Department of Health and Human Services
OFFICE OF 
  
INSPECTOR GENERAL 
 
 
 
 
 
 
 
H   G M
OW  RANTEES  ANAGE 
 
F C
INA  NCIAL  ONFLICTS OF 
 
I R F
NTEREST IN  ESEARCH  UNDED 
 
  N I
BY THE  ATIONAL  NSTITUTES 
 
H  
  OF  EALTH
 
 
 
Daniel R. Levinson  
Inspector General 
 
November 2009 
OEI-03-07-00700   
 
 
Office of Inspector General 
http://oig.hhs.gov 
 
The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, 
as amended, is to protect the integrity of the Department of Health and Human Services 
(HHS) programs, as well as the health and welfare of beneficiaries served by those 
programs.  This statutory mission is carried out through a nationwide network of audits, 
investigations, and inspections conducted by the following operating components: 
Office of Audit Services 
The Office of Audit Services (OAS) provides all auditing services for HHS, either by 
conducting audits with its own audit resources or by overseeing audit work done by others.  
Audits examine the performance of HHS programs and/or its grantees and contractors 
in carrying out their respective responsibilities and are intended to provide independent 
assessments of HHS programs and operations.  These assessments help reduce waste, 
abuse, and mismanagement and promote economy and efficiency throughout HHS. 
Office of Evaluation and Inspections 
The Office of Evaluation and Inspections (OEI) conducts national evaluations to provide 
HHS, Congress, and the public with timely, useful, and reliable information on 
significant issues.  Specifically, these evaluations focus on preventing fraud, waste, or 
abuse and promoting economy, efficiency, and effectiveness in departmental programs.  
To promote impact, the reports also present practical recommendations for improving 
program operations.  
Office of Investigations 
The Office of Investigations (OI) conducts criminal, civil, and administrative 
investigations of allegations of wrongdoing in HHS programs or to HHS beneficiaries 
and of unjust enrichment by providers.  The investigative efforts of OI lead to criminal 
convictions, administrative sanctions, or civil monetary penalties. 
Office of Counsel to the Inspector General 
The Office of Counsel to the Inspector General (OCIG) provides general legal services to 
OIG, rendering advice and opinions on HHS programs and operations and providing all 
legal support in OIG's internal operations.  OCIG imposes program exclusions and civil 
monetary penalties on health care providers and litigates those actions within HHS.  
OCIG also represents OIG in the global settlement of cases arising under the Civil False 
Claims Act, develops and monitors corporate integrity agreements, develops compliance 
program guidances, renders advisory opinions on OIG sanctions to the health care 
community, and issues fraud alerts and other industry guidance. 
   
   
 E X E C U T I V E   S U M M A R Y  
OBJECTIVES
 
1. To determine the nature of financial conflicts of interest reported by 
grantee institutions to the National Institutes of Health (NIH) in 
fiscal year (FY) 2006. 
2. To determine how grantee institutions managed, reduced, or 
eliminated these financial conflicts of interest. 
3. To determine whether vulnerabilities exist in grantee institutions 
oversight of the identification and management of financial conflicts 
of interest. 
BACKGROUND 
NIH receives billions of dollars annually to support its mission of 
conducting and supporting medical research.  In FY 2008, the total NIH 
appropriation was $29.5 billion, 80 percent of which was distributed 
through almost 50,000 competitive grants to more than 325,000 
investigators (hereinafter referred to as researchers) at over 3,000 
universities, medical schools, and other research institutions across the 
country and around the world.   
Pursuant to Federal regulation, each grantee institution receiving NIH 
funds must have a written policy for identifying financial conflicts of 
interest (hereinafter referred to as conflicts) and ensuring that conflicts 
are managed, reduced, or eliminated.  Grantee institutions must certify 
that they have written and enforced administrative processes to identify 
and manage, reduce, or eliminate conflicting interests.  They must also 
certify: 
  that existing conflicts (but not the nature of the interest or 
other details) will be reported to NIH prior to the expenditure 
of any funds under that award; 
  that these conflicts have been managed, reduced, or 
eliminated; and  
  that any subsequently identified conflicts will be reported and 
will be managed, reduced, or eliminated, at least on an interim 
basis, within 60 days of identification. 
We collected information from each of the 41 grantee institutions that 
reported conflicts to NIH in FY 2006.  We also requested supporting 
documentation, including researchers financial disclosure forms, 
  OEI-03-07-00700  HOW NIH GRANTEES MANAGE FINANCIAL CONFLICTS OF INTEREST  i   
   
E X E C U T I V E   S U M M A R Y  
conflict management plans, and conflict-of-interest committee meeting 
notes related to 184 conflicts reported to NIH in FY 2006.  
FINDINGS 
The most common type of financial conflict of interest among     
NIH-funded researchers is equity ownership.  Financial conflicts of  
interest may provide researchers with incentives to improperly influence 
the results of grant research.  The most common type of conflict among 
researchers (111 out of 165 researchers with reported conflicts) was 
equity ownership (including stock and stock options) in companies in 
which the researchers financial interests could significantly affect the 
grant research.  Grantee institutions provided specific equity amounts for 
56 researchers.  Six of these researchers had equity valued at greater 
than $100,000, and 13 researchers had equity ownership of 50 percent or 
more.   
Other conflicts involved researchers inventing technology, consulting, or 
holding positions with outside companies.  For these conflicts, grantee 
institutions that could provide specific compensation amounts indicated 
that seven researchers received at least $50,000 in royalty payments or 
compensation for their services.   
To manage financial conflicts of interest, grantee institutions often 
require researchers to disclose their conflicts in research 
publications; however, grantee institutions rarely reduce or 
eliminate financial conflicts of interest.  Grantee institutions reported 
that they managed 136 researchers conflicts, reduced 6 researchers 
conflicts, and eliminated 6 researchers conflicts.  Another 17 researchers 
conflicts were handled using a combination of management, reduction, 
and elimination.   
Grantee institutions frequently used disclosure to manage researchers 
conflicts.  This includes disclosing the conflict in publications and/or 
presentations in which research results are presented.  Some of the other 
methods used by grantee institutions to manage conflicts did not seem to 
directly address the specific conflicts.  Examples of these methods include 
researchers certifying that their primary commitment is to the grantee 
institution and agreeing to abide by institutional financial              
conflict-of-interest policies and procedures. 
  OEI-03-07-00700  HOW NIH GRANTEES MANAGE FINANCIAL CONFLICTS OF INTEREST  ii   
   
EE XX EE CC UU TT II VV EE    SS UU MM MM AA RR YY   
Vulnerabilities exist in grantee institutions identification, 
management, and oversight of financial conflicts of interest.   
  Ninety percent of the grantee institutions rely solely on 
researchers discretion to determine which of their significant 
financial interests are related to their research and are 
therefore required to be reported.   
  Because nearly half of the grantee institutions do not require 
researchers to provide specific amounts of equity or compensation 
on their financial disclosure forms, the specific financial interests 
of NIH-funded researchers are often unknown. 
  Grantee institutions do not routinely verify information 
submitted by researchers.  
  Conflicts were not uniformly reported by grantee institutions. 
  The majority of grantee institutions do not have policies and 
procedures to address subgrantee compliance with Federal 
regulations regarding conflicts. 
  Grantee institutions lack documentation to support their 
oversight of conflicts. 
  Grantee institutions are not required to report to NIH any 
financial interests that they have with outside companies. 
RECOMMENDATIONS 
Eighty percent of NIHs budget is used to fund research grants at 
grantee institutions.  Given the complex nature of researchers conflicts 
and the vulnerabilities that exist regarding their identification and 
management, there is a need for more transparency about and oversight 
of grantee institutions.  Increased oversight is needed to ensure that   
(1) these conflicts are managed appropriately, (2) the research 
conducted using Federal funds is not biased by any conflicting financial 
interests of researchers, and (3) human subjects are not subjected to 
unnecessary risks. 
We continue to recommend, as we did in a previous report, that NIH: 
Request grantee institutions to provide details to NIH regarding the 
nature of all reported financial conflicts of interest and how they are 
managed, reduced, or eliminated. 
  OEI-03-07-00700  HOW NIH GRANTEES MANAGE FINANCIAL CONFLICTS OF INTEREST  iii   
   
E X E C U T I V E   S U M M A R Y  
We also recommend that NIH: 
Require grantee institutions to collect information on all significant 
financial interests held by researchers and not just those deemed by 
researchers to be reasonably affected by the research. 
Require grantee institutions to collect information on specific 
amounts of equity and compensation from researchers. 
Develop and disseminate guidance on methods to verify 
researchers financial interests. 
Ensure that grantee institutions are providing adequate oversight of 
subgrantee compliance with Federal financial conflict-of-interest 
regulations.  
Ensure that grantee institutions are maintaining proper 
documentation as outlined in the Federal financial  
conflict-of-interest regulations. 
Ensure that grantee institutions take appropriate actions against 
researchers who do not follow grantee institutions  
financial conflict-of-interest policies and procedures. 
Increase oversight of grantee institutions to ensure that financial 
conflicts of interest are reported and managed appropriately. 
Develop regulations that address institutional financial conflicts of 
interest. 
AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 
RESPONSE 
Overall, NIH did not state whether it concurs or does not concur with 
our recommendations.  We ask that in its final management decision, 
NIH more clearly indicate whether it concurs or does not concur with 
our recommendations and what steps, if any, it will take to implement 
them.   
NIH stated that it takes its compliance oversight responsibilities very 
seriously and is committed to preserving the public trust in objective 
scientific research.   
NIH also stated that many of the report findings were not made within 
the context of the current financial conflict-of-interest regulation and 
therefore, many of the recommendations are difficult to assess and/or 
cannot be implemented because NIH is bound by the requirements of 
  OEI-03-07-00700  HOW NIH GRANTEES MANAGE FINANCIAL CONFLICTS OF INTEREST  iv   
   
