1) the senior officials or (2)

the other personnel with specific authority/oversight

of research participants or processes at the institution

who are subject to the policy.

The scope of institutional officials covered by an

Board members, the president/chancellor, provosts and vice provosts,

vice presidents/vice chancellors, deans and vice/associate deans,

department chairs, division chairs, institute and center directors, IRB

chairs, the COI and institutional COI committee chairs, the chair of

the institutional biosafety committee, and the chair of the stem cell

review committee (Note: AAMC/AAU model policy provides

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ELEMENT KEY DECISION POINT/

COMMENTS OPTIONS

institutional conflicts of interest policy varies (due in

part to different nomenclature) but typically includes

the most senior officials at the institution, the most

senior officials at components of the institution

involved in research (e.g., the school of medicine), and

officials with research or researcher oversight

responsibilities (e.g., dean of research or director of

research administration).

The institution can maintain a list of institution officials

covered under the policy (by position) to avoid

uncertainty.

positions listed as examples only.)

Individuals who have direct authority over faculty appointments,

salaries, promotions, and/or allocation of institutional resources,

such as assignment of graduate students or other trainees, funding or

space, for faculty who are conducting human subjects research

(including the President, the Provost, the Vice Provost and Dean of

Research, School Deans, Senior Associate Deans, Department

Chairs, Division Chiefs, and Institute and Center Directors)

An individual who, because of his or her position with the institution,

has the capacity to affect, or can reasonably appear to affect,

institution processes for the design, conduct, reporting, review, or

oversight of human subject research (including Vice Presidents,

Associate Vice Presidents, Deans, Executive Associate and Associate

Deans of Research, Department Chairs, Center Directors, and

Directors of Research Administration Units)

Administration:

Reporting

The policy should define how potential institutional

conflicts of interest are disclosed.

Potential conflicts of interest of individuals can be

disclosed through established individual conflicts of

interest reporting processes (e.g., by expanding scope

of questions/forms for covered institutional officials).

Potential conflicts of interest of institution may be more

difficult to capture because knowledge of relevant

relationships may exist in various administrative

components. The policy needs to define clearly who

has responsibility for reporting what type of

relationship and to whom report is submitted. There

could be updates either: (1) upon creation / knowledge

of interests, or (2) on a regular, periodic basis.

Disclosure of potential conflicts of interest of institution

through offices/departments with knowledge of potential or

existing financial relationships such as technology transfer

office, development office, sponsored research/grants offices

and IRB

Offices/departments identified in various policies

institution include: treasury, sponsored research/grants,

technology transfer/licensing, purchasing,

development/fundraising office, continuing education,

IRB

Investigators may also have responsibility for identifying

research involving intellectual property in which

institution has interest

Disclosure of potential conflicts of interest of institutional

officials through individual conflict of interest disclosure

process

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ELEMENT KEY DECISION POINT/

COMMENTS OPTIONS

Administration:

Review

Responsibility

The policy should indicate who will review potential

institutional conflicts of interest when disclosed.

Reviewers should have authority to make to significant

recommendations regarding conflicts of interest,

including elimination of conflicts of interest.

Note that most institutional conflicts of interest policies

reviewed have a COI committee undertake the review

(as recommended by AAMC/AAU report).

COI Committee (same or different from individual COI

Committee)

Initial review by research administration official before

review by COI Committee with investigator given opportunity

to present compelling circumstances why research should

proceed to committee if potential conflict of interest identified

Administration:

Composition of

Conflict of Interest

Committee

The policy should define who will comprise the COI

committee (if such a committee will review disclosed

potential institutional conflicts of interest).

Note that the AAMC/AUU model policy and a number

of institutional conflicts of interest policies include an

independent and/or external member on the committee.

Institutional COI Committee will consist of at least seven

members appointed by the institution’s President/Chancellor

(or his/her designee), of whom at least two will be members

of the public with no active transactional relationships with

the institution. One of the public members should have no

institutional affiliation at all. In case of the public member(s)

affiliated with the institution (for example, alumni), care

should be taken that neither they nor their immediate family

members are on the institution’s payroll. At least two

members of the institutional COI Committee should be

appointed from the standing individual COI Committee(s)

(Note: AAMC/AAU model policy provides composition as

example only.)

Physician member who does not conduct research, chair/vice-

chair of IRB, representative from office of general counsel,

representative from physician administrative office,

representative from office of media relations, representative

from affiliate/department involved in innovations (institution

only), and representatives from board of trustees (institution

conflict only)

Two members of individual COI committee and at least one

external member

Three expert advisors with no financial or other actual or

apparent conflicts of interest who must be external to

institution (other than for Phase I and low risk studies)

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ELEMENT KEY DECISION POINT/

COMMENTS OPTIONS

Dean of research, senior associate deans of research from

each school or a senior faculty member with relevant

expertise, at least two other senior faculty and two members

of the public with no significant relationships with the

institution

Response:

Action/Review

Standard

The policy should indicate the institution response (or

responses) to identified institutional conflicts of

interest.

Institution may identify certain interests that are not

permitted (or that necessarily warrant

elimination/management) and establish a review

standard for other interests or apply the same review

standard to all interests.

Review standard in policies reviewed (consistent with

AAMC/AAU Report) generally involves presumption

that conflicts of interest must be eliminated, but allows

management of conflicts of interest if presumption

rebutted.

