[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]
NIH ETHICS CONCERNS: CONSULTING ARRANGEMENTS AND OUTSIDE AWARDS
=======================================================================
HEARINGS
before the
SUBCOMMITTEE ON
OVERSIGHT AND INVESTIGATIONS
of the
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTH CONGRESS
SECOND SESSION
----------
MAY 12, MAY 18 and JUNE 22, 2004
----------
Serial No. 108-88
----------
Printed for the use of the Committee on Energy and Commerce
Available via the World Wide Web: http://www.access.gpo.gov/congress/
house
NIH ETHICS CONCERNS: CONSULTING ARRANGEMENTS AND OUTSIDE AWARDS
=======================================================================
HEARINGS
before the
SUBCOMMITTEE ON
OVERSIGHT AND INVESTIGATIONS
of the
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTH CONGRESS
SECOND SESSION
__________
MAY 12, MAY 18 and JUNE 22, 2004
__________
Serial No. 108-88
__________
Printed for the use of the Committee on Energy and Commerce
Available via the World Wide Web: http://www.access.gpo.gov/congress/
house
U.S. GOVERNMENT PRINTING OFFICE
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__________
COMMITTEE ON ENERGY AND COMMERCE
JOE BARTON, Texas, Chairman
W.J. ``BILLY'' TAUZIN, Louisiana JOHN D. DINGELL, Michigan
RALPH M. HALL, Texas Ranking Member
MICHAEL BILIRAKIS, Florida HENRY A. WAXMAN, California
FRED UPTON, Michigan EDWARD J. MARKEY, Massachusetts
CLIFF STEARNS, Florida RICK BOUCHER, Virginia
PAUL E. GILLMOR, Ohio EDOLPHUS TOWNS, New York
JAMES C. GREENWOOD, Pennsylvania FRANK PALLONE, Jr., New Jersey
CHRISTOPHER COX, California SHERROD BROWN, Ohio
NATHAN DEAL, Georgia BART GORDON, Tennessee
RICHARD BURR, North Carolina PETER DEUTSCH, Florida
ED WHITFIELD, Kentucky BOBBY L. RUSH, Illinois
CHARLIE NORWOOD, Georgia ANNA G. ESHOO, California
BARBARA CUBIN, Wyoming BART STUPAK, Michigan
JOHN SHIMKUS, Illinois ELIOT L. ENGEL, New York
HEATHER WILSON, New Mexico ALBERT R. WYNN, Maryland
JOHN B. SHADEGG, Arizona GENE GREEN, Texas
CHARLES W. ``CHIP'' PICKERING, KAREN McCARTHY, Missouri
Mississippi, Vice Chairman TED STRICKLAND, Ohio
VITO FOSSELLA, New York DIANA DeGETTE, Colorado
STEVE BUYER, Indiana LOIS CAPPS, California
GEORGE RADANOVICH, California MICHAEL F. DOYLE, Pennsylvania
CHARLES F. BASS, New Hampshire CHRISTOPHER JOHN, Louisiana
JOSEPH R. PITTS, Pennsylvania TOM ALLEN, Maine
MARY BONO, California JIM DAVIS, Florida
GREG WALDEN, Oregon JANICE D. SCHAKOWSKY, Illinois
LEE TERRY, Nebraska HILDA L. SOLIS, California
MIKE FERGUSON, New Jersey CHARLES A. GONZALEZ, Texas
MIKE ROGERS, Michigan
DARRELL E. ISSA, California
C.L. ``BUTCH'' OTTER, Idaho
JOHN SULLIVAN, Oklahoma
Bud Albright, Staff Director
James D. Barnette, General Counsel
Reid P.F. Stuntz, Minority Staff Director and Chief Counsel
______
Subcommittee on Oversight and Investigations
JAMES C. GREENWOOD, Pennsylvania, Chairman
MICHAEL BILIRAKIS, Florida PETER DEUTSCH, Florida
CLIFF STEARNS, Florida Ranking Member
RICHARD BURR, North Carolina DIANA DeGETTE, Colorado
CHARLES F. BASS, New Hampshire TOM ALLEN, Maine
GREG WALDEN, Oregon JANICE D. SCHAKOWSKY, Illinois
Vice Chairman HENRY A. WAXMAN, California
MIKE FERGUSON, New Jersey EDWARD J. MARKEY, Massachusetts
MIKE ROGERS, Michigan JOHN D. DINGELL, Michigan,
JOE BARTON, Texas, (Ex Officio)
(Ex Officio)
(ii)
C O N T E N T S
__________
Page
Hearings held:
May 12, 2004................................................. 1
May 18, 2004................................................. 261
June 22, 2004................................................ 487
Testimony of:
Alberts, Bruce, President, National Academy of Science....... 26
Augustine, Normal, Co-Chair, Blue Ribbon Panel on Conflict of
Interest Policies.......................................... 25
Azar, Alex, II, General Counsel, U.S. Department of Health
and Human Services......................................... 505
Barker, Anna D., Deputy Director, Advanced Technologies and
Strategic Partnerships; Maureen O. Wilson, Assistant
Director; and J. Carl Barrett, Director, Center for Cancer
Research, National Cancer Institute........................ 570
Glynn, Marilyn L., Acting Director, U.S. Office of Government
Ethics..................................................... 273
Heller, Jonathan C., Vice President, Information and Project
Planning, Predicant Biosciences............................ 545
Kington, Raynard S., Deputy Director, National Institutes of
Health..................................................... 290
Levine, Peter J., President and Chief Executive Officer,
Correlogic Systems, Inc.................................... 538
Liotta, Lance A., Chief, Laboratory of Pathology; accompanied
by J. Carl Barrett, Director, Center for Cancer Research;
Anna D. Barker, Deputy Director, Advanced Technologies and
Strategic Partnerships, National Cancer Institute.......... 341
Maskell, Jack, American Law Division, Congressional Research
Service.................................................... 291
Petricoin, Emanuel, Lead Microbiologist, Center for Biologics
Evaluation and Research, Food and Drug Administration...... 346
Swindell, Edgar M., Associate General Counsel, Ethics
Division, Department of Health and Human Services.......... 281
Varmus, Harold, former Director, NIH, President and Chief
Executive Officer, Memorial Sloan-Kettering Cancer Center.. 304
Zerhouni, Hon. Elias, Director, National Institutes of Health
May 12, 2004............................................. 16
June 22, 2004............................................ 497
Additional material submitted for the record:
Food and Drug Administration, prepared statement of.......... 376
(iii)
NIH ETHICS CONCERNS: CONSULTING ARRANGEMENTS AND OUTSIDE AWARDS
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WEDNESDAY, MAY 12, 2004
House of Representatives,
Committee on Energy and Commerce,
Subcommittee on Oversight and Investigations,
Washington, DC.
The subcommittee met, pursuant to notice, at 10 a.m., in
room 2322, Rayburn House Office Building, Hon. James C.
Greenwood (chairman) presiding.
Members present: Representatives Greenwood, Bilirakis,
Walden, Ferguson, Barton (ex officio), Deutsch, DeGette, and
Allen.
Staff present: Mark Paoletta, majority counsel; Alan
Slobodin, majority counsel; Ann Washington, majority counsel;
Casey Hemard, majority counsel; Billy Harvard, legislative
clerk; David Nelson, minority investigator; and Jessica
McNiece, minority research assistant.
Mr. Greenwood. Good morning, everyone. This hearing of the
Oversight and Investigations Subcommittee will come to order. I
apologize for being a few minutes late. The Chair recognizes
himself for an opening statement and, welcome to our guests.
Thank you for being with us.
For years in America and American political history there
was quote ``honest graft'' described by William Safire as
``money made a result of political power without doing anything
illegal, no longer considered permissible.''
Later as described by Safire the practice ``honest graft''
became known as the revolving door. Government officials when
they retire take jobs with private industry. In an article
appearing on December 7, 2003 in the Los Angeles Times
detailing the decade long practice of high level scientists at
the National Institutes of Health receiving hundreds of
thousands of dollars in fees to consult for private drug or
biotechnology companies revealed yet a new form of honest
graft, what I call the swivel chair. Now the government
official does not have to retire, he can take outside
consulting jobs with the drug industry as a scientific expert
yet still have the privilege of being on the inside of the NIH,
the crown jewel of the American biomedical research enterprise.
This swivel chair at NIH is still defended, to some extent,
in the name of retention, recruitment and moral, to some extent
as an entitlement of the scientific class. The controversial
nature of this swivel chair policy at NIH is perceived when one
considers its analogy in the context of Congress. I do not
believe the American people would tolerate for one moment the
notion that Members of Congress could be allowed outside income
to consult for private entities doing business before the
Congress. In fact, the Congress eliminated the practice of
members receiving outside income such as cash gifts for
speeches. It took the straightforward approach of raising our
salaries and eliminating outside income that raised conflict of
interest issues.
Today this subcommittee examines the issue of outside
income for NIH scientists posing conflict of interest concerns
such as consulting for drug companies or cash gift awards to
NIH senior managers from grantee institutions receiving or
seeking substantial funds from that official's institute. As we
pursue the facts over the nature and extent of these outside
income practices one question is worth wondering: If this kind
of reform was good enough for the Congress, why is it not good
enough for the National Institutes of Health?
As I have noted before as the chairman of the subcommittee,
the scandal is often finding out what not what is illegal, but
what is legal. Consider NIH's policies on cash awards and
outside consulting. Under current policies an NIH Institute
director is permitted to accept a cash gift from a grantee or
cooperative agreement holder with his institute provide it is
presented as a ``bona fide award'' and meets the minimal
criteria for such an award. If a grantee wants to reward or
influence an NIH official, it can do so if the cash is called
an award as long as there is adequate financial backing for
such endeavors.
If a university seeking NIH funds wants to attract reward
or influence an NIH official whose salary is paid by taxpayers
to give a speech by paying cash to that official for his
speech, that is otherwise part of his taxpayer supported
official duties. He can do so without running afoul of criminal
felony statutes and noncriminal ethics regulations by calling
the event a lecture award.
For outside consulting by NIH scientists with drug or
biotechnology companies under current policies established by
then NIH Director Harold Varmus in 1995, there is no limit on
the amount of compensation or the number of hours. On December
7, 2003 the Los Angeles Times revealed that high level NIH
scientists, including some institute and center directors,
received hundreds of thousands of dollars in compensation for
consulting with drug and biotechnology companies. The next day,
this committee began its own detailed investigation of these
outside consulting arrangements only to discover that high
level NIH scientists making higher salaries than that of the
Vice President of the United States were not even required to
file public financial disclosure reports.
Equally astonishing, this committee learned that prior to
our investigation NIH employees were not required to provide
the amounts of compensation they were receiving through their
drug company consulting, not required to provide it to the
public.
Even though the NIH has complied in providing a substantial
amount of information in documents in response to the
committee's request, as a result of these nondisclosure
policies and slow rolling by HHS lawyers, to this day we still
lack complete information on the amounts of compensations
received by individual NIH scientists in many consulting
arrangements over the last 5 years. We have been told that NIH
only has the authority to request NIH employees to voluntarily
produce information on past consulting agreements, and many
have reportedly not responded.
If NIH scientists are too embarrassed to have these details
publicly known, then that reluctance to divulge this
information is a message in itself about the propriety of these
arrangements. Thus, because of the HHS and NIH inability to
respond, I am announcing today that the committee will be
sending request letters to drug companies to get the amount
data for individual NIH scientists consulting arrangements.
The controversy over outside consulting with drug companies
is further underscored when one considers what has happened in
the last few years to make working at the NIH more attractive,
exciting and important. Many scientific personnel at NIH have
boosted their salaries well beyond the caps in the Federal
Civil Service System by converting themselves into consultant
employees through the widespread use of what are called special
compensation authorities under Title 42 of the Public Health
Service Act. Not only can annual salaries be boosted by an
extra $50,000 or $60,000, but under an arcane Office of
Government Ethics legal ruling, highly paid Title 42 personnel
are exempt from filing public financial disclosure reports,
although recently some have been required to be public filers.
Through Federal technology transfer policies, NIH can now
pay royalty income to NIH inventors for technologies they have
discovered that have been commercialized. Congress has
completed the doubling of NIH's budget, vastly enlarging the
universe of unique and intellectually enlivened research
opportunities at NIH.
Finally, in the post September 11th world, the NIH occupies
a key leading role in assisting our bioterrorism defense
efforts. But to proponents of outside consulting,
notwithstanding all these developments, moral at the NIH will
be damaged if the freedom to be put on a drug company's payroll
is not preserved, even though we are told very few NIH
employees engage in outside consulting.
The committee begins its consideration of these NIH ethics
concerns by receiving testimony about the report of the NIH
Blue Ribbon panel on conflict of interest policies released
last week after 66 days of work. This panel was appointed by
the Director of the NIH shortly after the December 2003 Los
Angeles Times Article and the beginning of the committee's
investigation on outside consulting. The co-chairs of the panel
were Dr. Bruce Alberts and Normal Augustine, who will be
testifying before us today.
The Blue Ribbon panel assessed the current status of
conflict of interest policies with particular attention to
outside consulting and made recommendations for improving. The
panel states its recommended improvements are ``needed to
assure the continue deserved public confidence in the work of
NIH.''
We welcome our very distinguished witnesses from the NIH
Blue Ribbon panel. And thank you for your public service and
the quick response you delivered to the NIH Director.
By definition and by your description the panel's work was
limited by a relatively short timeframe and by limiting
yourselves to not investigating specific allegations or
reviewing individual cases under investigation. The panel's
work was a useful step, but it is only the first step as the
NIH, the Congress and the American public and interested
stakeholders sort out the facts and the issues.
In general, the panel recommended that high level employees
at the NIH should not engage in consulting activities with
pharmaceutical or biotechnology companies, but that some NIH
employees should be allowed to consult, but be limited to an
amount equal to 50 percent of the employee's annual salary with
no one source accounting for more than 25 percent of annual
salary.
The panel also called for relaxing restrictions on earnings
from outside teaching, writing and speaking engagements.
I look forward to discussing this report with the co-
chairs, since I have many questions and I am troubled by some
of aspects of the report.
For example, the report maintains that very few NIH
employees engage in consulting agreements with drug or
biotechnology companies. It also found ``an extremely complex
set of rules governing conflicts of interest at NIH. These
rules are widely misunderstood by some of the very people to
whom they are intended to apply, thereby creating uncertainty
as to allowable behavior and adversely affecting moral.''
If so few NIH employees engage in outside consulting, why
allow it in any form replacing one confusing set of rules with
another? Why not a blanket prohibition on the swivel chair?
While some of the rules may be confusing, it needs to be
acknowledged that some rules are clear. The committee has
investing NIH ethics concerns for over a year, along with
several other NIH oversight activities. Unlike the Blue Ribbon
panel, we have been looking case specific practices. It is
clear from the cases we have reviewed that some NIH scientists
are either very close to the line or have crossed the line.
We are serious about upholding the highest ethical
standards at the NIH, and NIH scientists should not even be
close to the line. Yet this has been the persistent problem at
NIH for years, not because of confusion but because of a
deliberate permissive attitude reflected in some NIH employee
comments received by the Blue Ribbon panel.
In a June 1987 letter to HHS David Martin, the Director of
the Office of Government Ethics wrote of the ethics program at
NIH ``My greatest concern, however, relates to the area of
outside activities such that there occasionally appears to be a
blurring of the distinction between what should be properly
authorized as official business and outside activities.''
In a November 22, 1991 letter to HHS Secretary Lewis
Sullivan the Director of the Office of Government Ethics Steve
Potts wrote ``I am concerned, however, about the persistent
weakness in the NIH outside activity approval system as it
relates to scientists and doctors and NIH.''
And in December 22, 1991 letter to NIH Director Bernadine
Healy Mr. Potts wrote ``We believe also that the permissive
attitude of NIH toward outside activities has led to certain
activities being approved without adequate documentation to
support such decisions. Less than 1 percent of over 4,000
requests for approval of outside activities were denied.
Moreover,'' he said, ``approximately 40 percent of the 553
requests we received were approved after the activity had
already taken place.''
In it's 1991 audit OGE reviewers wrote: ``The permissive
attitude at NIH toward outside activities and its fear that
further restrictions of outside activities may hinder
recruitment and retention of scientific personnel has also
played a major role in the problems and issues we identified.''
One NIH official stated that if OGE is saying that NIH
employees who are on the cutting edge of biomedical research
are like other Federal employees and should be denied the right
to talk about their expertise even though the subject matter is
related to agency responsibilities and programs, then NIH does
not agree. The official contended that NIH is unique and should
be exempt from this restriction.
From its February 1992 report on employee conduct
standards, the General Accounting Office found that NIH was one
of five out of 11 agencies audited that because of overly
permissive policies approved outside activities such as
speaking and consulting that it appeared to be violated the
standard of conduct prohibiting the use of public office for
private gain. Keep in mind, these permissive practices took
place under rules on outside consulting that are in some
respects more restrictive than what the Blue Ribbon panel is
recommending. In November 1995 NIH Director Howard Varmus
loosened these consulting restrictions to ``strengthen our
ability to recruit.''
The Blue Ribbon panel report seems to handle the conflict
of interest issues gently and seems almost blithely to accept
the retention and recruitment arguments for maintaining some
form of outside consulting and compensated scientific
activities by NIH scientists. But as I constantly hear on
oversight issues from the NIH and the FDA, do not give me
anecdotes, give me data. Are there facts or information that
back up these arguments about NIH's ability or inability to
retain or recruit? What are the turnover rates of the Title 42
personnel? What have the turnover rates been over the year for
NIH scientists? Was NIH less of a research institutions before
the November 1995 lifting of consulting restrictions? What have
been the benefits to society from the consulting? What new
drugs were developed?
Some questions are unanswerable, but are certainly with
considering. What new drugs were not developed because the NIH
scientists were devoting more energy about the drug company
research and not the NIH research?
As Josephine Johnson of the Hastings Center noted in the
March 12, 2004 issue of Science ``If a scientist's desirably as
a consultant stems from her NIH post, can be sure that the
advice and time she sells to industry does not already belong
to NIH? Nevertheless, given the sometimes six figure sums
involved, concerns should persist about whether salaried
individuals can give their primary job the effort and attention
it deserves while also understanding considerable consulting
work given similar consulting arrangements in many of the
Nation's public and private universities the real question of
the moment is should we abandon the idea of impartial
disinterested science or should NIH be the last stronghold of
this ideal?''
I am disappointed by the Blue Ribbon panel's lack of
substantive analyses of the issue of bona fide awards. While
the panel acknowledges that scientists who receive these awards
are frequently required to prepare a lecture as an acceptance
speech, it left unexplained the conflict of interest issues
arising from the fact that these speeches are required in order
to get the cash by a private entity possibly with substantial
interests before NIH and are official duty activities of NIH
scientists. I believe this matter of what constitutes a bona
fide award and the serious conflict of interest issues raised
by receipt of cash awards from prohibited sources warranted
further consideration and thought by the panel.
In addition, if these awards are so important in raising
the visibility of NIH scientists and recognizing the value of
NIH research, why does NIH not collect and publish information
listing these awards to promote itself and its importance?
We are all eager to hear from the Director of NIH, Dr.
Elias Zerhouni. Since the committee has been engaged on these
issues over the last year, I have had the pleasure of working
with him. I believe Dr. Zerhouni has been a man of good
intentions throughout and I hold him in the highest esteem. He
has been earnestly attempting to respond to the committee's
concerns and to help us to reach a conclusion of this
investigation, if for no other reason than to lift the cloud of
uncertainty felt by some NIH employees about this probe. When
he has been adequately advised by the department, he has taken
decisive steps to address the problems, but more needs to be
done.
In my discussions with Dr. Zerhouni, I had hoped to
complete our investigative work on NIH ethics concerns by the
hearings to be held today and on May 18th. Unfortunately, the
delays and obstinacy principally at the HHS Office of General
Counsel in getting amount data on the individual consulting
arrangements will extend this investigation beyond May 18th as
we are now forced to pursue this data from the drug companies.
As I have learned from experience, the truth will ultimately
come out.
This hearing will be Dr. Zerhouni's first public response
to the Blue Ribbon panel report and recommendations.
Dr. Zerhouni, I look forward to your testimony and working
with you on mutual issues of concern, including the improvement
of NIH's ethics program worthy of a great scientific agency
with talented and valued employees.
And I now recognize the ranking member, the gentleman from
Florida, Mr. Deutsch for an opening statement.
Mr. Deutsch. Thank you, Mr. Chairman. With unanimous
consent put in Mr. Dingell's statement and Mr. Waxman's
statement into the record.
Mr. Greenwood. Without objection.
[The prepared statements of Hon. Henry A. Waxman and Hon.
John D. Dingell follow:]
Prepared Statement of Hon. Henry A. Waxman, a Representative in
Congress from the State of California
Last December, the Los Angeles Times revealed that a handful of
high-ranking NIH scientists had accepted hundreds of thousands of
dollars in consulting fees from pharmaceutical companies. The story,
and this subcommittee's subsequent investigation, caused NIH to
reexamine many of its conflict of interest policies, and rightfully so.
NIH is respected around the world for its scientific leadership and the
high quality of its research. Probably the world's greatest biomedical
research establishment, NIH's reputation for scientific integrity and
independence is unmatched. It is therefore particularly disturbing that
NIH scientists should give even the appearance of being influenced by
the pharmaceutical industry in their decisions.
I have no doubt that most NIH scientists are carrying out their
jobs according to the highest ethical standards. But some of what this
subcommittee's investigation has exposed is very troubling. Dozens of
NIH scientists have accepted very substantial sums of money from drug
companies with few checks on whether those relationships posed
conflicts of interest. All public servants must be sensitive to the
reality and even the appearance of such conflicts, and an institution
of NIH's scientific standing must be especially vigilant. America and
the world must feel confident that NIH's research results are not
biased by drug company influence. Because if we allow NIH's credibility
to be compromised, we have all lost.
I commend Dr. Zerhouni for the steps he has taken to change the
ethical rules that guide NIH. And I recognize that the ``Blue Ribbon
Panel'' has made a good faith effort to minimize potential conflicts of
interest. But more needs to be done. I am particularly concerned that
some potential conflicts of interest will still go undisclosed. Full
disclosure is essential for ensuring public confidence in the work of
NIH.
I've asked the GAO to analyze the work of the Blue Ribbon panel,
and I hope that GAO will be able to provide a roadmap to enhance the
Panel's recommendations.
Many argue that if we don't allow NIH scientists to accept large
payments from the drug industry, we will lose them to higher paying
jobs in industry or academia. I am not ready to accept this conclusion.
One heartening finding of the subcommittee's investigation is that the
vast majority of NIH scientists are willing to do their jobs without
receiving supplemental income from drug companies. Of the thousands of
scientists employed by NIH, only a small percentage were found to be
receiving money from drug companies. Apparently, the rest of NIH's
scientists have found sufficient compensation in their government
salaries and the opportunity to work at the world's leading biomedical
research facility.
We are justifiably proud of NIH's long tradition of scientific
achievement. We've always been able to trust the science that comes out
of NIH. This is a legacy we need to defend and protect. Americans need
to know that when NIH reaches a conclusion, that conclusion is based on
hard evidence and the scientific method. We need to act now to impose
appropriate conflict of interest standards so that America and the
global scientific community can continue trusting in NIH.
______
Prepared Statement of Hon. John D. Dingell, a Representative in
Congress from the State of Michigan
Mr. Chairman, you are to be congratulated on this investigation
into conflicts of interest at the National Institutes of Health (NIH).
NIH is a national treasure, the flagship for scientific research into
the causes and cures for diseases that have ravaged mankind through the
ages and others that have arisen with devastating effect in more recent
times. It has been so successful in fulfilling its missions that
Congress, on a bipartisan basis, has increased its budget four-fold
over the past two decades. Along with the increased funds have come
increased tasks.
In general, we have been very careful not to earmark funds for
research into specific diseases, trusting the NIH scientists to pursue
the most promising research as they see fit. We have also passed
legislation to permit private/public partnerships in the hopes of
making promising cures available to the American people in an
expeditious manner. This makes sense.
Unfortunately, certain scientists have been trusted to determine
when their personal financial involvement with drug and biotech
companies poses a conflict of interest with their responsibilities to
the public. And those scientists have not been subject to rigorous
review or full disclosure. Now we see that at least three
Administrations have not only tolerated, but encouraged, the acceptance
of monies, in some cases extraordinarily large sums, by NIH scientists
from private companies with substantial interests in the decisions at
NIH. The secret purchase of information and influence must stop.
Mr. Chairman, another activity that must stop is the lack of
cooperation with this important inquiry. I agree with you that this
investigation has been slow-rolled and stonewalled from its onset a
year ago. We have yet to receive all the requested documents and
interviews. It is my understanding that the Department of Health and
Human Services has refused to supply at least one witness you requested
for the hearing next week.
Moreover, the Department has broken with past practice in order to
monitor, if not hinder, the inquiry. As you are aware, this
Subcommittee has had a longstanding agreement with the Department that
it could provide personal counsel to individual employees during staff
interviews on particularly sensitive investigations, provided that no
information from those interviews would be revealed outside the
interview room. That agreement spans three Administrations and control
of the Committee by both parties. Two weeks ago we discovered that the
attorneys accompanying all department employees to these interviews
were reporting back the contents of those interviews, and had informed
the employees that they were in the interviews not to represent the
individuals but for the purpose of reporting the content of the
interviews back to the Department. This came as a surprise to both
majority and minority staff and undermines the credibility of our work.
I offer you the full support of the minority in whatever steps,
including formal process, you may take to acquire the necessary
cooperation from the Department.
This investigation is important--both to protect the integrity of
the scientific work at NIH, and to protect the credibility of the work
of this Subcommittee. Mr. Chairman, you have my thanks and my support
as we continue the bipartisan work on this matter.
Mr. Deutsch. Thank you.
Thank you, Mr. Chairman, for holding this very important
hearing into conflicts of interest at the National Institutes
of Health. NIH is truly a critical agency that enjoyed
bipartisan support for its work fighting diseases and cripple
and kill millions of Americans. Yet it appears that the
leadership of NIH may have fallen victim to a disease itself,
and that is creed.
It is important to differentiate between the current and
former leadership of NIH that have encouraged the option of
corruption, the HHS lawyers that have facilitated the payoffs
from drug and biotech companies and the thousands of the
dedicated scientists that do such brilliant work solely for the
benefit of their employers, the American people.
While the full extent of the corruption is unknown largely
because of the stonewalling of the Department of HHS, there
appears to be only 114 employees out of 17,526 that currently
admit to providing consulting services to drug and biotech
companies.
Today we hear from a so called Blue Ribbon panel appointed
by the Director of NIH Dr. Elias Zerhouni, as well as Dr.
Zerhouni himself.
The panel represented by its co-chair today, made 18
recommendations to reform the ethics program at NIH. They
issued these recommendations in a 68 page report released last
week.
To say that the report constitutes nothing more than an
apology for the status quo does it a disservice. It is a report
from a panel that blatantly refused to consider the most
important facts. The panel apparently felt compelled to base
its recommendation on their misplaced need to excuse the
inexcusable.
I cite the executive summary, and I am quoting, ``The panel
did not investigate specific allegations or review individual
cases.'' Nor, apparently, did it do much else except hear
testimony from 32 witnesses over 4 days of public hearing, some
28 of which had a direct financial interest in maintaining the
status quo. Three others are lawyers that developed or defended
the rules that perpetuated the corruption. And finally, the
former head of NIH that removed virtually all obstacles to
acceptance of gratuities at NIH.
It would appear that the panel had at least some
substantial amount of help in drafting this report from HHS
General Counsel. Mr. Chairman, that office has facilitated
destruction of much of the legal basis for ethical standards in
NIH and it has been largely responsible for the attempt to
cover up the extent of the corruption at NIH from this
subcommittee. Nonetheless, the panel members are responsible
for this public report, and Dr. Zerhouni is the official who
will be responsible for cleaning up the corrupt practices at
the agency.
Again citing from the report section 5 recommendations page
60, ``The panel believes that with careful oversight and
monitoring the potential conflicts of interests can be
effectively avoided.'' This is clearly not the case.
I am anxious to hear from the panel representative just how
NIH is supposed to effectively monitor and oversee the for
profit activities of its thousands of employees. I suggest that
the report really proposes is the existing quality control
system that might accurately be described as a system of
careful twisting of the rules and an overlooking of the
consequences.
I submit for the record a summary of what the panel should
have had but did not consider, specifically: A spreadsheet
prepared by NIH of the employees with current consulting
contracts with drug and biotech companies; a series of
PowerPoint slides prepared by the subcommittee staff off the
information contained in that spreadsheet, and; a series of
articles by David Williams from the L.A. Times that explores
some of the stories in detail.
Dr. Zerhouni, I have two recommendations for you. If you
are indeed serious about restoring the pristine reputation of
NIH research, suspend every ethics official in the NIH that has
approved a consulting agreement between a drug or biotech
company and an NIH employee until real investigations, perhaps
from the Office of Inspector General, confirmed that they made
a vigorous effort to determine the extent of any potential
conflict. Staff review of the documents in our possession today
suggests that these ethics officer, by in large, saw their role
as facilitating the consulting arrangements rather than
protecting the government from conflicts of potential conflict.
The NIH's own spreadsheet suggests that their facilitation was
a success.
Finally, I would urge you in the strongest possible terms
to end the practice today of NIH researchers taking anything of
value from a drug a biotech company. The conflict is not
defendable short of NIH having supervised each review and every
task undertaken, every work product produced, every piece or
advice provided the drug company and comparing them against
current and former tasks that need to be taken by the Federal
Government. Even then it is hard to imagine how the American
taxpayer could possibly be assured that the employee on the
payroll of a drug or biotech company is always acting in their
best interest.
Mr. Chairman, again, I want to thank you for holding this
hearing. I look forward to the witnesses.
I yield back any remainder of time.
Mr. Greenwood. The Chair thanks the gentleman and notes the
presence of the chairman of the full committee, Mr. Barton. And
we are pleased to have him here, and he recognized for his
opening statement.
Chairman Barton. Thank you, Mr. Chairman.
I want to commend you for holding this hearing.
I am going to ask unanimous consent that my formal
statement be put into the record.
Mr. Greenwood. Without objection it will.
Chairman Barton. I am just going to speak extemporaneously.
The NIH is an important asset to our Nation. As such, we
doubled its budget over the last 5 years to I think a little
over $28 billion. There is not a member of this subcommittee or
the full committee, or I would even possibly like the House and
the Senate, that does not want the NIH to be absolutely totally
successful.
I have the privilege to have a private meeting with Mr.
Zerhouni, and everything that I know about you personally and
the information that we exchanged indicates to me that you
really want to do nothing but enhance the reputation of the
agency that you head.
Having said that, NIH has not been reauthorized in over 10
years. There are some very controversial issues that your
agency deals with, and the Congress has been reluctant to wade
into the fray and engage in the policy debates that need to be
debated if we are going to reauthorize the Institute.
It is my intention in this Congress to reauthorize the NIH,
and I have been working on a bipartisan basis with Ranking
Member Dingell, and I think we are going to be able to do that.
