Conflict of Interest: A Tricky Issue for Universities

Conflict of Interest: A Tricky Issue for Universities Karen Hersey, Professor Franklin Pierce University Nonprofit Technology Transfer Course November 17, 2008 Used with Permission

Four Categories of Conflicts • Investigator Financial Conflict of Interest • Financial interests of investigator may suggest a presumption of bias in carrying out research; will the personal financial interests of the researcher have a potential effect on the quality, outcome and/or dissemination of the research undertaken? • Investigator Conflict of Commitment • Established by organization’s policy on duty owed institution as primary employer • Senior Officer/Supervisory Conflict of Interest • Influence of senior officers representing their self interest or interest on behalf of the institution may favor one research program over another, one sponsor over another; sr. officers may try and influence licensing negotiations; may cause confusion for students • Institutional Conflict of Interest • Conflict between institutional mission of education, dissemination of knowledge etc and interest as an investor, equity holder in institutional start-up companies, venture funds etc.

Conflict of Interest: Two Separate Types of “Conflict” 1. Financial conflict of interest leading to potential bias in Research • Administratively/Academically managed • Some governmental regulation 2. Conflict resulting in preferential treatment/bias in Technology Transfer • Managed by the licensing group or an independent patent committee, or vice president • Not governmentally regulated (yet)

Investigator Financial Conflict of Interest in Research: A Definition • American Association of Universities (AAU) Definition • The term individual financial conflict of interest in science refers to situations in which financial considerations may compromise, or have the appearance of compromising, an investigator’s professional judgment in conducting or reporting research

Investigator Conflict of Interest (Research): The NIH Guidelines • NIH: 45 CFR §94 (1995) • Investigators applying for research funding must disclose “significant financial interests” • Includes financial interests of spouses and dependent children • Equity interest when aggregated (adding the interests of family members) of more than $10,000 or • Is equal to more than 5% interest in company that could benefit from the research • Or salary, payments etc. when aggregated (from all family members) are more than $10,000 annually from company that could benefit from the research

Investigator Conflict of Interest (Research): The NIH Guidelines • NIH: 45 CFR §94 (1995) • Institutions must: • Have a COI policy • Appoint a reviewing official • Require PIs to submit statements of financial interest that may reasonably be affected by the research • Provide guidelines for identifying conflicts and for managing and eliminating them and • Provide certifications to NIH at the time of submitting proposals for funding

Investigator Conflict of Interest (Research): The NSF Guidelines • Provided as NSF Policy Statements (not regulation) • Institutions basically self regulate by having policies in place; requiring internal disclosures of Significant Financial Interests directly/significantly affected by proposed research. • Aggregated financial/equity holdings worth more than $10,000 or representing more than 5% ownership interest in an company that could be directly or significantly affected by the proposed research • Institutions must report only if there are conflicts they cannot manage, but must keep records • And, if there is an unmanageable conflict but the importance of the research outweighs the conflict, the institution can go ahead with it. • Does require certifications by institution as to policies, management etc. in place and certifications by individual investigators that they have read the guidelines and institutional policies

Investigator Conflict of Interest: (Technology Transfer) • 3 areas of potential conflict of interest in Technology Transfer: • Licensing to companies in which an investigator has a financial interest at bargain royalty rates • Equity participation (by inventor/investigator) in start-up companies that are funding research in the inventor’s lab • Consulting relationships with companies that may directly benefit from the investigator’s research

Institutional Conflicts of Interest in Technology Transfer • University as Start-up shareholder • University as Start-up board member • University managers as individual shareholders in start-ups or in potential licensees • University as Licensor & royalty beneficiary • Licensee as sponsor of research • Technology Transfer Office as “dealmaker”

Institutional Conflict of Interest: A Definition • AAU Definition • Where institution or senior management, sub-units, affiliated foundations (etc) has an external relationship with a company that itself has a financial interest in a faculty research project • Where institutional officials serve on boards of companies that have significant financial transactions with the institution • Where an institution has equity holding or royalty expectations that could influence how it conducts research, who it hires, etc. • Suggested that firewalls must be erected between the those in the institution that direct its financial holdings and those in the institution that direct its research activities

Managing Conflicts of Interest in Technology Transfer • Commonly-used management tactics 1. Limit inventor’s activity w/start-up if inventor stays at university • Restrict/carefully monitor research funding from licensee (any licensee, not just start-up); watch licensing of improvements • Limit start-up/licensee use of students • Require faculty to advise students of start-up activities • Insist upon arm’s length negotiations between licensee (start-up) – no university employee or trustee interference • Limit university’s participation on board or in management • Require firewall between university equity-holder and technology transfer, research etc. • Conflict avoidance policy for technology transfer professionals, i.e. no personal investing, recuse if investment already held

A Closer Look at Consulting • Consulting activities are a matter of university policy • Commonly, faculty may consult one day a week • Extent of institutional involvement in consulting activities – split practice • Some institutions require review and sign off • Some require only annual reporting • Due to conflict of interest reporting requirements, all institutions should be managing conflicts in consulting & research

Faculty Consulting: Issues for the Faculty and the Institution • Use of university facilities for consulting raises issues of tax liability, overlap w/faculty, student research, conflict of interest, misuse of students • Definitions in consulting agreements generally “sweeping” (see sample) • University sign-offs may result in breach of agreements • Faculty may inadvertently or purposely set off areas of innovation reserved for consulting • Faculty accept personal liability for consulting obligations

U.S. University Solution • Adopt conflicts of interest policies that meet the NIH and NSF requirements and apply them to all research situations • Require annual reports on consulting and outside activities both for pay and pro bono

Resources for COI Information • Recognizing and Managing Personal Financial Conflicts of Interest, COGR, 2002 • Report on Individual and Institutional Financial Conflicts of Interests (Oct. 2001) access through http://aau.edu/research • NIH: http://grants.nih.gov./grants/policy/coi • NSF: http://nsf.gov Search Conflict of Interest

Conflict of Interest: A Tricky Issue for Universities