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FDACounsel.com
Financial Disclosure – Duties and Strategies for
Clinical Studies
Michael A. Swit, Esq.Law Offices of Michael A. Swit
539 Samuel Ct.Encinitas, CA 92024
760-815-4762 -- fax: [email protected]
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Presented to:
San Diego Chapter, Association of Clinical Research Professionals (ACRP)
January 21, 2003 San Diego, California
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How to Focus on the “Law” of Financial Disclosure
Law School in 60 seconds What is “law”?
U.S. Constitution Statutes – Federal Food, Drug, and
Cosmetic Act (“the Act”) Regulations – force and effect of law –
21 CFR Part 54
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How to Focus on the “Law” of Financial Disclosure … What’s not “law”?
Anything else FDA writes – guidances, speeches, warning letters, complaints in Federal court –
“Guidance” – “…describes the agency’s interpretation of or
policy on a regulatory issue” – 21 CFR 10.115(b)(1)
“…do not legally bind the public or FDA…” – 21 CFR 10.115(d)(1)
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How to Focus on the “Law” of Financial Disclosure
FDA advisory opinions – formal position of FDA; binding until refuted; FDA can’t take regulatory action vs. someone who relies on an FDA advisory opinion – 21 CFR 10.85(e) Preambles to proposed or final rules
= an advisory opinion – 21 CFR 10.85(d)(1)
“Common” law = case law
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How to Focus on the “Law” of Financial Disclosure So, where do we find the law of
Financial Disclosure? NOT:
in Constitution, the Act (or any other law administered by FDA), or the Common Law
YES: Regulation – 21 CFR Part 54
Problem – often doesn’t say much more than the definition on SPOOS on Slide #
What do you do -- read every word with care
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How to Focus on the “Law” of Financial Disclosure Finding the law of Financial
Disclosure … YES
in the Feb. 2, 1998 Federal Register -- --- see preamble to the Final Rule
= binding advisory opinion read very carefully
The rest is commentary … The March 2001 Guidance document FDA presentations at DIA, RAPS, etc.
Caution – FDA does not cite GAAP
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Financial Disclosure – the Basics Goal -- Reduce potential for bias in
clinical studies and enhance human subject protection
How implemented FDA Rules @ 21 CFR Part 54; Feb. 2, 1998
– published in F.R.; effective 1 year later FDA Guidance: “Financial Disclosure by
Clinical Investigators” – March 20, 2001
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Basics…
Requirements – for any application (NDA, PMA, BLA, etc.) submitted after effective date, applicant must: disclose data on the “financial interest”
of “clinical investigators” of “covered clinicals studies; or
certify there are NO disclosable interests
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Basics… “Clinical investigators” – covers:
Principal investigators Sub-investigators named in 1572 spouses and dependent children exempted: per March 2001 Guidance --
“nurses, residents, or fellows and office staff who provide ancillary or intermittent care but who do not make direct and significant contribution to the data”
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Basics… The Five Basic “Financial Interests”
subject to disclosure -- Direct payments > $25,000 -- aka
“Significant Payments of Other Sorts” or SPOOS
excludes costs to conduct the clinical studies includes honoraria, grants to fund ongoing
research, compensation for or in the form of equipment or services, or retainers for ongoing consultation
disclosure (for all interests) must be made during the “covered” clinical trial and for one year following completion of the trial
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Basics … The Five “Financial Interests” …
Equity interest of more than $50,000 in a publicly traded company
Ownership interest, stock, stock option or other financial interest, no matter how small, the value of which cannot be readily determined through reference to public prices (e.g., any privately held company or unlisted equity interests)
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Basics … The Five “Financial Interests” …
Proprietary interest in the investigational product
including, but not limited to, patents, copyrights, trade secrets, and licenses
Financial arrangements under which the compensation (e.g., money, equity interest, royalty interest) could be higher for a favorable trial outcome than for an unfavorable trial outcome
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Basics … “Covered Studies” –
trials FDA or the sponsor relies on to establish that the tested product is effective; or
a study in which a single investigator makes a significant contribution to the demonstration of safety
FDA is particularly concerned with Phase II and III trials (efficacy) and bioequivalence studies where results obtained by a single investigator can have a profound statistical effect on trial outcome
In general, large open-label studies conducted at multiple sites, treatment protocols, Phase I tolerance studies, pharmacokinetic studies, and most clinical pharmacology studies are not “covered” studies
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How FDA Addresses Questionable Financial Deals FDA may take "any action it deems
necessary to ensure the reliability of the data, including": FDA itself auditing the data from that
investigator; Requesting the applicant submit further
analyses of data; e.g., to evaluate the effect of that investigator's data on the overall study data;
and …
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How FDA Addresses Questionable Financial Deals …
FDA may take "any action it deems necessary” …
Requesting sponsor conduct additional independent studies to confirm the results of the questioned study; and
Refusing to treat the covered clinical study as providing data that can be the basis for agency action (e.g., an application approval).