We want NIH to succeed. But we are also concerned that as our
staffs have worked on the policy side and as the oversight
investigation staffs have worked together on this side, the
administrative side, we have found NIH to be less than
cooperative, and that's going to change.
Now, you can go back to your agency and you can tell your
directors and all that the administrative officials that they
can cooperate, you know, cooperatively or we will make them
cooperate coercively, you know. We are going to get the
information that this staff has asked for and we are going to
share it on a bipartisan basis, and then we are going to see
what recommendations, if any, need to be made.
I am very concerned about the fact that there are large
honorariums and consulting fees being paid without any internal
or external requirements for disclosure. There was a time in
the Congress where a Member of Congress could accept an
honorarium, I think we were capped at $2,000 per speech and I
think $30,000 or $35,000 per year. And those all had to be
reported. They could be used for personal use, but they had to
be reported and they had to be capped.
Apparently within your agency there are little, if any,
controls on that and at least anecdotally there are stories of
at least one individual getting a half million dollars. I do
not know if that is true or not. But if that is true, at a
minimum it needs to be reported and disclosed, and it might
need to be banned.
Now the Blue Ribbon panel that Dr. Augustine chaired, I
believe, held seven hearings over a 2 or 3 month period and
made some recommendations that apparently have not been agreed
with. Now, that could be wrong and you may bring that out in
testimony. But we have to have transparency. We have to have
accountability. And we simply must have the faith of the
American people that the research grants that are given at NIH
are given because of the merit, not because somebody got a big
honorarium or speaking fee.
So, this is not a hearing that is being convened for a
witch hunt. Again, we want the NIH to succeed, but we do want
to put into place the proper checks and balances to make sure
that the full faith and trust of the American people can be
placed in the agency.
With that, Mr. Chairman, I would yield back.
[The prepared statement of Hon. Joe Barton follows:]
Prepared Statement of Hon. Joe Barton, Chairman, Committee on Energy
and Commerce
Thank you, Chairman Greenwood for holding this important hearing.
The ethics concerns and the lack of public accountability associated
with much of the outside consulting fees and cash awards received by
NIH scientists is yet another reason the NIH needs to be reauthorized
by this Committee.
It has been over a decade since the NIH has been reauthorized.
Since that time, the restrictions on outside consulting have been
lifted entirely. Rules on public disclosure have been weakened to the
point that the Los Angeles Times reported that 94% of NIH's highest
paid employees were not required to publicly disclose their consulting
incomes. These highly paid employees included some scientists who were
paid more than the Vice President of the United States. At the same
time restrictions were lifted and public disclosure was minimized, the
NIH did not even require the employees to tell the agency the amounts
proposed or actually received in order to get the outside consulting
approved.
I am well acquainted from my years as Chairman of this Subcommittee
with the attitude often found at the NIH: the rules don't apply to us.
Now I sense we are hearing a variation on this theme: If the rules do
apply to us, they shouldn't. Such permissive attitudes and practices
can no longer be tolerated. One can only wonder: if NIH can be so
permissive about the most basic ethical rules in the Federal
government, what does this say about NIH's ability to manage taxpayer
dollars and, most importantly, ensure that taxpayer-supported research
gets translated into cures?
The NIH is the premier medical research institution with nearly a
$28 billion appropriation. There must be greater transparency of NIH
activities to hold this agency accountable for the taxpayer investments
made. It is an enormous agency requiring much constructive oversight
and the strong support of this Committee.
Continued public confidence in the work of the NIH must be assured,
especially at a time when public-private partnerships should be
strengthened. Technology transfer activities of the NIH have helped
speed research from the bench to the bedside. These efforts have been
successful without the need to place NIH scientists on industry
payrolls.
The productive collaborations in clinical research of the Federal
government, academia, and industry have recognized the distinct roles
that each of these entities is best suited for. These roles should not
be blurred.
Chairman Greenwood is to be congratulated for his leadership. In
this hearing and others to come, I expect this Subcommittee to reveal
the full nature of the problem of the NIH ethics program. This effort
should be considered part of the broader work of this Committee to
modernize and improve the authority of the NIH.
I especially want to welcome Dr. Elias Zerhouni, the Director of
the NIH, and I thank all the witnesses for appearing before the
Subcommittee. I look forward to your testimony.
Mr. Greenwood. The Chairman thanks the gentleman and
recognizes for an opening statement the gentle woman from
Colorado, Ms. DeGette.
Ms. DeGette. Thank you, Mr. Chairman.
And in the interest of time, I would ask unanimous consent
to put my entire opening statement in the record.
Mr. Greenwood. Without objection it will be put in the
record.
Ms. DeGette. I just would like to mention one thing that
really struck me when I was reading the background materials
for today's hearing and also a number of the newspaper articles
and other materials about this issue. The Chairman and I had
been working for some time on legislation around human subject
protection, as you know, Dr. Zerhouni. And what struck me was
in previous years some of the NIH researchers who were on the
NIH payroll also had financial interests in drugs that were
being provided to people who were in these studies. And this
was not disclosed to the individuals in those studies and, in
fact, a couple of people died as a result of some of the drugs
they were given in the studies.
The reason I bring this up is because I have always
assumed, and I think Mr. Greenwood has too, that when we are
talking about human subject protection and our legislation, we
are sort of talking about some of these renegade researchers.
And what struck me was these are NIH researchers. These are
researchers, the very top tier researchers in our Nation, and
yet they were conducting human subject research without full
disclosure to the patients.
I understand since those studies, which were in recent
years, the NIH has subsequently instituted a rule that
prohibits such conflicts. But that has only been in recent
years. And it just strikes me, Mr. Chairman, that a little part
of us, a little footnote to this whole investigation is the
issue of human subject protection because if this can happen at
our flagship institution in this country, think about what is
going on everyplace else.
And with that, Mr. Chairman, I will yield back the balance
of my time.
[The prepared statement of Hon. Diana DeGette follows:]
Prepared Statement of Hon. Diana DeGette, a Representative in Congress
from the State of Colorado
I want to thank the Chairman for holding this hearing today.
Conflicts of interest issues are so important, particularly in the
realm of health and science because of the vast research potential that
can help mankind and the direct impact on individuals. I am very glad
to be here today to try to get at the bottom of what I think is a real
scandal.
This issue is of particular interest to me and in fact I have
legislation, that I have worked on in cooperation with our esteemed
Chairman, that aims to put key protections in place for human research
subjects. In working on this bill, one of the things that has become
clear is that addressing conflicts of interest issues are crucial; not
only is it important to inform patients whenever conflicts of interest
exist that could directly affect them, but we need to work towards
eliminating such conflicts especially in clinical trials.
I commend Dr. Zerhouni for recognizing that problems exist at the
NIH and for convening the Blue Ribbon Panel (BRP) to look into the
situation. I think this was an important first step. However, I will be
honest and let you know right from the start that I think very serious
shortcomings exist within this report and it doesn't give me much
confidence that the changes I think need to happen will be made.
Just this morning there was a Los Angeles Times article alleging
that although the Blue Ribbon Panel found permissive practices at the
NIH, they were not detailed in its final report. I don't understand why
the BRP did not consider it important to, at the very least, outline a
few examples of the problem. I will be very interested in our witness's
explanations as to why they made this choice and how they think they
can solve a problem, if the depths of the problem are not illuminated.
This is just one of the reasons that I believe the proposed changes
in the BRP report are seriously flawed. Let me cut to the chase about
why else the recommendations aren't going to help. Mr. Chairman, unless
there is a blanket restriction on outside compensation serious
conflicts of interests will continue to exist.
For example, currently honoraria, as such, is not allowed. This ban
is essentially meaningless because NIH employees are allowed to receive
thousands of dollars in consulting fees, awards that come with
significant monetary prizes, etc. So if the BRP recommendations are
followed and certain restrictions on consulting fees are instituted for
certain employees, but there is no change to regulations regarding
receipt of bona fide cash awards, then surely we will see a shift to
more and larger cash awards being given to NIH employees from outside
companies. The money influx won't change; it will just shift around so
that it fits the new rules.
One of the things that struck me in reading the report is the
notion that many employees, including senior level scientists are
increasingly demoralized by the scrutiny and criticism the NIH has
received recently in regards to this issue. This is really too bad
because these staff members are simply doing what the rules allow them
to do. However, I think that there is an implication in the report that
somehow it is the media and Congressional condemnation that is the
problem, rather than the issue itself. It is not the fault of the
scientists that they are under a ``cloud of suspicion'' as it is
characterized in the report, it is the unethical system that has
created this situation.
The good news is there is a very easy solution. Clean up the system
entirely and the ``cloud'' and all the investigations and news stories
all disappear. It seems crystal clear to me. Remove big money from the
equation entirely and the integrity of that great institution that is
the National Institute of Health is restored.
Mr. Chairman as you may be aware two Members of this Committee, Mr.
Brown and Mr. Waxman wrote ten drug companies in March asking about
payments to NIH employees. Only two provided responsive answers,
Schering Plough and Abbott Labs.
I ask that both responses be added to the record because they
contain several instances of payments that are apparently current but
that NIH did not include on its spreadsheets. This may be because the
employees did not report the income as required or it may be because
the information collection apparatus at NIH failed to include those
consulting payments in response to your request.
In either case it is disturbing that an Agency that makes the
sanctity of data collection an article of faith seems does not seem to
be up to supplying data requested to Congress. Apparently, this
Committee should seek information directly from firms in the
pharmaceutical and biotech industries since the government agency
cannot provide a complete record.
Thank you again for holding this hearing and I look forward to
hearing the testimony of our witnesses.
Mr. Greenwood. The Chair thanks the gentlelady, and
recognizes the gentleman from Oregon, Mr. Walden, for an
opening statement.
Mr. Walden. Thank you very much, Mr. Chairman.
I have a prepared statement I would like to insert in the
record.
And I just want to say, like my other colleagues, I think
we are all very supportive of the NIH and the great work that
is done by your extraordinary scientists to bring us cures to
disease and illness and new research for drugs and other
techniques to improve the lives of Americans. And just as NIH
is on the cutting edge of research, I think what we are saying
is you need to be on the cutting edge of ethics, too. And the
problems that have come up are serious and they are ones that
need to be addressed. And I know that you have inherited these
as you have come on board only recently, and a lot of changes
occurred upwards of 10 years ago. But they are now out there
and we are going to look at them closely, and we should.
Because the research needs to be above question both at NIH and
every other institution in America, as well as in journals
where they publish medical research, too. We need to know that
the information being provided, the research that is being done
is above question when it comes to the ethics. And I know you
agree on that. So look forward to working with you on this.
Thank you, Mr. Chairman.
[The prepared statement of Hon. Greg Walden follows:]
Prepared Statement of Hon. Greg Walden, a Representative in Congress
from the State of Oregon
Chairman Greenwood, thank you for holding this hearing.
I am an enthusiastic advocate for the National Institutes of
Health. NIH research yields miraculous breakthroughs that save lives
and dramatically improve the quality of life for those with once-
untreatable diseases and medical conditions.
I am proud that Congress kept its commitment to doubling the NIH
budget. I supported this ambitious endeavor every step of the way.
One thing that we have been abruptly reminded of by recent news
accounts is that the questionable actions of a few can tarnish the
good, honest work being done by others. Additionally, even the
appearance of impropriety and conflict-of-interest can have a
devastating affect. Congress and the American taxpayer have invested in
NIH, and in a way, we place our hopes and wishes in the hands of NIH
researchers. These hopes for a cure and wishes for loved ones to
recover from illnesses are more valuable than any cash award or stock
option that NIH researchers and staff might receive from extramural
consulting agreements.
I applaud NIH Director Zerhouni's initiative in forming a Blue
Ribbon Panel on Conflict of Interest Policies. Now that the Blue Ribbon
Panel's report has been released the hard work begins. Do the Panel's
recommendations go far enough? Will the recommendations truly avert
conflicts of interest--both real and perceived? If the answers to these
questions are not ``yes,'' then work remains to be done. The report's
recommendations are a good start. I am interested to hear how these
recommendations will be put into practice. Finally, I challenge NIH to
press forward and continue to find ways to strengthen these policies,
so that the hard-earned and well-deserved image of NIH is not
tarnished.
Mr. Greenwood. The Chair thanks the gentleman, and
recognizes the chairman of the Health Subcommittee, the
gentleman from Florida, Mr. Bilirakis for an opening statement.
Mr. Bilirakis. Thank you. And thank you very much, Mr.
Chairman. And, again, my gratitude, too, for you holding this
hearing and for all the investigations you all have conducted.
Drs. Zerhouni, Alberts and Augustine, we thank you of
course for taking time to be here and for all the work you have
done leading up to this hearing.
I had not intended to make an opening statement. I had
intended to come in here and just sort of listen to you all
before jumping to any conclusions. And I would like to think
that I have not jumped to any conclusions.
We hold these hearings to learn, and we certainly should
not be prejudging before we listen to you and have an
opportunity to ask you questions. But I would say that you have
got to know that we are besieged by our constituents and by
disease, many many disease-specific groups.
I have chaired the Health Subcommittee for quite a few
years. I do not think I knew that there were so many diseases
out there. It is just amazing. I sometimes feel, I do not know,
like maybe an undertaker or whatever it is and particularly so
when the constituents will come in or, as I said before,
representatives of disease-specific groups with a child who is
ill with a certain disease. And so many comes in, ALS, and
whatnot. And what do they ask for? They beg for an increase in
research funding at the NIH.
And I have to tell that we formulated a sort of a policy
here sometime ago, going back to when the other party was in
charge, where you know we did not think that this ivory tower
of the Congress should make decisions on how much money should
go to research for a specific disease. We do not know. We
figured, you know, they might be on the cusp of a real
breakthrough in a particular disease and we are we to basically
say. And Dr. Zerhouni have discussed this. And who are to
basically say that you have got to shift dollars from this to
this, or whatever the case may be.
And yet these same people that are already heartbroken
after they have sat down and talked to me and other people on
this committee and in this Congress, and they pick up the
newspaper and they read some of these things that are taking
place.
Now, you know, is it truly a conflict of interest in terms
of does it play a part in the decisionmaking in terms of where
the dollars go for research, which specific disease and which
specific research? I do not know. But I am here to tell you,
and I know you are intelligent enough to realize this, that
perception and image is really sometimes a hell of a lot more
significant than fact. So how much these families feel when
they pick up these newspaper articles and read about this stuff
and whatnot.
So this is critical. And as Chairman Barton said, you know,
we double funded. We made a promise back in the mid-'90's, and
I guess there are quite a few promises that we do not fulfill;
I think we intend to but we do not. But that is one that
fulfilled. And yet I just do not think that the people at NIH
are doing their share in terms of fulfilling promises to the
sick people of our country regarding their disease and whatnot.
I have often been very concerned and curious, and curious
underlined, as to how NIH allocates the funding and whatnot and
what criteria they use. And I am not sure that we have ever
really gotten a handle on specifically how what criteria you
use. But some of these things that are taking place, the
consulting fees and the speaking fees and whatnot, playing a
part in all that, well whether they are or not, I don't know.
But it sure as heck is a perception out there, reasonably so,
that that is taking place.
So I hope that you do a good job here this morning trying
to explain to us, maybe answer all of these concerns that we
have. But not only for ourselves, but also for the sick people
out there in America who depend on you so very much. Thank you.
Thank you, Mr. Chairman.
Mr. Greenwood. The Chair thanks the gentleman for his
insights.
Prior to introducing our panel, the Chair would ask
unanimous consent that this binder be incorporated into the
record. It includes several pieces of correspondence from the
Department of Health and Human Services, a series of articles
from the Los Angeles Times and the Blue Ribbon report is
incorporated in here, as are spreadsheets supplied to this
subcommittee from the NIH concerning outside consulting
agreements. And without objection, that will be incorporated
into the record.
[The information referred to appears at the end of the
hearing.]
Mr. Greenwood. And now I have the privilege to introduce
our panel. Thank you for your patience and listening to our
opening statements.
And the first of our witnesses is the Honorable Elias
Zerhouni. Dr. Zerhouni is the Director of National Institutes
of Health. And let me say again and for the record, I think you
are the best thing that ever happened to the NIH. I think the
skills that you have brought toward reorganizing the NIH, to
making its mission clear, the administration of the NIH, your
vision are exemplary and I think your commitment to ethics is
second to none.
And I regret that--I know that you would have liked to have
been spending a lot more time working on the mission of NIH
than responding to our requests, and I am sorry for that. We
have important work to do. We are going to get it done. And I
am very optimistic when this process is over, we all will be
better off for it and so will the NIH, and so will all of the
patients, that Mr. Bilirakis has just referred to.
We also have with us Dr. Bruce Alberts who is President of
the National Academy of Science. And we welcome you. We thank
you for your service in heading up this Blue Ribbon Commission.
And we also have Dr. Normal Augustine, Ph.D, Co-Chair of
the Blue Ribbon Panel on Conflict of Interest Policies for the
NIH.
Welcome to all of you.
It is the practice of this committee to take its testimony
under oath, and so I need to ask if any of you have any
objections to giving your testimony under oath? I see no
objections.
I need to advise you that pursuant to the Rules of the
House, you are entitled to be represented by counsel. Any of
you request to be represented by counsel? I would think not.
Okay.
In that instance would you rise and raise your right hands,
please.
[Witnesses sworn.]
Mr. Greenwood. Okay. You are under oath.
And Dr. Zerhouni, the floor is yours for your opening
statement.
TESTIMONY OF HON. ELIAS A. ZERHOUNI, DIRECTOR, NATIONAL
INSTITUTES OF HEALTH; BRUCE ALBERTS, PRESIDENT, NATIONAL
ACADEMY OF SCIENCE; AND NORMAN AUGUSTINE, CO-CHAIR, BLUE RIBBON
PANEL ON CONFLICT OF INTEREST POLICIES
Mr. Zerhouni. Thank you very much, Mr. Chairman and members
of the subcommittee, ranking member.
I am pleased to have this opportunity to be here and
testify about our agency's ethics program. And before I do, I
would like to really tell you that my intent and the intent of
the agency is to work in parallel with you and your concerns
and address them fully. I do not think the American people can
afford to have an agency like NIH with any taint, shadow, or
cloud over its head. So you have my commitment, and I think you
have the commitment of all of NIH to do it as quickly, as
effectively as we can within the constraints that you well know
are always around a complex agency like the NIH.
So having said that, I believe that NIH has had great
success in improving public health thanks to the resources you
mentioned provided by the Congress and the President and the
talent of our scientists. But without the trust of the American
public, there is no progress that will be possible, and we need
to address that.
This trust must be sustained. This committee, the
subcommittee has raised questions about the NIH ethics process.
Your questions must be answered because our public health
mission is too important to have it undermined by any real or
perceived conflicts of interests.
I want to personally thank you, Mr. Chairman and members of
the subcommittee, for helping me in identifying what you
perceive as weaknesses in NIH's ethics policies and systems.
The Chairman has supported our efforts to review and reform
ethics rules and procedures of the agency. Mr. Chairman, I also
appreciate very much your leadership, your fairness and the
constructive guidance that you have provided me and NIH
throughout this process. We are looking forward to continuing
to work with the subcommittee in a process that I agree cannot
be finite because this situation evolves, in that the
relationship of science, industry, development of new
treatments, and new cures is one that is constantly changing
and we need to be able to be adaptive to that reality.
First, let me tell you how we internally within the
authority of the agency, started to address these issues before
the media reports. In July of 2003 as we started looking
because of your inquiry into awards. We then immediately
realized, I realized and I made the observation that the
consistency of our rules across the complex agency were not
what they should be. And when I learned of that and evaluated
that, we immediately moved to develop a trans-NIH ethics
advisory committee that would report directly to me in my own
office to review the activities of all high level officials and
of all relationships related to industry, biotech, or any
relationship that could be construed as influencing a granting
decision or a resource allocation decision. That was step one.
Let me give you an example. Because of this panel, we were
able then to instruct that all existing consulting
relationships with pharmaceutical or biotech firms be stopped
and resubmitted to this trans-NIH ethics advisory committee to
address this issue of blur that some of you have mentioned and
resubmit it to the advisory committee for review and reapproval
before they could proceed.
Working through the Department of Health and Human
Services, we looked at the issue of disclosure. Chairman Barton
raised the issue of a $500,000 award, I am not clear about what
that is. I suspect this is a prize that was given to one of our
directors, and I believe that was disclosed publicly. But when
you looked at the disclosure levels, you realized that because
of Office of Government Ethics rules related to the payment
mechanism that we used, that through this mechanism you could
have internal disclosure--and let me make sure everybody
understands.
We always have internal disclosure of these activities as
they occurred. But external disclosure would not occur.
So we immediately asked the HHS and the Office of
Government Ethics to close this inadvertent loophole in ethics
regulation that does not require public disclosure of financial
statements of some of NIH's most senior and highest salaried
personnel. OGE approved our request and extended a number of
public filers at NIH. As a result, all senior scientific
personnel within the jurisdiction of the NIH Director are now
required to file. That includes directors of institutes and all
their deputies and anyone in charge of a granting program.
This week we submitted a second request to the Office of
Government Ethics. Following the Blue Ribbon panel reports, I
felt that it was time to move and extend because we heard the
recommendation. We are now asking that all policymakers and
those who marshal any resource in the public interest be
required to file public financial disclosure reports. Our
request to the Office of Government Ethics relates to 500 new
additional positions that we would like to have disclosed.
As a result of your inquiries, we learned that the majority
of NIH scientists who consult for pharmaceutical or
biotechnology companies are not required under current rules to
disclose the specific amounts and type of compensation. They
have to disclose the relationship. But because of the rules
that we are under, which are not NIH rules, these are
government-wide rules, we could not request, supposedly, that
amount. We have changed that in the context of current
agreements. I asked that this rule be changed, and we were able
to have employees submit these compensation amounts for all
current and future consulting arrangements. And I think we
submitted all of that information to your committee,
subcommittee, Mr. Chairman, in March.
The issue of not being able to provide you all of the
information that you needed, frankly, goes beyond my own
authority to do. And it relates to the balance between the
Privacy Act and the regulations that we can effect. And I think
your staff has been well informed of that, and you have my
commitment that whatever I can do within the rules and
regulations and the advice that I receive, I will do. And this
is my promise to you.
Finally, I created a Blue Ribbon panel because I realized,
as you did, that in fact these issues were not just of marginal
changes or misinterpretation. I believe personally, given my
previous experience, that when you see a situation like this it
is not just an accident. A system is designed to produce the
results that you observe. So I believe right away that what we
needed to do was do a system review. And I asked that the Blue
Ribbon panel be formed to review existing laws, regulations,
policies and procedures under which NIH operates. And I asked
the committee to leave no stone unturned. I put no limits on
their ability to obtain data, obtain information except that I
felt that it was very important, and as I expressed to you Mr.
Chairman, it was very important in this situation to state
correctly what the problem is and continue in the work of the
investigative process of all of the other things that have
happened, that I do not think we can have the period of time
while we deliberate glaring deficiencies will remain
uncorrected.
So that was my goal here, and I think we have made some
progress. And I agree with you that we have to look at
balancing issues that come from that. I told the Blue Ribbon
panel that the principles that we, NIH, myself wanted to apply,
and we have been public on that.
No. 1 is transparency. No. 2 is full disclosure, and there
is a difference between the two. Full disclosure internally is
not fully transparent. Transparency to me relates to the
interaction with the public. Full disclosure means do you have
the exact content of the relationship well understood by the
third component, which is an independent peer review mechanism
that understands the science, not just ethics officers who may
be well versed in the law of ethics but not well versed in the
details of how science gets done.
And fourth, a monitoring process that will allow us to make
sure that we are not going to deviate in the future from those
principles.
I also have to tell you as NIH Director that although it
would be easier, quicker, more satisfying to basically create a
blanket prohibition, the reality of science is such that you do
need to have interactions between scientists and their
colleagues both within academia and within industry. It is also
a public interest, a policy interest of the United States to
have translation of these findings be effective. And we have
heard that through the many admonishments that Congress has
asked our agency to follow. And yet, at the same time, we
cannot forget that the primary interest is the public trust.
So we have three interests; public trust first, making sure
the translation is effective. But to make that translation
effective, you do need the best people that you can recruit.
Those three things are very hard to balance, and I want to
testify to the fact that we should keep the dialog open. And I
am more than happy to provide the data and the information that
would enlighten all of us together into what is the best policy
framework that we need to develop.
I have reviewed the panel's recommendations. I find them to
be constructive and it's a good approach to improve the NIH
ethics program. I think that we need to implement the
recommendations of the Blue Ribbon panel which improve the
trajectory of where we want to be, and do it as diligently as
we can either within my authority and if it's not within my own
authority, I will work with the department, and the Office of
Government Ethics to implement these recommendations as we go
forward; modified, obviously, by the process that we're
undergoing with you, Mr. Chairman.
In sum, I think these actions have strengthened NIH, the
actions we have taken have strengthened NIH's process not to
the point of perfection. But let me state here just as in a
concluding portion of my testimony, what I think is essentially
different about what is being proposed.
One, policy interest No. 1 is public trust. How can we
ensure public trust? Well, make sure that no individual who is
responsible for program funding decisions and recommendations
or professional management of grants or review of grants--we
have a very balanced process at NIH with multiple levels of
checks and balances. It's very hard for me to see how someone
alone can have a granting capability. However, that being said,
I think that the recommendation of the Blue Ribbon panel that
excludes any and all officials that have those responsibilities
from any consulting with not just pharmaceutical and biotech
companies, but also paid consulting from academia, is a good
recommendation. I think we should implement it and it will
preserve, give me, Director of NIH the assurance that there is
a layer of government scientists which is completely immune to
any potential interference. So that I think is a step that we
need to do. This is pretty different than whatever happened
before and whatever happens in universities or any other
institution. This is an innovative step and I think it's a good
step. And I think we need to take that.
I will reaffirm the prohibition against NIH scientists
conducting research involving human subjects having financial
relationships with any organization whose interest could be
effected by their research. We have always used that rule. I am
not sure that transgressions occurred. We should look at that.
Nonetheless, the principle should be implemented as we speak
today and we should be reaffirming this principle making sure
it sticks.
I will propose that employees engage in compensated outside
activities be prohibited from compensation in the form of stock
or other forms of equity ownership. This is a major departure
from prior policy. This is a recommendation of the Blue Ribbon
panel that does not apply just to employees with
responsibilities, but it will apply to every employee of NIH.
This is, I think, a major move and I think we should give
credit where credit is due, and that is the Blue Ribbon panel
giving us a clear recommendation in that regard.
I will set in place policies and procedures which give full
consideration of the appropriateness of recusals. I personally
believe that recusals should be used only in the most limited
circumstances when the employee has an unavoidable conflict,
like for example a spouse working for an organization. But
recusals that relate to the authority of the employee should be
limited to the most extreme exceptions. There may be some, but
we have to be very careful.
Principle two is increase transparency. In this case,
working with HHS and OGE, as I told you, we have increased the
public disclosure requirements. I will aggressively seek
additional authorities to require more employees to disclose
their outside activities where appropriate, including
disclosure of relevant outside relationships and financial
holdings in connection with research, publications, speeches,
inventions, clinical research. The Blue Ribbon panel has
considered this issue.
And let me just state the principle, I think, that we, NIH
Director and my own directors, have stated publicly in a
testimony in the Senate when asked whether there is any reason
why you would not want to disclose an existing outside
relationship. My answer to this is there should be no reason.
If you cannot disclose that relationship, then you should not
have that relationship. That is a clear principle I want to be
on the record to tell you that this is what I believe in, this
is what my scientists believe in. It is the rules and
regulations, complex as they are as pointed out by the Blue
Ribbon panel, that prevented this clarity from occurring.
Let me tell you, I am committed to make sure that whatever
we need to do we will do, so that in the context of
relationships with industry, biotech, any conflicting
relationship; and that we find ways of making sure that that
relationship is publicly disclosed.
I understand the Privacy Act issues. I understand that
people in their outside time on their own time have the right
to privacy. But when it comes to activities that are so closely
related to their government function, I think we should exclude
that from the general government ethics rules under which all
agencies of the government are working. So we will look forward
to find creative ways of making sure that that principle of
full transparency be implemented, however, we need to get
there. It may take us some time. We can do what we can do
today, but frankly this is a principle that I want to be clear
about: increasing the transparency.
There is no doubt also that the rules do prevent, as they
stand today, fair, good, honest scientific interchange in the
form of writing and teaching and reviewing and conferencing
with colleagues. This is something that the Blue Ribbon has
looked at. For activities under very limited dollar amounts and
other activities, I think as Director of NIH, as a scientific
manager, we have to be very careful to not put that in the same
category as drug company business relationships. That's the
bread and butter of scientific interactions. I hear your
comments, I understand your concerns but I plead with you to be
open minded about the academic activities of our scientists.
They are important to science.
And last, we will establish effective monitoring and
oversight mechanisms. We want to have a central data base that
will record all of those activities. One of the issues we found
is the disconnect sometimes between the very complex forms. And
I have to tell you, the Blue Ribbon panel got an education in
the law of ethics about this. If you knew the number of forms
and requirements; 520's, 278s, 450s and all of those things,
you can see how the employees really become confused. We need
to clarify and simplify it and have it in one place so that the
recusal, if it ever exists for that individual, is in the same
place as the disclosure from that scientist. We want to commit
to build probably a paragon, an example, of how you can manage
ethics with a transparent fashion by having this central data
base and full disclosure.
So I just wanted to convey to you that we want to work with
you. I cannot afford, nor can our scientists afford, any sense
that we are transparent and not willing to reform as deeply as
we need to reform so that this taint that you are worried
about, concerned about disappears.
With that, Mr. Chairman, I'm ready to answer any of your
questions.
[The prepared statement of Hon. Elias A. Zerhouni follows:]
Prepared Statement of Elias A. Zerhouni, Director, National Institutes
of Health, U.S. Department of Health and Human Services
NIH's mission is to generate new knowledge to improve health. The
outcomes of NIH research affect the lives of every American and
increasingly people around the world. Medical research leads to new
diagnostics, treatments and prevention strategies--and these medical
interventions must be founded on the veracity of the data and on the
unimpeachable integrity of the individuals who conduct the research and
oversee the research enterprise.
Recently Congress has questioned the relationships of some NIH
employees with outside organizations. Our public health mission is too
important to have it undermined by any real or perceived conflicts of
interest. And to this point, I am aggressively developing and
implementing new conflict of interest policies, revamping review of
activities with outside organizations and working to increase
transparency by expanding the number of employees who file internal and
public financial disclosure reports.
I want to personally thank Chairman Greenwood and Members of the
Subcommittee for helping me to identify potential weaknesses in NIH's
ethics policies and systems and for supporting my efforts to review and
reform ethics rules and procedures at the Agency. I appreciate both
your leadership and the constructive guidance you provided on this very
important issue.
New and Ongoing Changes to NIH's Management of Conflict of Interest:
I want to describe actions I have taken in response to concerns
about NIH's management of conflict of interest.
