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Identifying and Managing Financial Conflicts of Interests

TACUAApril 6, 2011

© Huron Consulting Group Inc. All rights reserved. Huron is a management consulting firm and not a CPA firm, and does not provide attest services, audits, orother engagements in accordance with the AICPA’s Statements on Auditing Standards.

Today’s Guests

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Stuart Horowitz, PhD MBALife Sciences & Advisory Services

•>20 years of experience•Scientist, investigator•Research administrator•Assists with research strategy, compliance, operations,

finances•Focus on ethical research, COI management

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Agenda

• Introduction/Background

• Recent Headlines

• Definitions (current)

• Approaches to Identifying and Managing COI

• Proposed Regulations

• Implications for the Future

COI – Ethics and Compliance

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• Rules & Regulations

• Guidelines

• Processes

• Few Bright Lines

• “NY Times Test”

• Good Sense

• Ethics

From: The Ethicist, NY Times

Background and Recent Headlines

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When do More >1 Interests Conflict?

• A conflict of interests (COI) can arise when a person is faced with a decision that might be influenced by two competing interests.

• (Although the term “conflict of interest” is often used, there is only a conflict by virtue of the existence of more than one interest—hence the plural form.)

• We may digress to the singular form, which most people use anyhow.

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COI issues are ubiquitous

• Not only Research, Education, & Healthcare

• Politics

• Law

• Purchase & Acquisition

• Employment

• Family

• Everyday Life

COI in The News NY Times April 3, 2011

Tipping the Odds for a Maker of Heart Implants

COI in The News NY Times April 3, 2011

“Our #1 Implanting Hospital“UMC… never pressed the physician about his possible ties to Biotronik, nor did he disclose any…

• $5,000/mo

• Consulting fees

• Steering trials/registries

• “Loser List”

Conflict of Interest Definitions

Many situational factors characterize any potential conflict of interests

• Primary vs. secondary interests

• Institutional or individual conflicts

• Real vs. perceived conflicts

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A conflict of interests exists when a secondary interest conflicts with a primary interest

NOTE: A conflict of interests is NOT a statement of wrongdoing.

POSSIBLE CONFLICT

Primary Interest“Do what is right”

Secondary Interest“Personal Financial Gain”

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Secondary interests conflict with primary interests in a number of circumstances

• Primary interest: Train students by having them work on projects

• Secondary interest: Use graduate students as free labor on startup

• Primary interest: Spend time working on class lectures

• Secondary interest: Spend time marketing patent for licensing

• Primary interest: Order best equipment for lab

• Secondary interest: Order equipment from a company that adds research funding and pays for travel to meetings

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• Receives research support from, or evaluates products or procedures of a business in which he or she or a family member has an ownership interest (stock/options/deferred compensation)

• Receives payments (consulting fees/honoraria/other) from an outside entity

• Uses institution’s resources for an outside entity, provides current or future rights to an entity for institution’s IP

A Potential for COI Exists if an Individual…

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• Accepts compensation for serving on an advisory or governing board

• Can influence institution’s business decisions with an entity he or she has an ownership interest in

• Agrees to limits on publication, peer-review of research

• Agrees to favorable research results

• Conducts research with an invention (any IP) involving possible future royalties or other cash flows

• Supervises a member of his or her immediate family

A Potential for COI Exists if an Individual…

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Non-Financial Conflicts of Interest may also interfere with researchers’ decision-making

• Career Advancement

• Personal Advancement

• Favoritism – Family and Other

• Scientific Bias

• Glory – PR

Not easily identifiable or manageable

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• A situation in which financial or other considerations have the potential to compromise or bias professional judgment and objectivity.

• At least 2 interests are conflicted (e.g. objectivity vs. $$$).

• Involves the use of authority for financial or other gain.

• May involve both individuals and institutions.

• Planning, conduct, reporting of research.

• Not a statement of wrongdoing.