E X E C U T I V E   S U M M A R Y  
the current regulation.  OIG believes that the current regulation allows 
NIH to take a more proactive role in overseeing grantee institutions.  
Moreover, OIG has recommended that, where necessary, NIH amend its 
regulations to enhance its oversight of financial conflicts of interest.     
Regarding OIGs first recommendation, that NIH collect the details 
about conflicts and how they were managed, reduced, or eliminated, 
NIH stated that it could be argued that requesting this information 
from grantees with frequency would constitute a rule, which would need 
to be issued consistent with notice and comment procedures.  OIG 
believes that the current regulation does not prohibit NIH from 
requesting follow-up information from grantee institutions with respect 
to reported conflicts.  The regulation specifies that the grantee 
institutions agree to produce such information on all conflicting 
interests.  To address NIHs concern, we have modified our 
recommendation slightly to parallel the language of the regulation at  
42 CFR  50.604(g)(3).  OIG continues to recommend that NIH work 
with the Secretary of Department of Health and Human Services (HHS) 
to amend the current regulation to request details regarding the nature 
and management of conflicts at grantee institutions.   
Regarding OIGs recommendation that NIH increase its oversight of 
grantee institutions, NIH highlighted a number of initiatives designed 
to enhance its oversight of and promote grantee compliance with 
Federal regulation.  However, despite these efforts, vulnerabilities 
continue to exist at grantee institutions in their identification, 
management, and oversight of conflicts.  Therefore, OIG maintains its 
position that increased oversight of grantee institutions is needed to 
ensure that conflicts are reported and managed appropriately.   
NIH will consider OIGs recommendation on developing and 
disseminating guidance on methods to verify researchers conflicts.  
With respect to OIGs recommendation that grantee institutions 
maintain proper documentation, NIH will continue to emphasize 
grantee institution compliance with documentation requirements 
established by Federal regulation. 
In response to the remaining five OIG recommendations, NIH referred 
to the recently developed Advanced Notice of Proposed Rulemaking 
(ANPRM).  NIH stated that many of the observations made by OIG are 
addressed in the ANPRM and will be considered by NIH and HHS 
during the formal rulemaking process.  OIG understands that NIH is 
engaged in rulemaking regarding some of the very vulnerabilities we 
  OEI-03-07-00700  HOW NIH GRANTEES MANAGE FINANCIAL CONFLICTS OF INTEREST  v   
   
E X E C U T I V E   S U M M A R Y  
identified in our report.  OIG will review the proposed rule and provide 
comments or clearance during the Departments internal review 
process.   
 
  OEI-03-07-00700  HOW NIH GRANTEES MANAGE FINANCIAL CONFLICTS OF INTEREST  vi   
 
 
 T A B L E   O F   C O N T E N T S  
EXECUTIVE SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i
 
 
I N T RO DUC T IO N . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 
 
 
F I N D IN G S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 
The most common type of financial conflict of interest among 
NIH-funded researchers is equity ownership . . . . . . . . . . . . . . . . . 8 
 
To manage financial conflicts of interest, grantee institutions         
often require researchers to disclose their conflicts in research  
publications; however, grantee institutions rarely reduce or    
eliminate financial conflicts of interest . . . . . . . . . . . . . . . . . . . . . 11 
Vulnerabilities exist in grantee institutions identification, 
management, and oversight of financial conflicts of interest . . . . 12 
   
R E C O MMEN D A T ION S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 
Agency Comments and Office of Inspector General Response . . . 22 
 
APPENDIXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 
A:  Financial Conflict-of-Interest Regulations. . . . . . . . . . . . . . . . 25 
 
B:  Methods Employed by Grantee Institutions To Manage,       
Reduce, or Eliminate Conflicts Reported to NIH From 
October 1, 2005, Through September 30, 2006 . . . . . . . . . . . . . . . 27 
 
C:  Agency Comments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 
 
   
A C K NO WL E D G M E N T S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37   
   
 I N T R O D U C T I O N  
OBJECTIVES 
1. To determine the nature of financial conflicts of interest reported by 
grantee institutions to the National Institutes of Health (NIH) in 
fiscal year (FY) 2006. 
2. To determine how grantee institutions managed, reduced, or 
eliminated financial conflicts of interest. 
3. To determine whether vulnerabilities exist in grantee institutions 
oversight of the identification and management of financial conflicts 
of interest. 
BACKGROUND 
Pursuant to Federal regulation, each grantee institution receiving NIH 
funds must have a written policy for identifying financial conflicts of 
interest (hereinafter referred to as conflicts) and ensuring that conflicts 
are managed, reduced, or eliminated.  Conflicts occur when designated 
official(s) of grantee institutions reasonably determine that a significant 
financial interest could directly and significantly affect the design, 
conduct, or reporting of the research funded by NIH.  With 80 percent of 
NIH funding allocated for extramural research grants, it is critical that 
any existing or potential conflicts be reported and managed, reduced, or 
eliminated by grantee institutions.  
This study was conducted in response to a congressional request. 
National Institutes of Health Grants 
NIH is the primary Federal agency responsible for conducting and 
supporting medical research.  Organized into 27 Institutes and Centers 
(Institutes), NIH receives billions of dollars annually to support its 
mission.  In FY 2008, the total NIH appropriation was $29.5 billion,    
80 percent of which was distributed through almost 50,000 competitive 
grants to more than 325,000 investigators (hereinafter referred to as 
researchers) at over 3,000 universities, medical schools, and other 
research institutions across the country and around the world.1  
Twenty-four of the 27 Institutes have grant-making authority.  Each of 
these 24 Institutes is responsible for managing and overseeing its 
 
1 NIH, NIH budget information.  Available online at 
http://www.nih.gov/about/budget.htm.   Accessed on November 10, 2008. 
  OEI-03-07-00700  HOW NIH GRANTEES MANAGE FINANCIAL CONFLICTS OF INTEREST  1   
   
I N T R O D U C T I O N  
grants, and each has its own grants management staff that handles 
these functions.   
Responsibility of Grantee Institutions  
Federal regulation at 42 CFR pt. 50, subpart F, establishes standards to 
ensure that the design, conduct, or reporting of research funded under 
NIH grants will not be biased by researchers2 conflicts.  Pursuant to    
42 CFR  50.604, each grantee institution receiving NIH funds must 
have a written policy for identifying conflicts and must ensure that 
conflicts are managed, reduced, or eliminated.  Additional text from  
42 CFR  50.604 is presented in Appendix A.   
Grantee institutions must also certify that they have written and 
enforced administrative processes to identify and manage, reduce, or 
eliminate conflicts.  As part of this process, grantee institutions must 
collect from each researcher a listing of his/her known significant 
financial interests (and those of his/her spouse and dependent children) 
that would reasonably appear to be affected by the research and in 
entities whose financial interests would reasonably appear to be 
affected by the research.  Pursuant to 42 CFR  50.603, a significant 
financial interest includes:  salaries, royalties, or other payments from 
sources other than the grantee institution exceeding $10,000 in a  
12-month period; as well as equity interests exceeding $10,000 in fair 
market value and/or representing more than 5 percent ownership in any 
single entity (hereinafter referred to as a company).  Additional text 
from 42 CFR  50.603 is presented in Appendix A.    
The regulations at 42 CFR  50.605(a) provide that a conflict exists 
when the designated official at the grantee institution reasonably 
determines that a significant financial interest could directly and 
significantly affect the design, conduct, or reporting of NIH-funded 
research.  Regulations also require that the grantee institution certify 
that existing conflicts (but not the nature of the interests or other 
details) be reported to NIH prior to the expenditure of any grant funds 
and that these conflicts have been managed, reduced, or eliminated.   
The grantee institution must also certify that any subsequently 
identified conflicts will be reported and the conflicts will be managed, 
reduced, or eliminated, at least on an interim basis, within 60 days of 
identification. 
 