I began reviewing ethics rules, policies and practices last July,
when this Subcommittee raised questions about NIH employees receiving
lecture awards. I believe NIH scientists must remain eligible to
receive recognition for their work in the form of legitimate awards.
However, NIH scientists should not be accepting awards that are merely
a ruse to provide compensation, and we will develop a system to
increase uniformity and track the determinations of NIH's senior ethics
officials as to whether an award can be accepted by NIH employees.
On November 20, 2003, I wrote to all senior managers at NIH
advising them to exercise great prudence in entering into any
arrangement that could reflect poorly on NIH or could create the
appearance of conflict, even in cases where the arrangements are
permitted by law (emphasis added).
In the same memorandum, I announced the creation of the new NIH
Ethics Advisory Committee (NEAC) in the Office of the Director to
provide independent peer review of activities involving outside
organizations. The NEAC, which conducted its first meeting on January
20, advises the NIH Deputy Ethics Counselor (DEC) on conflicts of
interest and helps to ensure that activities involving acceptance of
compensation from outside sources receive uniform oversight at the NIH.
NEAC reviews applications for proposed activities with outside
organizations that stand the greatest chance of posing risks to NIH's
objectivity, or appearances thereof, including, where an award is
valued at $2,500 or more; where total income from an activity with an
outside organization exceeds $10,000 or is unknown; where outside
compensation is in the form of equity; where the activity involves a
drug or biotech company; or where the activity involves senior NIH
leaders (e.g., scientific and clinical directors).
Co-chaired by the NIH Deputy Ethics Counselor (DEC) and Deputy
Director for Intramural Research, the NEAC consists of ten rotating
members and two ex-officio ethics advisors, all of whom are full-time
federal employees. The rotating members are nominated by IC Directors
and appointed by the Co-chairs. Membership represents the categories of
employees submitting proposals to the NEAC, including IC Directors and
Deputy Directors, Scientific Directors, Clinical Directors, Extramural
Directors, OD Senior staff, and others.
During the centralized NIH review, committee members review each
proposed activity to help assess whether it creates an actual or
apparent a conflict of interest. The committee reviews the proposals
based on criteria set forth in the Standards of Ethical Conduct for
Employees of the Executive Branch promulgated by the U.S. Office of
Government Ethics (OGE) and the supplemental Department of Health and
Human Services (HHS) regulations.
To ensure oversight of activities that had already been approved
prior to the creation of NEAC, we also instructed that all existing
consulting relationships with pharmaceutical or biotechnology firms be
stopped and resubmitted to NEAC for its review and input, before they
could be reapproved, if appropriate, by the NIH DEC.
The Inspector General of the Department of Health and Human
Services and the General Accounting Office also initiated their own,
separate reviews of ethics processes at NIH. In addition, OGE
accelerated its regularly scheduled review of the NIH ethics program.
We welcome these inquiries and are cooperating with the various
reviewers.
On January 12, 2004, at my request, Dr. Raynard Kington, the Deputy
Director of NIH, was appointed to be the new Deputy Ethics Counselor
for the Agency. Commensurate with his appointment, the role of the NIH
DEC has been expanded beyond the staff of my office and the Institute
and Center Directors to include Institute and Center Deputy Directors,
Scientific Directors, Clinical Directors and Extramural Program
Directors.
Regarding the important issue of public disclosure, working through
the Department of Health and Human Services, I asked that the Office of
Government Ethics grant approvals to require increased public
disclosure of financial statements of some of NIH's most senior and
highest-salaried personnel. OGE approved the request on February 6, and
as a result, all senior scientific personnel within the jurisdiction of
the NIH DEC are now required to file public financial disclosure
statements. Although many of these individuals were already filing
public financial disclosure forms, they will now be required to do so.
Recently, a second request was submitted to OGE to require additional
high-level personnel at NIH to file public financial disclosure
reports.
In addition, because the majority of NIH employees who file
financial disclosure forms are required to use the OGE-450 financial
disclosure form, which does not request the amounts of compensation
paid by outside organizations, and because the approval process focuses
on the nature of the activity and the identity of the outside
organization rather than the compensation paid, the amounts paid to NIH
employees in connection with their activities with outside
organizations has in many cases not been collected or reported either
internally or externally. I requested that the Department ask OGE to
revisit this approach and, as a result, NIH employees are now required
to submit these compensation amounts for all current and future
consulting arrangements in their request for approval of activities
with outside organizations. Furthermore, to the extent that additional
NIH employees will be required to file public financial disclosure
forms, these amounts will be collected and reported on such forms.
As part of our internal policy review, we are also asking employees
to disclose compensation amounts for expired activities with outside
organizations. I personally believe we should know those amounts, and
so I requested that the Department work with OGE to find a way,
consistent with the Privacy Act, which places limits on collection of
identifiable information by the federal government, to ask for these
amounts. The Department was successful in doing so, and so we have been
able to ask employees for these dollar amounts. We have carefully
considered, including internal discussions with legal counsel and
others, to what extent we can and should order that employees must
provide this information instead of voluntarily requesting it. After
such consideration, it is our understanding that asking for this
information on a voluntary basis is the most appropriate and prudent
way to proceed. We have also been cooperative in providing this
information we have collected for our internal policy review to the
Subcommittee where it has asked for the information.
The Blue Ribbon Panel:
Finally, I created the Blue Ribbon Panel on Conflict of Interest
Policies to review existing laws, regulations, policies, and procedures
under which NIH operates regarding real and apparent financial
conflicts of interest where compensation is received by employees. I
also charged the Panel with reviewing public financial disclosure rules
and procedures. The panel began its review on March 1 and made its
recommendations to the standing Advisory Committee to the NIH Director
May 6. The recommendations were adopted by the Advisory Committee and
submitted to me on the same day.
The Blue Ribbon Panel operated with extraordinary speed. Norm
Augustine and Bruce Alberts, the panel's co-chairs, as well as all the
panel members, served with distinction and performed a great public
service. They deserve gratitude and respect, and I thank them for their
extraordinary efforts. Dr. Alberts and Mr. Augustine are here to
testify and answer your questions.
In reviewing the Panel's report, I was impressed with the degree to
which they looked closely at both NIH policies and its procedures. The
Panel also explored regulations of other Agencies and the rules,
regulations, and laws set in place by the HHS, the Office of Government
Ethics (OGD), and the Congress. And in making recommendations, they did
as I asked--they did not limit themselves to what was in my authority
to change--rather I asked them to make any and all recommendations that
would improve NIH's management of conflict of interest. I told them
that where I did not have the authority to implement change, I would
seek the help of HHS and OGE.
I have reviewed all of the Panel's recommendations and plan to move
ahead as appropriate.
In sum, these actions have already significantly strengthened NIH's
internal oversight of ethics matters and continue to do so in the
future.
Next steps: Principles and Policies
After nine months of review and listening to the concerns of the
public, and after examining the recommendations of the Blue Ribbon
Panel, I want to unveil my plans for further improving NIH's ethics
program. My plans are based on four main principles:
1) Enhance public trust in NIH by preventing conflicts of interest
through the restriction of financial relationships employees
may have with outside organizations;
2) Increase levels of transparency in the NIH ethics program by
requiring much more internal as well as public disclosure of
the details of financial relationships employees have with
outside organizations, including consulting arrangements and
awards;
3) Balance NIH's ability to recruit and retain the best scientific
expertise while expediting the translation of research
advances;
4) Establish effective monitoring and oversight of employee activities.
I will seek to implement actions in response to these principles,
as appropriate, through administrative actions, and supplemental
regulations.
Principle One: Enhance Public Trust
I will seek to prohibit NIH senior management and NIH extramural
employees who are responsible for program funding decisions and
recommendations, and professional staff managing grants and
contracts and publication review from consulting with
pharmaceutical or biotechnology companies or from paid
consulting for academia, except in the case of the clinical
practice of medicine.
I will reaffirm the prohibition against NIH scientists participating
in research involving human subjects where the scientist has a
personal or imputed financial interest in an organization whose
interests would be directly and predictably affected by his
research, except in those exceptional cases where the interest
is not so substantial as to be deemed likely to affect the
integrity of the employee's services to the Government or is
otherwise subject to regulatory exemptions.
I will propose that employees engaged in compensated activities with
outside organizations be, in future, prohibited from
compensation in the form of stock or other forms of equity
ownership in the companies for whom they are working.
I will set into place polices and procedures to fully consider the
extent to which the recusals necessitated by an approved
activities with outside organizations have an effect on the
ability of senior scientific managers and decision makers to
conduct their government work. NIH will clarify the use of
recusals that are required because of financial relationships
with outside organizations. We will require a uniform policy
for informing relevant personnel of who is recused and
establish a new process for monitoring recusals.
Principle Two: Increase Transparency
NIH, working with HHS and OGE, has already increased the number of
senior managers who must publicly disclose their compensated
activities with outside organizations and the amounts received.
These are interim steps. I will aggressively seek additional
authorities to require more employees to disclose their
activities with outside organizations, where appropriate,
including disclosure of relevant relationships and financial
holdings in connection with research publications, speeches,
inventions, and clinical research. As I have said previously,
public disclosure and transparency will be the cornerstone of
the NIH ethics program.
I will ask NIH employees to voluntarily disclose all relevant
relationships with outside organizations and financial holdings
in their work products, such as publications, speeches, and
invention disclosures. And I will seek changes to regulations
to make such disclosures a requirement.
Principle Three: Recruit and Retain Best Scientific Expertise While
Expediting Translation of Research Advances
I will propose that regulations allow NIH scientists to receive
compensation for teaching, speaking or writing about their
research, but only if the information is shared in a public
forum and has already appeared in published literature.
NIH will continue to allow certain types of consulting arrangements,
teaching and lecturing opportunities, receipt of bona fide
awards, and collaborations with the private sector, but only
under clear, rigorous rules meant to eliminate real and
appearances of conflict of interest. Consulting, collaborating
and teaching must continue in order to expedite the translation
of research advances, but only under clear guidelines.
Principle Four: Establish Effective Monitoring and Oversight Mechanisms
I will seek to limit the amount of time spent on consulting and the
amount of compensation received annually. The limits proposed
by the Blue Ribbon Panel will be considered as the draft
regulation is developed.
NIH will improve its ability to manage and track approved activities
with outside organizations by increasing the accountability of
managers, creating a centralized data base, centralizing review
of senior managers and scientists, conducting random audits of
files pertaining to activities with outside organizations, and
continuing the rigorous peer review conducted by the NEAC.
NIH will develop and implement a new, more understandable method of
training employees on ethics rules, and we will establish a web
site that displays rules in plain language, updates employees
on regulatory trends and changes and discusses--anonymously--
ongoing cases as examples of best practices or unacceptable
practices.
Much of the discussion about ethics policies and procedures at NIH
has been unnecessarily negative. NIH employees have great integrity. In
retrospect, the policies and rules could have been even stricter, their
implementation could have been more efficient and oversight could have
been more rigorous. But for better or worse, this was the system NIH
employees had to negotiate.
As we move forward, all of us, the NIH leadership, HHS, OGE, and
the Congress, will have to strike a careful balance between maintaining
public trust in NIH and allowing appropriate interactions between NIH
scientists, industry, academia and all elements of the research
community.
Collaborations with the non-governmental research community are
vital, not only for understanding and advancing science, but for
translating our knowledge into actual medical practice and treatment.
We should be more transparent, more vigilant about oversight, and we
need to tighten the rules. But it would be a mistake to ban all
compensated activities with outside organizations. Such an action would
be bad for science, unfair to the employees, and ultimately hinder our
efforts to improve the nation's health.
Mr. Greenwood. Thank you very much, Dr. Zerhouni.
Dr. Alberts, you are recognized for an opening statement.
And Dr. Augustine, you are going to speak for the Commission.
TESTIMONY OF NORMAN AUGUSTINE
Mr. Augustine. Yes, please. We will share our remarks. I'll
begin.
Mr. Chairman and members of the committee, we welcome the
opportunity to share with you our findings in our review of
conflict of interest policies at the NIH.
We are very well aware of the support that this committee
has given to NIH over the years, and also the expectations you
have for the NIH and I might add that we, as private citizens
are sharing those expectations.
Dr. Alberts and I today appear on behalf of the entire
members of our panel, a list of which is attached in the
submittal. And we do appreciate your including our formal
statement for the record. Dr. Alberts and I will briefly
summarize it in a more informal fashion this morning with the
committee's permission.
Our panel, as you know, was established at the request of
Dr. Zerhouni. We were asked to complete our work in 90 days
because of the urgency that the NIH assigned to this particular
issue.
As has been mentioned, we were asked to focus on policy
issues, not on specific cases. And the reason for that was that
there are least three other investigations underway by official
government agencies into specific matters.
During our efforts we had over 30 witnesses appear before
us from a variety of perspectives. We established a website at
NIH which we received responses from over 300 employees of NIH
with respect to a series of questions we had asked of them. We
spoke one-on-one generally, often by telephone with the
director of all 27 institutes and centers of NIH and we put the
notice in the Federal Register that we would welcome input from
the public.
NIH, as has been pointed out several times this morning, is
indeed a great national asset, a treasure. Its impact on
health, not only in America but throughout the world, has
clearly been profound. The more we learned about NIH the more
apparent it became to us that NIH's principal asset, far above
anything else, were the scientists and the clinicians that
worked for the institutes and the centers.
The easiest thing in the world for us to have done would
have been simply to have put an outright ban on all consulting,
to insist that everybody's related personal activities,
emphasize related, be placed on the web. But we were also
mindful of the fact that there were at least two ways that we
could damage NIH even though our efforts would be well meaning.
The first of those would be that if we were to recommend
policies with regard to conflicts of interest that were too
liberal, too easy and the NIH were to continue to suffer from
publicity of apparent conflict of interest violations, that
this could be very damaging to the support for the NIH by the
public, damaging to its science and damaging to those who put
their faith in the NIH. On the other hand, we also realized
that if we placed recommended rules that were so restrictive
and some analytical to common accepted practices in the
scientific community, we truly believed that it would be very
hard to hire the world class scientists, many of whom have
decades of education, to serve the NIH's role.
Similarly, we encountered the fact that NIH researches, as
all other citizens, have certain rights to privacy in their
private life. By the same token, those of us who depend upon
NIH researchers, the public, have every right to be aware of
what activities there are in their private lives that might
impact their impartiality of carrying out their
responsibilities as public servants.
Further, we were well aware that it's inappropriate for a
private organization to benefit from government sponsored work
in a discriminatory fashion. At the same time, we realized that
it's almost through the activities of commercial firms that the
basic research conducted at NIH is able to impact the health of
America's citizenry.
Considering these factors, we arrived at three principal
findings, which I will just generalize and Dr. Zerhouni has
really touched on them very thoroughly.
The first is that we recommend that the NIH conflict of
interest policies be substantially tightened, they be made more
restrictive particularly for the senior leadership at NIH.
Second, we believe that more disclosure by more people both
public and private is very much needed.
And third, we believe that in cases where there are not
conflicts of interest, that steps should be taken to give
scientists the latitude to participate in the accepted cultural
approaches practiced by the scientific community at large.
Well, that is a brief introduction. Let me ask Dr. Alberts
to use our remaining 5 minutes to summarize some of the
specific instructions.
Mr. Greenwood. Dr. Alberts, you are recognized.
TESTIMONY OF BRUCE ALBERTS
Mr. Alberts. Thank you, Mr. Chairman.
There are 18 recommendations in our report, and you have
them and I have no time to really go over them in detail here.
Let me just point out a few essential recommendations that I
want to pay special attention to in view of the comments
already made.
Recommendation one at the top deals with the senior
leadership issue and would prohibit any paid consulting for a
set of senior employees and those having responsibility for
program decisions. And Dr. Zerhouni has already spoken
eloquently about accepting those recommendations, and I don't
think I need to say anything more about them, except that this
is a change in policy from a 1995 policy that was implemented
at the NIH.
The issue of whether we should abandon any kind of contact
with industry by the majority of the 5,000 scientists who work
at the NIH who are just pure researchers and have nothing to do
with any resource decisions or allocations or recommendations
is one that you've addressed here and one that we took very
seriously. We came down the side, as Mr. Augustine said, of
allowing those interactions where they are appropriate after an
appropriate screening and specifically said these people should
be able to consult for either industry or academia where there
is no conflict and wherever it makes sense after the decision
is made centrally at the NIH. Why?
Well, let me say, I have 30 years in the universities at a
research scientist before I came to Washington 10 years ago. I
was at the UCSF, which is the place where all this biotech
stuff started. And at the beginning, I was very much against
any academic involvement with industry. And personally, I had
never had any. But I have talked to many, many scientists
including the young scientists at NIH who are coming there to
do public service and have no actually plans or actually
activities yet with industry. But the fact is that this is very
much a two way street. People who do this often tell me that
they gain more from knowing about what industry is doing and
enlarging their thinking by seeing what these people are doing
in new kinds of ways. They are often ahead of academia. I'm
talking about colleagues at UCSF now. That in fact these kinds
of interactions changed the ambitions and often the
effectiveness of the research that people are doing both in
universities and by analogy at the NIH. And so that's the basic
reason why I personally came down on the side of allowing it
where appropriate.
However, we are very concerned about what we call conflict
of commitment. We talk about this as a shower test. What are
you thinking about when you're in the shower? Are you thinking
about your NIH job or are you thinking about something else?
And so we wanted to make sure that it's the NIH job that you're
thinking about, and we therefore have recommendation three
which puts real limitations on both how much compensation you
could receive and how many hours you can spend and, I think
very importantly, whether you could take equities. Equities, we
feel, creates a different kind of sense of involvement than
money received. You would become, in a sense, an owner and you
tend to get a lot of attention, may get a lot of attention from
an employer that we don't want. We don't want them to be
primarily concerned with their outside activities.
Now these recommendations, obviously, represent
restrictions from current policy. We also have recommendation
five, which is designed to promote more interactions between
NIH scientists and their colleagues elsewhere; we move in the
direction of more leniency. This involves a change recommended
in OGE regulations allowing them to behave like other
scientists and receive small honoris where they go to speak
about their work and be able to speak about their work in a
public forum and provided it's been published already in the
literature freely.
We found these restrictions had come from--the regulations
are very confusing. In fact, I was very surprised by them. And
I think it hampers the ability of scientists to, again,
interact with the scientific community, do the best they can to
disseminate what they're doing and also get information back
from their colleagues. Because science is very much a highly
cooperative interactive activity.
Then we go on to recommendation ten which deals with
ensuring a complete internal disclosure of financial interests
and other potential conflicts of interests. This has to do with
form 450. I learned all these facts. I am hoping I can erase
all this information that I have learned.
Form 450. We want more form 450 filers. That may be
limited. If not, we want NIH to get it some other way so they
know every possible conflict of interest and can regulate it
more efficiency.
The other issue which of course we're very concerned, for
Dr. Zerhouni and for the panel, is transparency. Transparency
we would mean public availability of information. Disclosure we
use NIH's accessibility to the information.
And we supported the idea that this Title 240, it is sort
of bizarre, regulation that prevents NIH from getting
information from people publicly who they want to have
information for should be changed somehow, either by OGE
regulation or by law if necessary. And the NIH, as Dr. Zerhouni
said, has now requested some 500 people be put under that
regulation and we'll see what happens. We would certainly
support that.
We also would produce transparency in a different way by
requiring an employee in recommendation 13 to publicly disclose
all relevant outside relationship and financial holdings in
their work products; that is their publications, speeches and
invention disclosures. So it is another form of public
disclosure.
Finally, we looked at the comparative salary scales of
academia and NIH for scientists. And we found that at the lower
levels, the scientists are well compensated. They are fairly
compensated. The problem comes at the higher levels of the
leadership where, for whatever reason, the marketplace is at
much higher salary levels for many of the people you would like
to have as senior leaders than NIH can actually pay. And so
because leadership is so crucial, it is crucial to have the
right leaders in the organization, we have recommendation 18
that the NIH Director working with Congress should ensure that
the agency has authority under Title 42 or some other hiring
mechanism to recruit senior scientific staff in a highly
competitive market and asking the HHS to also to review and if
appropriate, raise the current annual salary caption of
$200,000 for the most senior Title 42 employees at NIH. We are
concerned that the present ceiling is limiting the agency's
ability to retain and recruit the very best leadership. And,
again, I cannot emphasize the leadership issue.
Let me just go through this transparency issue, because
personally I would be very much in favor of having all the
information that you want posted on our public website. In
fact, our panel was leaning strongly in that direction when we
encountered the Privacy laws. That was at our last meeting.
And, in fact, we have learned that this would, or what we
believe is that some government wide legislation would be
needed to change the Privacy law in order to do what the panel
was heading for in our recommendations. And so we concluded in
the end that the strong governmental policy protecting personal
information against disclosure would be a formidable challenge
to overcome and thought there was no use in recommendations
that are meaningless and instead we have constructed several
recommendations to the end of making more effective both the
internal disclosure, as I said, and public disclosure through
the public disclosure at speaking and work products stage that
I mentioned, and finally by requested an agency wide public
report that annually summarizes the amount and the nature of
the outside activity of NIH employees, which is recommendation
four which I didn't have a chance to mention.
Thank you very much.
[The prepared statement of Norman Augustine and Bruce
Alberts follows:]
Prepared Statement of Dr. Bruce Alberts and Mr. Norman Augustine,
Representing the National Institutes of Health Blue Ribbon Panel on
Conflict of Interest Policies
Mr. Chairman and Members of the Committee, thank you for this
opportunity to share with you the findings of our Panel which evaluated
Conflict of Interest Policies affecting the National Institutes of
Health (NIH). We are, of course, well aware of the support given by
this committee to the NIH over the years and of the high expectations
you, and indeed the American people, hold for NIH.
We appear today on behalf of the members of the Panel, a complete
list of whom is attached to this testimony. Our Panel was established
at the request of Dr. Elias Zerhouni, Director of NIH, and was
requested to complete its work within 90 days because of the urgency of
the matter at hand. Administratively, we were formed as a Working Group
of the Advisory Committee to the Director of the National Institutes of
Health. We should note that our assignment was forward-looking; that
is, we were concerned with policy rather than with specific cases that
occurred in the past. As you are aware, there are a number of on-going
investigations of prior matters being conducted by entities within the
government. Other than providing our basic charter, which was to review
existing conflict of interest policies and to propose new policies
where appropriate, no constraints were placed by NIH on the content of
our work.
In carrying out the Panel's responsibilities we met a total of five
days and held one telephone conference. We heard testimony from over 30
individuals, including members of the public, and established an
internal web site which received over 300 responses from NIH employees.
In addition, we interviewed the Directors of all 27 NIH Centers and
Institutes. Notices of meetings were placed in the Federal Register.
The National Institutes of Health represents a national and global
treasure. Its principal asset is the truly remarkable scientists and
practitioners who choose to serve as its employees. In many ways the
future health of our nation depends on a robust and productive NIH. But
if care is not taken, the ability of NIH to continue to serve the
public's health could be severely damaged in either of two ways by
issues affecting conflict of interests. On the one hand, if the science
NIH conducts or its funding decisions are, or even appear to be, biased
or corrupted, the public, the broader scientific community, and the
government's funding officials could lose faith in the institution's
credibility. On the other hand, if a unique set of rules were to be
enacted that is so inconsistent with the established practices of the
scientific community, it could drive talented individuals away from NIH
as an employer and at the same time discourage the dissemination of
knowledge.
Developing sound policies for managing and preventing conflicts of
interest requires the balancing of several sometimes competing values
and considerations. First, government employees, like all citizens, are
entitled to a life of their own with reasonable privacy--but at the
same time, the public has a right to complete assurance that outside
activities will not inappropriately influence an employee's judgment or
commitment to public service. Second, although sound arguments can be
made for the enactment of consistent and uniform conflict of interest
rules across the federal government, each agency, including NIH, has
unique circumstances and needs. Third, it is clear that a government
employee should not receive personal financial gain for outside
activities by exploiting knowledge gained through his or her government
position, yet much of the accumulated knowledge and value of a
scientist might well have resulted from efforts made and
accomplishments achieved outside of government service. The Panel has
sought diligently to balance these sometimes conflicting considerations
as it developed its recommendations.
In its deliberations the Panel found an extremely complex set of
rules governing conflicts of interest at NIH and, in fact, across the
federal government. In the context of NIH, with its unique mission to
conduct and support biomedical and health-related research on its own
campus, across the country, and internationally, these rules are widely
misunderstood by some of the very people to whom they are intended to
apply. This has created uncertainty about allowable behavior and has
engendered fear that inadvertent transgressions could occur--
significantly damaging morale.
The Panel found that most of NIH's policies and procedures for
managing conflicts of interest are reasonable and appropriate and it
believes that the agency has been responsive to direction provided to
it in this area by the Department of Health and Human Services (HHS),
the Office of Government Ethics (OGE), and Congress. However,
significant improvements can be made, including imposing greater
restrictions on some types of activities, relaxing some restrictions
that are inappropriate and counterproductive, enhancing disclosure and
transparency, and improving the overall management of these issues at
NIH through better training, education, and resource management.
We believe the existing conflict of interest policies affecting NIH
do not sufficiently discriminate among groups of employees who have
widely differing responsibilities and therefore widely differing
susceptibility to conflicts of interest. In particular, we conclude
that the policies affecting senior officials of NIH should, as a matter
of policy, be tightened--that is, made more restrictive. It is our view
that greater internal and, in some circumstances, public, disclosure
can be beneficial in assuring the continued quality of the NIH's work
and the confidence the public can place in that work. In particular,
some senior NIH staff members, absent case-by-case approval authority,
are, under present interpretation of the relevant laws, not expected to
file public disclosure forms.
On the other hand, we found that many well-intentioned constraints
that have been placed on researchers at NIH who perform purely
scientific work have been counterproductive. As but one example, NIH
scientists are generally prohibited from indicating their affiliation
with NIH when giving lectures, even when those lectures are accompanied
by appropriate disclaimers.
At present, only a relatively small number of NIH employees are
engaged in consulting arrangements with industry. In contrast, a
substantial number of NIH employees are involved in outside activities
with professional societies and with academic and research
institutions--primarily in the forms of teaching, speaking, or writing
(including editing). In addition, NIH scientists who are recognized for
outstanding scientific achievements, leadership, or public service are
sometimes the recipients of awards, which may be accompanied by a cash
prize. The Panel believes these are important--even essential--
activities for NIH scientists, since they are part of the tradition of
science and provide evidence of the value and significance of the NIH
research community to the larger scientific community. For example,
speaking at academic institutions or other similar public fora is a
critical part of being a productive and contributing scientist. It
provides an important avenue for the exchange of scientific ideas, and
both the speakers and the audiences benefit.
What did the Panel not accomplish that we sought initially to do?
During our initial meetings, and in the first full draft of the report
that was used to frame our Panel discussions at our April 5-6 meeting,
we seriously considered proposing that selective information from the
Form 520 be posted on a publicly accessible portion of the NIH website.
(Form 520 must be submitted to obtain permission for any outside
activity). More specifically, we discussed the possibility of
requiring, as part of the permission process, the public posting of
both the nature of each paid outside activity, as well as the exact
amount of the compensation received each year. The Panel was thinking
that such compete transparency could serve as a ``disinfectant'' to
remove suspicions that might otherwise persist concerning the internal
NIH disclosure and permission system.
In the course of these deliberations, we encountered the federal
Privacy Act and other relevant federal statutes and regulations. We
asked the lawyer on our Panel, Dorothy Robinson, to consider these
matters further and to discuss them with NIH legal counsel. She
reported that the federal Privacy Act presents a serious barrier to
virtually any agency-mandated public disclosure of the sort we were
considering, other than the public disclosure mandated for those senior
level employees designated as Form 278 filers--including those so
designated through equivalency rulings by the Office of Government
Ethics. (See also Letter from Marilyn L. Glynn, Acting Director of OGE,
to Bruce Alberts and Norman Augustine, April 19, 2004, attached).
The Panel considered the possibility that the Privacy Act might be
amended to allow for this type of disclosure, but concluded that the
strong governmental policy protecting personal information against
disclosure would be a formidable challenge to overcome. Instead, as you
will hear, the Panel constructed recommendations aimed at augmenting
and making more effective internal disclosure within NIH. We want NIH
to have all of the information and abilities it needs to make thorough
and effective conflict of interest reviews. We have also recommended
enhanced public disclosures in connection with all speaking and
publications by NIH personnel, as well as an agency-wide public report
that annually summarizes the amount and nature of the outside activity
by NIH employees.
Our recommendations are as follows:
Recommendation 1: NIH senior management and NIH extramural
employees who are responsible for program funding decisions and
recommendations, and professional staff managing grants and contracts
and application review should not engage in consulting activities with
pharmaceutical or biotechnology companies or in paid consulting for
academia. The Panel considers speaking for compensation at an industry
site as equivalent to consulting for industry. In addition, the Panel
does not include in this prohibition time spent in clinical practice by
health care practitioners, if approved as an outside activity free of
conflicts.
Recommendation 2: The Panel reaffirms current federal law that
intramural scientists conducting research with human subjects--for
example, investigators and research team members involved in patient
selection, the informed consent process, and clinical management of a
trial--should not be allowed to have any financial interest in or
relationship with any company whose interests could be affected by
their research or clinical trial, except with an appropriate waiver or
authorization.
Recommendation 3: In addition to existing requirements for engaging
in outside activities, the following additional requirements should be
in place for employees directly involved in the administration or
conduct of NIH research programs and who are not subject to the
restrictions posed in Recommendations 1 and 2:
a. The total amount earned annually from compensated consulting with
industry or academia should not exceed an amount equal to 50
percent of the employee's annual salary, and no one source
should account for an amount in excess of 25 percent of annual
salary.
b. Employees eligible to engage in compensated outside professional
activities should not:
i. receive compensation in the form of stock options or other forms
of equities for their services
ii. spend more than 400 hours per year on these activities (writing
excepted).
c. An exclusion to the above limits should exist for NIH employees who
are health care practitioners. For these employees, there
should be a more flexible time limitation and the capitation
for compensated outside medical care and patient services
should be 100 percent of base pay, with the one-source
limitation removed.
Recommendation 4: To improve NIH's ability to manage and track
approved outside activities:
a. all requests for outside activities (Form 520) should be updated on
an annual basis (with such updates indicating only those
changes that have occurred)
b. supervisors should be held accountable for the evaluation and
approval of outside activity requests, and this supervisory
function should be a component of a supervisor's performance
evaluation
c. NIH should publish an annual institute-wide statistical report on
the number and types of outside activities approved for its
employees.
Recommendation 5: NIH should seek a change to OGE regulations so as
to allow NIH scientists to receive compensation for teaching, speaking,
or writing about their research, only if the information is to be
shared in a public forum and it has appeared in the published
literature.
Recommendation 6: NIH intramural scientists should continue to be
allowed to engage in compensated speaking, teaching, and writing for
professional societies and for academic and research institutions as an
outside activity as long as all ethics review and approval requirements
are met.
Recommendation 7: NIH should seek a change to OGE regulations to
permit employees to be identified by their title or position (and
institutional affiliation) when engaged in teaching, speaking, or
writing as an approved outside activity. Disclaimers should be provided
that the activity is not being conducted in the employee's official
capacity as an NIH employee and that the views expressed do not
necessarily represent the views of NIH.