Conflict of Interests Defined

COI ≠ Wrongdoing

• “Conflicts of interest are ubiquitous and inevitable in academic life, indeed, in all professional life. The challenge for academic medicine is not to eradicate them, which is fanciful and would be inimical to public policy goals, but to recognize and manage them sensibly and effectively.”

• David Korn JAMA 284, 2234-2236, 2000

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• Individual–Investigators

–Students

–Research technicians, data analysts

–IRB members

–Anyone involved in technology transfer

–Anyone involved in procurement, education, healthcare

• Institutional–Financial & IP holdings of the institution

–Allocation of resources for research

–Executives and board members

Either individual or institutional interests may create potential conflicts

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When addressing real or perceived conflicts of interests…

…Perception is Reality

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• Human Subject Protection

• Research Integrity

• Individual Integrity

• Public Trust in Institution

• Research Participation

• Public Trust in Research

• Progress in Biomedical Research

• Funding and Reimbursement

Conflicts of Interests introduce a number of added risks to any research endeavor

Regulations and Guidance

What are The Rules?

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Industry Landscape• ↑ Complexity of relationships with industry• ↑ Budget federal $$• ↑ Industry research $$$• Growth of translational strategies• Growth of multidisciplinary science centers

Overview

We await final rules

Goals of Proposed Rule Changes• Expand and add transparency to disclosure of Significant

Financial Interests• Clarify and define terms in PHS regulations

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New Definitions• PD/PI• Disclosure of Significant

Financial Interests• FCOI Report• Financial Conflict of

Interest• Financial Interest• Institutional

Responsibilities• Manage vs. Mitigate

Need to Know – Proposed Definitions*

Revised Definitions• Contractor • Investigator• Institution• PHS• Research• Significant Financial

Interest• Monetary Threshold

*Revised definitions and or concepts

Minor Revisions of Old Definitions

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ACTION!

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Minor Revisions on Old Definitions (Continued)

• PHS Grant – This definition now includes a specific reference to the National Institutes of Health.

• Research – Now includes a non-exclusive list of examples of different types of PHS funding mechanisms such as

– Grants

– Cooperative agreement

– Career Development Award

– Center Grant or Individual Fellowship award

– Any activity where funding is available from PHS

– Our expectation is that NSF and public expectations will follow PHS policy

– Institutions should not have double standards on FCOI

Minor Revisions of Old Definitions

ACTION!

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• Disclosure of FIs happens from Investigator to Institution (+/- Committee).–Institution that is applying for or receives PHS funds.

• Disclose FIs that reasonably appear to be related to the Investigator’s institutional responsibilities.–FI = Anything of monetary value (current or potential).

• Significant relates to the amount and to a possible relationship to the investigator’s institutional responsibilities.–Who determines what reasonably appears to be related? (Not the

investigator/discloser/respondent)

• The institution determines relatedness.

Minor Revisions of Old Definitions

ACTION!

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• Refers to “significant”

Problems with Old and New Definitions

ACTION!

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Substantial Revisions - SFI Monetary Thresholds

• At least 1 of the following interests is a SFI:– If a publicly-traded company, if the

value of past 12 mos remuneration + value of current equity >$5,000 (on the day of disclosure)

– If a non-publicly-traded company (e.g. startup) if thevalue of past year’s remuneration >$5,000 OR…If the investigator holds any equity interest

– Intellectual property rights (e.g., patents, copyrights), royalties from such rights, and agreements to share in royalties related to such rights

• Excluded: Work for government entities or an institution of higher education.

ACTION!

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Disclosure vs. Reporting

Disclosure

ReportingInvestigator

UniversityResearch Integrity Office

ORCOI Committee

Disclosure vs. Reporting

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New Definition - FCOI Reports

• Communication from the Institution to PHS regarding FCOI, initially, prior to the Institution’s expenditure of any funds, and ongoing.

• If your standards are higher (stricter) than PHS’s, reports to PHS are held to your standards.

• Must include a description of the key elements of management plans that were put in place.

• Additional requirements for reports based on timeliness of disclosures and reviews.