2 The term researcher includes the principal researcher or any other person who is 
responsible for the design, conduct, or reporting of research funded by NIH. 
  OEI-03-07-00700  HOW NIH GRANTEES MANAGE FINANCIAL CONFLICTS OF INTEREST  2   
   
I N T R O D U C T I O N  
The NIH Grants Policy Statement and the NIH grant application 
explain the financial disclosure responsibilities of grantee institutions.  
By signing a grant application, the designated representative of the 
grantee institution is certifying that the applicant organization will 
comply with all applicable assurances and certifications referenced in 
the application, including those related to conflicts.   
On May 8, 2009, NIH issued an Advance Notice of Proposed 
Rulemaking to gain public input on whether modifications are needed to 
42 CFR pt. 50, subpart F.  NIH invited public comments on all aspects 
of potential regulation in this area, and particularly on the following 
issues:  (1) expanding the scope of the regulation and disclosure of 
interests, (2) changing the definition of significant financial interest, 
(3) identifying and managing of conflicts by grantee institutions, 
(4) assuring grantee institution compliance, (5) requiring grantee 
institutions to provide additional information to NIH, and  
(6) broadening the regulations to address institutional conflicts of 
interest.3 
NIH Oversight of Grantee Institutions 
NIHs oversight responsibilities include ensuring that (1) grantee 
institutions are fully and correctly implementing the financial     
conflict-of-interest regulation at 42 CFR pt. 50, subpart F, and  
(2) reporting requirements are being met.  In FY 2006, NIH conducted 
targeted site reviews of 18 grantee institutions as part of its oversight 
responsibilities.  The 18 grantee institutions reviewed represented 
approximately $4 billion in research grant awards for FY 2005.4  NIH 
reported that the $4 billion represented approximately 25 percent of 
total research grant awards for FY 2005.   
NIH found no instances of intentional noncompliance by grantee 
institutions but found that more emphasis is needed on the appropriate 
definition of investigator as listed at 42 CFR  50.603.  NIH observed 
that grantee institutions have the most difficulty identifying and 
reporting conflicts that arise after the start of the research project and 
obtaining disclosures from researchers who join the project after its 
 
3 NIH Guide Notice NOT-OD-09-099.  Available online at 
http://grants.nih.gov/grants/guide/notice-files/NOT-OD-09-099.html.  Accessed on            
May 12, 2009. 
4 Observations from NIHs FY 2006 Targeted Site Reviews on Financial Conflict of 
Interest. Available online at http://grants1.nih.gov/grants/policy/coi/index.htm.  Accessed 
on November 21, 2008.   
  OEI-03-07-00700  HOW NIH GRANTEES MANAGE FINANCIAL CONFLICTS OF INTEREST  3   
   
I N T R O D U C T I O N  
inception.5  Other compliance issues included (1) not having provisions 
in place to ensure that identified conflicts are reported to NIH by 
subgrantees through the prime grantee, (2) not having a consistent 
reporting process in place, (3) submitting grant applications prior to 
collecting significant financial interest information from researchers, 
and (4) expending grant funds prior to reporting identified conflicts to 
NIH.6  
Inquiries of Researchers Conflicts  
Recent inquiries by the Senate Finance Committee (Committee) into 
payments from drug and device companies to researchers and 
physicians has led to a number of high-profile investigations into the 
financial conflicts of interest among NIH-funded researchers.  To date, 
nine cases that involve NIH-funded researchers have been made public 
by Committee staff.  Among these cases, five include researchers who 
allegedly failed to report that they received payments (or own stock) of 
$1 million or more from drug and device companies.  One of these 
researchers, from Emory University, failed to disclose that he received a 
total of $2.4 million over a 7-year period.  Subsequently, NIH suspended 
a $9 million grant to Emory and the researcher stepped down from 
research and as department chair.          
Related Study by the Office of Inspector General  
In a January 2008 report, the Office of Inspector General (OIG) 
reviewed 438 financial conflict-of-interest reports that were received by 
NIH from grantee institutions during FY 2004 through FY 2006.7  Of 
these 438 reports, 93 percent did not state the nature of the conflicts 
and 89 percent did not state how conflicts would be managed, reduced, 
or eliminated because regulations do not require grantee institutions to 
report the nature or other details of the conflicts.  Regulations only 
require grantee institutions to report the existence of a conflict and 
assure that the conflict has been managed, reduced, or eliminated.  The 
report concluded that it would be difficult for NIH to determine whether 
followup with grantee institutions is warranted if the details regarding 
the nature and management of conflicts are not collected.   
 
5 Ibid. 
6 Ibid. 
7 HHS, OIG, National Institutes of Health:  Conflicts of Interest in Extramural 
Research, OEI-03-06-00460, January 2008.     
  OEI-03-07-00700  HOW NIH GRANTEES MANAGE FINANCIAL CONFLICTS OF INTEREST  4   
   
I N T R O D U C T I O N  
One of OIGs recommendations to NIH was to require grantee 
institutions to provide details regarding the nature of conflicts and how 
they are managed, reduced, or eliminated.  In response to OIGs final 
report, NIH did not concur with this recommendation.  NIH stated that 
the responsibility for identifying and managing conflicts must remain 
with grantee institutions and that collecting such information would 
effectively transfer the responsibility to the Federal Government.  NIH 
also stated that it had taken a series of actions to improve its 
administration of financial conflict-of-interest policies and procedures.  
METHODOLOGY 
Scope 
We focused our review on the 41 grantee institutions that submitted        
225 financial conflict-of-interest reports to NIH in FY 2006.  These 
reports, provided by NIH, were originally identified in OIGs       
January 2008 study.  An additional grantee institution sent a report to 
NIH that was a notification of potential research misconduct and not of 
a conflict.  This grantee institution and its researcher are not included 
in our data analysis.   
In OIGs prior study, we found that NIH could not provide an accurate 
count of the financial conflict-of-interest reports received from grantees 
during FY 2004 through FY 2006, and therefore the 225 reports 
reviewed for this study are not a complete count of all conflicts reported 
to NIH in FY 2006.  During data collection for this study, 24 of the 41 
grantee institutions reported sending to NIH an additional 235 financial 
conflict-of-interest reports for FY 2006 that NIH had not originally 
provided to us.  These additional reports are not included in our data 
analysis.  
Data Collection 
We collected data from each of the 41 grantee institutions that reported 
conflicts to NIH in FY 2006.  Officials from all 41 grantee institutions 
responded to our request for information regarding the following:  their 
policies and procedures describing the reporting and management of 
conflicts; the nature of each conflict reported to NIH in FY 2006; how 
each conflict was managed, reduced, or eliminated; the decision process 
for determining how each conflict was managed, reduced, or eliminated; 
and how grantee institutions ensure researchers compliance with 
Federal regulations and conflict management plans.  All 41 grantee 
institutions had policies and procedures related to conflicts.      
  OEI-03-07-00700  HOW NIH GRANTEES MANAGE FINANCIAL CONFLICTS OF INTEREST  5   
   
I N T R O D U C T I O N  
We requested documentation that outlined how grantee institutions 
identify and manage, reduce, or eliminate conflicts.  This documentation 
included: 
  written policies and procedures that meet the requirements in 
Federal regulations at 42 CFR pt. 50, subpart F, and any 
additional written policies and procedures; 
  written information or guidance that the grantee institution 
provides to researchers regarding conflicts; 
  institutional forms or checklists that researchers use to disclose 
their significant financial interests and those used to certify 
compliance with conflict management plans; and 
  other institutional forms or checklists used by designated 
officials, committee members, or other staff to review and/or 
verify financial disclosure information and determine whether 
conflicts exist.  
We also requested supporting documentation for each of the financial        
conflict-of-interest reports submitted to NIH in FY 2006.  Supporting 
documentation included: 
  the researchers financial disclosure forms; conflict management 
plans; proof that the conflicts were managed, reduced, or 
eliminated; meeting notes; and records of contact; 
  correspondence to/from the researcher, conflict-of-interest 
committee, designated officials, and other grantee institution 
staff regarding the conflicts; and  
  any additional documentation that provides information 
regarding how the conflicts were identified and managed, 
reduced, or eliminated.   
Data Analysis 
Of the 225 financial conflict-of-interest reports submitted to NIH in    
FY 2006 by the 41 grantee institutions, we included only 184 in our 
analysis.  We excluded 41 financial conflict-of-interest reports from        
five different grantee institutions for various reasons.  Thirty-three of 
these 41 reports were from one grantee institution.  Upon receipt of our 
survey, that grantee institution determined that the 33 reports had 
been mistakenly sent to NIH.  According to the grantee institution, the 
financial interests were not significant financial interests as defined by 
Federal regulation.  The grantee institution stated that these conflicts 
  OEI-03-07-00700  HOW NIH GRANTEES MANAGE FINANCIAL CONFLICTS OF INTEREST  6   
   
I N T R O D U C T I O N  
were, therefore, not required to be reported to NIH.  The remaining 
eight reports were excluded because they were either duplicates or 
erroneous reports (e.g., the report was for an incorrect grant number).  
We used a standard protocol to extract information from the 
documentation.  We analyzed the grantee institutions policies and 
procedures regarding conflicts.  We determined whether these documents 
demonstrated that each grantee institution was meeting requirements in 
the Federal regulation at 42 CFR  50.604.  We also determined whether 
grantee institutions followed their own policies and procedures to identify 
and manage, reduce, or eliminate conflicts.  This includes identifying the 
methods that were implemented to manage, reduce, or eliminate conflicts.  
We also determined whether grantee institutions verified information 
submitted by researchers.  Verification was defined as any attempt made 
by the grantee institution to validate, certify, or clarify the conflict 
information provided by the researcher.         
Standards 
This study was conducted in accordance with the Quality Standards for 
Inspections approved by the Council of the Inspectors General on 
Integrity and Efficiency. 
  OEI-03-07-00700  HOW NIH GRANTEES MANAGE FINANCIAL CONFLICTS OF INTEREST  7   
   