Recommendation 8: There should be no restrictions on royalties
received on works written, edited, or published or on income received
from patents licensed by any NIH employee who conducted the work as an
approved outside activity.
Recommendation 9: The current OGE rules regarding receipt of bona
fide cash awards for meritorious public service or achievement and
NIH's interpretations of the rules are reasonable and should apply to
all employees. There should be no limit on the amount of money received
from a bona fide award. These awards are considered gifts under current
law and are not considered outside activities because the employee
accepts the award in his or her official capacity.
Recommendation 10: To increase NIH's ability to manage conflicts of
interest, it should either move immediately to increase the number of
employees required to annually file a confidential disclosure form 450
or find some other means to achieve comparable levels of internal
disclosure.
Recommendation 11: NIH should ask OGE to make a regulatory change
or seek statutory modifications to provide NIH with greater discretion
in determining whether certain Title 42 employees should file public
financial disclosure form 278. This would promote the public interest
by increasing transparency and thereby enhance trust in government. In
the meantime, NIH should seek additional equivalency rulings from OGE
to increase the number of public filers to include all the senior
employees as specified in Recommendation 1.
Recommendation 12: NIH supervisors should be provided with enhanced
training on the criteria to be used for their annual review of
financial disclosures so as to become more effective in managing and
avoiding employee conflicts of interest.
Recommendation 13: To preserve public confidence in NIH, the agency
should put in place a policy that requires employees to disclose all
relevant outside relationships and financial holdings in their work
products, such as publications, speeches, and invention disclosures. In
addition, where relevant, such disclosures should be made to potential
research subjects as part of the informed consent process.
Recommendation 14: NIH employees should be required to submit
recusals in writing to immediate supervisors when a potential conflict
of interest emerges. The supervisor should then be required to inform
those who should be aware of the employee's need to be recused from the
official duties for which there is a conflict. As is currently the
case, when an employee must be recused from official duties, those
duties can be reassigned only to someone at an organizational level
above the employee. As such, recused employees or their supervisors
will need to inform both superiors and affected subordinates of the
recusal.
Recommendation 15: The NIH Ethics Office should prepare a user-
friendly document and website that displays ethics rules in simple
language and emphasizes examples of outside activities and financial
interests that are permissible as well as those that are not. Employees
seeking approval of outside activities should, as part of their
submission of form 520 and its supplements, indicate in writing that
they have reviewed these summary materials and have discussed any
questions they have with their relevant ethics official and/or
supervisor.
Recommendation 16: The NIH Ethics Advisory Committee should issue a
report of its findings, in the form of anonymous case studies and
generalizable principles, on a regular basis to provide the NIH
community with a clear common body of knowledge by which to understand
and interpret ethics rules.
Recommendation 17: NIH management should assure that sufficient
resources are provided for the administrative and management functions
of its ethics activities to guarantee that the expanded program
proposed in this report can be implemented.
Recommendation 18: While the Panel has not addressed the
application of Title 42 to the hiring and compensation of senior
scientific staff, it is clear that some such hiring and compensation
authority needs to be applicable to this group of employees if NIH is
to remain competitive in the market for talent. In addition, the NIH
Director should ask HHS to review and, if appropriate, raise the
current annual salary capitation of $200,000 for the most senior Title
42 employees at NIH. The Panel is concerned that the present ceiling is
limiting the agency's ability to recruit and retain the nation's best
scientists as the leaders of NIH.
Mr. Chairman, since our report is not unduly long and contains
substantiation for these recommendation, we would like, with the
committee's permission, to have it considered for inclusion in the
record as an attachment to this statement.
Among the more significant changes these recommendations, if
implemented, would impose are:
Senior NIH officials would not be permitted to engage in paid
consulting with biotechnology or pharmaceutical companies or
academic institutions.
In instances where paid consulting is permitted (i.e., no conflicts
of interest exist), such activity would be subject to a 400
hour annual limitation and a compensation cap of 50 percent of
the individual's annual base salary, with no more than 25
percent being derived from any one source.
The number of individuals filing disclosures, both public and
private, would be increased, and all work products would bear a
disclosure statement indicating related financial interests or
activities of the researcher(s).
Compensation for outside work in the form of equity would be
(prospectively) prohibited.
Scientists, where no conflicts exist, would be encouraged, not
discouraged, in participating in outside activities which are
innate to the workings of the scientific community at large.
Thus, scientists would be permitted to receive outside
compensation for speaking or writing about their work without
having to wait one year after that work has been completed and
published.
The salary ceiling for employees hired under Title 42 authority would
be increased to an extent which would assure that the NIH is
competitive in the marketplace for world-class scientists and
managers of science.
In arriving at its findings and recommendations, the panel noted
that for virtually every policy it could conceive it could also
identify extraordinary circumstances under which the application of
that policy would be counterproductive to the accomplishment of the NIH
mission. For this reason, it is important that, within the constraint
of applicable laws, the NIH Director be granted the authority to make
carefully considered exceptions when deemed appropriate.
In conclusion, the Panel believes that the recommendations
presented in our report can correct many of the concerns that have in
the past been expressed about conflict of interest practices at NIH. We
urge that the recommendations be adopted as quickly as possible. This
is needed to assure the continued, deserved public confidence in the
extraordinary work of NIH, to enhance the continued quality of the
scientific staff at NIH, and to rectify what the Panel perceives to be
a growing morale problem among an excellent NIH staff.
Thank you, and we would be pleased to answer your questions.
NIH Blue Ribbon Panel on Conflict of Interest Policies
a working group of the advisory committee to the director, nih
roster
Bruce Alberts, Ph.D. (Co-Chair), President, National Academy of
Sciences, Washington, DC
Norman R. Augustine (Co-Chair), Chairman, Executive Committee, Lockheed
Martin Corporation, Bethesda, Maryland
Christine Cassel, M.D., President, American Board of Internal Medicine,
Philadelphia, Pennsylvania
Thomas H. Murray, Ph.D., President, The Hastings Center, Garrison, New
York
Phillip Pizzo, M.D., Dean, School of Medicine, Stanford University,
Stanford, California
The Honorable Stephen D. Potts, Chairman, ERC Fellows Program, Ethics
Resource Center, Washington, D.C.
Dorothy Robinson, Esq., Vice President and General Counsel, Yale
University, New Haven, Connecticut
Lawrence Sadwin, President, Lifestyle Security, L.L.C., Warren, Rhode
Island
James Siedow, Ph.D., Vice Provost for Research and Professor of
Biology, Duke University, Durham, North Carolina
Reed V. Tuckerson, M.D., Senior Vice President, Consumer Health &
Medical Care Advancement, UnitedHealth Group, Minnetonka,
Minnesota
Mr. Greenwood. We thank you, both Dr. Augustine, Dr.
Alberts.
And the Chair would recognize for questioning the chairman
of the full committee, the gentleman from Texas Mr. Barton.
Chairman Barton. Thank you, Mr. Chairman. I appreciate the
courtesy. I have got a hearing downstairs, too, on a
telecommunications issue. So I appreciate be able to go out of
turn.
Dr. Zerhouni, I am told that in the last 5 years there have
been about 1500 agreements covering over 500 of NIH employees
that cover some sort of outside consulting or compensation
agreement with someone who has business with the NIH. Does that
number seem approximately correct to you?
Mr. Zerhouni. I agree with your 1500 and 500 employee over
5 years. All outside activities that we were able to record. I
am not sure that all of them had relationships with people that
had business with the agency.
Chairman Barton. Okay.
Mr. Zerhouni. I am not sure of that.
Chairman Barton. Some sort of an agreement, maybe not a
business relationship?
Mr. Zerhouni. Right. It may be all kinds of agreements, and
we have reported that in detail to the committee.
Chairman Barton. Okay. With some sort of a drug company or
a biotech company?
Mr. Zerhouni. Some of them would have relationship with
drug companies, but not necessarily that the drug company had
business with NIH.
Chairman Barton. Okay.
Mr. Zerhouni. If the company has official business with
that scientist, our current rules prohibit outside activities
in that context.
Chairman Barton. Okay.
Mr. Zerhouni. Okay.
Chairman Barton. Well, just as an example, this is a
director who is no longer with the agency. I will not list the
gentleman's name. But while he was a director of NIH, just as
an example, this particular individual, director of the
institute, he served on the board of directors of a private
company, a biotech company and held one-half of the stock
equity in that company. So I would think that was some sort of
relationship. Now that gentleman is no longer with us. No
longer with the NIH I should say. He is still alive and
healthy.
On December 8 the committee staff sent a request to NIH
that asked for details on all these agreements covering 5
years. And a funny thing happened. Apparently a lot of those
agreements that were in effect were terminated on the date of
the letter. We don't know the exact number, but it could be as
many as half of the agreements just coincidentally all of a
sudden were terminated. Does that strike you as a little bit
odd?
Mr. Zerhouni. Well, first of all, I think the relationship
that you pointed out first with the Director, I think should be
off limits. I said that the very first time. I consider stock
ownership, fiduciary duties in an outside entity when you have
a responsibility, that should be off limits. And I think the
rules address that.
The second about the numbers. At the time of the December 8
subcommittee request we recorded about 228 agreements at that
time--no, 228 scientists involved in about 300 agreements. Now
do not hold me to the numbers. Then I requested, I said if you
want to continue you have to put a hold on all your agreements
and come to the newly formed--the one that I formed in
November--the NIH Ethics Advisory Committee. In that process,
two of the directors that had been reported in the L.A. Times
out of the 27 directors we have, the two that were involved,
terminated their agreements. And as we requested, the review--
the uncertainty I think and perhaps what you are, I think,
alluding to that perhaps some scientists were not so happy or
were not so comfortable with this being reviewed by an
independent panel. It says two things.
One, the system failed and two, the new system is sending a
message that if you want something at NIH, you are going to
come to an independent panel that is not related to your
institute or your ethic's advisor, it is in the Director's
office and you had better be sure about what you are doing
before you come forward.
So you can look at it two ways, Mr. Chairman.
Chairman Barton. Is it also true that when you talked
earlier in your oral testimony that there is some things that
you do not have the authority to require that, that there is
some Privacy rules that apparently apply to the entire
government that overrule your ability to get information, but
when you request legal opinion from the Office of General
Counsel at HHS--I do not want to put words in your mouth. But
did the Office of General Counsel encourage you to find a way
to encourage your agency to cooperate with this committee or
did the Office of General Counsel at HHH encourage you to find
a way to not cooperate? Put that in your own words.
Mr. Zerhouni. Right.
Let me just says this, that my instructions to my staff and
my interactions with the Office of General Counsel, reflected a
desire to find every possible way to cooperate. And if there
is, and you mentioned the cooperation----
Chairman Barton. I want to make sure.
Mr. Zerhouni. Right.
Chairman Barton. You said the Office of General Counsel
told you to find every way to cooperate?
Mr. Zerhouni. No, I said that.
Chairman Barton. Oh, you said that.
Mr. Zerhouni. I said that. I said please----
Chairman Barton. I did not ask what you said. I want to
know what their attitude was when you asked them for----
Mr. Zerhouni. The first event was that NIH could not change
its rule without new regulations. That was the advice we
received. That is why we created this NIH advisory committee.
After the December 7 media reports, we did a full analyses
of exactly what happened in 1995. The Office of Government
Ethics at the time had set some rules.
When we were asked to provide the information you needed,
Chairman Greenwood called me because we did not have the
compensation amounts. So I immediately said, well, frankly we
need to have them. I do not have----
Chairman Barton. But apparently those are not required
under current regulation----
Mr. Zerhouni. They are not required under government----
Chairman Barton. [continuing] and so we have no clue what
some of these people are being compensated for.
Mr. Zerhouni. But, Mr. Chairman, I would like to point out
this is not an NIH specific issue. This is Government Ethics
1993. And I think you will have the acting director of OGE and
you will ask. I can assure you, this was not an option of NIH.
In 1998 we requested that that disclosure be made so that we
could have more disclosure.
Chairman Barton. Well, let me ask, has it to your personal
knowledge at anytime has NIH been able and actually request and
receive compensation figures from individuals who have outside
arrangements that result in financial enumeration or stock
enumeration? Have you ever asked for and been able to receive
that? Not you, but I mean NIH?
Mr. Zerhouni. To my knowledge between 1995 and now, I do
not think so. I do not know before 1995, Mr. Chairman. I will
check and let you know.
Chairman Barton. Could you find that out?
Mr. Zerhouni. I will find that out for you.
Chairman Barton. Okay. Well, my time is getting close to
expiring.
If you were to make a recommendation to the Office of
General Counsel at HHS to testify before this subcommittee
voluntarily, what would you recommend?
Mr. Zerhouni. That they should.
Chairman Barton. Are you aware that we asked them and that
particular individual said no.
Mr. Zerhouni. No, I am not. I am not aware of that.
Chairman Barton. Do you think that shows an attitude of
cooperating or noncooperating with this committee?
Mr. Zerhouni. I cannot comment, Mr. Chairman, on what they
decide. I was not aware of that.
Chairman Barton. Because it is no, does that indicate
cooperation? You came.
Mr. Zerhouni. And I will come again.
Chairman Barton. Yes. I would say you are cooperating.
Mr. Zerhouni. I will cooperate to the greatest extent I
can, and I think we should all do that.
Chairman Barton. All right.
I could go, Mr. Chairman, but I am going to excuse myself
to go downstairs. But I want this panel to understand this is
the first hearing and NIH, to some extent, is the first agency.
But this will not the last hearing and this will not be the
last agency. We are going to have accountability.
This committee is going to reestablish the oversight
responsibility that former Chairman John Dingell was noted for,
and we are going to do it on a bipartisan basis. And I would
encourage you to encourage the people in your agency that if we
ask for information, they can do it voluntarily or
involuntarily, but they will do it. We are going to get to get
to the bottom of this.
And with that, I would yield back to the distinguished
subcommittee chairman.
Mr. Greenwood. The Chair thanks the gentleman and
recognizes for 10 minutes for purposes of inquiry, the
gentleman from Colorado.
Ms. DeGette. Thank you, Mr. Chairman.
Dr. Zerhouni and the other panelists, I have been thinking
about something for a few days, which is of course the Blue
Ribbon panel recommendations. And the whole idea, the premise
you all seem to be coming from now is that we really should not
eliminate this outside income and payment, so instead what we
should try to do is have transparency. And I frankly, I will be
honest like the Chairman, have some questions about that
fundamental premise.
Dr. Zerhouni, you said that a blanket prohibition might not
be the most satisfying thing to do because scientists need to
interact with others and outside groups in order to do their
work. Would that be a fair summary of your statement, Doctor?
Mr. Zerhouni. I said a blanket prohibition would be the
easiest.
Ms. DeGette. Right.
Mr. Zerhouni. And most superficially satisfying. But I
think if you look into it more, remember NIH has two functions.
One is to do the research in its own laboratories and then
granting.
Ms. DeGette. But the button line is you feel that these
scientists need to interact----
Mr. Zerhouni. Right.
Ms. DeGette. [continuing] with outside groups and industry
to do their research, right?
Mr. Zerhouni. To enhance their ability to understand
research and translate that research into real tangible
benefits.
Ms. DeGette. Okay. Right. Why do they have to be paid large
amounts of money to have that interaction.
Mr. Zerhouni. Okay.
Ms. DeGette. I mean, the money is not central to the
interaction, right?
Mr. Alberts. We looks into this. If you want to consult
with industry, we were talking about that very seriously on the
panel, you have to sign a confidentiality agreement with
industry that you will not disclose their private information.
If you are government employment doing it as an official duty,
you are not allowed to sign any such agreement.
So one of the things we explored could this contact with
industry occur purely as unpaid official duty activity.
Ms. DeGette. Right.
Mr. Alberts. What we concluded was it wouldn't happen.
Ms. DeGette. Why? Why.
Mr. Alberts. Because industry would refuse it.
Ms. DeGette. You mean industry just wants to force these
people to take money for cooperating like this?
Mr. Alberts. Well, you can only do----
Ms. DeGette. You have the top research scientist in the
country at NIH cooperating with private companies. And I would
assume there is also a mutual confidentiality agreement that
they will not disclose governmental proprietary information as
well.
Mr. Alberts. Of course. That's true, yes. That is right. We
were told that industry will not----
Ms. DeGette. Who told you that, Doctor?
Mr. Alberts. Various witnesses. I cannot remember their
names.
Ms. DeGette. Would you supplement responses?
Mr. Alberts. Legal people.
Basically that if you are going to be on a scientific
advisory board, for example, for a biotech company they will
not have you do that as your official duty activity unpaid
because you cannot--it is illegal for you to sign any
confidentiality agreement that you will not reveal trade
secrets that you learn in this relationship. So----
Ms. DeGette. Okay. Doctor, could you supplement your
answers with the names of the individuals who told you that it
was illegal to----
Mr. Alberts. We will submit that afterwards, yes. I cannot
remember.
Ms. DeGette. Thank you.
Dr. Zerhouni, did you want to clarify that?
Mr. Zerhouni. Basically when industry works with a
government employee under official duty activity, essentially
anything that is done within that work product, the employee
cannot receive any compensation. The product of that
interaction is owned in part by the government. So what
industry wants is to have a scientist on his or own time,
because you know, the rules are such that if you are doing this
on your own time, the current government ethics rules say that
this is your own work product. And that is why I think industry
prefers to work with scientists on their own private----
Ms. DeGette. I completely understand that.
Mr. Zerhouni. Right.
Ms. DeGette. That does not go to the issue of why they have
to be paid large amounts of money to do that, sir.
Mr. Zerhouni. The large amounts of money, I think we can
give you the data since we have it. We have the current data--
--
Ms. DeGette. I have some data right here that I am going to
talk about in a minute.
Mr. Zerhouni. Okay.
Ms. DeGette. And I have some slides. But before we put
those up, I would like to ask Dr. Augustine something. Because
you something about it is hard to hire top tier scientists at
the NIH without this compensation. Is that really what we are
talking about. I mean, is that the unspoken message in this
room that really the money we are paying these scientists, as
the Chairman said, some of them--many of them are paid more
than the Vice President of the United States. One of them made
$290,000 on the government payroll last year. Is what we are
really saying is we do not think we can hire these scientists
unless we allow them to get private contracts for substantially
more money? Is that really what we are saying, sir?
Mr. Augustine. Well, you start out exactly where we were.
With regard to compensation, the higher level scientists are
clearly underpaid compared with their marketplace.
Ms. DeGette. Right. But you know something? I am clearly
underpaid compared to lawyers of my level of experience in the
private market. I mean, people go into these jobs for public
interest, not for the salary, I would assume. Is that not an
assumption you thought of, too?
Mr. Augustine. I was going to finish. I would respectfully
submit that these people are within their marketplace, the
academic community, they are significantly underpaid. We also
found that that probably is not the principal driver in this
issue. The principal driver we found was their desire to be
treated as other members of the academic community who are
permitted to do consulting, who are permitted to interact with
industry and have this two way exchange.
The difficulty, if I could take a moment, as I understand
it is that if they do this as an official duty--let me back up.
If they do consulting with a firm, the firm obviously wants a
confidentiality statement. You are not allowed to sign that if
you are on official duty. Furthermore, if you are on official
duty, you are not allowed to give preference to a single
company. It would be unfair.
Ms. DeGette. Right. I understand those are the rules. And I
am sorry to be rushing. I only have 10 minutes to question.
And I understand all of those concerns. But one thing we
have found, and I know we are going to have more
investigations, is that some of the payments that are being
made by these private companies when the researchers are on
their own time, aside from their NIH research, are
disproportionate to the amount that people, say, at the
University of Colorado Health Sciences Center are being paid,
because they are the NIH and they do control big grants. In
other words, you know, the payments they are getting may not be
in not direct correlation to the actual work you are doing. Do
you share that concern, Doctor?
Mr. Augustine. We do.
Ms. DeGette. I would think so.
Mr. Augustine. The reason we put on the limit on as to the
amount they could receive was exactly that consideration. But
it should also be noted that these people that are allowed to
consult under our recommendation are not involved in making
grants. They have nothing to do with grant making.
Ms. DeGette. Well, I understand that. But that may not be
what some of the private companies are thinking.
Here is why I am concerned. If we can show slide No. 1, we
have some slides here to talk about the extent--now these are
individuals. And I think these are in your notebooks, too. Are
they in the notebooks? No, they are not in the notebooks. We
will hand you a copy of it.
These are agreements that have been authorized under NIH
procedures. I think some of these may be unauthorized under the
new procedures Dr. Zerhouni is talking about and the Blue
Ribbon panel, however those rules have not yet been enacted. So
these financial agreements could happen right now.
The first one is Michael Brownstein who is the Chief of
NIMH Genetic Lab. He has received almost $2 million from four
biotech firms. In each case, he is either a member of the board
or the scientific advisory board or both.
Here is my question: How can the public be assured that
nothing he knows from his work at NIH, nothing he learns about
the projects of competitors of these firms from his work at NIH
or any subject involving his work at NIH will not be brought up
at these meetings? Anybody have any idea? How do we know
because he is making all this money from four biotech firms
that there is not going to be any kind of crossover? Doctor----
Mr. Augustine. Well, you raised the concern we had, namely
that we place a limit on what they can take and we ruled out
stock.
Ms. DeGette. But, Doctor, you have recommended a limit.
That limit has not been enacted.
Mr. Augustine. Well, we recommended it about a week ago.
Ms. DeGette. Right. Okay. Yes, last week.
Mr. Augustine. Hopefully, it will be.
Ms. DeGette. With this hearing coming up this week.
Well, let me ask you a question Dr. Zerhouni. What do you
think Michael Brownstein is thinking about in the shower?
Seriously, that is what you all said the standard is.
Mr. Zerhouni. Well, I think that, and again I said that
publicly before the Blue Ribbon panel, I say it again. I think
people have stock, stock ownership, board positions in private
entities, I do not think that should happen for senior
officials. Even, I mean for anybody. I mean we are prohibiting
that for everybody.
Ms. DeGette. Is that part of the rules you are enacting?
Mr. Zerhouni. Yes.
Ms. DeGette. And when do you intend to enact those rules?
Mr. Zerhouni. ASAP. As soon as I can.
Ms. DeGette. Okay. Let us take a look at slide No. 2. This
is about consulting arrangements between NIH employees and drug
and biotech firms. This is Dr. Germain, who is the Deputy Chief
of Lymphoma Bio Section of the NIAID. Now, he is receiving
$430,000 roughly, a little more, plus stock of an unspecified
value from seven different companies. Even if there is no
actual conflict, and it sure looks like there might be to me
because apparently all he stated on his ethics forms is he is a
consultant to these firms, how do we know that he has time to
do his work and manage his section?
Mr. Alberts. Okay. That is the----
Mr. Zerhouni. First of all, I think that Dr. Germain was
the object of the media reports, so we looked very carefully at
that.
Fundamentally what we have looked at is this conflict of
commitment, how much time do you really spend on these things
within your own time as a scientist. It turns out that if you
look carefully at Dr. Germain these are long--I mean this total
for example that you are reporting is for over 10 years. So
that what you really need to look at is not just the ethics
consideration, and this is why we think we need independent
peer review for every one of these agreements and this is what
the new system is doing.
Ms. DeGette. Okay. Just one last question. And first of all
it is over 4 years, not 10 years at least in this slide. But
second, and this is my question, the Blue Ribbon panel
recommendation is $100,000 compensation and no more than 400
hours per year. That adds up to an 8-hour day every week of the
year. I want to ask all of you, do you think that is reasonable
for our research scientist at a place like NIH who are well
compensated compared to other people who are in the public
service, do you think one work day, or I guess Saturday, every
week would be a reasonable amount of time for these people to
be spending on outside activities?
Mr. Alberts. That is basically the academic standard. Most
universities allow that kind of effort.
Ms. DeGette. So your answer is yes?
Mr. Alberts. That is the limit. And I was at Princeton for
10 years, we were allowed this. But not on Princeton time, but
we were allowed to spend as much as 1 day a week on outside
activities.
Ms. DeGette. But Dr. Augustine, when you were over at
Lockheed Martin--you were at Lockheed Martin, right?
Mr. Augustine. I retired.
Ms. DeGette. Did they let the people their researchers take
1 day a week for outside activities?
Mr. Augustine. We would not.
Ms. DeGette. Thank you.
Mr. Greenwood. I just want to follow up on that. I just
want to understand something before I get into my inquires
here.
One day a week for outside activities, does that leave 4
days a week for the NIH?
Mr. Augustine. Extra days.
Mr. Zerhouni. Extra days. On their own time.
Mr. Greenwood. That seems that they have 5 days a week that
they are giving to us, of course.
Mr. Zerhouni. Yes.
Mr. Greenwood. And how do they account for that?
Mr. Alberts. It depends. In universities they have to
account in different ways depending on the university.
Mr. Greenwood. Did you recommend that there be an
accounting process so that when I take that day, I----
Mr. Zerhouni. Right. And that is what I refer to in my
fourth opening statement about the need for monitoring and
oversight. In other words, the system as it stands today, Mr.
Chairman, I could not tell you that I know for sure Dr. X is
spending so many hours doing whatever they do. But I know for a
fact that you can manage that if you have a data base that's
managed centrally where you have the requisite review not of
what the scientist says, but of the original documents that say
you should work 1 day a week at this place or that place so you
can accumulate them in one place.
Universities have done that. I came from a university that
implemented such a system. And I think you can do it if you
really centralize it.
Mr. Greenwood. I have questions. I mean, there are a lot of
questions that that raises. When I talk about the swivel chair,
I am talking about somebody sitting at a desk and saying okay,
Doctor, you have a call from XYZ company. He takes the call or
he cannot take the call and he calls later on an NIH phone and
spends 2 hours. Is that a system to account for all of that?
Mr. Zerhouni. Mr. Chairman, I would sleep so much better if
I just gave you what you want, what you are expressing, which
is total separation firewall between the Federal agency and the
private sector.
Mr. Greenwood. I think there needs to be.
Mr. Zerhouni. You know, and that would be much easier to
do, much easier to--but having been myself a scientist at
managing a university--Lockheed Martin is not a university. And
I think we need to really look at that carefully and make a
decision. But, frankly, I would be where you are if I had my
full drothers, make my life easier.
Mr. Greenwood. All right. Let me pose another question to
you. Today's Los Angeles Times reports that internal documents
show that the Blue Ribbon panel was concerned about how little
is known about the extent of financial ties between drug
companies and NIH personnel. According to minutes of a closed
door meeting early in April of that Blue Ribbon panel, the
panel was ``was surprised to learn that many people do not
disclose at all. The panel thinks there needs to be an internal
review that picks up significant financial interests.''
The question is, I guess I should address this to Drs.
Alberts and Augustine, do these minutes reflect the fact that
many NIH employees are not disclosing their outside consulting
even to their institutes to get approval?
Mr. Augustine. Yes, and I will begin if you look.
We were concerned. There are two basic mechanisms for
disclosure at NIH that you are aware of that really apply to
the government as a whole. One has private disclosure within
the agency, the other is more public disclosure.
With regard to the former, which is the form 450, only
people who are specifically prescribed to submit that form have
to submit it. There is not a blanket group that has to submit.
And so we were concerned that there are a large number of
people that do not submit at all, and they comply with the
rules as they are written today.
With regard to the latter form, the 278, the public
disclosure form you have already heard this problem with the
artifact of the interpretation of the legislation denies the
NIH leadership the ability to compel people to file. And that
we recommended be changed or at least the interim steps be
taken of the type that Dr. Zerhouni has already taken to cause
more people to have to file public disclosures.
The bottom line is that they are basically complying with
the rules as they are written, but they need much more latitude
to have more people disclose both publicly and privately.
Mr. Greenwood. And we are disclosing: (a) the fact that
they have a private consulting arrangement or; (b) the income
derived therefrom?
Mr. Alberts. I think this needs some clarification. There
is yet another form, 520. So the outside activities require
review process in the form of filing the form 520 for any new
outside activity, and every employee as far as I know has gone
through that process. So outside activities are covered.
What we were talking about in our panel was well suppose a
researcher inherited $10 million worth of Merck stock and held
it and was doing something that might effect his or her
activities, bias them by that holding. Well, there was no way
unless that person was filing a form 450 for the NIH to know
about that holding. And so what this recommendation that I
talked about, recommendation ten, focused exactly on this
issue. We think the NIH must know the financial holdings that
might be relevant as well as the outside activities.
They do know about the outside activities because of form
520. 450 deals with the financial interests, and we are not
sure that OGE will actually allow enough 450 filers. So we
recommend if they do not, then find some other way to get the
information.
Mr. Greenwood. Well, OGE ultimately is going to follow the
laws and the committee is going to help the rest.
Mr. Alberts. Yes, of course. We encourage that.
Mr. Greenwood. But let me understand one other issue here.
There are two ways to gather information of this kind. One is
to say if you are engaged in this activity or if you own these
stocks, then you need to submit a form.
Mr. Alberts. Yes.
Mr. Greenwood. The other one is to say everybody needs to
submit a firm. And you either affirmatively declare these
things----
Mr. Alberts. Yes.
Mr. Greenwood. [continuing] or you declare that you have no
such entanglements.
Mr. Alberts. The latter would be our recommendation.
Mr. Greenwood. And the latter is your recommendation?
Mr. Alberts. Yes.
Mr. Greenwood. Okay. All right.
What is the factual basis for your statement that there are
``approximately 120 of NIH's employees currently involved in
consulting agreements?'' How reliable is that statement?
Mr. Alberts. It was mentioned, we had an extensive
interaction with NIH staff to get information. And as you can
see from the report, we started from zero knowing about any of
these things except for a few people. Steven Potts who is the
former Director of OGE understood these things, but most of us
for the first time ever encountered all this complex set of
forms and regulations.
And so in preparing our report, we relied on request for
information back and forth to NIH staff to give us the
information. That was one of the specific requests we made, and
that was the number we got back from----
Mr. Greenwood. So that was 120 employees affirmatively
said, yes, I am doing that?
Mr. Alberts. That was for the NIH data base. We did not
contact the employees directly, we asked the NIH what they
knew.
Mr. Greenwood. And when you say 120 employees have these
arrangements, that is a minute in time?
Mr. Alberts. That is a minute in time.
Mr. Greenwood. Right. So it could be that the next day, 40
more start consulting agreements. What is your sense of over
the course of a year how many employees at NIH are involved in
these consulting arrangements.
Mr. Augustine. Mr. Chairman, we were told that there were
118 employees in March of 2004; that's the moment in time,
involving 196 different activities. We were told that that
number is probably suppressed because of the attention that has
been given to the issue at this time. It could be higher or
lower.
We do not have a projection for the future, but it was
higher in the past.
Mr. Greenwood. Well, did you consider asking for
information as to the state of affairs 6 months previously or a
year previously so that you would nullify this suppressing
effect?
Mr. Augustine. I do not have the specific data with me. I
would be glad to provide it for the record, if possible.