AAMC/AAU model policy and a number of institution

policies all permit conflicts of interest to proceed with

appropriate management plans only if there compelling

circumstances that warrant continuation.

Rebuttable presumption that any potential conflict of interest

reported should be eliminated or research not conducted at

institution (Note: Standard is from AAMC/AAU Report.)

No reference to specific standard for review, but evidence of

“compelling circumstances” is necessary for research to

proceed (which essentially operates as a rebuttable

presumption that either conflict of interest reported should be

eliminated or research not proceed)

Certain institutional COIs require immediate action to divest

(e.g., equity in/royalties from company based on institution

intellectual property if property also relates to human subjects

research)

Review:

Facts Considered

The policy should identify the factors to be considered

in assessing the concern raised by the conflict of

interest and the existence of compelling

circumstances that would support management

(rather than elimination) of the conflict of interest.

Factors to be considered in assessing a potential conflict of

interest:

the nature of the science

the nature of the overlapping interests

how closely the interest is related to the research

the degree to which the interest may be affected by the

research

the degree of risk that the research poses to human

subjects and the integrity of the research

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ELEMENT KEY DECISION POINT/

COMMENTS OPTIONS

the degree to which the COI can be effectively managed

whether the institution is uniquely qualified, by virtue of

its attributes (e.g., special facilities or equipment, unique

patient population) and the experience and expertise of its

investigators, to conduct the research and safeguard the

welfare of the human subjects involved

how direct and immediate the covered official’s authority

is over the research and the people involved in

conducting the research

status of the company (e.g. privately-held start-up

company, small publicly-traded or large publicly-traded

company) and the importance or perceived importance of

the research to the finances of the company

risk to the academic freedom and unbiased treatment of

the faculty member who has proposed the research

perceived risk to the reputation of the institution

whether the studies involve institutional intellectual

property that is used as a platform technology or a

generic method used broadly

likelihood that a societally important development project

will be substantially impeded if the research is not

performed at institution

societal impact of successful development, relative to

potential risk to the institution

magnitude of potential risks posed to students or trainees

engaged in the research project

whether the trial is at multiple sites and, if so, whether

the institution’s role is relatively passive or the site that

gathers and/or monitors the data from all other sites

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ELEMENT KEY DECISION POINT/

COMMENTS OPTIONS

whether the institution’s resources are fundamentally

important to the progress of the science

proportion of the total subjects in the study that are under

the supervision of the university

unique expertise of investigator

Review: Decision

and Appeal

Institution must generally decide: (1) who will make

final decision regarding the existence of a conflict of

interest; (2) whether and what appeal rights will exist;

and (3) who will approve any plan for management of

identified institutional COIs.

Senior official makes final decision regarding existence of

conflict of interest. There should be a mechanism for appeal.

Vice President of Research Administration makes final

decision

Vice Provost for Research Advancement makes final decision

Provost makes final decision

COI Committee makes final decision, but there is right of

appeal to the governing board

Elimination of

Conflicts of Interest

The policy should address how conflicts of interest

will be eliminated. Divestiture/elimination of interests

Refusal to proceed with research

Recusal of institutional official (if possible given institutional

responsibilities)

Management:

Mechanisms for

Management

The policy should address how conflicts of interest

will be managed, including who establishes the

management plan.

IRB may participate in development of management

plan.

COI Committee or other reviewer(s) establish any necessary

mechanisms for management

IRB reviews any proposed management plan and may make

modifications

Mechanisms to manage conflicts of interest include:

Disclosure of the institutional COI in the informed

consent process;

Formal recusal of any conflicted covered official from the

chain of authority over the project and possibly also from

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ELEMENT KEY DECISION POINT/

COMMENTS OPTIONS

authority over salary, promotion, and space allocation

decisions affecting the investigator, as well as

communication of the recusal arrangements to the

official’s superior and colleagues.

Designation of a “safe haven” (e.g., a non-conflicted

senior individual) with whom the investigator can address

institutional COI-related concerns if conflict involving

covered official;

Use of an external IRB (since most institutional IRBs are

composed of faculty and staff from the institution);

External monitoring of the study, particularly endpoint

assessments;

Use of an external data safety monitoring board or similar

review board to evaluate the design, analytical protocols,

and primary and secondary endpoint assessments, and to

provide ongoing evaluation of the study for safety,

performance issues and the reporting of results;

Disclosure of the institutional COI in public presentations

and publications;

Disclosure of the institutional COI to other centers in a

multi-center trial

Reduction/restriction (rather than divestiture/elimination)

of financial interests

Disclosure of COI to others involved in research

Limitation of research role (e.g., to conduct of certain

procedures, non-primary site/not coordinating site)

Presence at IRB meeting of community member and

community member’s approval

Third party opinion on whether to conduct research

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ELEMENT KEY DECISION POINT/

COMMENTS OPTIONS

Management:

Oversight

Policy should indicate who will implement and

monitor compliance with an institutional COI

management plan.

Policy may also describe who should receive reports

regarding identified conflicts of interest.

COI Committee and affected personnel responsible for

implementation and COI committee audits

School Dean or his/her designee responsible for management

Annual report to COI committee on compliance with

management plan