 F I N D I N G S  
The most common type of financial conflict of 
Federal regulation requires that 
interest among NIH-funded researchers is equity 
grantee institutions report 
ownership 
significant financial interests to 
NIH if they determine that the financial interests could directly and 
significantly affect the design, conduct, or reporting of the research.  
These financial interests may provide researchers with incentives to 
improperly influence the results of grant research.  This review includes 
the 184 financial conflict-of-interest reports sent to NIH in FY 2006; 
these reports involved 165 researchers.  
The majority of researchers conflicts were related to equity ownership in 
outside companies 
Financial conflicts of interest may provide researchers with incentives 
to improperly influence the results of grant research.  The most common 
type of conflict among researchers was equity ownership (including 
stocks and stock options) in companies in which the researchers 
financial interests could significantly affect the grant research.  One-
hundred eleven researchers owned equity in companies ranging from 
publicly traded companies to small, privately held companies.  Of these 
111 researchers, 44 (39 percent) were founding members of the 
companies. 
Table 1 shows the nature of conflicts that were reported by grantee 
institutions in FY 2006, the number of researchers who had each type of 
conflict, and the number of reports that were related to each type.  
Table 1:  Nature and Number of Conflicts Reported by Grantee Institutions 
Between October 1, 2005, and September 30, 2006 
 
Nature of Conflicts  Number of Researchers1  Number of Reports2 
Owning equity   111  127 
Inventing or de veloping 
95  101 
technology/intellectual property 
Consulting for  an outside company  66  74 
Holding a posit ion at an outside company  65  78 
Receiving royalties  27  32 
 
Speaking or writing for an outside company  7  7 
 
Serving as an expert witness  1  1 
Other3    3  3 
Source:  OIG analy sis of grantee institution survey responses. 
1 The total number of researchers equals 165.  The number of researchers in this column does not equal 165 because some 
researchers had more than one type of conflict.  
2 The number of re ports in this column does not equal 184 because some reports were about more than one type of conflict. 
3 These three researchers are one researcher who was the daughter of the NIH program officer on the grant, one researcher 
whose spouse who was an employee of a related outside company, and one researcher whose paid staff on the grant included 
his son and an employee of his private company.
  OEI-03-07-00700  HOW NIH GRANTEES MANAGE FINANCIAL CONFLICTS OF INTEREST  8   
   
F I N D I N G S  
 
Grantee institutions provided specific equity amounts for 56 researchers;  
6 researchers had equity valued at more than $100,000, and  
13 researchers had equity ownership amounts of 50 percent or more.   
For 56 of the 111 researchers with equity ownership, grantee 
institutions provided specific amounts of equity that were reported as 
dollar values and/or ownership percentages.  Grantee institutions 
submitted equity values for 28 of these researchers, which ranged from   
$0 to $4 million.  Six of these 28 researchers (21 percent) had equity 
values greater than $100,000.  The average equity value for researchers 
was $232,464 and the median was $22,500.  For equity interests that 
were valued at $0, the researchers owned a percentage of a company 
that was above the Federal threshold (5 percent).  For example, a 
researcher could hold a percentage of equity ownership in a company for 
which the equity had no current dollar value yet.  Although the equity 
may have no value at present, it may have great future value if the 
research leads to the eventual commercialization of a product.  
The researcher with equity valued at $4 million disclosed that he was 
president and director of a company related to the research.  This 
researcher owned 400,000 shares and 300,000 stock options of the 
company, valued at a total of $4 million.  The researcher also received 
an annual salary of $325,000.   
For 41 of the 56 researchers with specific amounts of equity, grantee 
institutions also submitted equity ownership percentages that ranged from 
2 percent to 100 percent.  For these 41 researchers, the average equity 
percentage was 38 percent and the median equity percentage was            
33 percent.  Thirteen of these 41 researchers (32 percent) had equity 
ownership amounts that were 50 percent or more.   
Other common conflicts of researchers included inventing technology, 
consulting, holding positions with outside companies, or receiving royalties  
The second most common type of conflict among researchers was 
inventing or developing technology/intellectual property related to or 
used as part of the grant research.  Grantee institutions reported that 
95 researchers had this type of conflict.  Nearly 70 percent of these           
95 researchers had their technology/intellectual property licensed by the 
grantee institution to a private company with which they had a  
  OEI-03-07-00700  HOW NIH GRANTEES MANAGE FINANCIAL CONFLICTS OF INTEREST  9   
   
F I N D I N G S  
relationship.8  Examples of relationships that researchers had with 
these companies include holding equity in the companies and consulting 
with the companies.  
Another common type of conflict among researchers was consulting with 
companies whose financial interests would reasonably appear to be 
affected by the grant research.  Sixty-six researchers had consulting 
agreements with outside companies, creating conflicts.  The majority of 
researchers consulted with just one company.  However, one researcher 
consulted with five companies.   
Sixty-five researchers held some type of position at outside companies, 
such as serving in an executive role, serving on a companys board of 
directors, and/or serving on a companys advisory board or medical 
review board.   
Twenty-seven researchers received royalties (either from the grantee 
institutions or other entities) from the licensing of 
technology/intellectual property.9  This technology/intellectual property 
was often licensed to the companies by the grantee institutions.    
Grantee institutions provided specific compensation amounts for               
31 researchers; 7 of these received at least $50,000 in payments.         
One-hundred thirty-nine researchers invented technology/intellectual 
property, consulted with outside companies, served on advisory boards, 
and/or provided other types of services.  Of these 139 researchers,      
113 were compensated for their services, received royalty payments, or 
had the potential to receive royalty payments.10   
Grantee institutions provided specific dollar amounts for 31 of the     
113 researchers; seven of these 31 researchers (23 percent) received at 
least $50,000 from royalty payments or for their services.  Instead of 
receiving a dollar payment for consulting, one additional researcher 
received a specific percentage of equity for his services.   
 
8 The Bayh-Dole Act, passed in 1980, facilitated the transfer of inventions developed by 
federally funded research institutions to private industry.  Private industry could then 
develop the inventions into commercial products that would benefit the public.  This 
transfer of technology is often done through licensing agreements between grantee 
institutions and private entities. 
9 Federal regulations exclude from the definition of a significant financial interest 
royalties received from the grantee institution; however, grantee institutions sometimes 
identified these royalties as conflicts.  
10 Twenty-six researchers provided services to outside companies but were not 
compensated (i.e., they served on advisory boards without compensation). 
  OEI-03-07-00700  HOW NIH GRANTEES MANAGE FINANCIAL CONFLICTS OF INTEREST  10   
   
F I N D I N G S  
Specific dollar amounts for compensation ranged from $1,500 to    
$1.075 million.  The researcher who reported $1.075 million received   
$1 million in royalties and $75,000 in consulting fees.  The average 
dollar amount of the compensation for all researchers was $79,248 and 
the median was $23,000.   
Grantee institutions reported that 
To manage financial conflicts of interest, 
136 researchers conflicts were 
grantee institutions often require researchers to 
managed, 6 researchers conflicts 
disclose their conflicts in research publications; 
were reduced, and 6 researchers 
however, grantee institutions rarely reduce or 
conflicts were eliminated.  
eliminate financial conflicts of interest 
Another 17 researchers conflicts 
were handled using a combination 
of management, reduction, and elimination.  However, grantee 
institutions were not consistent in how they used these terms.  For 
example, grantee institutions would describe a similar management 
method; yet one grantee institution would report the method as 
management, whereas another would report it as reduction.  Appendix 
B provides the methods grantee institutions used to manage, reduce, or 
eliminate researchers conflicts reported to NIH in FY 2006.   
The most common method for managing conflicts was disclosure.     
One-hundred forty-two researchers were required to disclose their 
conflicts in the following ways:    
  in publications and/or presentations in which the research 
results are circulated,  
  to other staff working on the grants,  
  to human research subjects participating in the grant 
research (this information is usually provided in patient 
consent forms), and/or 
  to the grantee institutions Institutional Review Boards 
(these boards ensure the rights and safety of people 
participating in clinical trials). 
The second most common method for managing conflicts was to ensure 
that protections were in place to prevent the exertion of inappropriate 
pressure on other staff working on the grant.  Sixty-two researchers had 
their conflicts managed using this method.  This method included: 
  OEI-03-07-00700  HOW NIH GRANTEES MANAGE FINANCIAL CONFLICTS OF INTEREST  11   
   
F I N D I N G S  
  ensuring that staff who work on the grant knew where to bring 
any concerns about the impact of the conflict on them or the 
research, 
  ensuring that students and trainees were not involved with the 
company with which the researcher had a relationship, and/or   
  gaining prior approval before allowing students and trainees to 
conduct research related to the company. 
Other common methods to manage conflicts included: 
  requiring researchers to notify the grantee institution when 
and how relationships with the outside companies changed 
(this included changes in equity amounts, changes in the 
nature of the researchers relationship with the outside 
companies, changes in any funding of the research provided 
by the outside companies, and accrual of royalties), 
  requiring researchers to ensure that an open exchange of 
research results would take place, 
  monitoring or oversight of the grant research by grantee 
institution staff not related to the grant research, and 
  limiting or prohibiting researchers from research involving 
human subjects. 
Some of the other methods used by grantee institutions to manage 
conflicts did not seem to directly address the specific conflicts.  
Examples of these methods include researchers certifying that their 
primary commitment is to the grantee institution and agreeing to abide 
by institutional financial conflict-of-interest policies and procedures. 
 