Mr. Greenwood. After reviewing the spreadsheet of
consulting agreements data and the accompanying documentation,
the committee staff found at least 90 instances where a
consulting agreement appears on an employee's financial
disclosure form, yet did not appear on the spreadsheet which
was supposed to contain a comprehensive list of all agreements.
Does the Blue Ribbon panel have any reason to believe that not
all consulting agreements have been and are being disclosed to
the agency? How can you be ceratin that all employees are
making full disclosure?
Mr. Augustine. I believe that the answer to that is that
you have to depend upon the employees to comply with the rules.
And I think one failing probably has been that the rules have
not been adequately explained and understood by the employees.
In addition, it is probably appropriate to conduct spot checks
to be sure that the compliance is there.
Mr. Greenwood. In my first question I referred to today's
L.A. Times story and there was a quote that was taken from
minutes according to the L.A. Times. And that was the quote
that I read that says that the panel was ``was surprised to
learn that many people do not disclose at all'' etcetera.
The NIH provided the committee the minutes of the panel's
closed sessions and the staff did not find any such quotes in
the minutes. Are there draft meeting minutes that the NIH has
not provided to the committee?
Mr. Zerhouni. I can check into that.
Mr. Greenwood. Either we did not get that or the L.A. Times
made it up.
Mr. Zerhouni. I do not know, but I can shed some light to
that. After the article I asked Dr. Kington our Deputy where
did that come from. And emails were the source of that, not
minutes to my knowledge.
Mr. Greenwood. So when the L.A. Times says that these were
from minutes of a closed door meeting in April, you are saying
that that is not the case. That they were from----
Mr. Zerhouni. Mr. Chairman, give me some time to look into
that. Because this happened this morning. I really cannot--but
I will follow up with you and tell you what our best guess is
where that information is from.
Mr. Greenwood. In the same L.A. Times article today it is
reported that the Deputy Director Raynard Kington wrote in an
email that he feared the panel members did not understand
``that there is not a bright line'' between those involved with
intramural research and those involved with outside extramural
research. Kington also wrote ``I think, and I think many
outside people would agree, that our IM, intramural scientists,
should not consult with universities and other institutions
that are funded by us,'' Kington added.
Dr. Zerhouni, do you agree with Dr. Kington?
Mr. Zerhouni. I asked Dr. Kington to see if he had the
email, and again I have the email here. I would be happy to
give it to you.
If you look at the discussion that went back and forth, you
will see that the context of the quote and the context of the
email are a little different. That Dr. Gottesman was talking
about teaching writing and academic activities. Dr. Kington was
talking about having influence over granting mechanism. And you
can see through the email the conversation.
I think it is healthy to have good debate about these
issues, but I think that is the source, and I would be happy to
give you the copy of the email I have, Mr. Chairman.
Mr. Greenwood. Yes, we will ask you to submit that email
for the record.
My time has expired. And the gentleman from Maine, Mr.
Allen is recognized is for 10 minutes.
Mr. Allen. I thank you. Thank you all for being here.
And, Mr. Chairman, I thank you very much for holding this
particular hearing.
I did not hear all that you said at the beginning, so I
want to make sure I am understanding where you are recommending
we go. I take Dr. Zerhouni's point about an academic
institution and the need for in academic institutions, most of
the academics I know are doing something else on the side as
well. But clearly this is an area of great concern because of
the reputation of NIH, because of the function as an
independent body doing research and yet in the private sector
today it is pretty clear that the pharmaceutical and biotech
industries are large, and certainly at least the pharmaceutical
industry is very profitable and has these networks of
relationships are being formed. And I think as Members of
Congress we really have to be concerned about the issues that
you are all dealing with today.
But it sounds to me, correct me if I am wrong, there are
different ways to go at this problem of whether or not there is
a conflict of interest. And it sounds to me from what I picked
up that one way is to have a review of the content of the
agreement so we know what the agreement itself is.
A second way would be to put some sort of cap on the amount
of money that can be earned by any NIH employee.
A third way is the amount of time that the employee could
spend, and we have already discussed that.
And a fourth way, which I do not think has been mentioned
yet, is to really look at the nature of the outside entity,
whatever corporate entity it is, whatever subsidiary
relationships that it may have.
So let me ask you about a few of those. The time spent, Dr.
Zerhouni, I think you said the 400 hours a year is what is
traditional in the academic world. Do you have any idea whether
for NIH employees who are doing consulting today that 400 hours
is what they do, I mean 400 hours a year is sort of typical of
what many employees are doing so far or is it more or less?
And, you know, are we really reining them in or not when it
come to the hours they actually would do one form of consulting
or another?
Mr. Zerhouni. I do not have this information right in front
of me, but my experience with that is that 90 percent probably
spend 20-30 hours, 1 or 2 interactions. And then a small
percentage may be at the 400 hours or more.
So typically the percentage of individuals who have
discoveries or real advances in science that would be of
greater interest is very small in a university as well as a
Federal agency.
Mr. Allen. So a 400 hour a year restriction for NIH
employees would be the kind of restriction that would only
effect a few people today is what you are saying?
Mr. Zerhouni. My sense would be that based on my experience
people who have the opportunity to provide 400 hours are those
who would typically have made a breakthrough discovery, know
something that no one else knows, something like that. Well,
you know that in a research institution it is not going to be
100 percent of the people, but more like 10 percent or 15
percent of the people. But that is my guess, and I can
certainly look it up for you.
Mr. Allen. When it comes to the review of the content of
the agreement, I am a little bit curious about is that going to
be done by independent panel or the NIH Ethics Advisory
Committee, is that going to be involved in doing a sort of peer
review of agreements?
Mr. Zerhouni. That is the idea. It should be done
independently by individuals who are not in the reporting
relationship to the person who is requesting this and are
directly reporting to the director of the agency, so that you
do not have a conflict there.
Mr. Allen. Do you expect the committee to meet on a regular
basis? And if so, will it make its judgments as a committee and
not as individuals? I mean, how----
Mr. Zerhouni. The committee will meet on a regular basis.
It is managed by the Deputy Director of NIH, Dr. Kington, and
will make its recommendation on a regular basis as well as
keeping a case history of every single case that comes to their
attention so that we can over time identify patterns if we need
to.
Mr. Allen. Okay. I would like if we have time to put up
some slides. Slide A dealing with Pfizer. You have that?
This is one slide that basically looks at some of the more
prominent drug and biotech companies that are currently paying
NIH employees. I wanted first to note that really only Abbott
Labs and Schering Plough cooperated with Mr. Waxman and Mr.
Brown. But we got information on the other firms.
This one dealt with Pfizer.
Just looking at this, you cannot see that, but Mr. Brewer
the chief the molecular disease branch, Dr. Brewer, is
receiving $19,000 a year in 2001, $16,500 in 2002, $20,000 in
2003 and $18,000 a year fee for the future.
I mean, my understanding, correct me if I am wrong, is that
the recommendation in the report is that people would be--I
mean employees would be limited to earning no more than 50
percent of their current income per year outside. Is that a
restriction that is going to have a material bearing on many of
the people who are currently NIH employees or is it a
restriction that will effect only a tiny fraction of the
current consultants?
Anyway who would like to.
Mr. Augustine. Mr. Allen, if I might respond. I think there
is a fifth criterion on your list of four. I think the four
were very good.
The fifth one we felt has to do with responsibility of the
individual at NIH. And so we would differ between a person in a
leadership role, a person who is performing human subject work,
a person who is overseeing an allocation of grants to the
outside, and finally what I would call the bench scientist
working entirely in the laboratory.
And so I think the restrictions, the more important
restriction rather than the dollar amount is that we would
simply preclude those first few groups from having any outside
consulting and it would only be the latter group that we would
permit under our recommendation to have consulting. And only
then when it did not pose a conflict of interest with ongoing
work.
Mr. Allen. I see. So the higher up the chain you go, the
less you can do by way of outside consulting?
Mr. Augustine. And at the upper levels the answer is one.
Mr. Allen. None.
Mr. Alberts. There is also the 25 percent from any one
source restriction that we are recommending.
Mr. Allen. Okay. Okay. But your position is that you think
the 50 percent of income for those to whom it applies is a
restriction that should deal with part of this particular
problem, anyway?
Mr. Augustine. I think we would characterize it much as Dr.
Zerhouni did. I think it will not effect the average person.
But the person who is trying to do something extreme, I think
we have stopped them.
Mr. Allen. Okay. Thank you.
Let me just check one more slide here. Slide B for Wyeth,
do you have that? Just calling your attention to a couple of
the people.
I mean, there you have--no, these are not broken out quite
the same way. But Melissa Kitner Triolo, almost $120,000 over 3
years. And Germain, the past is spread out, but the future
$25,000 a year.
I mean, those are numbers that you are comfortable with for
people in their positions? Excuse me 1 second.
I do not know where they are in the chain.
Mr. Alberts. I do not either, so I cannot answer that
question.
Mr. Allen. Dr. Zerhouni, do you know where they are in the
chain?
Mr. Zerhouni. Yes. I mean, Dr. Germain is a laboratory
chief. He's a chief of the biotech. So he is an intramural
scientist.
Mr. Allen. Yes.
Mr. Zerhouni. Am I comfortable with them making $25,000 a
year or half of their salary? The answer is yes, as long as it
is completely reviewed, completely disclosed and that we
understand the content of the relationship.
Dr. Germain is a world class immunologist who invented,
discovered many of the fundamentals of immune system response.
He is basically in the Nobel Prize equivalent category. Many
people want to talk to him about his knowledge of immunology.
It is going to be the case that if you look at this, many
of them are 2500 or 10 or 15; there is a relationship between
the amount of activity and the importance of the research of
that person, typically.
Mr. Allen. Okay.
Mr. Zerhouni. So that is where we need to cap. That is
where we have to have clear rules of only so much.
Mr. Allen. Thank you very much.
I yield back.
Mr. Greenwood. The Chair would announce that we face a
series of four votes now. Dr. Zerhouni, I know that you need to
be back at NIH to meet with the President. What time do you
need to leave here, sir?
Mr. Zerhouni. Right now.
Mr. Greenwood. About now?
Mr. Zerhouni. About now, Mr. Chairman.
Mr. Greenwood. Pardon me?
Mr. Zerhouni. About now, Mr. Chairman.
Mr. Greenwood. About now. Okay.
In that case, what we will do is we will recess for these
votes. We will return in about a half an hour. Drs. Alberts and
Augustine, I assume you can remain with us?
Mr. Augustine. Yes.
Mr. Greenwood. You will have time to grab some lunch. We
will be back here as soon as the series of votes are over,
which should be 30 minutes or so.
And then, Dr. Zerhouni, we are probably going to ask you to
come back at another time and drill you all over again.
Mr. Zerhouni. Absolutely. I am sorry about the event today.
Mr. Greenwood. So the committee will stand in recess until
the series of votes is completed.
[Brief recess.]
Mr. Greenwood. Mr. Bilirakis for 10 minutes.
Mr. Bilirakis. Thank you, Mr. Chairman.
Let me ask you gentlemen since the Director is not here,
you heard him make his statement where he talked about
reviewing and he had certain steps to try to address this
problem, this situation and whatnot. I guess my question has to
go with does he have the authority to do what is needed to be
done, whatever he may decide? Does he have the authority?
Mr. Augustine. Mr. Bilirakis, I think our answer to that
would be that he does not have the total authority he needs.
Part of it relates to his ability to compel additional people
to file form 450, the private disclosure form. In addition, the
interpretation of Title 42 is such that it makes it very
difficult for him to compel people to file form 278, the public
disclosure form. In each case there probably is a way around
it, but in each case that way is cumbersome. And in the case of
the form 278, he can file exceptions by positions, but it is a
major undertaking. And every time you reorganize NIH, you would
have to refile.
Mr. Bilirakis. And apparently his lawyers advised him that
he did not have the authority necessary, as I understand it.
Mr. Augustine. Our sense has been very much that Dr.
Zerhouni has tried mightily to comply with the rules as he
understands them and the constraints that are placed on him,
including the Privacy Act.
Mr. Bilirakis. Well, he has told us the same thing about
the allocation of research dollars to what disease and that
sort of thing that he does not--I mean my impression is at
least that he does not have the authority to do anything about
that. So here he is a director and he is being held responsible
for these particular acts that we are talking about and, you
know, some of the other areas, apparently the allocation of the
dollars and whatnot.
But let me ask you then, should he have that authority?
Mr. Augustine. The two specific authorities that I
mentioned we believe he should have. And we tried to stand back
and understand the context of the problem. And the issue, I
think, begins with some years ago when there were
dissimilarities throughout the government in conflict of
interest rules. And there was a feeling that that was unfair to
the employees and there should be more standardization. And as
a result of that standardization, we do not reflect properly
the uniqueness of the NIH. And I think the rules that are there
or the intention was probably good, but they just do not apply
very well to NIH's situation.
Mr. Bilirakis. So, yes. And the staff just reminded me,
certainly your people have spent an awful lot of time on your
study and your recommendations and whatnot. So are we saying
then that he does not have the authority to put all those into
effect?
Mr. Augustine. I think that some of the recommendations he
would have to get relief from OGE and from HHS. Many of them he
could put into place, and some he could put in temporary
circumventions, if you will.
Mr. Alberts. Could I also refer you to the letter that we
submitted with our testimony that was addressed to Norman and I
from Marilyn Glynn, who is the Acting Director of the Office of
Government Ethics that deals directly with the transparency
question and it would imply that he doesn't have some authority
he needs.
Mr. Bilirakis. Well, all right. You heard the Chairman say
earlier that we want to certainly make every effort to
reauthorize NIH. We have not done that in a long time. It
hasn't, at least from a financial standpoint, adversely
affected the working of NIH. Maybe in other areas it has, but
the point of the matter is that it has continued to function
and function relatively well. But we would like to think that
we will reauthorize this year. It is a tough year. It is a
tough year to reauthorize or legislate or anything. But
hopefully we can work that out.
So, I guess it is an opportunity I think to do a lot of
things in reauthorization, and that Dr. Zerhouni previously in
the hearing testified that he needed some congressional
authority to be able to put his road map into effect. Somehow
we are talking about in the other areas of authority here. So
that being the case, we need your help. And you may have
covered it in your recommendations, I do not know, but I do not
think your recommendations have really gone into well the
director has the authority for this, does not have authority
for that.
So we plead with you on behalf of the committee, I am sure
the chairman would agree, that inputs from you in that regard
would be very, very helpful. And, again, this year is fleeting
with elections and that sort of thing, so sooner rather than
later, obviously, in that regard. So there is an opportunity
too, for you all to basically say hey, Congress this is what is
needed.
I said this, sort of tried to say it I guess in my opening
statement, we do not want to do anything here to hurt the
research effort. This entire hearing and some of these problems
and whatnot, or potential problems, the perception as we have
already indicated is awfully important. And so, you know, keep
that in mind, too.
I had a hearing yesterday that looked like it was kind of a
clear cut hearing, and boy we found out that we conceivably
could be doing an awful lot of harm without realizing it as a
result of digging into things and listening to some of the
testimony. So I think the same thing is true to here.
And I hesitate to do this, but I guess I am--I am trying to
figure out in my mind in the NIH, in this booklet--well, there
are spreadsheets but they are not numbered, and that is the
problem. They are not numbered. But toward the end we have the
list of ongoing consulting arrangements for IC employees. I
guess it would probably be page 4 if it were numbered.
Mr. Augustine. I do not believe we have a copy.
Mr. Bilirakis. All right. Let me just go over this with you
and see if you can respond without having it before you.
There is a William Paul. It is funny, but I have a good
friend back home by that name, William Paul. And his brother is
a staff member of mine. But it is not why I picked on this.
But he is the laboratory chief. That is his position title.
outside organization Suntory Pharmaceuticals Research Lab LLC,
and then also Novartis Pharmaceutical AG Science Board. The
former or biotech is Formac Pharmaceutical. The nature of
activity, member. What does that mean, member? He is a member
of those companies?
Mr. Alberts. It means he is a member of the scientific
advisory board of a corporation.
Mr. Bilirakis. A corporation?
Mr. Alberts. Yes. Yes. Novartis is a big pharmaceutical
company and they obviously have a special board to advise them
on science. And he--I do not know often they meet, but several
times a year, at least.
Mr. Bilirakis. Right. And that is against his being a
consultant, right? Because a consultant also is on there but
not in this particular case.
Mr. Alberts. Yes. Norman could probably explain it better
than I can.
Mr. Augustine. Well, I think if he was paid to serve on a
advisory board, we would group that basically as being a
consultant, in our view.
Mr. Bilirakis. Yes. Okay. Well, and really I want to make
it public, no reflection on Mr. Paul. I mean a person, I hate
to say innocent until proven guilty but this is not a criminal
thing. But my point in the manner is that he has conducted
himself in the way he should have ethically conducted himself
unless proven to the contrary.
Mr. Augustine. Yes.
Mr. Bilirakis. And so I don't insinuate anything.
What I am trying to understand here. He is a member or
consultant with these two companies. His fee in one case from
5/1/00 to present was $280,000. His fee in the other case with
Novartis 2/1/01 to present fee is $100,000. And his travel
here. And then it says future fee, in the first case $350,000,
travel $8,000. And future fee in the Novartis case $120,000
over 5 years, travel expenses $40,000.
And, again, I am not saying there is anything wrong here.
We Members of Congress are accused all the time by people that
are well, you know, I have to live on $15,000 a year and you
guys are making X amount of government money and you are
overpaid. And we hear that all the time. And we are accused of
getting campaign contributions, political action committee
money or whatever the case may be. And in 22 years there I can
think of one case when I had a Member of Congress said to me
that he had looked when someone was making an appointment, he
looked at the rooster to see if that person or that
association--it would not have been an individual--would have
contributed. So I understand. We are not here throwing stones.
But can you tell me if you can, not whether this money is
more than it should be, but what role could this person play? I
mean he is a member, a consultant to these organizations.
Pharmaceutical, he is also the laboratory chief. What could go
wrong in terms of conflict, in terms of things that we are all
concerned about?
Mr. Alberts. I can answer that. First of all, I do know
William Paul. He is a distinguished immunologist and a member
of the National Academy of Science.
Mr. Bilirakis. I am sure he is and I hope everybody will
take it the right way.
Mr. Alberts. He is a senior member of the National Academy
of Sciences and internationally known leader in the field of
immunology.
According to the rules that allow him to do this, he cannot
use any specific knowledge from his research at NIH in advising
the corporation or whoever he is advising about science. He can
only use his general knowledge of immunology. That is an
important point. He is not allowed to take any of his official
duty information and get compensated for it. And that,
obviously, was cleared by the NIH review----
Mr. Bilirakis. Yes, but how could----
Mr. Alberts. So now what is he doing?
Mr. Bilirakis. Yes, what is he doing? Who knows what kind
of knowledge is----
Mr. Alberts. Okay. so these companies are obviously trying
to produce drugs that will either prevent auto-immune diseases
or deal with bacterial and virus infections. And if you are
doing that, this is actually my field of cell biology, it is
very important to know and deeply understand how the immune
system works. So I am quite sure he is there because he has a
deep understanding, a broad understanding of all of the very
complex molecular interactions that make the immune system
work, and he brings that to the corporation in ways that they
cannot otherwise get. Because their employees, presumably, are
not as distinguished and do not know all the things that he
knows. So that would be the general nature of what he would be
doing there.
He would hear from them what they are trying to develop and
say well here is what I know from my field of immunology that
would enable you to do it better or here is why it will not
work. And so they go through different projects one at a time
with the scientific advisory board and get scientific advice on
what the best direction for them to go.
Mr. Bilirakis. All right. But if he were not the person
that you say he is and that I would assume he is, and wanted to
misuse his position with the NIH on behalf of these companies
who are compensating him pretty darn royalty, I would say,
could he do so and basically who would find out about it,
etcetera?
Mr. Alberts. I suppose anybody could be dishonest. I do not
think there is any way of monitoring that from the NIH side
exactly what he says inside that room. You would have to rely
on his integrity.
You should ask the same question to Dr. Zerhouni when he is
here.
Mr. Bilirakis. Yes, I would have to. Of course, he is not
here.
Well, how much authority--could Dr. Zerhouni say, hey, no,
you cannot do this?
Mr. Alberts. Well, the NIH has all the authority to prevent
any outside activity and it has the responsibility of
preventing any outside activity that poses a possible conflict
of interest. And that is why before anybody could do any of
these outside activities, they must file a form 520. And every
time they have any new activity, they must file that form. And
we are recommending that even if nothing has changed, they must
file it at least annually. that is the new recommendation.
Mr. Bilirakis. Yes.
Mr. Alberts. So they have the full authority to prevent him
from doing that. They have to say yes before he could do that.
Mr. Bilirakis. I guess my time is up, trying to interpret
that clock up there. But would it be better that should we not
be paying these people maybe more and not basically allowing
things like this to take place? Because of the perception out
there as far as Members of Congress are concerned, we have had
to cut out honorariums and just so many of these things, gift
laws, gift ban laws and things of that nature. There have been
some changes to the campaign finance whatnot because of the
concerns of perception and image.
Mr. Alberts. Well, there is a perception problem. We are
very worried about that. I do not actually know William Paul's
responsibility at the NIH. If he has any responsibility for
making funding decisions, then the answer is no according to
us. If he has no such responsibilities, is purely a scientist,
then we are recommending that he should be allowed to continue
with the limitations. I mean, we have limitations. And I mean,
he may be exceeding the limitations on income and hours; I do
not know anything about that. But this would be generally
allowed if it had no conflict in other standards; no stock
options, no equities, not more than 25 percent of his income
from one source, you know all those things.
Mr. Bilirakis. In a number of these it does say stock. That
means they have got stock options.
Mr. Augustine. Yes. About one-fourth hold some kind of
equity.
Mr. Bilirakis. Well, on that I say wow very loudly.
Thank you, Mr. Chairman.
Mr. Greenwood. The Chair thanks the gentleman, and he
recognizes the gentlelady from Colorado for 10 minutes.
Ms. DeGette. Thank you, Mr. Chairman.
You had better watch out whenever Mr. Bilirakis says
``wow'' very loudly.
I want to go back to this example of Dr. Paul, not to pick
on him because it is really just an example of what I think are
some of the ethical issues folks are facing.
He sits on the scientific advisory board of Novartis and
other organizations. And I think what you testified, Dr.
Alberts, is that he as part of his NIH duties, he can share his
generalized scientific knowledge but not specific proprietary
knowledge that he might have as a result of his activities at
NIH, correct?
Mr. Alberts. Right.
Ms. DeGette. You need to say words.
Mr. Alberts. Pardon?
Ms. DeGette. You need to speak for the record. Say yes or
no.
Mr. Alberts. That is, if you are sharing knowledge as part
of your job that you have developed in your laboratory----
Ms. DeGette. Right. Yes or--I mean is that an accurate
summary of your statement that I did?
Mr. Alberts. That is right. That is accurate.
Ms. DeGette. Okay. The concern I have is this: I do not
have such a concern about someone like Dr. Paul being
dishonest. My concern is, first of all, he is an expert in his
field. How is he going to know as he is sitting there giving
this information whether or not it is proprietary information
of the NIH or not? I mean, if it is in his field of information
and he is asked to reply on something, is that not a very, very
fuzzy line?
Mr. Alberts. Well, I would be in exactly the same position.
I am not in exactly that field. But I could imagine myself in
the same position.
Ms. DeGette. Right.
Mr. Alberts. And I could clearly distinguish what I had
done in my own laboratory from general knowledge----
Ms. DeGette. But what about knowledge that you had received
from things you had done in your laboratory that then entered
into your knowledge?
Mr. Alberts. It is very hard to explain. But I could
separate that personally.
Ms. DeGette. Okay. But let me ask you a further question
from that then. Let us say that Dr. Paul or someone else is
sitting on one of these advisory boards, and let us say that
Novartis or some other organization comes to them with an
issue, a study they are going to do, and Dr. Paul has
specialized knowledge of his work at NIH that would effect what
Novartis was planning to do with that study, and maybe in a way
that is detrimental to patients. Who is Dr. Paul's fiduciary
and ethical responsibility to at that point? Is it to Novartis
to give them the information he knows that might affect a
patient study or is it to NIH?
Mr. Alberts. It is to NIH. And this is why we----
Ms. DeGette. Well, the what happens if Novartis goes
forward with a study that might be detrimental----
Mr. Alberts. Oh, I am sorry, I missed you. Detrimental, I
see. I am sorry. You are saying prevent something bad from
happening.
Ms. DeGette. Right. Well, let us say that they're doing
some kind of a human----
Mr. Alberts. Well, if I was in that position and I was
being very careful, I would say I think you need to talk
somebody, I would recommend somebody else to talk to who knew
the same thing.
Ms. DeGette. But what if he is the one that knows it
because he is the one that did the study at NIH? That is the
problem with----
Mr. Alberts. He would give somebody who actually knows it.
Nobody in science who----
Ms. DeGette. You can see why we are concerned about some of
these ethical concepts.
Mr. Alberts. Right.
Ms. DeGette. I mean if you look at the L.A. Times series
that we saw, why you have so many blurring of lines, correct?
Mr. Alberts. Yes. But I am just saying that if I was in
that position, I could like make my way out of that without
preventing----
Ms. DeGette. Do you have a 100 percent view that everyone
else can figure that----
Mr. Alberts. Of course not.
Ms. DeGette. Of course not. Okay.
Now, I want to talk about some more parts of the panel
recommendations. I am not meaning to pick on you all. I think
we are just really concerned this be clarified.
In recommendation four of the Blue Ribbon panel the report
states: ``A research clearly should not consult with a company
that has applied for or received a research contract from the
employee's own laboratory or branch.'' My question is should a
researcher consult with a company that is a subsidiary of the
company has applied for or received a research contract form
the employee's own laboratory or branch?
Mr. Augustine. I would view the subsidiary as being the
parent company itself in that regard.
Ms. DeGette. Okay. Should a researcher consult with a
company that is partnered with a company that has applied for
or received a research contract from the employee's own
laboratory or branch?
Mr. Augustine. If it is partnered on the specific issue at
hand, the answer would be no. If it was a partner in the other
area, the answer might be yes.
Ms. DeGette. Why the distinction between a subsidiary and a
different company that is partnered with it?
Mr. Augustine. Well, a subsidiary would be owned by the
company, whereas a partnership would be for a specific purpose.
And you might have partnerships for different purposes and one
purpose may have nothing to do with what this employee does.
Ms. DeGette. Okay. That makes sense.
Should a researcher consult with a company that has a
direct financial interest in a company that has applied for or
received a research contract from the employee's own laboratory
or branch?
Mr. Augustine. If I understand that question correctly, I
think the answer would be no unless it was a de minimis issue.
Ms. DeGette. Well, how would you know that?
Mr. Alberts. I am not clear about the question.
Ms. DeGette. But the question is let us say company A has a
direct financial interest in company B but they are not a
subsidiary, but they have got a big investment. And the
employee has a contract with company B. Can they also have one
with company A?
Mr. Augustine. My answer would still be no the way you
described it.
Ms. DeGette. Okay. Now do ethics officers generally conduct
background checks to identify subsidiary partner and/or shared
interest companies?
Mr. Augustine. I do not know the answer to that.
Mr. Alberts. I do not know the answer either. But we heard
that NIH wanted to make a extensive data base that would
provide that information.
Ms. DeGette. Right. Because here is the problem----
Mr. Alberts. We heard people say that.
Ms. DeGette. You do not know that, and it is hard to know.
It would be hard for an ethics officer to find that out. But
here is why it is important. You know from all of the publicity
Dr. Katz, who were talking about, was consulting with AG
Schering when his institute had dealings with Burlac which is a
U.S. subsidiary of Schering, right?
Mr. Augustine. Well, without addressing the specific case,
which we did not do, clearly it is up to the individual who is
doing the consulting to know who owns your company and who has
interest in it.
Ms. DeGette. Right. And in this case, Dr. Katz disclaimed
knowledge that his institute was a subsidiary. So you can see
how this would be a problem. And I guess my view would be what
are we going to do about that?
Mr. Alberts. I think that is a good question for Dr.
Zerhouni.
Dr. Katz would not be allowed to do any consulting in the
new regulations that Dr. Zerhouni is supporting, because he is
too high a level. But----
Ms. DeGette. Well, okay.
Mr. Alberts. But we were----
Ms. DeGette. But let us take it somebody else. I mean,
under your proposed regulations someone is going to have to
figure out all of these relationships out.
Mr. Augustine. Well, it is really up to the individual who
wants to do the consulting to know----
Ms. DeGette. But how are they going to know? Because, see,
Dr. Augustine, you see what I am saying. Is like I am asking
you, okay, can someone have these relationships and it is yes/
no, yes/no. But that is not in the recommendation. And who is
going to educate these researchers about what they have to do?
Mr. Augustine. Yes. I would draw the parallel to the SEC
rules where you are expected to know who you are investing in.
And there are enforcement procedures to run tests to make sure
that you are being honest.
Ms. DeGette. But these rules are not similar to the SEC
rules in the sense we are talking about institutional
researchers. I do not think you can draw those parallel at all,
because a lot of the relationships they have people probably
would not be able to have in the financial services industry
without full disclosure.
Mr. Augustine. I think the employer would go to the
prospective firm that wanted to hire them as a consultant and
say give me a list of the firms that you own or have financial
interest in.
Ms. DeGette. Okay. Maybe you could make that in your
recommendations or maybe Dr. Zerhouni can put it in his
rulemaking.
Mr. Alberts. Yes. We did not get to that detail. We said
the NIH should take care of this problem.
Ms. DeGette. Well, it is a thorny problem and believe me, I
will bring it up with him.
Let me just ask about one more of your recommendations.
Recommendation two suggests that the NIH intramural scientists
should not be allowed to have any financial interests in or
relationship with any company whose interest could be effected
by their research or clinical trial ``except in special
circumstances.''
What types of special circumstances does this exception
refer to?
Mr. Augustine. Well, you picked a terrific example of the
sort thing you struggled with. It seemed that for every policy
we could prescribe, we ourselves could think of exceptions.
Ms. DeGette. Right.
Mr. Augustine. This is a great example. The example of the
case where a medical researcher has developed a new technique
that only that researcher has practiced or new instrument that
only that researcher has learned to us, and to deny them
participation in the trial would increase the risk of the
trial. And so in our view there would be an exception in a case
like that, but the exception would stipulate that there were
special steps to be taken where others would monitor the work
of this individual and further the patient would be informed.
Ms. DeGette. Right. But the issue really is not the
participation, it is the payment for the participation, right?
Mr. Alberts. There is no payment here. These are people
doing official duty work.
Mr. Augustine. Yes.
Ms. DeGette. Well this is called financial interest. Your
recommendation two is financial.
Mr. Alberts. I mean there is no payment. They are doing
clinical trials at the NIH.
Ms. DeGette. Right.
Mr. Alberts. They must not have any outside financial
interest that could effect them. And so if this is the inventor
of the technique, they may have the patent for the technique.
Ms. DeGette. Right.
Mr. Alberts. There is no way you can get around that.
And we strongly support----
Ms. DeGette. But who is going to decide--my question was--
--
Mr. Alberts. The director of the NIH has to decide.