ACTION!

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New Definitions – Project Director / Principal Investigator

• The PD/PI is the Project Director and/or the Principal Investigator of a PHS-funded research project. –This term will be used in the new regulations in circumstances

where the term “Principal Investigator” may have been used in the past.

Director YInvestigator X

“PD/PI”

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New Definitions - Institutional Responsibilities

• A clear and deliberate move away from disclosure of SFIs on a project-specific basis. (Yet reporting will be project specific)

• Hope to gain a better understanding of the totality of an Investigator’s interests …result in more consistent identification, evaluation, and management of COI.

• Investigator’s professional responsibilities on behalf of the Institution including, but not limited to activities such as–Research–Research consultation–Teaching–Professional practice– Institutional committee memberships–Service on panels such as Institutional Review Boards or Data and

Safety Monitoring Boards.

ACTION!

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New Definitions - Manage

• Manage means to take action to address a financial conflict of interest, which includes reducing or eliminating the financial conflict of interest, to ensure that the design, conduct, or reporting of research is free from bias or the appearance of bias.

• Includes management of any financial conflicts of a sub-recipient Investigator.

• Require that, prior to the Institution’s expenditure of any funds …Institution shall …[if an FCOI exists] …develop and implement a management plan that shall specify the actions that have been, and shall be, taken to manage such FCOI.

ACTION!

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When is FI = FCOI?

• Financial Conflict Of Interests = a significant financial interest that could directly and significantly affect the design, conduct, or reporting of PHS-funded research.

• Could implies potential and to some extent appearance. Could is in the eye of the beholder.

• Affect refers to bias or the potential for bias. The potential for bias is a matter of opinion.

• The review process determines which disclosed FIs are COIs.

ACTION!

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Updated FCOI Disclosure Requirements – It’s all about timing

• Investigators will be required to disclose Significant Financial Interests on an ongoing basis–This amends the previous mandate of disclosing interests each

time a new project is undertaken–Remember, financial interests include those associated with

spouses or children of the Investigator in question

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• All investigators could potentially conduct research

at any time• These investigators could

have current or potential FCOI’s

This could potentially get complicated

ACTION!

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FCOI Disclosure requirements - After Spending Begins

• If the disclosure is timely (within 30 days of the identification of the conflict):

– Institution shall, within sixty days: Review the FI disclosure; determine whether it is related to PHS-funded research; determine whether a FCOI exists; and, if so, implement, on at least an interim basis, a management plan that shall specify the actions that have been, and will be, taken to manage the FCOI.

– Institution may determine that additional interim measures are necessary with regard to the Investigator’s participation in the PHS-funded research project between the date of disclosure and the completion of the Institution’s review.

ACTION!

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FCOI After Spending Begins (continued)

• (B) implement, on at least an interim basis, a mitigation plan which shall include review and determination as to whether any PHS-funded research, or portion thereof, conducted prior to the identification and management of the FCOI was biased in the design, conduct, or reporting of such research.

• Institution may determine that additional interim measures are necessary with regard to the Investigator’s participation in the PHS funded research project between the date that the FI is identified and the completion of the Institution’s review.

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ACTION!

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Notable Changes – Transparency of FCOI Policies

Old Rules• Not only must Institutions

maintain an up-to-date COI policy that is enforced in accordance with PHS standards, this policy must be on file and in writing

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COI Policy

New Rules

• Institutions must make available a written copy of their current COI policy on a publicly accessible website

COI Policy

ACTION!

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Notable Changes – FCOI Policies of Subcontractors/Sub-grantees

Old Rules• Institution must take

“reasonable steps” to ensure that Subcontractors or Sub-grantees are compliant within the regulations

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New Rules

• Institution must clearly state which FCOI policy (e.g. the Institutions or the Sub’s) will be used when Subcontractor/Sub-grantee activity is present

Regardless of who’s FCOI policy is used, it must comply with PHS standards!

ACTION!