Vulnerabilities exist in grantee institutions  Vulnerabilities exist at grantee 
identification, management, and oversight of  institutions regarding conflicts.  
financial conflicts of interest   For example, grantee institutions 
do not require researchers to 
provide specific amounts of equity or compensation on financial 
disclosure forms.  Grantee institutions also do not routinely verify all 
researchers identified financial interests.  Moreover, some grantee 
institutions lacked documentation related to the reporting and/or 
management of these conflicts.  These vulnerabilities may affect the 
identification, management, and oversight of conflicts by grantee 
institutions.   
  OEI-03-07-00700  HOW NIH GRANTEES MANAGE FINANCIAL CONFLICTS OF INTEREST  12   
   
F I N D I N G S  
Ninety percent of the grantee institutions rely solely on the researchers 
discretion to determine which of their significant financial interests are 
related to their research and are therefore required to be reported     
Federal regulation requires grantee institutions to obtain a listing of 
researchers significant financial interests that would reasonably appear 
to be affected by their research.  All 41 grantee institutions require 
researchers to disclose only significant financial interests that relate to, 
or could possibly relate to, the research.  It is left up to each researchers 
discretion to determine which significant financial interests would 
reasonably appear to be affected by research.  None of the grantee 
institutions maintains a policy of full disclosure of all significant 
financial interests.  Full and complete disclosure ensures that the 
determination of whether a significant financial interest relates to the 
research rests with the grantee institution and not with the researcher.   
However, three grantee institutions also require researchers to disclose 
all of their consulting agreements and positions held at outside 
companies.  One grantee institution has additional disclosure 
requirements for its faculty physicians.   
Because nearly half of the grantee institutions do not require researchers to 
provide specific amounts of equity or compensation on their financial 
disclosure forms, the specific financial interests of NIH-funded researchers 
are often unknown 
Disclosure requirements for equity and compensation related to 
conflicts are not consistent across grantee institutions.  Of the              
41 grantee institutions, 23 specifically instruct researchers to disclose 
actual dollar amounts of compensation and/or equity on financial 
disclosure forms or in supplemental forms.  The remaining 18 grantee 
institutions do not specifically instruct researchers to disclose actual 
amounts.  These grantee institutions require researchers to disclose 
only that they received monetary compensation or equity above a 
certain threshold (e.g., over $10,000) or as a range (e.g., $20,001 to 
$100,000).  However, 7 of these 18 grantee institutions instruct 
researchers to provide details of their financial interests, which could 
include actual dollar amounts.  If specific amounts of equity and 
compensation are not reported, grantee institutions may not be able to 
assess the true nature of the conflict or determine the most appropriate 
management strategy.  
Grantee institutions did not provide specific equity amounts for 50 percent 
of researchers who received equity.  Grantee institutions did not provide 
  OEI-03-07-00700  HOW NIH GRANTEES MANAGE FINANCIAL CONFLICTS OF INTEREST  13   
   
FF II NN DD II NN GG SS   
specific amounts for 55 of 111 researchers who received equity.  For     
48 of these 55 researchers, grantee institutions provided only a 
minimum value or a range for researchers equity.  For the majority of 
these equity amounts, grantee institutions provided a minimum value, 
such as greater than 5 percent or greater than $10,000.  For the 
remaining 7 researchers, grantee institutions provided no information 
on the amount of equity held by researchers.  
Grantee institutions did not provide specific amounts of compensation for     
72 percent of researchers who received compensation from an outside 
company.  Grantee institutions did not provide specific amounts of 
compensation for 81 of the 113 researchers (72 percent) who were 
compensated for their services, received royalty payments, or had the 
potential to receive royalty payments.  For 63 of these researchers, 
grantee institutions provided only a minimum value or ranges.  For     
15 of the 81 researchers, grantee institutions did not provide potential 
royalty amounts.  For another 3 of the 81 researchers, the compensation 
amount could not be found within any information that was submitted 
by the grantee institution.   
Grantee institutions do not routinely verify information submitted by 
researchers       
Thirty of the 41 grantee institutions reported that they verify the 
information disclosed by researchers.  However, only 19 of these grantee 
institutions submitted documentation to show how they verified 
information reported by researchers in FY 2006.  Only seven of these 
grantee institutions verified information for all of their financial 
conflict-of-interest reports.  Because grantee institutions do not 
routinely verify information submitted by researchers, they rely on the 
researchers to submit accurate and complete information.  
According to the documentation, 19 grantee institutions verified 
information for conflicts related to 59 of their 135 reports (44 percent).  
For conflicts related to 48 reports, grantee institutions used only one 
method to verify information.  For conflicts related to 11 reports, 
grantee institutions used multiple methods of verification.   
For 31 of the 59 verified reports, the submitted documentation showed 
that information was verified by reviewing licensing agreements and/or 
patents involving the researchers.  For 21 of the 59 reports, the 
documentation showed that researchers involvement with outside 
companies was confirmed through Internet searches.  For 15 of the 59 
reports, evidence showed that consulting agreements or contracts 
  OEI-03-07-00700  HOW NIH GRANTEES MANAGE FINANCIAL CONFLICTS OF INTEREST  14   
   
F I N D I N G S  
between the researchers and the outside companies were reviewed for 
verification.  Documentation for 3 of the 59 reports showed that the 
grantee institution contacted the outside company to confirm the nature 
of the relationship with the researcher.       
Conflicts were not uniformly reported by grantee institutions 
Because there was no standard format for reporting researchers 
conflicts to NIH during the time of our review, these conflicts were not 
reported in a consistent format across grantee institutions.  Some 
grantee institutions sent one financial conflict-of-interest report that 
related to one grant, but pertained to multiple researchers.  Conversely, 
other grantee institutions sent a separate report for each researcher 
with a conflict who worked on the same grant.  One grantee institution 
sent separate reports for a researchers conflicts that were related to 
several different projects associated with one grant.  Because of the lack 
of a consistent format, a one-to-one relationship did not exist between 
the number of reports sent to NIH by grantee institutions and the 
number of researchers who have conflicts.  Without an accurate count of 
the number of conflicts among researchers, NIH may encounter 
difficulties with the tracking and oversight of conflicts.  
Beginning in July 2009, NIH requires grantee institutions to utilize 
their Electronic Research Administration (eRA) Commons Web-based 
system to report researchers conflicts.11  The financial                 
conflict-of-interest module in eRA Commons will allow grantee 
institutions to prepare an initial financial conflict-of-interest report, as 
well as edit or rescind the report for each identified conflict.  For each 
report submitted, the following data will be collected: 
  grant number; 
  principal researcher; 
  name of the researcher with the conflict; 
  whether the conflict has been (1) managed, (2) reduced, or  
(3) eliminated; 
  whether the report is for a subgrantee; and 
 
11 NIH, Financial Conflict of Interest (FCOI): User Guide, Commons System Version 
2.19.1.4.  Available online at http://era.nih.gov/files/fcoi_user_guide.pdf.  Accessed on  
June 19, 2009.    
  OEI-03-07-00700  HOW NIH GRANTEES MANAGE FINANCIAL CONFLICTS OF INTEREST  15   
   
FF II NN DD II NN GG SS   
  the name of subgrantee if the report is for a subgrantee 
recipient.  
The majority of grantee institutions do not have policies and procedures in 
place to address subgrantee compliance with Federal regulations regarding 
conflicts 
Federal regulations require grantee institutions to take reasonable 
steps to ensure that their subgrantees comply with the regulations.  
However, only 17 out of 41 grantee institutions sent documentation 
showing that they address subgrantee compliance with institutional 
policies and procedures.  Furthermore, documentation for only 2 of 
these 17 grantee institutions provided specific information regarding 
the process subgrantees should follow in disclosing conflicts to the 
grantee institutions.    
In addition, 2 of the 184 financial conflict-of-interest reports reviewed 
for this study were subgrantee notifications to the grantee institutions.  
When one of these grantee institutions was asked to provide details 
regarding the nature and management of the researchers conflict for 
the purpose of this study, the grantee institution could not do so and 
had to contact the subgrantee for such details.   
Grantee institutions lack documentation to support their oversight of 
conflicts  
Some conflicts lacked documentation regarding researchers financial 
interests.  Conflicts related to 18 reports at six grantee institutions did 
not have documentation to show that grantee institutions reporting 
policies and procedures were followed.  For conflicts related to 15 of the            
18 reports, grantee institutions did not submit specific forms that 
researchers are required by policies and procedures to complete.   
For conflicts related to 2 of the 18 reports, documentation indicated that 
conflicts were reported inaccurately.  Discrepancies were found between 
the initial financial disclosure forms submitted by the researcher and 
subsequent information discovered by the grantee institution.  For 
example, one researcher failed to disclose that he held 386,250 stock 
options in the company in which he had a conflict.  Another researcher 
failed to disclose the fact that an employee of the researchers company 
and the researchers son were paid as staff on the grant.  In these two 
instances, although the grantee institutions discovered the conflicts, the 
researchers did not initially report them. 
For the remaining financial conflict of interest report, no supporting 
documentation was submitted.     
  OEI-03-07-00700  HOW NIH GRANTEES MANAGE FINANCIAL CONFLICTS OF INTEREST  16   
   