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Addressing Financial Disclosure Before FDA Does Clinical investigator selection
process -- make compliance an integral aspect of selection find out early, before clinical protocols are
set in stone; allows you to possibly address via study design to minimize bias
if present, document per regulations
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Addressing Financial Disclosure Before FDA Does …
Clinical study agreements should “mirror” the regulations – mandate disclosure of Interests or a certification there’s
nothing to disclose a constant duty to update if there is any change include the right to obtain a one-year post study update
regarding interests
CRO agreements should obligate the CRO to obtain disclosure/ certification
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Minimizing Bias In Event of Financial Disclosure Key – take the action early; you will have to
describe it later in your marketing application and you also may not be able to address effectively later
Possible angles: multiple study sites/investigators blinding objective endpoints randomized assignment of patients to treatment
v. control groups have someone other than investigator measure
subjective endpoints
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Other Considerations The Jesse Gelsinger scenario -- If an
investigator has a significant financial interest, has that been adequately disclosed in the study’s informed consent documents??
Other entities may also impact financial disclosure duties, such as:
the investigator’s institution (e.g., university or hospital) may have separate rules with different, lower thresholds
HHS rules may apply as well (e.g., if federally funded); and are not identical
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Why comply?
It’s the law If FDA doesn’t get you, Alan
Milstein and Bill Lerach will!!
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“SPOOS”
The Do’s and Don’t’s of “Significant Payments of Other
Sorts”
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What’s a SPOOS?
Direct “payments” > $25,000 -- aka “Significant Payments of Other Sorts” or, more precisely, per 21 CFR 54.2(f), means:
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So How Do We Know If It’s A SPOOS?
“…payments made by the sponsor of a covered study to the investigator or the institution to support activities of the investigator that have a monetary value of more than $25,000, exclusive of the costs of conducting the clinical study or other clinical studies (e.g., a grant to fund ongoing research, compensation in the form of equipment or retainers for ongoing consultation or honoraria) during the time the clinical investigator is carrying out the study and for 1 year following the completion of the study.”
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“… payments”
Remember – this is a noun – thus, we are describing types of remuneration
Rule – silent directly, but indirectly (“e.g.”) makes clear can include: honoraria equipment retainers for consultation
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“… payments …” Preamble – fairly silent on what’s a payment other
than those examples actually in the Rule. exception – FDA: no duty to disclose
competing interests that also could bias the investigator (see Comment #17)
Guidance – travel expenses added to mix excessive; or for other family members (FAQ #26)
Common sense – has an immediate or measurable value – arguably is a payment; if your friendly CPA would regard as income if you were a sole proprietor
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“… payment.” Gray areas:
What if deferred until after one year from study completion?
What if contingent on an event unrelated to study’s success – e.g., the stock reaches $XX in value, we will pay you $25,001?
What if duty to pay back or return? Arguably, look at:
FRV/FMV at end of use during study interest – opportunity cost of money
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“… made” Intertwined with “payment”
What if only parts of the payment have been made (see, also, “What is $25,000” slide, to follow)?
may depend on whether contingent What if a present pledge to give the money
at a time after the study completed? Rule: silent Preamble: silent Guidance: silent
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“… by the sponsor” “By”
what if made by someone else, but the money came from the sponsor originally?
might look to CME rules for guidance conspiracy to avoid 21 CFR 54?
“Sponsor” -- per 21 CFR 54.2(h) = “…the party supporting a particular study at the time it was carried out” – thus, the “applicant” – a term itself defined
in 21 CFR 54.2(g) – may not be “sponsor”
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“… by the sponsor? must they be named in the IND? what re joint venture partner (e.g., Lilly/Icos on
Cialis®) not in the IND? “the” – DOES THAT MEAN THERE
CAN ONLY BE ONE PERSON WHO’S THE SPONSOR? risky argument to make and inconsistent with
other FDA positions Waxman-Hatch Act – “conducted or
sponsored” for 3-year exclusivity files the IND; or provides significant support to the study
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“…sponsor?” Preamble: silent Guidance:
whoever provides “material” support (either money or test product)
“sponsor” here is not same as some other FDA regulatory definitions of sponsor (e.g., 21 CFR 312.53 and 812.43, where a “sponsor” is someone who submits a marketing application)
Common sense: usually whoever pays the bills Trap for unwary – CRO can be a sponsor under
Guidance if provides things of value to CI’s (FAQ #9)
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“…of a covered study”
See definition of “covered clinical study” at 21 CFR 54.2(e)
But, the SPOOS definition itself in Rule does not include the word “clinical” – any significance? doubtful probably inadvertent
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“…to the investigator” 21 CFR 54.2(d) defines “clinical investigator”:“…means only a listed or identified investigator
or subinvestigator who is directly involved in the treatment or evaluation of research
subjects. The term also includes the spouse and each dependent child of the
investigator.” PhRMA – companies err on side of inclusion
out of fear of omission leading to regulatory challenge by FDA
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“…investigator” What about payments to a corporation controlled
by the investigator?“…or [to] the institution…”
What if a related entity, but not legally same as the institution (e.g., WARF vs. U. of Wis.)?