Ms. DeGette. Dr. Zerhouni is going to decide----
Mr. Alberts. Well, eventually he has to.
Ms. DeGette. Well, what do you mean ``eventually''?
Mr. Alberts. Well, it goes to this special panel that he
set up, NIH Ethics Advisory Committee. There is a new
committee, a central committee which he spoke about. If they
had any trouble, they would obviously bounce it to him.
Ms. DeGette. What do you mean if they had any trouble?
Mr. Alberts. The ultimate decisionmaking has to be him. If
they thought it was ambiguous. You would have to ask them how
they would actually do it, but let me just make the one point.
The American Association of Medical Colleges put out a
major report, I think about a year ago, which was a surprise to
all--recommendations on exactly this issue, human subject
research, which was a very thorough well done report.
Ms. DeGette. Yes, I am aware of it. I work a lot in human
subject research.
Mr. Alberts. William Danforth was the Chair, I believe.
At any rate, the panel in our report strongly supports that
report and its recommendations, and for the NIH as well. And
they have a specific set of procedures to be gone through in
exactly this case, this kind of case with an oversight panel.
And we would support exactly those recommendations. And we
could submit those recommendations to the record, if you like?
Ms. DeGette. I would love it.
Mr. Alberts. Okay.
Ms. DeGette. And, Mr. Chairman, let me just say, I am more
confused now than when we started the day and I am really glad
we are having a whole series of hearings on this. Because I
think it is critically important to the research of this
country, and I have a lot more questions.
Thank you.
Mr. Greenwood. The Chair thanks the gentlelady. And without
objections, the slides presented by the gentlelady will be
entered as part of the record.
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Mr. Greenwood. And the Chair recognizes himself for
purposes of inquiry.
It seems to me, gentlemen, that I have identified two
reasons why we need to be permitting NIH employees to have
extra income, whether that income is pursuant to Title 42,
whether that extra income is derived from consulting, whether
it is from speaking fees and so forth. And one of them is
retain and recruit good people, and the other is to advance the
science because you do not necessarily want the NIH science to
be insular, and there is a two way education streaks that
occurs between the scientists and private sectorsphere, which
is good for both. Good for America. Good for the patients that
benefit from the cures that come from all of that shared
knowledge.
So let us look at recruitment and retention. The question
is, does the NIH or the Blue Ribbon panel have any actual
evidence that NIH scientists have left because of consulting
fees being cut? Was such data requested by the panel? Was such
data requested by the NIH? What I am trying to get it is sort
of an undischarged assumption that if you do not provide these
extra enumeration, that somehow we will lose quality people.
How do we discharge that assumption? What is the evidence of
that?
Mr. Augustine. Well, we did not gather statistical data. I
am not sure what is available. One reason we did not, is there
are so many other factors that bear on people leaving and not
leaving.
We did in our conversations that I mentioned that we had
with each of the center and institute directors ask if they
have encountered situations where they had trouble recruiting a
senior scientist or retaining a senior scientist due to salary
issues and also due to conflict of interest issues. And with
regard to the former, there were a number that had indicated
they had had such circumstances. So our evidence is anecdotal,
but fairly convincing.
Mr. Greenwood. Well, it would be fairly human nature to say
hey boss if you do not pay me more I am out of here. But that
may be the truth.
Mr. Alberts. Let me just say a word about, we talked to
some young scientists in closed session. We were worried they
would not speak completely frankly in open session. We also
talked to some in open session, so we tried both ways.
And the young scientists who came were basically focused on
doing public service and they were--I could tell that these
were really outstanding people you want at the NIH.
And one of the things--none of them were doing any outside
consulting. But we asked them specifically whether they thought
it was important that they sometime in the future have this
opportunity, and they said that it was important to them. They
did not want to be treated as second class citizens compared to
all their colleagues. And so from that I would take it that it
would have an affect on their long range career plans if they
thought they could never engage in the kind of activities that
other colleagues----
Mr. Greenwood. Because of the money or because of the
opportunity, experience?
Mr. Alberts. I do not think it is really the money,
actually.
Mr. Greenwood. Well, that is an interesting point. Because
I am sure that there are--I would guess that there are lots of
employees at the NIH who are receiving excess compensation
because of Title 42 who in fact would not leave if it were not
for that.
Mr. Alberts. I do not know. I do not know.
Mr. Greenwood. Right. But how is that determination made.
In other words, if I am at NIH and I see all my friends are on
Title 42 and they are making an extra $50,000 a year more than
I am, I want that. So I, how did you get that? Well, I filled
out this Title 42 form and then it got signed off by my
director. In your study of this, is there any actual criteria
used to determine who is deserving of the extra cash and
whether it is necessary to give that to them to be retained?
Mr. Alberts. We were looking forward at policies. We did
not have the opportunity. I must emphasize, 66 days, we all
have full time jobs. It was a killer already. And we did not
have time to look into----
Mr. Greenwood. You did not look into that. I mean, it is an
important point because that goes to Mr. Bilirakis' question of
resources that the taxpayers put into NIH, is it going to cure
diseases or is it going to pay salaries that are in excess of
what is necessary in order to keep those folks there.
Obviously, 42 does not allow the most menial tasks, because
the assumption is you can get the menial tasks done without
paying the extra salary, but I have not encountered any actual
criteria that anyone uses to decide whether someone should or
should not qualify.
Do you know what the turnover rates for scientists is at
NIH?
Mr. Alberts. I'm sorry, what rates?
Mr. Greenwood. The question is what are the turnover rates
for NIH scientists? Do we know anything about that? Do we know
what they were 10 years ago? Do we know what they are now?
Mr. Alberts. I do not know.
Mr. Greenwood. Do we know whether if Title 42 has in fact
made a difference? I mean, has anybody ever looked to see
whether the turnover rate is lower after Title 42 was put in
place to provide these extra salaries?
Mr. Alberts. There is one thing I can say. I do not know
the turnover rates, but as a scientist I could say something
about the quality of the work being done at the NIH. And the
quality of the scientists that are there since I came to
Washington, there has been a major change. I came to Washington
in 1993. It corresponds with Title 42. I cannot say it was the
cause. But I was once offered a job at the NIH a long time ago
and I did not want to go there. So I know what it was like then
and I know what it is like now. And I think the quality of the
science has vastly improved.
Mr. Greenwood. Why did you not want to go?
Mr. Alberts. Pardon?
Mr. Greenwood. Why did you not want to go?
Mr. Alberts. I was at the University of California, San
Francisco, and I preferred to stay there.
Mr. Greenwood. It was not a financial decision?
Mr. Alberts. No. No.
Mr. Greenwood. On page 4 of your report it says ``employees
in a position to influence the financial interests of an
outside entity such as current or possible future recipient of
an NIH grant or contract should neither receive financial
benefits from the organization nor have a significant financial
interest in it.'' And Ms. DeGette was inquiring about this kind
of thing.
Does the term ``financial benefits'' as used in this
statement include financial benefits associated with an award?
Mr. Augustine. That is a good question. If the
organization--let me back up a little bit.
That is a very detailed question in a specific case here.
But applying our general rule if the award were to be made by
an organization that was seeking a contract with that
employee's work group, we would view that as being
inappropriate. And I think----
Mr. Greenwood. But let us be specific about that. Does that
mean they have to have a current pending application in for
that budget year, or could it be that their potential
contenders down the road? I mean, suppose I decided that my
university wants to start getting into the NIH game and we have
not been in it much, or we opened up a new center for a
particular kind of disease and we say who is the center
director there, let us pay him $25,000 to come on out. And then
maybe a year or 2 hence, we will make application.
Mr. Augustine. I think the current rules on that say that
if there is a likelihood of a future application, you cannot
take a position with that firm or you cannot consult for it.
Second, if unforeseen they do turn in an application for a
grant, you then have to disqualify yourself with regarding the
terms of the award of that grant.
Mr. Alberts. My understanding, I guess Dr. Zerhouni should
be here to answer that. You cannot form a new award and give it
to an NIH employee. It has to be an award that has been around
for a while and have a drawn track record.
Mr. Greenwood. All awards start somewhere.
Mr. Alberts. Yes, yes. But my position if I was director, I
would not allow a new award to be given to an NIH employee.
Mr. Greenwood. Although that has happened?
Mr. Alberts. I do not know anything about it.
Mr. Greenwood. Yes. We have got plenty of evidence to that
affect.
Also on page 4 your report states ``In addition, NIH
scientists who are recognized for outstanding scientific
achievements, leadership or public service are sometimes the
recipients of awards which may be accompanied by a cash prize.
The panel believes these are important, even essential
activities for NIH scientists, because they are part of the
tradition of science and provide evidence of the value and
significance of the NIH research community to the larger
scientific community.''
If awards are an important part of the tradition of
sciences, raises the visibility of NIH and NIH scientists, why
hasn't the NIH posted a listing of the scientists who have
received awards, the names of the awards and the citation of
the award what the scientists is being honored for? Why did the
Blue Ribbon panel not recommend that NIH post such award
listings?
Mr. Augustine. It is a terrific idea, and I wish we had
thought of it.
Mr. Greenwood. Okay.
Mr. Alberts. I did not know they did not do it.
But, you know, I mean in general at my university,
University of California San Francisco they advertise every
award as much as they can. So I would assume that the NIH does
that as well, but we did not receive any information about
that.
Mr. Greenwood. You now, if Boeing decided to give awards to
the defense Pentagon employees, and that became the tradition,
I mean I am sure that health care is not the only place where
scientists are really smart and want to do good things. I mean,
DuPont could give awards to EPA employees. What is the
difference?
Mr. Augustine. I think there are distinctions. I have
struggled with your questions in the past.
One distinction is that the NIH has as part of its mission
to spread the knowledge that develops outside, whereas Boeing--
--
Mr. Greenwood. But you do not have to get paid for that.
Mr. Augustine. I am sorry?
Mr. Greenwood. But you do not have to get paid for that.
Mr. Augustine. But that is a separate issue can come back
to.
Mr. Greenwood. Yes. But I am talking about awards.
Mr. Augustine. Okay. I again think there are two
distinctions. One is that Boeing has no desire to build a
particular--to spread its information; NIH does. Second, Boeing
pays a competitive salary and the NIH at the senior levels does
not.
Mr. Greenwood. I guess what I am trying to get at is if I
am an employee of the Environmental Protection Agency, just
like somebody at NIH wants to save the world from some dread
disease, somebody over at EPA wants to save the world from some
dread toxin. Same thing in terms of both altruistic, okay. And
yet we seem to have one whole set of rules and traditions that
the people who are saving the world through medicine, that they
are so special that you have to treat them differently and give
them prizes and awards and consulting fees. But some smock who
is over at the EPA who is just trying to save the world from
pollution, maybe he is trying to save the world from
catastrophic global climate change, shut up do your job and
take your Federal salary.
Mr. Augustine. The question we addressed was why not just
rule that you cannot accept awards given by companies, firms.
And we are told that there are a number of awards that are very
prestigious, long established that scientists in this field
would like to have. There are not in the aerospace field, and I
do not know about the EPA.
Mr. Alberts. General Motors Cancer Fund is one such prize.
Mr. Greenwood. In recommendation one the Blue Ribbon panel
proposes that in addition to NIH senior management, NIH
extramural employees who are responsible for program funding
decisions and recommendations should not engage in outside
consulting. Is the rationale for this recommendation that these
extramural program administrators are high level officials who
are responsible for making funding decisions on grants,
contracts and cooperative agreements?
Mr. Augustine. Really it wa the latter. It was not
necessarily that they were high level, it was just that anybody
who has responsibility for grants or contracts we felt should
not be prevented to consult.
Mr. Alberts. We specifically took some case studies and
discussed them. The initial review of grants is done by a panel
of outside people, maybe 12 people from outside. It's called a
study section. And it has an NIH extramural employee who is
staffing that evaluation, initial evaluation of event. And we
said specifically, the panel agreed, that it should extend to
that level. That is not a very high level, but it is a very
important level because it is where the first judgments are
made about scientific quality, even though the staff member is
just managing a group of outside scientists. The thought there
was a possibility of perceived conflict. And so we took some
case studies. We were not able to go through every position,
but it does reach pretty low in that part of the NIH.
Mr. Greenwood. Okay. In recommendation 11 you state that
the NIH should seek additional equivalency rulings from OGE to
increase the number of public filers to include the senior
employees specified in recommendation one.
On January 12, 2004 the HHS associate general counsel for
ethics requested the Office of Government of Ethics to
determine if the following positions be required to file public
disclosure reports: Institute, center directors, IC deputy
director, IC scientific directors and IC clinical directors.
The Office of Government Ethics granted this request the
following month.
Does the Blue Ribbon panel consider NIH extramural
employees covered by HHS request and OGE determination?
Mr. Augustine. Did we consider them?
Mr. Greenwood. The question does the Blue Ribbon panel
consider NIH extramural employees to be covered by the HHS
request and OGE determinations.
Mr. Alberts. The senior employees.
Mr. Greenwood. Pardon me?
Mr. Alberts. Certainly the senior employees.
I understand from Dr. Zerhouni's testimony they just asked
for 500 more positions, and I assume that's mostly what those
are. I do not know what they are. But Dr. Zerhouni can answer.
Mr. Greenwood. Since NIH extramural program administrators
have high level responsibilities, why aren't they covered in
the January 2004 HHS request to OGE to cover senior Title 42
officials under public disclosure requirements?
Mr. Augustine. My understanding is that that was a first
step, but that he has got additional ones he is going to ask
for exceptions on.
Mr. Greenwood. Okay. All right.
I have got four more questions that I am trying to get in
here. What did the Blue Ribbon panel mean in recommendation 18
that ``the NIH director working with Congress should ensure
that the agency has authority under Title 42?''
Mr. Augustine. It was our view that some mechanism was
needed to pay senior scientists beyond what's allowed exclusive
of Title 42. We are also aware of the issue that has gone back
and forth between the committee and the HHS as to the
applicability of Title 42 at all.
We did not enter into that. Most of us are not lawyers. We
do not know which side has the merit. The one thing we know is
that there needs to some mechanism, whether it is Title 42 or
some other mechanism, to be sure that these people can be paid
adequately.
Mr. Greenwood. Title 42 authority used by the NIH to
compensate NIH institute directors and other senior officials
at annual salaries of up to $225,000 is section 209(f). This
section provides that under certain circumstances special
consultants may be employed ``to assist and advise in the
operations of the Public Health Service'' without regard to
Civil Service laws. Do you believe that the statutory provision
was intended to authorize the compensation of NIH officials
already occupying continuing full time positions in order to
evade the pay caps under the Federal Civil Service pay scale?
Mr. Augustine. I think neither of us are lawyers and would
not be qualified to opine.
Mr. Greenwood. Without being lawyers, the question is
having looked at this issue, we are seeing what appears to be a
gap between the intent of the law, which is to bring in special
people to assist and advise in the operations of the Public
Health Service, and that is a very different model than
somebody who has been working there for years, going to
continue to work there for years and that is their job as
opposed to somebody we have to bring in a special consultant
and that person is going to need more money to give us his or
her time.
Mr. Augustine. I could certainly understand that point of
view could be defended. I could understand the point. But we
really did not examine it at any depth.
Mr. Greenwood. Okay.
Last question. Does the Blue Ribbon panel have concerns
that NIH did not work with the Congress previously on
clarifying Title 42 authority?
Mr. Augustine. In 1985 you mean or currently?
Mr. Greenwood. Heretofore. Recent.
Mr. Augustine. The hiring authority of Title 42 or the pay
of Title 42?
Mr. Greenwood. Both, I think.
Mr. Augustine. I guess with regard to hiring authority, we
really did not involve ourselves with that.
With regard to compensation, our view was that the Director
of NIH would work with whoever it takes to try to seek relief
for the more senior employees.
Mr. Greenwood. Okay. Thank you. You have been very generous
with your time, not only today but for the 10 weeks that you
spent doing this work. And the committee and the country owes
you a debt of gratitude. Thank you for your time.
Mr. Alberts. Thank you.
[Whereupon, the subcommittee at 2:08 p.m. was adjourned.]
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NIH ETHICS CONCERNS: CONSULTING ARRANGEMENTS AND OUTSIDE AWARDS
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TUESDAY, MAY 18, 2004
House of Representatives,
Committee on Energy and Commerce,
Subcommittee on Oversight and Investigations,
Washington, DC.
The subcommittee met, pursuant to notice, at 10 a.m., in
room 2322 Rayburn House Office Building, Hon. James C.
Greenwood (chairman) presiding.
Members present: Representatives Greenwood, Stearns,
Walden, Ferguson, Barton (ex officio), DeGette, and Waxman.
Staff present: Alan Slobodin, majority counsel; Bud
Albright, staff director; Ann Washington, majority counsel;
Casey Hemard, majority counsel; William Carty, legislative
clerk; William Harvard, legislative clerk; David Nelson,
minority investigator and economist; and Jessica McNeice,
minority staff assistant.
Mr. Greenwood. A quorum being present, this hearing of the
Oversight and Investigations Subcommittee will come to order.
The Chair recognizes himself for purposes of making an opening
statement. Good morning to everyone.
In this hearing the subcommittee turns from last week's
focus on the lofty aims of the NIH Blue Ribbon Panel on
Conflict of Interest Policies to the ignoble case specific
realities of how ethics issues have been handled at the NIH. We
will look mostly at what led to the weaknesses in the NIH
ethics program and what can be learned from this examination to
increase the chances for success and improving NIH's ethics
program. This examination will highlight two cases illustrating
conflicts of interest, concerns rising from consulting
agreements and election reports.
Consider the case of Correlogic Systems, a small bioscience
company in Bethesda, Maryland, developing diagnostic disease
tests. Although a small company, Correlogic attracted the
partnership of the Food and Drug Administration, the National
Cancer Institute, to develop a test by Correlogic based on an
innovative way that attempts to detect diseases by looking at
patterns of proteins in the blood as opposed to single
biomarkers, the conventional method used by researchers.
Correlogic's test takes a single drop of blood from a
patient and scans for patterns of protein fragments through a
mass spectrometer. The test was able to detect ovarian cancer
in 50 of 50 patients who participated in the study, 100
percent, including patients with earliest stage cancers.
Ovarian cancer is the fifth leading cause of cancer deaths of
U.S. women but the survival rate is near 95 percent when
ovarian cancer is detected in stage one.
The data produced in this study was a joint effort of
Correlogic, the FDA, and the NCI through the FDI, NCI clinical
proteomics program. Correlogic's partners were Dr. Emanuel
Petricoin of the FDA and Dr. Lance Liotta of the NCI.
In light of these encouraging results in April 2002 the
joint effort of Correlogic and the FDA and NCI was converted
into a cooperative research and development agreement called a
CRDA involving the NCI, the FDA, and Correlogic. A CRDA is an
agreement that allows the Government to collaborate with
outside organizations on research and development. Dr. Liotta
and Dr. Petricoin became the co-principal investigators of
CRDA. This was a research created to allow Dr. Liotta and Dr.
Petricoin to test Correlogic's software.
One of the purposes of this joint collaboration was to
develop technology and develop a strategy that would lead to
the prompt commercialization of protein pattern recognition
tests first for ovarian cancer patients. Now, at this point,
this could have been a great public health story.
A public/private partnership saving the lives of ovarian
cancer patients by expediting development of these diagnostic
tests. Unfortunately, this story took a different path.
Sometime in the spring of 2002 NCI decided to unilaterally
sponsor clinical trials on the ovarian cancer test instead of
executing a clinical research CRDA with Correlotic.
Since the time that NCI has wanted to unilaterally pursue
clinical trials, Correlogic and NCI have been engaged in
negotiations for about 2 years now over whether to pursue the
clinical trial CRDA.
In the fall of 2002 a company called Biospect recruited Dr.
Liotta and Dr. Petricoin to consult for them. Biospect is a
competitor of Correlogic. Its mission statement, ``Development
technology for identifying and assaying protein biomarker
pattern,'' is virtually identical to Correlogic's.
At this time Dr. Richard Clausner, former Director of NCI,
was a board member of Biospect. Dr. Carol Dahl, former Chief of
the Office of Technology and Industrial Relations at NCI,
served as Vice President for Strategic Partnerships. In
addition to hiring Liotta and Petricoin, the two co-principal
investigators on the Correlogic CRDA and co-inventors of
Correlogic's test, Biospect also hired the technology transfer
officer from NCI and the person with whom Correlogic had to
negotiate its CRDA.
FDA scientists like Dr. Petricoin are subject to stricter
ethics regulations than NIH scientists because the FDA is a
regulatory agency and would be prohibited from consulting with
biotechnology companies. Nonetheless, Dr. Petricoin's request
to consult with Biospect was approved in October 2002. Dr.
Liotta's request was approved in December 2002. His consulting
agreement covered the areas of diagnostic devices, serum
handling, and microfluidics but not areas involving data
pattern analysis.
Sometime in 2003 Correlogic learned that Liotta and
Petricoin were consulting for Biospect. In July 2003 a
representative for Correlogic raised concerns that Dr. Anna
Barker, the Deputy Director of NCI, about Dr. Liotta's
consulting arrangement with Biospect. As a result of this
complaint, the NCI re-reviewed Dr. Liotta's consulting
arrangement and reapproved it.
NCI recognized that Biospect and Correlogic did business in
the same area, but Dr. Carol Barret, Liotta's supervisor,
determined that the consulting was limited to areas that did
not overlap with Liotta's official duties.
In the days before this hearing Dr. Petricoin and Dr.
Liotta have ceased their consulting arrangements with Biospect
but the damage has been done to a promising partnership. Dr.
Zerhouni has stated that all public/private partnerships such
as cooperative research and development agreements must be
transparent but the Correlogic case proves that such
transparency can be a fiction.
The NIH and the FDA allowed Government scientists who are
co-inventors and creative partners with Correlogic to secretly
provide consulting services without the knowledge or consent of
Correlogic to Correlogic's competitor which had already hired
the NCI tech transfer specialist from the CRDA. What happened
to the public trust?
Every day private companies negotiate provisions in
business contracts to protect themselves from employees or
consultants who might later try to work for a competitor.
Indeed, there was such a provision in the Biospect consulting
agreement with Dr. Liotta. Yet, in a case like Correlogic a
private company entering into a CRDA with NIH cannot protect
itself. It risks its Government partners taking the insight,
knowledge, and prestige gained from the CRDA to consult with
the competition and all under the cover of an ethics approval.
Even under the so-called limited consulting agreement with
Biospect, Dr. Liotta was permitted to advise Biospect on what
seemed to be commercialization strategies, the very heart at
what CRDA was all about. There are a few situations more
destructive of public/private partnerships than this one. What
company will want to enter a CRDA with NIH if this is the way
conflict of interest issues are managed? This isn't
transparency. This is an outrage.
In addition to the Correlogic case, the subcommittee will
look at the strange story of how NIH officials got to live
under a permissive policy for receiving cash gift awards from
entities doing business with their institutes. In 1996 Dr.
Richard Clausner, who was the Director of the NCI, was notified
by the University of Pittsburgh that he had been awarded the
Dixon Prize of Medicine associated with a $30,000 cash gift.
However, ethics officials at the NIH advised him that he
could not accept the prize. There were three reasons for this
advice. (1) an ongoing lawsuit by famous cancer researcher Dr.
Bernard Fisher against the University of Pittsburgh, the NCI,
and other co-defendants; (2) an ongoing contract dispute
between Pittsburgh and NCI; and (3) the University of
Pittsburgh status as a major entity doing business with the
NCI, receiving and seeking substantial funding for grants,
contracts, and agreements.
In giving this advice, one of the NIH ethics officials
conferred with an attorney at the Office of Government Ethics
who supported the advice and indicated that Dr. Clausner still
could not accept the award even if he disqualified himself from
all matters involving Pittsburgh.
On August 27, 1997, Dr. Fisher and the defendants announced
a settlement of the lawsuit which involved a $2.7 million
payment from Pittsburgh to Fisher. However, most of this $2.7
million actually came from other defendants, not Pittsburgh.
One of those defendants was the NCI and available evidence
indicates that Dr. Clausner orally approved a $300,000 payment
from the Government as a contribution to the settlement.
At about the same time, the Dixon Prize Awards Committee
made up of faculty members of the University of Pittsburgh,
decided to recommend Dr. Clausner again for the award. This
time the cash gift was increased from $30,000 to $40,000.
Although the rules for the prize state that the award should be
given to the individual who made the most progress in medicine
for the year in question, Dr. Clausner was honored for
achievements that occurred prior to becoming NCI director in
1995.
Giving the prize to Dr. Clausner in 1997 was like giving
the Academy Award to a well-liked actor who just didn't happen
to make any movies that year. Within days after the settlement,
Harriet Robb, the HHS General Counsel and Presidential
appointee, asked Edward Swindell, the Acting Director of the
Ethics Division, to see if there was a way Dr. Clausner,
Presidential appointee, could receive the prize from Pittsburgh
now that the litigation was settled.
Notwithstanding the past guidance from OGE and the concerns
raised by the NCI ethics advisor, Mr. Swindell wrote the legal
opinion that interpreted the ethics regulations to allow an NIH
official to receive a cash gift award from a grantee as long as
there wasn't a pending matter in the official's in-box at the
time the award was tendered. This interpretation has bound HHS
and NIH to this day preventing Dr. Zerhouni from taking
immediate steps to place restrictions on awards.
I am pleased that the Office of Government Ethics
recognizes in its testimony for this hearing that the HHS
interpretation was overly permissive. Although the University
of Pittsburgh insist that Dr. Clausner was selected on his
merits, serious appearance questions are raised because of the
timing and the circumstances of the award.
In addition, it is amazing that the highest ranking ethics
official at HHS ignored these appearance questions, disregarded
OGE's advice, and may have provided a permissible but incorrect
interpretation of ethics regulations to please political
appointees.
We invited both Dr. Clausner and Dr. Michael Lotts of the
University of Pittsburgh who chaired the awards committee at
the time to testify at this hearing. Both indicated that they
would be unable to testify. We also invited the NCI's ethics
advisor Dr. Maureen Wilson to testify but she had a long-
standing personal commitment that prevented her from appearing
today. We may have her as a witness at a future hearing.
The subcommittee will hear from two panels of witnesses
today. The first panel includes representatives from OGE, HHS,
NIH, an ethnics specialist, Congressional Research Service, and
Dr. Harold Varmus, the former director of the NIH. The second
panel features witnesses from the NCI, the FDA to discuss the
Correlogic case study.
Through this hearing it is my hope we will learn about the
problems of day-to-day implementation of NIH ethics issues and
in so doing understand what must be done to assure that the
good intentions of Dr. Zerhouni are actually carried out.
The Chair welcomes these witnesses and looks forward to
their testimony and recognizes the gentlelady from Colorado for
an opening statement.
Ms. DeGette. Mr. Chairman, I would ask unanimous consent
that Mr. Waxman be recognized out of order. He has an
obligation on the Senate side.
Mr. Greenwood. Without objection, Mr. Waxman is recognized
for an opening statement.
Mr. Waxman. Thank you very much.
Mr. Greenwood. Try to keep it as brief as mine was.
Mr. Waxman. If I did, Mr. Chairman, I would forget about my
obligation on the Senate side completely. I thank both of you
for allowing me to make this statement. Last week the
subcommittee held its first hearing on revelations that dozens
of NIH scientists had accepted large consulting fees from drug
companies. Not only were NIH officials accepting money from
companies where interest might have been in conflict, but many
of these arrangements were being kept secret from the public.
NIH has a long and proud tradition of scientific
independence and integrity. Because NIH is the source of some
of our Nation's most important biomedical research, it is
essential that America and the world continue to feel confident
that NIH's grant decisions and research results are not biased
in any way.
Today we will hear from the Government agencies and others
directly responsible for enforcing department and Government-
wide conflict of interest rules. I am deeply troubled that
these groups in whom we have placed responsibility for ensuring
the highest ethical conduct from public servants are the very
people who sanctioned the loose ethical rules that resulted in
the questionable financial relationships we have uncovered.
This subcommittee's investigation has revealed a series of
actions by the Office of Government Ethics and by HHS ethics
advisors that seem designed not to protect against conflicts of
interest but to ease the way for such conflicts. It was the
Office of Government Ethics which advised Dr. Varmus in 1995
that NIH was free to life existing caps on the amounts that NIH
scientists could receive from drug companies. As a result of
that advice, there is no limit on the amount of money NIH
scientists can accept from drug companies.
It was the Office of Government Ethics that drafted the
legal opinion concluding that scientists hired under Title 42,
including those in senior positions, could not be required to
publicly disclose their financial dealings with drug companies.
It was HHS ethics advisors who signed off on the huge
consulting fees paid to high-ranking NIH officials that
triggered this investigation in the first place.
These decisions are the opposite of what people have the
right to expect from our Government ethics officials.
Unfortunately these decisions appear to be part of the dubious
pattern of covering up conflicts of interest rather than trying
to avoid them. This is a pattern also reflected in HHS' highly
questionable decision to permit Tom Scully, the head of CMS, to
continue to negotiate the Medicare drug benefit legislation
while at the same time looking for a new job with the very
interest most affected by that legislation.
I want to close on a positive note. Last week I expressed
in my statement in the record a particular concern that under
the Blue Ribbon Panel's proposal some NIH scientists would
still have no obligation to disclose financial relationships
with drug companies. NIH testified that despite the agency's
own desire for a full disclosure, it had been advised by
Federal ethics officials that full disclosure could not be
required.
This week I have learned that Dr. Zerhouni has decided to
seek new rules to require public disclosure of potential
conflicts of interest for all NIH employees. I applaud Dr.
Zerhouni for his insistence on full disclosure. Only with full
disclosure can we continue to ensure public confidence in the
work of NIH. I hope that we hear from today's witnesses that
they will not throw up any barriers to Dr. Zerhouni's very
appropriate decision. Thank you, Mr. Chairman.
Mr. Greenwood. The Chair thanks the gentleman and ask
unanimous consent to enter into the record a letter dated May
17 to Ms. Dara Corrigan, Esq., Acting Principal Deputy
Inspector General at the Department of Health and Human
Services. This is a bipartisan letter signed by Chairman
Barton, ranking member Dingell and myself and the ranking
member of this subcommittee Mr. Deutsch asking for a review of
the Petricoin case mentioned in my opening statement. Without
objection it will be entered into the record.
The Chair recognizes and welcomes the chairman of the full
committee for his opening statement, Mr. Barton.
Chairman Barton. Thank you, Mr. Chairman. This is a very
important hearing. I am glad to be a part of it and I
appreciate you holding it.
As I said last week, this committee will get the
information that it needs to do its oversight. Last week
because of the failure of the HHS Department and NIH to produce
certain information that this committee had requested on
consulting agreements we had to announce that we would seek it
from the drug companies.
I am pleased to learn that immediately after our hearing
last week the NIH director suddenly discovered the ability to
get that information. This committee is now getting the
information and we will continue to do so. Let us hope that HHS
and NIH have learned that it is absolutely pointless not to
provide information and force this committee to force them to
cooperate, as I said last week, coercively.