F I N D I N G S  
For conflicts related to another nine financial conflict-of-interest reports 
at four grantee institutions, the grantee institutions submitted only 
financial disclosure forms dated several years before or 1 year after the 
date of the report to NIH.  For example, one grantee institution 
submitted financial disclosure forms from FY 2001 even though the 
grantee institutions policy requires researchers to submit annual 
disclosures.  Another grantee institution submitted financial disclosure 
forms from FY 2007.    
Some conflicts lacked documentation to show that they were managed, 
reduced, or eliminated.  For conflicts related to nine reports at five 
grantee institutions, no supporting documentation was submitted to 
show that the conflicts were managed, reduced, or eliminated.   
For 60 out of 184 reports, no evidence could be found in the submitted 
documentation to show that management methods were followed.  
Submitted documentation showed that researchers followed 
management methods in 124 of the 184 reports.  For the remaining          
60 reports, no evidence could be found in the documentation to show 
that management methods were followed. 
Grantee institutions submitted various types of documentation to show 
that researchers conflicts were managed.  For 67 reports, grantee 
institutions submitted evidence that a periodic review of the conflicts 
was conducted.12  Documentation submitted for 53 reports provided 
evidence to show that the conflicts were disclosed in publications, 
during presentations, on consent forms, and to researchers staff 
members or students.  For 14 reports, submitted documentation showed 
that a data-monitoring committee or an independent reviewer was 
assigned to monitor the research projects.   
Finally, documentation submitted for 15 reports contained evidence that 
the institution obtained only a certification signature from the 
researcher stating that management methods had been followed. 
 
12 Periodic review includes written progress reports or annual updates from researchers 
regarding their conflicts and/or reports supporting that the conflicts were managed, 
reduced, or eliminated.  Periodic review also includes reviews by a conflict-of-interest 
committee.   
  OEI-03-07-00700  HOW NIH GRANTEES MANAGE FINANCIAL CONFLICTS OF INTEREST  17   
   
F I N D I N G S  
Grantee institutions are not required to report to NIH any financial interests 
that they have with outside companies 
Although this study focuses on researchers conflicts, license agreements 
can also pose conflicts for the grantee institutions themselves.  Grantee 
institutions provided documentation that showed they held the same 
types of financial interests as their researchers.  The financial interests 
held by these researchers were determined to be conflicts by the grantee 
institutions.  NIH does not have any policies or procedures in place for 
grantee institutions to report institutional conflicts.  The potential for 
financial gain can pose an institutional conflict when a grantee 
institution licenses technology/intellectual property for the purposes of 
commercialization.   
 
  OEI-03-07-00700  HOW NIH GRANTEES MANAGE FINANCIAL CONFLICTS OF INTEREST  18   
   
F R IE NRC DEO IMCN MOG EMS NM  DE ANT DI AO TN IS O  N S  
 
 
NIH is the primary Federal agency responsible for conducting and 
supporting medical research.  Eighty percent of NIHs $29 billion budget 
is used to fund research grants at research institutions across the 
country and around the world.  With so much funding at stake, the 
question of research integrity becomes crucial because of the 
appearance or existence of conflicts by recipients of these grants.  It is 
vital to public health and safety that this research not be biased by 
researchers conflicts.  
Federal regulations establish standards to ensure that the design, 
conduct, and reporting of federally funded research will not be biased by 
any conflicting financial interest of a researcher.  The regulations 
require that grantee institutions only report to NIH the existence of a 
conflict and assure that the conflict has been managed, reduced, or 
eliminated.  As found in OIGs previous study, National Institutes of 
Health:  Conflicts of Interest in Extramural Research,   
OEI-03-06-00460, NIHs primary method of oversight is reliance on the 
assurances that the grantee institutions have followed Federal 
regulations and managed, reduced, or eliminated the conflicts.   
Given the complex nature of researchers conflicts and the 
vulnerabilities that exist regarding their identification and 
management, there is a need for more transparency about and oversight 
of grantee institutions.  Increased oversight is needed to ensure that   
(1) these conflicts are managed appropriately, (2) the research 
conducted using Federal funds is not biased by any conflicting financial 
interests of researchers, and (3) human subjects are not subjected to 
unnecessary risks. 
Therefore, we continue to recommend, as we did in the previous report, 
that NIH: 
Request Grantee Institutions To Provide Details to NIH Regarding the Nature 
of All Reported Financial Conflicts of Interest and How They Are Managed, 
Reduced, or Eliminated 
In view of the findings of this report, OIG continues to believe that NIH 
has cause and current authority to collect basic details regarding the 
nature of conflicts and how they are managed as a followup to financial 
conflict-of-interest reports filed by grantee institutions.  This would 
  OEI-03-07-00700  HOW NIH GRANTEES MANAGE FINANCIAL CONFLICTS OF INTEREST  19   
   
R E C O M M E N D A T I O N S  
enable NIH to question whether certain conflicts could affect the 
research being conducted.   
We recommend that after a grantee submits a report identifying the 
existence of a conflict, NIH use the current authority at                         
42 CFR  50.604(g)(3) to request details about the conflict and how it 
was managed, reduced, or eliminated.  We further recommend that NIH 
request that 45 CFR  50.604(g)(2) be amended to provide it with the 
authority to require grantee institutions to report certain details to NIH 
about the nature and management of conflicts at the time grant funds 
are issued to the grantee institutions or for any conflicts that the 
grantee institutions identify after the initial report.   
We also recommend that NIH: 
Require Grantee Institutions To Collect Information on All Significant 
Financial Interests Held by Researchers and Not Just Those Deemed by 
Researchers To Be Reasonably Affected by the Research 
Federal regulation requires grantee institutions to collect a listing of 
researchers known significant financial interests that would reasonably 
appear to be affected by the research and in companies whose financial 
interests would reasonably appear to be affected by the research.  We 
believe the term reasonably affected by the research is left open to 
interpretation.  In addition, in the absence of any guidelines, 
researchers within the same grantee institution may interpret 
reasonably affected by the research in different ways.  Full and 
complete disclosure ensures that the determination of whether a 
significant financial interest relates to the research rests with the 
grantee institution and not with the researcher.  
To maintain consistency across grantee institutions and researchers, we 
recommend that NIH amend 45 CFR  50.604(c)(1) to require 
researchers to report all significant financial interests to the grantee 
institutions.  
Require Grantee Institutions To Collect Information on Specific Amounts of 
Equity and Compensation From Researchers 
Without knowing the exact amounts of researchers equity and 
compensation, grantee institutions may not know the true nature of 
researchers conflicts.  Collecting this information might enable grantee 
institutions to more appropriately manage conflicts.  
 
  OEI-03-07-00700  HOW NIH GRANTEES MANAGE FINANCIAL CONFLICTS OF INTEREST  20   
   
R E C O M M E N D A T I O N S  
Develop and Disseminate Guidance on Methods To Verify Researchers 
Financial Interests 
Although the majority of grantee institutions reported that they verify 
the information provided by researchers regarding their conflicts, few 
grantee institutions submitted documentation to show that verification 
was actually performed.  To assist grantee institutions in fulfilling their 
responsibilities under 42  CFR 50.604(d), NIH should provide grantee 
institutions with guidance on when and how to verify information 
provided by researchers. 
Ensure That Grantee Institutions Are Providing Adequate Oversight of 
Subgrantee Compliance With Federal Financial Conflict-of-Interest 
Regulations 
NIH should make certain that grantee institutions are ensuring that 
subgrantees are in compliance with Federal regulations.  NIH should 
also suggest to grantee institutions that they outline subgrantee 
procedures for reporting conflicts to both the grantee institutions and 
NIH.   
Ensure That Grantee Institutions Are Maintaining Proper Documentation as 
Outlined in the Federal Financial Conflict-of-Interest Regulations 
Because we found cases in which grantee institutions lacked 
documentation to show that conflicts were reported, managed, reduced, 
or eliminated according to grantee institutions policies and procedures, 
NIH should ensure that grantee institutions are maintaining proper 
documentation as outlined in 42 CFR  50.604(e). 
Ensure That Grantee Institutions Take Appropriate Actions Against 
Researchers Who Do Not Follow Grantee Institutions Financial         
Conflict-of-Interest Policies and Procedures 
NIH should ensure that grantee institutions are taking appropriate 
actions against researchers who do not follow institutional financial         
conflict-of-interest policies and procedures.  This is consistent with 
NIHs important oversight responsibilities under 42 CFR  50.606.  NIH 
may want to consider collecting information regarding noncompliant 
researchers and any sanctions taken against them to determine 
whether grantee institutions are appropriately handling researcher 
noncompliance. 
Increase Oversight of Grantee Institutions To Ensure That Financial 
Conflicts of Interest Are Reported and Managed Appropriately 
NIH should take a more proactive approach in overseeing grantee 
institutions because of the varying ways grantee institutions report, 
  OEI-03-07-00700  HOW NIH GRANTEES MANAGE FINANCIAL CONFLICTS OF INTEREST  21   
   
