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The NIH’s Amended Conflict of Interest Regulations: A New, Weaker Approach to Intellectual Property Interests?

Posted Aug 24 2011 1:35pm

kate-greenwood-kg-2010-1-cropped-comp Yesterday, at long last, the National Institutes of Health released the final revisions to its regulations governing financial conflicts of interest on the part of applicants for federal research funds.  And there is good news.  The rule’s sunshine provisions have not, as was feared , been “gutted.”  Grant recipients will have to make their investigators’ financial conflicts of interest publicly accessible.  While an institution will not have to post the details of each conflict on its website, as was provided in the proposed regulations , if it does not it will instead have to provide the information in writing to anyone who asks for it.  Academics, advocates, federal and state prosecutors, other regulators, and members of the news media will have the access they need.  For sure, prospective patients or research participants will be less likely to come across information about investigator conflicts, but, as Kathleen Boozang explains here , it is far from clear that they would find such information helpful.

Of potentially more significance than the weakened sunshine provisions, the final regulations diverge from the proposed regulations with regard to the treatment of intellectual property.  Under the prior regulations , investigators were required to inform their institutions about relevant intellectual property rights, including copyrights, patents, and royalties in excess of $10,000.  The proposed regulations modified the definition to require disclosure of copyrights, patents, and royalties (and agreements to share in royalties) regardless of amount.  Under the final regulations, investigators do not need to tell their institutions about their intellectual property rights and interests unless and until they are in “receipt of income related to such rights and interests.”

The preamble to the final regulations is somewhat confusing.  For example, while the final regulations define significant financial interest to exclude intellectual property rights and interests that do not produce income, the agency states in the preamble that it “would expect institutional policies to require disclosure upon the filing of a patent application or the receipt of income related to the intellectual property interest, whichever is earlier.”  The preamble also contradicts itself with regard to the applicability of the rule’s $5,000 threshold, stating at one point that the threshold “applies to licensed intellectual property rights (e.g., patents, copyrights), royalties from such rights, and agreements to share in royalties related to licensed intellectual property rights,” while explaining (correctly, I think) at another point that “the $5,000 threshold would apply to equity interests and ‘payment for services,’ which would include salary but not royalties.”

The NIH’s explanation of its addition of the “receipt of income related to such rights and interests” qualifier to the definition of a significant intellectual property right or interest is especially confusing.  The agency writes that its intent was to exclude from the definition

“the rare cases when unlicensed intellectual property is held by the Investigator instead of flowing through the Institution,” because “it is difficult to determine the value of such interests.”  The agency’s point about valuation may be true, but that is an argument in favor of disclosure not against it.  With regard to equity interests, the final regulation requires investigators to disclose any equity interest in a non-publicly traded entity; the Food and Drug Administration similarly requires disclosure of equity interests “whose value cannot be readily determined through reference to public prices[.]“  The FDA also requires disclosure of any “[p]roprietary interest in the tested product,” without regard to value.

When an investigator has a proprietary interest in a product under study the potential exists for a serious conflict regardless of the interest’s current value or whether it is currently income-generating.  Seton Hall Law’s Center for Health & Pharmaceutical Law & Policy and others have recommended a near-total ban on serving as an investigator in that case.  Such a ban cannot, of course, be implemented unless investigators are required to tell their institutions about their proprietary interests.

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