This hearing today will show that the committee is doing
more than getting information. We are starting to achieve
positive changes in NIH ethics policy both for consulting and
for awards. For example, because of the committee's
investigation HHS has ordered all of its agencies, including
the NIH, to collect an amount of information as part of the
approval process for outside activities.
Because of this committee's investigation, the Office of
Government ethics is now providing additional guidance on the
issue of awards. Finally, the committee has already played a
role in spurring efforts by HHS and the Office of Government
Ethics to expand the number of NIH employees that will be
covered by public financial disclosure requirements. Much more
needs to be done, quite frankly, but the committee has played
an important role in getting the process moving.
We are also exposing abuses and questionable practices.
This subcommittee will examine a remarkable case today in which
the NIH and FDA scientists who were collaborating with a
private company on a joint invention under a public/private
partnership which we call a CRDA were secretly consulting with
their private partners competitor.
Incredibly the FDA scientist who worked at the FDA Center
for Biologics was allowed to consult with this competitor which
was about technology company. Such consultations are prohibited
under the stricter supplemental regulations that apply to the
FDA but did not apply to NIH. As a result of these secret
deals, progress appears to have slowed on a public/private
partnership that could lead to prompt commercialization of a
lifesaving ovarian cancer diagnostic test. Public trust has
been damaged.
In another astonishing case that we will go into today, a
permissive HHS policy allowed an NIH director to collect cash
gift awards for major grantees under very questionable
circumstances. In 1997 Richard Clausner, who was then the NCI
director, appeared to be personally involved in approving a
$300,000 payment from the Government to settle a lawsuit filed
against both U.S. Government and the grantee with great
financial benefit to the grantee.
The grantee almost at the same time offered Dr. Clausner a
$40,000 cash prize. Yet, the official for overseeing the HHS
ethics program did not even address the appearance issue and
disregarded advice from the Office of Government Ethics.
Instead, this official wrote a legal interpretation that would
allow Dr. Clausner to accept the prize.
It will be a hallmark of my chairmanship, at least I hope
it will be, that we are going to hold agencies responsible for
their actions and produce better results in Government ethics
and better services and better policies for the American
people. That is the purpose of oversight. We will continue to
look at NIH. We will also focus our efforts on the FDA.
I want to congratulate Chairman Greenwood for his work on
this investigation. I want to thank the ranking members on the
minority side for their participation and the staffs on both
sides. We are doing this on a bipartisan basis and we are
beginning to see results. I look forward to having a productive
hearing today, Mr. Chairman. I yield back the balance of my
time.
Mr. Greenwood. Thank you, Mr. Chairman. The Chair
recognizes the gentlelady from Colorado, Ms. DeGette, for an
opening statement.
Ms. DeGette. Thank you, Mr. Chairman. Before I make my
opening statement, I would ask unanimous consent that Mr.
Dingell's opening statement and the rest of the opening
statements of the committee be made part of the record.
Mr. Greenwood. Without objection.
Ms. DeGette. Thank you for holding this hearing, Mr.
Chairman. I found the hearing last week to be very illuminating
and I think this issue is so important and has such
ramifications for the integrity of medical research and public
health. I am glad that you are having a series of indepth
hearings on this issue.
I want to begin by reiterating the statement that I
strongly expressed at the last hearing which is I have grave
concerns about the Blue Ribbon Panel recommendations. I
believe, Mr. Chairman, that we need to consider not only full
disclosure and limits on outside compensation, but also even a
blanket restriction on outside compensation because of the
serious conflicts of interest and the appearance of conflicts
of interest.
At least week's hearing we heard the same argument being
made over and over by the witnesses. That view is that allowing
lucrative contracting agreements between NIH scientists and
outside companies in addition to allowing the acceptance of
awards that come with a hefty amount of cash attached to them,
to name two examples, are key to recruiting and retaining
quality scientists and researchers.
Now, a fact that everybody knows but no one really talked
about too much is that the current rules did not always exist.
The caps on outside compensation were lifted in the mid-1990's,
something I think Dr. Varmus will talk to us about.
Up to that point there were monetary restrictions on what
these Federal employees could receive from outside groups, for
example, and there was certainly more public disclosure in this
regard. I think what we really need is more information about
the situation at NIH before the restrictions were done away
with. Did the NIH have serious problems with recruiting and
retaining high-level talent? Was the NIH a lower quality
institute before 1995 due to this problem? If so, was the
problem because of the outside compensation?
If that is the case, I would like to get some factual
evidence to support this because it has been repeatedly given
as the reason that this is so important to the integrity of the
NIH. We also need to see if limitations on outside compensation
and awards, as well as disclosure, will go far enough to
prevent the kinds of conflicts that the Chairman himself
highlighted in his opening statement.
One of the things that has been reported on, and was also
include in the Blue Ribbon Panel Report, is that many employees
including senior level scientists at the NIH are increasing
demoralized by the scrutiny and criticism that this issue has
cost lately.
In addition, it has been alleged that the confusing nature
of the current roles is also confusing and dispiriting to
staff. I think this is really too bad because these staff
members are simply trying to wade through the rules and do what
the rules allow them to do. However, I think that there is an
implication in the report that somehow it is the media and
congressional examination that is the problem rather than the
issue itself.
It is not the fault of the scientists that they are under a
cloud of suspicion as it is characterized in the report but it
is the system that has created this situation. There has also
been a lot of talk about perceptions of conflicts of interest
and how it has been a morale problem at the NIH. The fact of
the matter is there are serious conflicts of interest issues.
We heard this last week. We are going to hear it again today.
Those conflicts of interest must be scrutinized for everyone's
sake including, and perhaps most importantly, the NIH
scientists that they apply to.
The resolution of this problem, which means completely
cleaning up what is currently happening, is to preserve the
reputation of the NIH and the integrity of everybody who works
there.
Now, there is one solution that from our perspective would
be really simple. If we completely banned outside compensation
there would be a bright line and the confusion would disappear.
In the absence of persuasive evidence that this policy would
seriously hamper the science, I believe we should seriously
consider this option.
I also want to say one thing that won't help the situation
is if we keep layering onto the current system and revamp it in
a way that causes even more confusion, especially for the
scientist, and making changes that will surely allow for future
transgressions will not help either.
For example, if as proposed by the Blue Ribbon Panel
certain restrictions on consulting fees are instituted for
certain employees but there is no change as to regulations
regarding receipt of bona fide cash awards, then surely what we
will see, and we see this with campaign finance reform all the
time, is a shift to more and larger cash awards in other places
like for prizes. The money influx won't change. It will just
shift around and it will be very confusing for all involved.
I think what we need to do is try to get a grip on this and
we need to challenge all of our assumptions including the
assumptions that we simply can't get good people without these
large amounts of outside compensation. I think that is the nub
of the issue and I really look forward to hearing all of our
witness' view on this.
Again, Mr. Chairman, thank you for holding this hearing and
I look forward to hearing the testimony.
Mr. Greenwood. Thank the gentlelady. I recognize the
gentleman from New Jersey, Mr. Ferguson.
Mr. Ferguson. Thank you, Mr. Chairman. Thank you for
holding this hearing and for your diligence in pursuing this
investigation of possible conflicts of interest at NIH.
NIH provides our country and the world with world-class
research done by the best scientists and doctors our country
and the world has to offer. Although it is important that NIH
attract and retain the best and the brightest in the fields of
medical research, we must be assured that the professionals at
NIH are conducting themselves according to the highest
standards.
Last week we heard from Dr. Zerhouni and the members of the
Blue Ribbon Panel about the recommendations to establish
policies against conflicts of interest. I look forward to
hearing from today's witnesses concerning two examples where
the line may have been crossed and the best interest of
medicine may have been compromised. This committee and Congress
must do all that it can to ensure that NIH maintain a spotless
reputation free from any question as to the mission and goals
of the professionals at NIH.
Just before I close, I just had a group of advocates for
ALS research in my office. They are fanning out across Capitol
Hill today and making a very persuasive argument for increased
NIH funding for ALS research. Clearly it is something that
needs to be done and we in the Congress want to advocate for
that.
But whether it is the hearings we had some months ago
about, frankly, scientifically dubious grants that are awarded
sometimes by NIH, frankly, sometimes morally objectionable
grants that are sometimes made by NIH, or whether it is a
conflict of interest issues that we are dealing with now, it is
extremely important that NIH maintain its stellar reputation
and its spotless reputation for doing research and for
conducting itself with the highest standards possible.
People's lives depend on it. The lives of our children, our
grandchildren, and their grandchildren depend on the research
that you do. The only way you are going to be able to continue
to do that important research is to keep folks like us out of
your hair. We can only stay out of your hair if we know for
certain that you are doing your job in a way that we don't need
to be getting involved in your business.
That is one of the reasons I feel so strongly about these
hearings and one of the reasons I appreciate the Chairman and
the ranking member of the full committee and the subcommittee
for encouraging this investigation.
We are big fans, I anyway am, and I know we all are fans of
NIH and the research and the important work that NIH does. That
is why it is so important for NIH to maintain its reputation
for integrity. Thank you, Mr. Chairman. I yield back.
Mr. Greenwood. The Chair thanks the gentleman and
recognizes the gentleman from Florida, Mr. Stearns, for an
opening statement.
Mr. Stearns. Good morning and thank you, Mr. Chairman.
Obviously this is a very important hearing and I appreciate
your calling it. I think last week we sort of looked at this
from a helicopter and I guess we could say we are looking at it
this morning perhaps on the ground. We are trying to understand
some of the details about this.
We talk about the field of science being one inherently
cooperative and collaborative. Scientists and physicians and
researchers need to share and study alongside one another. I
think we all understand that. Of course, we saw in the 1980's
and 1990's and that we were losing good researchers to the
private sector. For the Federal Government obviously to compete
for these scientists we provided some financial incentive so
Congress took the step to try and create some competition and
allow us to keep these scientists.
Perhaps, as we see today, Mr. Chairman, the pendulum has
swung too far. We hear different exploits about arrangements
between NIH and high-level researchers and industry. I am
concerned about perhaps some of the smaller universities or the
mid-level universities not getting an opportunity to
participate in NIH grants because they can't get their foot in
the door because of the ties of maybe these prestigious
universities or scientists are not directing or not allowing
some of these mid-level or small colleges to get involved with
some of the grants.
All this calls into question what can we do here in
Congress. Can we allow this continuing incentive for scientists
to remain in place? At the same time, obviously, like my
colleague from New Jersey, we have supported increased funding
for NIH and we think it is important in the long run to get
this ground breaking detection on ovarian cancer. I think all
of us are a little disturbed about this and that is why I think
this hearing will get to the bottom of it and will bring out
some good examples of things it will show us that we probably
need some action. Thank you, Mr. Chairman.
Mr. Greenwood. The Chair thanks the gentleman.
[Additional statements submitted for the record follow:]
Prepared Statement of Hon. Michael Bilirakis, a Representative in
Congress from the State of Florida
Thank you, Mr. Chairman. I appreciate all the work that you and
your staff have done to examine these two specific cases of
consultation fees and outside awards before us today. Last week's
hearing focused on what the NIH is doing to create greater oversight of
this important matter, and I think that we can all agree that Dr.
Zerhouni's creation of the Blue Ribbon Panel is a step in the right
direction. However, I don't know that it is enough. While I am not
interested in laying blame today, I am glad to having the opportunity
to discuss these two specific cases, and find out how severe this
problem was.
I appreciate both panels of witnesses taking the time to come here
today, even though I'm sure you all will be asked some difficult
questions. I'd like to extend a special thanks to Dr. Harold Varmus,
former Director of NIH, for his testimony today. Dr. Varmus has
testified before my subcommittee several times, and I am anxious to
hear his thoughts.
The ethical concerns being raised today in this hearing are
worrisome to me. However, during this discussion, I also believe it is
critical we remember that the NIH is the world's leader in conducting
important research that will unlock critical information and lead to
discoveries beneficial to patients suffering from many diseases. We
don't want to hinder those efforts. But because of the tradition of
excellence, the NIH is also held up to a certain standard. That
standard should not be tainted by the thought that the research
conducted at NIH is influenced by private companies giving money to
institute directors.
My Subcommittee on Health has held four hearings during the 108th
Congress to highlight research activities at the NIH and educate
Members and others about the work that the NIH is doing so we can
better assess how to help NIH better meet its stated mission. One of
the reasons my Subcommittee has held these hearings is that, while NIH
does exemplary research, their transparency and accountability in the
approval process of investigator-driven grants at the NIH could be
improved. Many times it is difficult for Members of Congress to get a
quick answer about research activities, let alone the general public.
The lack of transparency of the NIH processes could be one of the
reasons that we are holding this hearing today. If there were more
transparency with respect to these consulting fees and awards, such as
making the information public, then maybe there wouldn't be the need
for a high level of concern.
As I said last week, the fact that some NIH officials have received
cash, stock, and stock options from consulting arrangements with drug
or biotechnology companies really gives me pause. While I understand
that there is importance in allowing scientists the opportunity to
pursue their independent work, I have concerns with tying the financial
success of an individual to a particular company's stock. If outside
consultation fees and award grants in any way affect the grant approval
process and the budget priority setting at NIH, then that taints the
entire NIH process, including the research.
I am glad that we have this forum today to speak to officials from
NIH, and hear the comments of other agencies, such as the Food and Drug
Administration (FDA) and Ethics offices. I am curious to hear how the
NIH has managed possible conflicts of interest, and the degree that
they have been effective.
Thank you, Mr. Chairman. I yield back the balance of my time.
______
Prepared Statement of Hon. John D. Dingell, a Representative in
Congress from the State of Michigan
Mr. Chairman, again let me commend you for conducting this
investigation and holding this hearing, as well as the one last week,
into conflicts of interest at the National Institutes of Health (NIH).
The scientists at the NIH campus, and the grantees that use NIH funds
for their biomedical research, are critical to this Nation's fight
against disease. These hearings are being held because several NIH
researchers have decided to supplement their taxpayer-funded salary
with monies provided by drug and biotech companies, firms whose vital
interests are tied to the research performed at the NIH.
Today we will hear from Dr. Harold Varmus, a Nobel laureate and a
former Director of NIH. He was the responsible official in 1995 when
all effective administrative controls were lifted from the consulting
practices of NIH employees and public disclosure was virtually removed
as well. Dr. Varmus has much to account for, as does the current NIH
leadership and the Department of Health and Human Services (HHS)
lawyers who have systematically undermined the application of any
meaningful ethical standards to the consulting arrangements of NIH
employees.
As a direct result of this investigation and one conducted by the
Los Angeles Times, some changes have been made or have been agreed to
by the current Director. This is a good thing, but not nearly enough.
Last week, Dr. Zerhouni and the co-chairs of the so-called Blue Ribbon
Panel testified that, except for the highest level employees and those
administering grants, all other NIH researchers would be free to
continue to serve two masters provided that they received the approval
of something called the NIH Ethics Advisory Council (the NEAC). This
Council was supposed to apply the most rigorous standards to its review
of outside consulting arrangements.
All NIH employees with current outside arrangements with drug or
biotech firms were supposed to suspend those arrangements in February
and reapply to the NEAC. While over half the NIH employees engaged in
these apparent conflicts chose not to reapply, about 120 did. Several
NIH researchers have been approved by NEAC to receive payments from
companies that had agreed to pay them hundreds of thousands of dollars
(one researcher had received almost $2 million from biotech firms in
recent years). This is not acceptable.
Finally, I cannot help but note an even worse case of an ethical
violation approved by the Department. One of the witnesses scheduled to
appear today is an employee not of the NIH, but the Food and Drug
Administration (FDA). He signed a contract to receive thousands of
dollars from a biotech company whose products could be regulated by his
employer, the Center for Biologic Evaluation and Research. This appears
to be in direct conflict with the Supplemental Regulations for FDA that
forbid receipt of monies by any employee from any regulated entity.
Ethics officials at FDA and/or HHS apparently approved this
``outside employment.'' FDA has told the Subcommittee staff that any
approval was an error without precedent elsewhere in that Agency. I
certainly hope that is the case but intend to join with you, Mr.
Chairman, in asking for an expedited review of all outside employment
by FDA employees as well as the HHS and FDA review of the consulting
arrangement that we will discuss today.
Thank you again for holding this hearing, and for the bipartisan
manner in which this entire inquiry has been handled.
Mr. Greenwood. The Chair thanks the witnesses for your
patience for half an hour of opening statements, 15 minutes of
which was mine, I think. We welcome each and every one of you.
Let me introduce our first panel.
Ms. Marilyn L. Glynn is the Acting Director of the U.S.
Office of Government Ethics. Welcome and thanks for being with
us this morning.
Mr. Edgar M. Swindell, Associate General Counsel, Ethics
Division, Department of Health and Human Services. Good
morning, sir.
Dr. Raynard S. Kington, Deputy Director of the National
Institutes of Health. Good morning, sir. Thank you for joining
us.
Mr. Jack Maskell is with the American Law Division of the
Congressional Research Service. Thank you for your service.
And, finally, Dr. Harold Varmus, M.D., Former Director of
the National Institutes of Health and is currently the
President and Chief Executive Officer of the Memorial Sloan-
Kettering Cancer Center in New York. Good morning, sir. Welcome
to all of you.
It is the custom and practice of this committee to take
testimony under oath so I would begin by asking if any of you
object to giving your testimony under oath. Seeing no
objection, it is then my responsibility to inform you that you
are entitled to be represented by counsel if you wish. Do any
of you choose to be represented by counsel this morning? Okay.
In that case, if you would rise and raise your right hands, I
will give you the oath.
[Witnesses sworn.]
Mr. Greenwood. You are under oath. Ms. Glynn, we will begin
with you and you are recognized for 5 minutes for your opening
statement.
TESTIMONY OF MARILYN L. GLYNN, ACTING DIRECTOR, U.S. OFFICE OF
GOVERNMENT ETHICS; EDGAR M. SWINDELL, ASSOCIATE GENERAL
COUNSEL, ETHICS DIVISION, DEPARTMENT OF HEALTH AND HUMAN
SERVICES; RAYNARD S. KINGTON, DEPUTY DIRECTOR, NATIONAL
INSTITUTES OF HEALTH; JACK MASKELL, AMERICAN LAW DIVISION,
CONGRESSIONAL RESEARCH SERVICE; HAROLD VARMUS, FORMER DIRECTOR,
NIH, PRESIDENT AND CHIEF EXECUTIVE OFFICER, MEMORIAL SLOAN-
KETTERING CANCER CENTER
Ms. Glynn. Thank you for the opportunity to appear today to
discuss executive branch ethics rules relating to consulting
activities and awards. Mr. Chairman, you asked that I
particularly address these issues, consulting and awards, as
they pertain to the situation at NIH.
By way of brief background, let me explain that my office,
the Office of Government Ethics, or OGE as it is called, is the
executive branch agency responsible for directing policies
relating to the prevention of conflicts of interest on the part
of executive branch employees.
Of particular relevance to the issue before the
subcommittee today are OGE's standards of conduct regulations.
Pursuant to an Executive Order issued by the first President
Bush, these standards of conduct are intended to be a uniform
set of ethics rules for the entire executive branch. However,
agencies may add special provisions to address any agency
specific needs. My office must approve these so-called
supplemental agency regulations.
First I would like to say a few things about the awards
issue. The OGE standards of conduct contain a provision
authorizing employees to accept certain bona fide awards for
meritorious public service or public achievement. This awards
rule is an exception to the usual prohibition of acceptance of
gifts from prohibited sources or gifts given because of your
official position.
There are two key questions about this rule that have a
bearing on the issues you are examining today. First, what are
the permissible sources of these awards, particularly where the
award recipient is the head of an agency or the head of an
office or a large component in an agency. And, second, how do
you distinguish between real awards and mere speaker's fees.
In my written statement I have set out in some detail how
OGE would analyze both of these questions and I would be happy
to answer any questions you might have about those tests we set
out.
The second issue you asked me to speak about concerns rules
governing outside activities such as consulting for
compensation. The rules are designed to be reasonably flexible
and they reflect a balance between the rights of employees to
have a life outside of work with the need for the Government to
demand the highest ethical standards from its employees.
Generally speaking, the rules permit compensated consulting
unless the activity would require recusal from matters center
or critical to the employee's position, or if the activity
would violate a particular statute or regulation such as the
OGE rules prohibiting the use of public office for private
gain.
There are essentially two approaches that an agency can
take to implement this rule. First, an agency can review
outside activities of each individual employee on a case-by-
case basis in light of the general standards found in the OGE
rules. Or an agency can seek approval from OGE to issue a so-
called supplemental regulation restricting certain specific
outside activities for all employees at that agency or certain
groups of employees.
Since 1995 NIH has followed the case-by-case approach.
However, though, recent accounts in the media and elsewhere
about NIH consulting activities raise concerns about the nature
and extent of consulting arrangements that have been approved
under the case-by-case approach. I think it becomes clear that
either the system for reviewing the proposed activities on this
case-by-case approach should be strengthened by NIH or NIH
should develop specific supplemental regulations tailored to
the circumstances of NIH.
We have received the report of the Blue Ribbon Panel on
conflicts of interest policies and note that it recommends the
adoption of some additional restrictions. OGE is ready to help
NIH and its parent, HHS, implement whatever restrictions they
think would be necessary to ensure public confidence in the
important work of NIH.
My written statement provides further details concerning
these rules relating to outside activities and I would be happy
to answer any questions you may have.
[The prepared statement of Marilyn L. Glynn follows:]
Prepared Statement of Marilyn L. Glynn, Acting Director, Office of
Government Ethics
Mr. Chairman and members of the subcommittee: Thank you for the
opportunity to appear today to discuss Executive Branch ethics rules
pertaining to consulting activities and awards from outside sources.
Mr. Chairman, you asked in particular that I address issues that have
arisen at the National Institutes of Health with respect to employees'
consulting activities and outside awards. I will discuss these subjects
and provide OGE's views on the general legal questions. Before
discussing these specific topics, I want to provide the Subcommittee
with background information about OGE and its role in the Executive
Branch ethics program.
THE EXECUTIVE BRANCH ETHICS PROGRAM AND OGE'S ROLE
Established by the Ethics in Government Act of 1978, OGE is the
executive branch agency responsible for directing policies relating to
the prevention of conflicts of interest on the part of Federal
executive branch officers and employees. OGE develops rules relating to
ethics and conflicts of interests, establishes the framework for the
public and confidential financial disclosure systems, develops training
and education programs for use by executive branch ethics officials and
employees, and supports and reviews individual agency ethics programs
to ensure they are functioning properly.
As the supervising ethics office of the executive branch, OGE has
developed and issued various executive branch-wide regulations in Title
5 of the Code of Federal Regulations, including the Standards of
Ethical Conduct for Employees of the Executive Branch (Part 2635),
rules that implement the financial reporting requirements in the Ethics
in Government Act (Part 2634), and rules that implement criminal
conflict of interest laws (Parts 2635, 2637, 2640 and 2641). Pursuant
to the Ethics in Government Act and Executive Order 12674 (as modified
by E.O. 12731), regulations interpreting the provisions of sections
207, 208, and 209 may be promulgated only with the concurrence of the
Attorney General, while regulations establishing a single set of
executive branch standards of conduct and a system of nonpublic
financial disclosure are promulgated in consultation with the Attorney
General and the Office of Personnel Management.''
Many of the rules bearing on the issues of concern to the
Subcommittee today are found in OGE's Standards of Ethical Conduct. OGE
issued these rules originally in 1992, pursuant to the order of the
first President Bush to ``establish a single, comprehensive and clear
set of executive-branch standards of conduct that shall be objective,
reasonable, and enforceable.'' E.O. 12674, 201(a). In keeping with
the President's goal of promoting uniformity in the application of
ethics requirements across the executive branch, the OGE standards were
to supercede any agency-specific standards, unless an agency sought and
obtained approval from OGE to issue supplemental regulations ``of
special applicability to the particular functions and activities of
that agency.'' Id. at 301(a).
While OGE provides direction and overall leadership to the
executive branch ethics program, the head of each agency has primary
responsibility for the ethics program at his agency. Each agency head
appoints a Designated Agency Ethics Official (DAEO) to manage the
ethics program and act as a liaison to OGE. The DAEO and his staff
ensure that the required ethics program elements are accomplished.
Basic elements and responsibilities of an agency ethics program include
effective collection and review of financial disclosure reports; ethics
training that meets the requirements of OGE's training regulations; an
employee counseling program; and prompt and effective action for
violations of the ethics rules. With respect to the issues of concern
to the Subcommittee today, I would note that the duties of agency
officials also include the approval of certain kinds of outside awards
and the review and approval of certain outside activities.
OGE provides training and guidance to agency ethics officials in
numerous ways. Among other things, OGE: publishes advisory opinions and
issues memoranda to ethics officials; conducts periodic national and
regional training courses; communicates regularly with ethics officials
through an electronic list service; provides consultative services to
agency officials through the OGE desk officer system and through
telephonic and written advice from OGE legal staff.
OGE also monitors and evaluates the executive branch ethics program
through periodic reviews of the ethics programs at each agency. The
purpose of these reviews is to ensure that agencies have developed
effective ethics systems and procedures, in compliance with OGE
regulations, to prevent conflicts of interest and other violations of
ethics laws and regulations. Typically, the focus of these reviews is
on agency systems, rather than instances of misconduct by individual
employees. Individual misconduct by employees is investigated by the
Office of Inspector General responsible for each agency.
AWARDS
OGE understands that the Committee has two primary questions about
the receipt of outside awards by employees. The first question pertains
to the permissible sources of such awards, and the second question
pertains to the distinction between an award and an honorarium for
giving a lecture. In order to address these questions, it is first
necessary to set out the purpose and requirements of OGE's awards rule.
The awards rule, 5 C.F.R. 2635.204(d), is actually an exception
to certain statutory and regulatory gift prohibitions. See 5 U.S.C.
7353; 5 C.F.R. part 2635, subpart B. Generally, employees are
prohibited from receiving gifts from certain prohibited sources and
gifts given because of an employee's official position. Prohibited
sources include any person who: (1) is seeking official action by the
employee's agency; (2) does business or seeks to do business with the
employee's agency; (3) conducts activities regulated by the employee's
agency; (4) has interests that may be substantially affected by
performance or nonperformance of the employee's official duties; or (5)
is an organization a majority of whose members are such persons. 5
C.F.R. 2635.203(d).
The awards rule provides an exception to these gift prohibitions
where the gift is a ``a bona fide award or incident to a bona fide
award that is given for meritorious public service or achievement.'' An
important limitation on the exception is that the donor must not be a
particular type of ``prohibited source,'' i.e., a person who has
interests that may be substantially affected by the employee's duties
(or an association or organization in which the majority of members
have such interests). Moreover, if the gift has an aggregate value in
excess of $200 or is in the nature of cash or an investment interest,
an agency ethics official must make a prior written determination that
the award is part of an ``established program of recognition'' that
meets additional criteria specified in the rule.
1. The source limitation
One question that has been raised is whether the head of an office,
such as the Director of one of the Institutes at NIH, may receive an
award from an entity that has grants, contracts or other business with
the same office. In other words, is someone doing business with a
particular office always going to be a person who has interests that
may be substantially affected by the duties of the head of that office,
even if the head of the office has delegated the relevant functions to
subordinates and does not currently have any personal involvement in
matters affecting that source?
OGE has not issued written guidance on this question. One possible
reading of the regulation might be that the head of an office ``may''
have duties that could affect any person doing business with that
office. The theory would be that the head of the office has authority
over every matter pending in his office and therefore has the power,
whether exercised or not in any given instance, to intervene in any
such matter. Regardless of any delegations or other attenuating
circumstances, the office head always ``may'' still perform the duties
that would affect the source.
While this may be a reasonable interpretation, OGE declines to
adopt such a broad reading. For one thing, we think it important that
the source limitation uses terms such as ``performance'' and
``duties,'' which suggests that some actual involvement by the employee
must at least be reasonably foreseeable. Other ethics provisions
expressly cover matters that are merely under an employee's ``official
responsibility,'' and we could have used such language in the awards
rule, but did not. See, e.g., 5 C.F.R. 2637.202(b)(2)(all matters
pending in agency are under official responsibility of agency head).
Moreover, since the awards rule intentionally carves out only a
particularly problematic subset of prohibited sources, it would be
somewhat peculiar to say that the agency head and other senior
management essentially may never receive an award from anyone involved
with the agency; again, we have drafted other rules that expressly
apply special provisions to agency heads and other senior officials,
but that was not the course chosen in the awards rule. See, e.g., 5
C.F.R. 2635.102(b)(conduct of agency head);
2635.807(a)(2)(i)(E)(3)(activities of high level political appointees).
Perhaps most important, we think the broad interpretation would
lead to unreasonable results. Under this interpretation, virtually
every person doing business with an office would be an impermissible
award source for the office head, regardless of the size of the office
or the nature or importance of the business. For example, a relatively
autonomous component of a very large agency might make a significant
number of modest grants to various associations, universities, and
other nonprofits to fund meetings or other informational events on a
wide range of noncontroversial topics, with such grants being handled
routinely by employees several levels below the agency head and without
any foreseeable intervention by higher level officials. Under these
circumstances, we do not believe it would make sense to say that an
association whose sole connection to the agency is one of these lower
level grants would be an impermissible source for an otherwise
legitimate award to the agency head. The broad interpretation of the
source limitation could produce even more extreme results. For example,
a component of an agency may procure paper products from a supplier;
even though the head of the agency may have the legal authority to
participate in this purchase, there is very little likelihood that the
agency head would become involved in such matters, and it would seem
unreasonable to say that the paper supplier would be an impermissible
source for an award.
At the same time, however, we do not believe it is necessary or
desirable to limit the reach of the source restriction to those
situations where the donor currently has matters before the head of an
office personally. Nor do we think the restriction can be avoided
merely because the head of an office usually or normally leaves such
matters to subordinates. In our view, the word ``may'' in the source
limitation does not mean that it must be ``more likely than not'' that
the office head will intervene in a matter substantially affecting the
source. If there is at least a reasonable prospect that the office head
may become involved in a matter, we do not believe that a donor who
could be substantially affected by such involvement should be allowed
to grant an award, possibly with the hope of building good will with
the office head in the event that his intervention may be needed or
desired.
The approach we would follow, therefore, is one of reasonableness:
is it reasonable to assume that the office head may become involved in
a matter substantially affecting the interests of the donor, or is the
chance of such intervention simply a remote and speculative
possibility? To assist agency ethics officials in making such
determinations, we have identified several factors they should
consider, in light of the totality of the circumstances:
How have such matters been handled historically by the office? For
example, is there precedent for the office head becoming
involved in matters of this type and/or matters involving this
particular donor in the past?
Are matters of this type typically handled at a level far below the
office head, or are they handled at an intermediate level
somewhat closer to the agency head?
How large is the office for which the employee is responsible?
Is there a multitude of similar matters pending somewhere in the
office at any given time, such that the matter affecting the
donor may be less likely to have any particular prominence?
How important or sensitive is the matter? For example, does the
matter involve a significant dollar amount or is there any
particular controversy or novelty? On the other hand, is the
matter relatively routine and one that does not call for the
exercise of significant discretion?