R E C O M M E N D A T I O N S  
manage, and oversee conflicts.  Although grantee institutions can 
provide guidelines to researchers indicating what constitutes a 
reportable significant financial interest, not all grantee institutions may 
define a significant financial interest that would reasonably be affected 
by the research in the same manner.  Therefore, NIH would need to 
provide oversight to ensure that grantee institutions are applying 
consistent standards.  NIH should also provide guidance regarding how 
financial conflicts should be managed so that management methods are 
used consistently across grantee institutions. 
Develop Regulations That Address Institutional Financial Conflicts of 
Interest 
Institutional financial conflicts of interest are not addressed by Federal 
regulations.  Because there is the potential for grantee institutions to 
have financial conflicts of interest related to grant research, NIH should 
develop regulations that address these interests.  In developing 
regulations NIH should address:  the definition of an institutional 
financial conflict of interest; the elements required in a grantee 
institutions s policy regarding institutional financial conflicts of 
interest; how institutional financial conflicts of interest are reported to 
NIH; and how institutional financial conflicts of interest are managed, 
reduced, or eliminated. 
AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 
RESPONSE 
Overall, NIH did not state whether it concurs or does not concur with 
our recommendations.  We ask that in its final management decision, 
NIH more clearly indicate whether it concurs or nonconcurs with our 
recommendations and what steps, if any, it will take to implement 
them.   
NIH stated that it takes its compliance oversight responsibilities very 
seriously and is committed to preserving the public trust in objective 
scientific research.  NIH strongly believes that all research should be 
conducted with the highest scientific and ethical standards.  
Furthermore, NIH stated that it has demonstrated its commitment to 
oversight activities and continues to make them an agency priority. 
NIH also stated that many of the report findings were not made within 
the context of the current financial conflict-of-interest regulation and, 
therefore, many of the recommendations are difficult to assess and/or 
cannot be implemented because NIH is bound by the requirements of 
  OEI-03-07-00700  HOW NIH GRANTEES MANAGE FINANCIAL CONFLICTS OF INTEREST  22   
   
R E C O M M E N D A T I O N S  
the current regulation.  The current regulation permits NIH to rely on 
grantee institutions to monitor and enforce researcher compliance with 
the regulation.  However, without knowing the nature of conflicts, NIH 
cannot properly oversee conflicts among its funded researchers.  OIG 
believes that the current regulation allows NIH to take a more proactive 
role in overseeing grantee institutions.  Moreover, OIG has 
recommended that, where necessary, NIH amend its regulations to 
enhance its oversight of financial conflicts of interest.     
NIH requested that OIG consider incorporating more direct references 
to the regulatory framework within the reports analysis, particularly 
within the findings.  Specifically, NIH requested that statements 
exceeding the requirements of the regulation be characterized as 
observations or suggested modifications to the current regulation.  A 
discussion of both NIHs and grantee institutions responsibilities is 
presented in the background of the report.   
Regarding OIGs first recommendation that NIH collect the details 
about conflicts and how they were managed, reduced, or eliminated, 
NIH continues to maintain that the responsibility for identifying and 
managing conflicts belongs with grantee institutions, as assigned by the 
current regulations.  In comments on OIGs previous study, NIH did not 
concur with this recommendation and stated that the collection of 
specific details of the nature and management of conflicts would 
effectively transfer the responsibility for managing conflicts from the 
grantee institutions to the Federal Government.   
NIH now states that it could be argued that requesting this 
information from grantees with frequency could constitute a rule, which 
would need to be issued consistent with notice and comment procedures.  
OIG believes that the current regulation does not prohibit NIH from 
requesting follow-up information from grantee institutions with respect 
to reported conflicts.  The regulation specifies that the grantee 
institutions agree to produce such information on all conflicting 
interests.  Further, we believe that the findings of this and related 
reports warrant NIHs requesting follow-up information on all reported 
conflicts.  To address NIHs concern, we have modified our 
recommendation slightly to parallel the language of the regulation at  
42 CFR  50.604(g)(3).  OIG also continues to recommend that NIH 
work with the Department of Health and Human Services (HHS) to 
amend the current regulation to request details regarding the nature 
and management of conflicts at grantee institutions.   
  OEI-03-07-00700  HOW NIH GRANTEES MANAGE FINANCIAL CONFLICTS OF INTEREST  23   
   
R E C O M M E N D A T I O N S  
Regarding OIGs recommendation that NIH increase its oversight of 
grantee institutions, NIH highlighted a number of initiatives designed 
to enhance its oversight of and promote grantee compliance with 
Federal regulation.  OIG recognizes NIHs continued efforts in 
increasing oversight of grantee institutions.  However, despite these 
efforts, vulnerabilities continue to exist at grantee institutions in their 
identification, management, and oversight of conflicts.  Therefore, OIG 
maintains its position that increased oversight of grantee institutions is 
needed to ensure that conflicts are reported and managed appropriately.  
NIH provided a summary of its oversight activities over the last decade 
and asked that we incorporate the information in the report.  The 
summary is included in the full text of NIHs comments presented in 
Appendix C.  
NIH will consider OIGs recommendation on developing and 
disseminating guidance on methods to verify researchers conflicts.  
With respect to OIGs recommendation that grantee institutions 
maintain proper documentation, NIH will continue to emphasize 
grantee institution compliance with documentation requirements 
established by Federal regulation. 
In response to the remaining five OIG recommendations, NIH referred 
to the recently developed Advanced Notice of Proposed Rulemaking 
(ANPRM).  It stated that many of the observations made by OIG are 
addressed in the ANPRM and will be considered by NIH and HHS 
during the formal rulemaking process.  OIG understands that NIH is 
engaged in rulemaking regarding some of the very vulnerabilities we 
identified in our report.  OIG will review the proposed rule and provide 
comments or clearance during the Departments internal review 
process.   
 
 
 
 
 
 
  OEI-03-07-00700  HOW NIH GRANTEES MANAGE FINANCIAL CONFLICTS OF INTEREST  24   
   
 A P P E N D I X   ~   A  
Financial Conflict-of-Interest Regulations 
Text taken directly from 42 CFR  50.603 
A Significant Financial Interest means: 
Anything of monetary value, including but not limited to, salary or other payments for services 
(e.g., consulting fees or honoraria); equity interests (e.g., stocks, stock options or other 
ownership interests); and intellectual property rights (e.g., patents, copyrights and royalties 
from such rights). The term does not include: 
(1) Salary, royalties, or other remuneration from the applicant institution;  
(2) Any ownership interests in the institution, if the institution is an applicant under the SBIR 
Program; 
(3) Income from seminars, lectures, or teaching engagements sponsored by public or nonprofit 
entities; 
(4) Income from service on advisory committees or review panels for public or nonprofit entities;  
(5) An equity interest that when aggregated for the Investigator and the Investigator's spouse 
and dependent children, meets both of the following tests:  Does not exceed $10,000 in value as 
determined through reference to public prices or other reasonable measures of fair market 
value, and does not represent more than a five percent ownership interest in any single entity; 
or 
(6) Salary, royalties or other payments that when aggregated for the Investigator and the 
Investigator's spouse and dependent children over the next twelve months, are not expected to 
exceed $10,000. 
Small Business Innovation Research (SBIR) Program means the extramural research program 
for small business that is established by the Awarding Components of the Public Health Service 
[PHS] and certain other Federal agencies under Pub. L. 97-219, the Small Business Innovation 
Development Act, as amended. For purposes of this subpart, the term SBIR Program includes 
the Small Business Technology Transfer (STTR) Program, which was established by              
Pub. L. 102-564. 
Text taken directly from 42 CFR  50.604 
Each institution must: 
(a) Maintain an appropriate written, enforced policy on conflict of interest . . . and inform each 
investigator of that policy, the Investigators reporting responsibilities, and of these regulations.  
If the Institution carries out the PHS-funded research through subgrantees, contractors, or 
collaborators, the Institution must take reasonable steps to ensure that Investigators working 
for such entities comply with this subpart, either by requiring those Investigators to comply 
  OEI-03-07-00700  HOW NIH GRANTEES MANAGE FINANCIAL CONFLICTS OF INTEREST  25   
   
A P P E N D I X   ~   A  
 
with the Institutions policy or by requiring the entities to provide assurances to the Institution 
that will enable the Institution to comply with this subpart. 
(b) Designate an institutional official(s) to solicit and review financial disclosure statements 
from each investigator who is planning to participate in PHS-funded research. 
(c) (1) Require that by the time an application is submitted to PHS each Investigator who is 
planning to participate in the PHS-funded research has submitted to the designated official(s) a 
listing of his/her known Significant Financial Interests (and those of his/her spouse and 
dependent children):  (i) That would reasonably appear to be affected by the research for which 
PHS funding is sought; and (ii) In entities whose financial interests would reasonably appear to 
be affected by the research.  (2) All financial disclosures must be updated during the period of 
the award, either on an annual basis or as new reportable Significant Financial Interests are 
obtained. 
(d) Provide guidelines . . . for the designated official(s) to identify conflicting interests and take 
such actions as necessary to ensure that such conflicting interests will be managed, reduced, or 
eliminated.  
(e) Maintain records of all financial disclosures and all actions taken by the Institution with 
respect to each conflicting interest for at least 3 years from the date of submission of the final 
expenditures report. . . . 
(f) Establish adequate enforcement mechanisms and provide for sanctions where appropriate. 
(g) Certify, in each application for the funding to which this subpart applies, that:  (1) There is 
[in] effect at that Institution a written and enforced administrative process to identify and 
manage, reduce or eliminate conflicting interests with respect to all research projects for which 
funding is sought from PHS, (2) Prior to the Institutions expenditure of any funds . . .  the 
Institution will report to the PHS Awarding Component the existence of a conflicting interest 
(but not the nature of the interest or other details) found by the institution and assure that the 
interest has been managed, reduced or eliminated . . . and, for any interest that the Institution 
identifies as conflicting subsequent to the Institutions initial report under the award, the report 
will be made and the conflicting interest managed, reduced, or eliminated, at least on an interim 
basis, within sixty days of that identification; (3) the Institution agrees to make information 
available, upon request, to the HHS regarding all conflicting interests identified by the 
Institution and how those interests have been managed, reduced, or eliminated to protect the 
research from bias; and (4) The Institution will otherwise comply with this subpart.                                           
  OEI-03-07-00700  HOW NIH GRANTEES MANAGE FINANCIAL CONFLICTS OF INTEREST  26   
   
