tutes of Health
Acknowledgments
ACKNOWLEDGMENTS The members of the Committee express their appreciation to the staff of the National Institutes
of Health for its administrative support and assistance in fact gathering. The editorial
contributions of Dr. Kathi Hanna, an independent consultant, were of major importance in
enabling this report to be prepared in the short period of time that was available. All findings
and recommendations are entirely those of the Committee.
i Page Left Blank Intentionally ii
Foreword
FOREWORD On May 6, 2004, at the 88
th
meeting of the Advisory Committee to the Director (ACD), the Blue
Ribbon Panel on NIH Conflict of Interest Policies, a working group of the ACD, presented its
report and recommendations. During the ACDs deliberations, the Panel clarified and amplified
several of its points and responded to concerns and questions raised by ACD members. The
essence of those deliberations is summarized below. At the conclusion of the session of the
ACD meeting devoted to the Panels report, the ACD voted to accept the Panels
recommendations and transmit them to the Director, NIH.
The definition of industry for purposes of the report
The Panel indicated that when the report refers to industry, the Panel means businesses, such
as pharmaceutical and biotechnology companies, and units of other companies that are engaged
in similar work.
Positions categorized as most senior
The ACD asked for clarification regarding which employees would be considered most senior
and thereby subject to special restrictions such as the prohibition on consulting. The Panel
indicated that they viewed seniority on the basis of the function of employees and that the degree
of leadership and the breadth of authority held were factors in considering a position most
senior.
Salary ceiling
On the issue of the competitiveness of NIH salaries, the Panel emphasized that only two groups
of NIH research staff have salary levels below market rates, the most senior leaders and staff
clinicians. The Panel also explained that, because the ceiling on NIH salaries is set through
negotiation with the HHS, indexing the top salary to the cost of living is not an option. The
current salary ceiling, as determined by the Secretary of HHS, is $200,000 but retention bonuses
and other additions to base pay can bring annual income above that amount.
Time and dollar restrictions on outside activities
The Panel indicated that the report does not address implementation of recommendations. Thus,
the report does not cover mechanisms for tracking time spent on approved outside activities in
order to apply the recommended 400-hour limit. However, in discussion, the Panel and ACD
agreed that, if the recommendation is implemented, tracking outside activity hours will be
challenging because these activities take place during an employees off-time (evenings,
weekends, and vacation time). They also agreed that it will be important not to create a punch-
the-time-clock atmosphere and the Panel noted that the role of supervisors would be important.
The Panel emphasized that the exception to time and dollar restrictions applies specifically to
persons providing outside medical care and patient services. The exception would raise the
iii Foreword
dollar cap on outside income to 100% of salary, remove the one-source limitation, and provide
for a more flexible limitation on time.
Prohibition on compensation in the form of equities
The ACD expressed interest in whether any other federal agency prohibits equities as a form of
compensation for outside activities. The Panel was not aware of any agencies that do have such
a prohibition and subsequent staff review of materials supplied to the Panel by the Office of
Government Ethics did not identify supplemental regulations with such a restriction. The Panel
indicated that, in recommending a prohibition on equity compensation, it was aware that such a
prohibition could discriminate against small pharmaceutical and biotechnology companies,
companies with more promise than cash flow. The Panel reported that it had weighed the
potential for such discrimination against the potential damage to NIHs reputation and had
decided that the risk to NIHs reputation was the greater danger, and the prohibition on equity
compensation is a reasonable tradeoff in order to allow appropriate outside activities to continue.
Based on the discussion with the ACD, the Panel agreed that, if the prohibition is implemented,
NIH should monitor its impact for deleterious effects.
To further explicate its rationale for the prohibition on equity compensation, the Panel
differentiated royalty income from equities. While both can create ongoing income streams,
royalties are a stake in an intellectual property. The value of intellectual property largely is
determined at time of development; later actions make little difference. Equity is a stake in a
company, so ongoing and future actions can significantly affect the value of the holding. Thus,
the conflict of interest concerns associated with equity income are not pertinent to royalties.
Amendments to requests for approval of outside activities
The Panel clarified that its recommendation on requiring annual updates to requests for approval
of outside activities does not replace or change the current requirement that employees re-file
such requests whenever they have a new outside activity or a substantive change in an ongoing
outside activity.
ACD action
Having addressed these issues, the ACD accepted the Blue Ribbon Panel report and voted
unanimously to submit the report to the Director, NIH, after it had been updated to reflect the
ACD deliberations. This foreword provides the requested revision.
iv Table of Contents
Table of Contents Acknowledgements . i Foreword . iii Executive Summary .. 1 Section I.
Introduction 7 Section II.
Background 15 Section III. Disclosure of Financial Information and Outside Activities 25 Section IV. Outside Activities .. 35 Section V.
Recommendations . 55 Appendix Material
A. Panel Roster ..................................................................................................... 69 B. Panel Biographies ........................................................................................... 70 C. Meetings and Speakers ................................................................................... 76 D. Questions to National Institutes of Health Staff About Outside . 78 Activities and Conflict of Interest E. OGE form 450 . 79 F. SF 278 form .. 87 v Table of Contents
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Executive Summary
EXECUTIVE SUMMARY Recently, concerns have been raised in the media and Congress that some employees at the
National Institutes of Health (NIH) have engaged in paid consulting arrangements with, or held
shares in, biotechnology companies or other entities that could influence their work as
government employees, thereby creating real or perceived conflicts of interest. These concerns
have brought new attention to NIH policies regarding approval of such consulting arrangements,
the nature of these arrangements (e.g., consulting versus speaking, teaching, or writing), the
viability of the NIH system for monitoring outside activities, and the substantial number of high-
level NIH employees who are not currently requiredby existing laws and regulationsto file
public financial disclosure statements.
This report responds to NIHs own inquiry into its conflict of interest policies. Are they
sufficient to uphold agency standards and maintain public trust in NIH and its activities? As part
of the NIH examination of the consulting activities of NIH investigators, the NIH Director
established the Blue Ribbon Panel on Conflict of Interest Policies as a working group of the
Advisory Committee to the Director, NIH. This Panel was charged to:
1) Review the existing laws, regulations, policies, and procedures under which NIH currently
operates regarding:

Real and apparent financial conflict of interest of NIH staff where compensation
or financial benefit from outside sources is received, including consulting arrangements
and outside awards; and

Requirements and policies for the reporting of financial interests by NIH staff,
including which interests are subject to public disclosure, and what portion of NIH staff
file public disclosures;
2) Make recommendations for improving existing laws, regulations, policies, and procedures
as appropriate;
3) Complete the review and development of recommendations within 90 days;
1
and
4) Provide recommendations to the Advisory Committee to the Director, NIH, for
deliberation and final recommendations to the Director, NIH.
In keeping with this charge, and in making its recommendations, the Panel did not investigate
specific allegations or review individual cases under investigation at NIH. Its primary goal was
to assess the current status of conflict of interest policies and procedures and make
recommendations for improvement, looking to the future.
In its deliberations the Panel found an extremely complex set of rules governing conflicts of
interest at NIH. These rules are widely misunderstood by some of the very people to whom they
are intended to apply, thereby creating uncertainty as to