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Elements of FCOI Reports• Project/Contract number• PD/PI or Contact PD/PI if multiple PD/PI model is used• Name of the Investigator with the FCOI• Nature of the financial interest (e.g., equity, consulting fee,

travel reimbursement, honorarium)• Value of the financial interest (dollar ranges would be

permissible: $0– $4,999; $5,000–$9,999; $10,000– $19,999; amounts between $20,000– X$100,000 by increments of $20,000; amounts above $100,000 by increments of $50,000), or

• A statement that the interest is one whose value cannot be readily determined through reference to public prices or other reasonable measures of fair market value

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• A description of how the financial interest relates to the PHS-funded research and the basis for the Institution’s determination that the financial interest conflicts with such research

• A description of the key elements of the Institution’s management plan, including

• The role and function of the conflicted Investigator in the research project; The rationale for including the conflicted Investigator in the research project; The conditions of the management plan; How the management plan will safeguard objectivity in the research project; Confirmation of the Investigator’s agreement to the management plan; How the management plan will be monitored to ensure Investigator compliance; Other information as needed.

Elements of FCOI Reports (Continued)

ACTION!

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Potential FCOI Management Approaches

• Public disclosure of FCOI (e.g., when presenting or publishing the research).• For research projects involving human subjects

research, disclosure of FCOI directly to participants.• Appointment of an independent monitor capable of taking

measures to protect the design, conduct, and reporting of the research against bias, or the appearance of bias.

• Modification of the research plan.• Change of personnel or personnel responsibilities, or

disqualification of personnel from participation in all or a portion of the research.

• Reduction or elimination of a financial interest (e.g., sale of an equity interest); or severance of relationships that create actual or potential financial conflicts.

ACTION!

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Additional Nuggets…

• Mandatory investigator education – initially and every two years.

• Requirement to manage management plans.• Removal of the exemption for Phase I SBIR/STTR grants.• Requirement to post your policies and procedures on a

public website.• Requirement, prior to spending PHS funds, to post a

plethora of information about investigator’s FI on a public website.

• Keeping the website 60-days current, andfor years.

Actions

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• Develop a new education program for your faculty & staff.

• Make sure your management plans can be managed.

• Develop a section of your web site where required FCOI data are posted and kept current.

What Else Should You Do?

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Approaches to Managing COI

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How to Deal With COI?

• David Armstrong, The Wall Street Journal:

–HHS requirement… to manage, reduce or eliminate conflicts

–“How they do so is left largely to them.”

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Bright Line

How to Deal With COI?

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COI Continuum

Permissive Restrictive

Ris

k

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Goals of COI Policy

• Protect research participants

• Protect the integrity of the research

• Protect the institution & faculty

– Funding Status

– Litigation

– Reputation/Public Image

• Reconsideration & Noncompliance

• “Good Policy Practices”

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Elements of COI Policy

• Purpose & Position & Principles

• Definitions, Limits

• Who Must Disclose

• Examples

• Process

• Responsibilities

• Consequences

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How to Deal With COI?

• Standard Operating Procedures

– Annual Disclosure

– Ongoing/Incidental Disclosure

– Analysis: Standards, Thresholds

– Administrative Processes

– COI Committee

– Management Plans

– Tracking and Monitoring Plans

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Institutions must ensure that several identification and disclosure mechanisms are in place

• Formal – Annual & Incidental

• Must be Required

• Define Exemptions

• Project-Specific Disclosures

• Informal Disclosures (Document)

• Disclosure by Hotline

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COI management plans may include a range of actions depending on the nature of the conflict

• Manage or Reduce

• Eliminate (Recusal or Divestiture)

• Written

• Acknowledged

• Appeal or Reconsideration

• Shared Inside & Out (NIH)

• Monitored

• Audited

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Elements of COI Management Plans…

• Disclosure to Participant

• Firewall

• Limits to Activities

• Limits to Role (PI)

• Independent Monitoring

• Reduced or End of Payments

• Partial or Complete Divestiture

• Individual Recusal

• Complete Recusal

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