 A P P E N D I X   ~   B  
Table B-1:  Methods Employed by Grantee Institutions To Manage, Reduce, or 
Eliminate Conflicts Reported to NIH From October 1, 2005, Through       
September 30, 2006 
   
Methods  ResNeuamrcbheerr os1f   Number of Reports2 
 
Disclosing conflict in publications, in presentations, to human research 
subjects, to other staff working on grant, and to Institutional Review  142  164 
 
Boards 
Protecting other staff working on grant from inappropriate pressure  62  75 
Notifying grantee institution of relationship changes with outside 
46  56 
company 
Ensuring open exchange of research results through publication and/or 
35  45 
presentations 
Monitoring/overseeing grant research or other activity related to the 
35  39 
grant research  
Limiting or prohibiting research involving human subjects  35  33 
Updating grantee institution regarding research and/or technology 
30  35 
developed as a result of research 
Prohibiting outside company related to conflict from sponsoring 
25  30 
research; requiring approval for outside company to sponsor research 
Preapproving/overseeing purchases of goods/services from affected 
22  25 
company by grantee institution 
Ensuring that no technology/intellectual property is inappropriately 
21  27 
shared with outside company 
Limiting/prohibiting role in decisions affecting outside company; 
20  26 
prohibiting service in specific roles at outside company 
Monitoring use of institution facilities; prohibiting use of institution 
20  23 
facilities/resources to further the interests of affected company 
Modifying or limiting researcher's role in the research (e.g., allowing no 
16  14 
role in subject selection or role in data analysis) 
Certifying that primary commitment is to grantee institution  12  14 
Agreeing to abide by financial conflict-of-interest policies and 
11  14 
procedures 
Facilitating financial conflict-of-interest training in research lab  9  12 
Prohibiting the designation of the researcher as having management 
9  12 
responsibilities on outside companys Web site or in publications  
Submitting a report of compliance regarding management plan  9  10 
Ensuring that an adequate level of peer review on research is 
7  10 
performed by grantee institution 
Prohibiting the alteration of scope of research; informing institution of 
7  7 
changes to research 
Restricting the sale of stocks; notifying grantee institution before stocks 
5  7 
are sold; placing stocks in escrow 
Assuring that Federal funds are used for grant research  5  4 
Limiting amount of time spent on conflicting activity  4  5 
Prohibiting use of grantee institution name in connection with outside 
4  5 
company without prior approval 
continued on next page 
  OEI-03-07-00700  HOW NIH GRANTEES MANAGE FINANCIAL CONFLICTS OF INTEREST  27   
   
A P P E N D I X   ~   B  
Table B-1:  Methods Employed by Grantee Institutions To Manage, Reduce, or 
Eliminate Conflicts Reported to NIH From October 1, 2005, Through       
September 30, 2006 (Continued)
Methods  ResNeuamrcbheerr os1f   Number of Reports2 
Prohibiting outside company from competing for grants and/or research 
4  5 
contracts that the grantee institution would otherwise accept 
Management of conflict not needed because conflict had already been 
4  5 
eliminated by researcher 
Divestiture  4  4 
Removing research staff from research or from role as study chair/primary 
4  4 
researcher 
Requiring that if other faculty/staff have financial interest in company, it be 
4  3 
disclosed to grantee institution for approval 
Prohibiting clinical trials without approval from grantee institution  3  5 
Prohibiting clinical trials at grantee institution  3  4 
Meeting with grantee institution to monitor management plan  3  3 
Communicating with NIH regarding outside relationship  2  4 
Notifying grantee institution of any decisions outside company makes that 
2  4 
could affect financial interest in company 
Monitoring use of Federal funds by grantee institution  3  3 
Disclosing management plan to outside company  3  2 
Clarifying whether acting on behalf of grantee institution or outside 
3  2 
company when dealing with third parties 
Prohibiting activities for the outside company that may appear to duplicate 
3  2 
grant work 
Requiring royalties associated with grant to be placed in a nonprofit 
organization; having researchers company sell technology to grantee  3  2 
institution at cost so no profits accrue to company or researcher 
Providing NIH with updates regarding technology/inventions via grant 
2  2 
progress reports 
Limiting compensation for conflicting activity  2  2 
Filing a Request for Exemption that allows researcher to conduct 
2  2 
conflicting activity 
Prohibiting subcontract work for outside company  2  2 
Requiring sole-source justification3  2  2 
Requiring researcher to gain approval of the grantee institutions Medical-
1  3 
Industry committee in order to consult 
Requiring review of contracts between outside company and grantee 
1  3 
institution  
Terminating conflicting activity  1  1 
Other methods  15  15 
Source:  Office of Inspector General analysis of grantee institution survey responses. 
1Although the total number of researchers with conflicts equals 165, the number of researchers in this column does not equal 165 because a 
researcher could have more than one type of conflict.  
2Although the total number of reports equals 184, the number of reports in this column does not equal 184 because one report could be related to 
more than one type of conflict. 
3In these instances, sole source is used to indicate that only one supplier exists that is capable of providing a particular product or service. 
  OEI-03-07-00700  HOW NIH GRANTEES MANAGE FINANCIAL CONFLICTS OF INTEREST  28  c 
APPENDIX 
Agency Comments 
....'~ 	
t.""~'f.. 	 DEPARTMENT OF HEALTH &. HUMAN SERVICES  Public Health Service
National Institutes of Health 
Bethesda, Maryland 20892 
AUG 2 4 2009 
TO:  Stuart Wright 

Deputy Inspector General 

for Evaluations and Inspections, HHS 

FROM: 	 Director, NIH 
SUBJECT: 	 Comments on the Office of Inspector General's Draft Report: 
How Grantees Manage Financial Conflicts of Interest in 
Research Funded by the National Institutes of Health," 
OEI-03-07 -00700 
Attached are the National Institutes of Health's cor:nments on the Office of 
Inspector General's draft report entitled "How Grantees Manage Financial 
Conflicts of Interest in Research Funded by the National Institutes of Health" 
(OEI-03-07 -00700). 
We appreciate the opportunity to review and comment on this important 
topic.  Should you have questions or concerns regarding our comments, 
please contact Meredith Stein in the NIH Office of Management Assessment 
at 301-496-2461. 
Francis S. Collins, M.D., Ph.D. 
Attachment 
oE 10 30700700  How NIH GRANTEES MANAGE FINANCIAL CONFLICTS OF INTEREST  29   
   
A P P E N D I X   ~   C  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  OEI-03-07-00700  HOW NIH GRANTEES MANAGE FINANCIAL CONFLICTS OF INTEREST  30   
   
A P P E N D I X   ~   C  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  OEI-03-07-00700  HOW NIH GRANTEES MANAGE FINANCIAL CONFLICTS OF INTEREST  31   
   
A P P E N D I X   ~   C  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  OEI-03-07-00700  HOW NIH GRANTEES MANAGE FINANCIAL CONFLICTS OF INTEREST  32   
   
A P P E N D I X   ~   C  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  OEI-03-07-00700  HOW NIH GRANTEES MANAGE FINANCIAL CONFLICTS OF INTEREST  33   
   
A P P E N D I X   ~   C  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  OEI-03-07-00700  HOW NIH GRANTEES MANAGE FINANCIAL CONFLICTS OF INTEREST  34   
   
A P P E N D I X   ~   C  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  OEI-03-07-00700  HOW NIH GRANTEES MANAGE FINANCIAL CONFLICTS OF INTEREST  35   
   
A P P E N D I X   ~   C  
 
 
 
 
 
 
 
 
 
 
 
  OEI-03-07-00700  HOW NIH GRANTEES MANAGE FINANCIAL CONFLICTS OF INTEREST  36   
   
 A C K N O W L E D G M E N T S  
 
This report was prepared under the direction of Robert A. Vito, Regional 
Inspector General for Evaluation and Inspections in the Philadelphia 
regional office, and Linda M. Ragone, Deputy Regional Inspector 
General.   
Tanaz Dutia served as the team leader for this study.  Other principal 
Office of Evaluation and Inspections staff from the Philadelphia 
regional office who contributed to the report include Maria Johnson and 
Chetra Yean; central office staff who contributed include Rita Wurm.  
 
 
  OEI-03-07-00700  HOW NIH GRANTEES MANAGE FINANCIAL CONFLICTS OF INTEREST  37