Rule – defines investigator Preamble – also clarifies no duty on business
partners (Comment #18) Guidance – only if parent company itself is a “Part
54 sponsor” (FAQ #22)BUT – what re Publicly-held parent vs.
privately held operating subsidiary?
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“…to support activities of the investigator…” “Support”
FDA – little written on its precise meaning presumably, it’s inverse of a study cost
“Activities of the investigator” what if give money for “indirect” reasons –
agreement not to study anyone else’s NSAID? scholarship/fellowship funds
[allows institutional funds to be used for other purposes; indirectly leaving more money for CI’s activities]
general grant to CI’s Dept.? Guidance – “direct support” (FAQ #25)
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“…that have a monetary value…” When is value measured?
at initial donation? $75,001 piece of lab equipment; 3-year depreciation;
study takes 2 years; do you need to disclose? at end of study?
How long does it have to stay >$25G? [contrast here to stock; which is not SPOOS]
What if value fluctuates – rarer; could happen – e.g., donated raw materials for experiments; Rule and Preamble are silent; Guidance – only addresses stock fluctuations
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“…of more than $25,000…” Thus, must be at least $25,000.01.
Picayune lawyer’s observation # 1 – Guidance incorrectly says “$25,000 or more”
Aggregate payments relative to the >$25G threshold? Rule – silent Preamble – silent Guidance – “cumulative monetary value”
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“ … exclusive of the costs of conducting the study or other clinical studies … ”
Exclusion – necessary or you would be disclosing the study costs themselves; presumably those are “for services rendered” and/or direct expenses
Costs – what is a cost: overhead – what if excessively allocated
to the study? profit allowed?
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“ … (e.g.,) By including some examples, does NOT
exclude others meeting definition Specifics listed:
a grant to fund ongoing research compensation in the form of:
equipment, or retainers for ongoing consultation, or honoraria
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“ …during the time the clinical investigator is carrying out the study…”
When does a study begin? Guidance – by implication, cites to 21 CFR
312.53 and 812.43 as keying when an investigator’s involvement in a study starts (FAQ #6)
Why important? what if there was a payment just before site
initiation cleared, but the protocol has been signed?
IND on file naming that investigator?
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“ … and for 1 year following completion of the study …” Varies – no hard and fast rules But, what if the investigator’s role in the
study ends on 12/31/02, but the study continues at other sites for more than a year thereafter? Guidance – flexible; can make site
specific (FAQ #14) Be sure to establish up front and stick by it
and make sure the investigators understand the measure
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Internal Controls Need an interdisciplinary team on this FDA’s view of the time and expense
involved is not shared by PhRMA Have a written procedure
train on it audit its implementation
If you use CROs and other contractors, you will have to ride herd on them
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Tired of SPOOS? A few truly obscure things to know about
SPOOS: According to CDRH, applies to payments made
for “consolation” – means you have to disclose if they pay you for failing results?
on Wall Street, “SPOOS” is the nickname for the Standard & Poors 500 Futures Contract”
rule was created on Groundhog’s Day a SPOO is a lifeform on the TV show Babylon 5[the foregoing brought to you courtesy of Google]
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Questions?
Call, e-mail, fax or write:
Michael A. Swit, Esq.Law Offices of Michael A. Swit
539 Samuel Ct., Suite 229Encinitas, California 92024
760-815-4762 ♦ 760-454-2979 (fax)[email protected]
http://www.fdacounsel.com
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About the speaker ...
Michael A. Swit has extensive experience in all aspects of FDA regulation with a particular emphasis on drugs and medical device regulation. In addition to his regulatory law experience, Mr. Swit also served for three and a half years as vice president and general counsel of Pharmaceutical Resources, Inc. (PRI) a prominent generic drug company and, thus, brings an industry and commercial perspective to his representation of FDA-regulated companies. While at PRI from 1990 to late 1993, Mr. Swit spearheaded the company’s defense of multiple grand jury investigations, other federal and state proceedings, and securities litigation stemming from the acts of prior management. Mr. Swit then served from 1994 to 1998 as CEO of Washington Business Information, Inc. (WBII) a premier publisher of FDA regulatory newsletters and other specialty information products for the FDA publishing company. Before starting FDACounsel.com, he was with Heller Ehrman from May 2001 to May 2003, and also twice in private practice with McKenna & Cuneo, from 1988 to 1990 and, most recently, from 1999 to 2001, first in that firm’s D.C. office and most recently, in its San Diego office. He first practiced FDA regulatory law with the D.C. office of Burditt & Radzius from 1984 to 1988. Mr. Swit has taught and written on a wide variety of subjects relating to FDA law including, since 1989, co-directing a three-day intensive course on the generic drug approval process, serving on the Editorial Board of the Food & Drug Law Journal, and editing a guide to the generic drug approval process, Getting Your Generic Drug Approved, published by WBII. Mr. Swit holds an A.B., magna cum laude, with high honors in history, in 1979, from Bowdoin College, and earned his law degree from Emory University in 1982. He is a member of the California, Virginia and District of Columbia bars.