Is the office head typically apprised of such pending matters and any
attendant issues, for example, through status reports that
identify the affected source?
Can it be said that the donor is a regular ``constituent'' or
``stakeholder'' with respect to the programs and operations of
the office? For example, does the particular donor have a
number of matters pending in the office or does the donor
regularly seek business or official action from the office?
The foregoing list of factors is not intended to be exhaustive, and
ethics officials should consider any information indicating that it is
more or less foreseeable that an office head would be in a position to
exercise duties substantially affecting a particular donor.
Finally, OGE wants to emphasize that the awards exception is
subject to the same general limits as all the other gift exceptions in
the OGE standards of ethical conduct. Among those limitations is the
caveat that employees may not ``[a]ccept gifts from the same or
different sources on a basis so frequent that a reasonable person would
be led to believe the employee is using his public office for private
gain.'' 5 C.F.R. 2635.202(c)(3). Although it is not feasible to
specify a bright line test for frequency of awards, we do think that
ethics officials should be cautious where high level employees have a
history of accepting awards of significant monetary value, as such
circumstances can increase the risk that an official may appear to be
using public office for private gain.
2. Awards vs. compensation for services
A second issue pertains to the relationship between the awards
exception and other ethical limitations concerning the receipt of
earned income and compensation. In particular, questions have been
raised about whether certain ``lectureships'' or ``lecture awards'' are
permissible awards, or more appropriately should be treated as outside
earned income or compensation for speaking. In certain instances, there
have been concerns that impermissible outside earned income or
compensation for speaking related to the employee's official duties may
have been misidentified as permissible awards. OGE shares these
concerns and recognizes that agency officials must exercise judgment to
distinguish true awards from what are essentially speaking fees.
Quite apart from the rules pertaining to awards and other gifts,
there are ethical restrictions that focus on the receipt of earned
income or compensation in certain situations. Certain Presidential
appointees are prohibited from receiving ``any earned income for any
outside employment or activity performed during'' their Presidential
appointment. Executive Order 12731, 102. Similarly, a provision in
the Ethics in Government Act limits the annual amount of outside earned
income that certain high level political appointees, such as noncareer
members of the Senior Executive Service, may receive to 15 percent of
the annual rate of basic pay for level II of the Executive Schedule.
For these purposes, earned income generally means ``compensation for
services.'' 5 C.F.R. 2636.303(b). This includes compensation for an
employee's services as a speaker, such as ``honoraria.'' Id. Earned
income does not, however, include items that may be accepted from a
prohibited source under the gift rules in the Standards of Ethical
Conduct. 2636.303(b)(1).
There is another restriction that focuses specifically on
compensation for speaking. Under 5 C.F.R. 2635.807(a), all
employees--not just Presidential appointees or other noncareer
personnel--are prohibited from accepting compensation for speaking that
is related to their official duties. Like the restrictions on earned
income discussed above, section 2635.807(a) covers payments for an
individual's activities or services, specifically ``any form of
consideration, remuneration or income . . . given for or in connection
with the employee's teaching, speaking or writing activities.''
2635.807(a)(2)(iii). Similar to the definition of earned income, the
definition of ``compensation'' in section 2635.807(a)(2)(iii)(A) does
not include ``items that could be accepted from a prohibited source
under Subpart B'' of the Standards of Ethical Conduct.
It should be apparent from this discussion that the rules governing
awards and the rules governing compensation or earned income serve
different purposes and have different requirements. On the one hand, a
bona fide award for meritorious public service or achievement is a
gift, which may be received notwithstanding the gift prohibitions,
under certain circumstances. Payments for speaking activities, on the
other hand, are not considered gifts but compensation for a service or
activity, and the permissibility of such compensation is judged by
different standards than those governing the receipt of gifts. The
exclusion of certain gifts governed by Subpart B of the Standards of
Ethical Conduct from the definitions of earned income and compensation
underscores the distinct treatment of gifts and compensation or earned
income.
Nevertheless, OGE recognizes that it may not always be immediately
apparent to employees and agency officials whether a particular offer
from an outside source should be viewed as a gift subject to the awards
exception or as compensation for a speaking activity. This is
especially true where an employee is offered something of value in
connection with a ``lectureship'' or ``lecture award'' sponsored by an
outside organization. In some instances, it may not be clear whether
the real intent of the payment is to honor the employee for meritorious
public service or achievement, or to compensate the employee for
providing a speech on a subject of interest to the sponsor or the
intended audience.
The question is further complicated by the fact that even clearly
bona fide awards programs sometimes involve the recipient giving a
substantive speech, i.e., not merely a brief ``thank you'' or
acceptance remarks. For example, recipients of the Nobel Prize for
Medicine--which is cited specifically in the OGE rule as an example of
a bona fide award--deliver a ``Nobel Lecture'' which can be of
significant duration and scientific content. E.g., www.nobel.se/
medicine/laureates/2002/horvitz-lecture.html (one of three co-
recipients in 2002 delivered 51 minute lecture, complete with data and
graphs). Plainly, the delivery of a speech by an award winner is not,
in and of itself, enough to convert an award into earned income or
compensation for speaking, for purposes of the ethical restrictions
discussed above.
By the same token, invitations to engage in speaking activities
often are motivated by the speaker's past accomplishments. The fact
that the sponsor of a lectureship extends an offer of compensation
based on the prospective speaker's curriculum vitae does not, in and of
itself, mean that the lectureship is an award as opposed to a
compensated speaking engagement. Even if the lectureship itself carries
a certain prestige within a particular profession or discipline, the
primary intent of the sponsor still may be to obtain the services of a
well-qualified speaker for an event.
OGE has not had occasion to issue written guidance on this
question, but we believe that the appropriate approach to such
questions is to determine whether the primary purpose of the
arrangement is to honor the employee for meritorious public service or
achievement, or to compensate the employee for services as a speaker.
In a somewhat analogous area of federal income taxation, we note that
authorities have focused on whether an award is ``intended primarily to
provide gratuitous honorific recognition of achievement'' or instead is
``primarily compensatory in nature.'' Rogallo v. United States, 475
F.2d 1, 2, 5 (4th Cir. 1973); see generally Kogan, The Taxation of
Prizes and Awards: Tax Policy Winners and Losers, 63 Wash. L. Rev. 257
(1988)(historic concern for awards as disguised compensation). Given
the range of award and lecture programs, this analysis inevitably
involves a case-by-case consideration of any factors bearing on the
purpose or intent of the particular program.
OGE has identified several factors that can be relevant to such
determinations. The list that follows is by no means intended to be
exhaustive. Moreover, in many cases, no one factor will be
determinative, and agencies will have to discern the primary purpose of
the program from the totality of the circumstances.
How has the sponsor historically characterized the program? It
would be relevant, for example, if the sponsor's written materials
traditionally have referred to the program as ``an award'' or,
alternatively, as a ``lecture series.''
How is the event promoted by the sponsor? For example, extensive
publicity by the sponsor advertising the speech as the draw for
attendance at an event could indicate that the speaker was invited
primarily to attract an audience for a lecture. Of particular concern
would be publicity by the sponsor in which the event is portrayed as an
opportunity for the audience to receive specialized information or
unique insights from the speaker.
Is it the policy of the sponsor to make the delivery of a speech
a condition of receiving the award? If the award winner has the
discretion to accept the full award but decline to make a speech, then
the arrangement almost certainly would be an award rather than a
compensated speaking activity. As noted above, however, the fact that
an award winner may be expected to make a speech does not necessarily
mean that the award is primarily intended as compensation for speaking.
What is the nature of the expected speech? If the speech consists
of little more than brief acceptance remarks, the award can hardly be
characterized as compensation for speaking. It also may be relevant
whether the anticipated speech would convey new or previously
unpublished information, or focus in significant part on new or ongoing
work of the speaker; this could suggest an intent to compensate the
recipient for the content of the speech rather than to honor the
recipient for past work. On the other hand, a speech merely reviewing
the past work for which the speaker is being honored could well be
consistent with a purpose to honor the recipient gratuitously for past
achievement.
CONSULTING ACTIVITIES
One of the major areas that can give rise to conflict of interest
questions is outside activities. Two basic issues must be addressed
when an employee proposes to engage in an outside activity: whether the
employee may participate in the outside activity at all, and, if so,
what limitations apply to such participation.
a. Conflicting Outside Activities and Appearance Problems
OGE's Standards of Ethical Conduct for Employees of the Executive
Branch prohibit an employee from engaging in an outside activity that
conflicts with his official duties. 5 C.F.R. 2625.802. An outside
activity will conflict with an employee's official duties if it is
prohibited by statute or an agency supplemental regulation, or if the
disqualification required to avoid a conflict of interest is so central
or critical to the performance of the employee's official duties that
his ability to perform his job is materially impaired.
There are two substantive provisions that may require
disqualification or recusal. A criminal statute, 18 U.S.C. 208,
prohibits employees from participating in certain matters affecting
their personal and imputed financial interests. An OGE regulation, 5
C.F.R. 2635.502, provides for employees and agency officials to
consider recusal from matters involving persons with whom the employee
has certain business and personal relationships. When an employee
wishes to participate in an outside activity that will require recusal
under either of these provisions, agency officials must exercise
informed judgment to determine whether the scope of any recusal will
materially impair that employee's ability to do his job. Such
management determinations take into account a variety of factors,
including the nature of the employee's duties, the needs of the office,
and the ability to reassign projects in the office.
Even if an outside activity is not prohibited under this standard,
it may nonetheless violate other principles or standards and therefore
be prohibited. One important standard is that employees may not use
their public office for their own private gain or the private gain of
others with whom they have certain relationships. 5 C.F.R. 2635.702.
Certain outside activities may be prohibited under this standard,
whether or not the activity would require the employee to recuse from
matters that are central or critical to the position. For example, even
if the head of an office reasonably can recuse from a matter affecting
an entity with which he has a consulting arrangement, there still could
be an appearance that the entity is benefiting from the employee's
official position: depending on the circumstances, one might reasonably
question, for instance, whether subordinates involved in the matter
would feel subtle pressure to favor the entity with which their
supervisor has a substantial business relationship. Moreover, some
outside consulting relationships may involve a subject matter that is
so closely related to an employee's official work that the overlap
would give rise to an appearance that the employee took advantage of
his official position to obtain the outside consulting opportunity or
that the employee is providing insights obtained on the job only to
those willing to pay.
The Standards provide that whether ``particular circumstances
create an appearance that the law or these standards have been violated
shall be determined from the perspective of a reasonable person with
knowledge of the relevant facts.'' 5 C.F.R. 2635.101(b)(14). Agencies
are undoubtedly in the best position to determine if an outside
activity is permissible under these Standards generally, and with
respect to appearances in particular. Some things that an agency should
consider in making a decision about whether participation in an outside
activity will create the appearance that an employee is using public
office for private gain are the level of the employee's position and
the nature of his duties; the subject of the outside work and its
relation to agency programs and operations; the identity of the outside
employer and its relationship to the agency, including whether it
receives grants or contracts; and the timing of the offer of
employment.
Although the standards mentioned so far generally require a case-
by-case consideration of the proposed outside activity, the OGE
Standards also permit agencies to promulgate blanket prohibitions on
certain outside activities. These prohibitions, called supplemental
agency regulations, must be approved by OGE, pursuant an Executive
Order requiring OGE concurrence in any departures from or additions to
the uniform standards of conduct applicable to the entire executive
branch. The Department of Health and Human Services, in fact, has
promulgated certain supplemental prohibitions on outside activities. 5
C.F.R. part 5501.
We note that a 1995 OGE review of the NIH ethics program discovered
that NIH had a series of restrictions on outside consulting that were
not promulgated in accordance with the procedures prescribed in the
Executive Order. OGE directed that NIH either remove these restrictions
or propose them for inclusion in the HHS supplemental regulation. At
that time, NIH chose to remove the restrictions and did not propose any
additional outside activity restrictions in the HHS supplemental
regulation. As we understand it, NIH decided to rely on case-by-case
evaluations, under the general standards applicable to all executive
branch employees.
Subsequently, questions have arisen concerning the current NIH
system and the need for more specific restrictions on certain kinds of
outside activities. In this connection, we understand that NIH now is
considering recommendations from the Blue Ribbon Panel on Conflict of
Interest Policies, which panel is a Working Group of the Advisory
Committee to the Director, which was appointed by the Director of NIH.
The Panel report makes numerous recommendations, including proposals
for supplemental regulations governing certain outside activities, such
as consulting. OGE has received a copy of this report and is in the
process of reviewing it. If the Department of Health and Human Services
decides to request amendments to its supplemental regulation, in
response to any recommendations of the Panel, OGE stands ready to
assist the Department and act expeditiously on any request.
b. Limitations When an Outside Activity Is Undertaken
The Standards of Ethical Conduct provide that an employee who is
engaged in an outside activity must comply with all applicable
provisions set forth in the ethics rules and statutes. This includes
rules that prohibit the misuse of official title, authority, resources,
information, and time in connection with outside activities. There are
also important restrictions on representing others before the
Government and serving as an expert witness in matters affecting the
Government. Additionally, certain noncareer employees are subject to
limitations on outside earned income, compensated service on boards of
directors, and involvement with entities providing professional
services of a fiduciary nature.
Particularly relevant in the context of the present inquiry are the
rules that require employees not to participate in certain Government
matters when their own interests, or the interests of certain others,
are affected by such matters. As mentioned above, disqualification or
recusal from certain matters may be required under 18 U.S.C. 208 or 5
C.F.R. 2635.502. The obligation to recuse when necessary and to
ensure that a disqualification is observed always remains the personal
responsibility of the individual employee subject to the
disqualification. An employee should notify his supervisor when he
becomes aware of the need to disqualify himself from certain matters
because of a potential conflict of interest. Once it is determined that
the outside activity is permissible, the employee's supervisor has a
responsibility to facilitate the disqualification by ensuring that the
employee is not assigned to work on matters from which he is
disqualified. Agency ethics officials obviously have an important role
through direct counseling to, and education of, employees and
supervisors to ensure that they understand when a recusal is required
and how to effectively implement a required recusal.
OGE PROGRAM REVIEWS AT NIH
As I stated earlier, OGE conducts systemic reviews of all executive
branch department and agency ethics programs to determine whether
agencies have developed effective ethics systems and procedures, in
compliance with OGE's regulations, to prevent conflicts of interests.
OGE typically has conducted reviews of approximately 35 agencies
annually, with major agencies being reviewed approximately every 5 to 6
years. Agencies are selected for review based on the length of time
since their last review, OGE staff concerns about an agency's program,
and news media reports of ethical concerns.
These reviews generally focus on several ethics program elements,
including the structure and staffing of the ethics program, the
financial disclosure systems, the ethics education and training
program, the advice and counseling services, the outside activity
approval process, ethics systems for advisory committees, acceptance of
travel payments from non-Federal sources under 31 U.S.C. 1353, ethics
staff relations with the Office of Inspector General, and ethics issues
unique to that agency. In large agencies or departments, OGE may look
at how the ethics program is managed in its individual components
rather than the entire agency. The reviews do not typically look at
individual employee cases of conflict. On occasion concerns about an
individual employee will arise in the course of a review, and OGE will
consider the facts giving rise to the concern and make appropriate
recommendations.
Since 1990, OGE has completed three program reviews at NIH. These
prior reviews focused on, among other issues, NIH practices and
policies pertaining to teaching, speaking, writing and other outside
activities. OGE has initiated a 2004 review of the NIH ethics program.
This review is being performed at the Office of the Director, NCI,
NIAID, and the Clinical Center. The focus of the current review is on
the structure and staffing of NIH's ethics program, the public and
confidential financial disclosure systems, the criteria and process for
approving outside activities, and the criteria and process for
approving the acceptance of awards. The review is ongoing.
conclusion
In closing, I would like to emphasize that OGE stands ready to work
with you, the Committee, HHS, and NIH to ensure that the public has the
highest confidence in the important work of all the components at NIH.
I would be happy to answer any questions you may have.
Mr. Greenwood. Thank you very much, Ms. Glynn.
Mr. Swindell.
TESTIMONY OF EDGAR M. SWINDELL
Mr. Swindell. Mr. Chairman and members of the subcommittee,
thank you for inviting me to speak with you today. I also have
a prepared statement that I will submit for the record.
I am the Assistant General Counsel for Ethics at the
Department of Health and Human Services and as such my
principal role is to provide legal advice to the Secretary and
the General Counsel on Government ethics and related issues. In
addition, I serve as the designated agency ethics official for
HHS under the Secretary's direct appointment.
Today I was the primary point of contact with the Office of
Government Ethics and we have a program within HHS that is
decentralized. There are deputy ethics counselors that run
ethics programs within the Department.
Based upon these qualifications I am here today to speak to
the committee. I would first like to emphasize to the committee
that the goal of ensuring public confidence and the integrity
of NIH is one that the Department shares very much with the
committee and a goal which we can work together to accomplish.
As NIH moves forward with the help of the Department to
address areas of concern, the Department values the committee's
informed views. Secretary Thompson has a goal of making HHS the
leading cabinet agency on ethics matters.
However, I understand that concerns have been raised by the
committee about a perceived lack of the responsiveness on the
part of the Department or on the part of the Office of General
Counsel within the Department with particular attention to
information requested by the committee regarding outside
consulting arrangements involving NIH employees.
I would like to assure you that the Department is fully
committed to cooperating with the committee. In response to the
NIH's request to ask employees for information regarding
outside compensation. The Department through OGC has worked
extensively to identify and resolve legal issues that are
relevant to pertaining this information.
When the committee first asked NIH to obtain amounts of
compensation for outside activities, these amounts were
unavailable for those individuals who file a confidential OGE
450 financial disclosure form or who do not file any financial
disclosure form at all. This is because OGE has historically
viewed the form as serving a conflicts of interest purpose
rather than a disclosure purpose. The conflicts analysis for
reviewing potential outside activities has historically focused
Government-wide on the type and source of compensation rather
than the amount.
HHS strove to help NIH find a way to collect the
information and was successful in doing so. This information is
critically important and so I have taken steps consistent with
the privacy act to obtain this data in the future for all
outside activity requests.
HHS advised NIH about the privacy act and its requirement
that collection and maintenance of identifiable information be
for purposes authorized by statutes, regulations, or executive
order. Although the interest of Congress alone would not be a
sufficient legal basis to collect and maintain the information,
an agency interest pursuant to statutes, regulations, or
executive order would be an appropriate basis. Accordingly, the
Department sought to identify such a legal basis.
On January 27, 2004, I issued a directive informing the
DECs, the ethics counselors, that in the context of any agency
evaluation, of any previously approved ongoing outside activity
for continued compliance with existing law, and in order to
request prior approval for any new outside activity employees
would be required to provide both retrospective, if applicable,
and prospective compensation information. Such amounts were to
be noted on the HHS 520 and this allowed NIH to collect
compensation amounts for all ongoing outside activities.
I would note that the form we have been using is from 1982
and we have canvassed other departments and agencies and found
out that of the other cabinet departments about nine of them
don't even have such forms that we have. Then five of them have
forms and they don't ask for this type of amount of information
either. We are going to be working to make sure that our form
is the best possible form for dealing with outside activities
that we have.
HHS explained to the committee staff the potential
difficulties in collecting information pertaining to completed
and closed outside activities. Referencing these discussions in
its February 25 letter to the Department, the committee said,
``The Department is attempting in good faith to assist the
committee.''
In addition, HHS continued to work to develop an
interpretation of the Ethics in Government Act that would
support the collection of information for completed outside
activities. In so doing, we discussed the legitimate and
important need for NIH to collect the information NIH and OGC
felt was important for the agency to collect.
As a result, OGE agreed with us that the Ethics in
Government Act and its implementing regulations providing the
DAEO, and therefore the Agency, with authority to evaluate the
agency's supplemental ethics regulations to determine their
continued adequacy and effectiveness in relation to current
agency responsibilities. This determination supported the
collection of information regarding completed and closed
activities with pharmaceutical and biotechnology companies.
As a result of these efforts, Dr. Zerhouni was able to
write to the committee on March 12, 2004, that ``We consider
this collection [of information] authorized by the Ethics in
Government Act of 1978 and Executive orders mentioned above.''
It is my understanding that NIH decided to manage litigation
risk from NIH employees who might not wish to comply with a
required collection of information by first attempting to
collect the information on a voluntary basis.
However, I understand that Dr. Zerhouni is now going to
instruct all NIH employees who had consulting arrangements
since January 1, 1999 to report the compensation amounts
received pursuant to the consulting as a requirement and
condition of their employment subject to discipline.
The Department has also worked with NIH and the committee
to facilitate an appropriate and timely response to other
aspects of the committee's investigation. The issue of
appropriate ethical oversight is critically important to the
Secretary. In fact, under the Secretary's and the General
Counsel's leadership the ethics division that I head has
undertaken a series of efforts to enhance its functions but
particularly to institute systematic oversight of components
ethics programs, review of financial disclosure forms, and
training to employees.
Our staff has been small. We have a large agency. It has
operated decent programs. We have had little ability to be able
to know what is going on absent situations that come up like
this or the OGE reviews that occur every 4 to 6 years. We are
going to do what we can to make sure that we have internally
the knowledge to know what is going on.
Our staffing will more than double from 11 in my office to
25. This, to my knowledge, will make us the largest single
legal office devoted exclusively to Government ethics outside
of OGE. The steps we are undertaking will enhance the
Department's operations and work on behalf of the public.
Therefore, the Department will continue to cooperate with the
committee as it addresses these important issues. In this
manner working together our two branches of Government can
achieve our collective goal of ensuring public confidence in
agency programs and operations through whatever means that will
best accomplish that objective.
I will be pleased to answer any questions you have.
[The prepared statement of Edgar M. Swindell follows:]
Prepared Statement of Edgar M. Swindell, Associate General Counsel for
Ethics, Office of the General Counsel, U.S. Department of Health and
Human Services
Mr. Chairman, Mr. Deutsch, and members of the subcommittee: Thank
you for inviting me to speak with you today to discuss the ethics
issues relating to the National Institutes of Health (NIH).
The goal of ensuring public confidence in the integrity of NIH is
one that the Department very much shares with the Committee B and a
goal which we can best accomplish together. The Committee's oversight
in this area has been edifying and helpful in identifying areas of
concern. As NIH moves forward, with the help of the Department, to
address those concerns, the Department values the Committee's informed
views and welcomes the Committee's suggestions regarding steps that can
be taken to ensure that the tremendous trust that the Congress and the
public place in NIH is as unquestioned as the vast contributions NIH
has made towards advancing the nation's health and the promise it holds
to continue doing so. To this end, we believe the recommendations of
the Blue Ribbon Panel provide an important perspective and serve as a
helpful starting point.
As Associate General Counsel for Ethics, my principal role is to
advise the Secretary and the General Counsel on government ethics,
restrictions on political activity by federal government employees, and
related issues. Concurrently, under an appointment directly from the
Secretary, I serve as the Designated Agency Ethics Official (DAEO) for
the Department. The DAEO is the point of contact with the Director of
the Office of Government Ethics (OGE). That office sets ethics policy
for the entire executive branch under an Executive Order issued by the
first President Bush replacing a system of individual agency regulation
of employee conduct.
I understand that concerns have been raised by the Committee about
the role of the Office of General Counsel, within the Department, in
responding to the Committee's oversight, with particular attention to
information requested by the Committee regarding payments, expenses,
and stock options paid to NIH employees for consulting arrangements
since January 1, 1999. NIH proposed asking employees for information
regarding compensation for outside activities. Accordingly, the
Department, working through OGC, has worked extensively with NIH and
the Committee's staff, as well as other federal agencies, to identify
and resolve legal issues relevant to obtaining this information.
When the Committee first asked NIH to obtain amounts of
compensation for outside activities, these amounts were unavailable for
those individuals who file the confidential OGE 450 financial
disclosure form or who do not file any financial disclosure form. This
is because OGE has historically viewed the form as serving a conflicts
of interest purpose rather than a disclosure purpose. And the conflicts
analysis for reviewing potential outside activities has historically
focused, governmentwide, on the type and source of compensation rather
than the amount. For the same reason, the HHS 520 form, used for review
of potential outside activities, did not, until my January 27, 2004
memorandum, request the amount of compensation. Historically, OGE has
advised that it did not view the dollar amount as normally relevant to
the outside activity conflicts analysis.
HHS strove to help NIH find a way to collect the information and
was successful in doing so. This information is critically important
and so we have taken steps, consistent with the Privacy Act, to obtain
this data in the future for all outside activity requests.
HHS advised NIH about the Privacy Act, and its requirement that
collection and maintenance of identifiable information be for purposes
authorized by statutes, regulations, or Executive Order, and that such
authority must be cited in the Privacy Act statement accompanying the
request for information. Although the interest of Congress alone would
not be a sufficient legal basis to collect and maintain the
information, an agency interest pursuant to statutes, regulations, or
Executive Order, would be an appropriate basis. At first, we hoped that
the Ethics in Government Act, administered by OGE, could serve such a
basis. The difficulty was that OGE did not historically believe that
amounts of compensation were normally relevant to conflicts analyses.
OGC worked with OGE to devise an interpretation of the authorities
provided in the Ethics in Government Act that would support the
collection of compensation amount information for ongoing activities as
well as activities being reviewed for compliance with the relevant
rules. At that time, OGE did not believe that the authorities in the
Ethics in Government Act could support the collection of compensation
amount for completed and closed outside activities.
On January 27, 2004, I issued a directive informing Deputy Ethics
Counselors [DECs] that in the context of any agency evaluation of any
previously approved, ongoing outside activity for continued compliance
with existing law and in order to request prior approval for any new
outside activity, employees would be required to provide both
retrospective (if applicable) and prospective compensation information.
Such amounts were to be noted on the HHS 520. This allowed NIH to
collect compensation amounts for all ongoing outside activities.
HHS explained to Committee staff the potential difficulties in
collecting information pertaining to completed and closed outside
activities. Referencing these discussions in its February 25, 2004
letter to the Department, the Committee said ``the Department is
attempting in good faith to assist the Committee.''
In addition, HHS continued to work to develop an interpretation of
the Ethics in Government Act that would support the collection of
information for completed outside activities. In so doing, we discussed
the legitimate and important need for NIH to collect the information
NIH and OGC felt was important for the agency to collect. As a result,
OGE agreed that, in this case, the Ethics in Government Act and its
implementing regulations providing the DAEO with authority to evaluate
the agency's supplemental standards to determine their continued
adequacy and effectiveness in relation to current agency
responsibilities, supported the collection of information regarding
completed and closed activities with pharmaceutical and biotechnology
companies. OGC further applied the same reasoning to all for-profit
entities.
As a result of these efforts, Dr. Zerhouni was able to write to the
Committee on March 12, 2004, that ``We consider this collection [of
information] authorized by the Ethics in Government Act of 1978 and
Executive orders mentioned above.'' It is my understanding that NIH
decided to manage litigation risk from NIH employees who might not wish
to comply with a required collection of information by first attempting
to collect the information on a voluntary basis.
However, because of inadequate response, I believe that Dr.
Zerhouni is now going to instruct all NIH employees who had consulting
arrangements since January 1, 1999 that are now closed to report the
compensation amounts received pursuant to the consulting as a
requirement and condition of their employment.
Background. HHS has a workforce of more than 60,000 individuals, of
which approximately 1,000 file public financial disclosure reports and
25,000 file confidential financial disclosure reports and receive
annual ethics training. These 60,000 employees safeguard the nation's
health and provide essential human services through myriad programs,
policies, and initiatives that affect countless stakeholders and a
large part of the American economy. Whether in allocating grant funds,
awarding contracts, entering into public-private partnerships,
approving lifesaving drugs, protecting patient privacy, or reducing
health care costs, our employees must address the concerns of the many
while avoiding the appearance or fact of undue influence by the few. To
assist those who bear that responsibility, the Ethics Division advises
on how to ensure these duties are carried out impartially and
unimpeachably. This is largely accomplished through legal advice to
agency decision-makers and ethics officials, guidance to employees,
education of the workforce, development of guidance documents, and,
when necessary, liaison with OGE.
In HHS, as in most large Cabinet Departments, the DAEO oversees and
coordinates a decentralized Departmental ethics program. As DAEO, I
appoint Deputy Ethics Counselors (DECs) chosen by each operating
division, such as the Food and Drug Administration (FDA), the Centers
for Disease Control and Prevention (CDC), and NIH. Each of these DECs,
along with agency heads and management in each component, are
responsible for running ethics programs tailored to the needs of
extensive, geographically dispersed workforces composed of many
professionally trained employees with varied responsibilities that
range from insuring the health care needs of the elderly and
disadvantaged to ensuring the safety and efficacy of drugs and medical
devices.
The DECs are senior management officials within each component, and
they have staff who assist them in carrying out the ethics functions,
either as collateral duties or as members of an ethics program office.
NIH in particular has such an office under its DEC. As managers closest
to day to day operations, they are equipped and responsible for
identifying and evaluating the relevant ethics issues in their
component. Additionally, the DECs and their staff possess the
scientific and technical expertise necessary to identify and resolve
ethics issues in situations involving science, medicine, and other
complex fields. Within their respective operating divisions, the DECs
are responsible for establishing a system for reviewing public and
confidential financial disclosure forms, considering outside activity
requests, providing ethics advice to individual employees, initiating
ethics education and training programs, and ensuring that violations of
the conflicts statutes or the conduct standards are reported to
investigatory authorities and where appropriate, seeing that
disciplinary action is taken. Individual employees are, of course,
ultimately responsible for their own actions.
In addition, the Ethics Division has responsibilities similar to
those of a DEC but for the Office of the Secretary and with respect to
political appointees. Staff lawyers within the Ethics Division provide
legal advice to the DECs to assist them in their role in making ethics
decisions. Furthermore, we conduct training such as an all day DEC
workshop each year to keep DECs current on ethics law, and
approximately thirty ethics officials from across the Department attend
the annual OGE conference and its various break-out sessions or classes
conducted on a wide variety of ethics topics. OGE's periodic program
reviews or audits provide us with a sense of how well the Department's
components meet their ethics responsibilities. In these reviews, OGE
has recognized that the Ethics Division provides sound guidance and
instruction and that a clear ``road map'' is in place.
Ethics Initiative. Based upon a process begun by the General
Counsel in December, the Ethics Division has undertaken a series of
efforts to intensify our ability to scrutinize and oversee the
Department's ethics activities. We are dedicating additional resources
to enhance the Ethics Division. As part of this initiative, the
Department will institute systematic oversight of the ethics programs
within the various operating divisions of the Department through
regularized compliance auditing and program review, as well as
dramatically strengthen our ability to provide guidance to these
programs and their officials. The initiative will increase component
accountability for ethics program implementation, augment financial
disclosure review and training development, and enhance the
capabilities of the Ethics Division and the authority of the DAEO. Our
staffing will more than double from 11 to 25. To my knowledge, this
will make us the largest single legal office devoted exclusively to
government ethics, outside of OGE. We will create two units within the
Ethics Division: the Advice and Financial Disclosure Branch and the
Education and Program Review Branch. These branches will be staffed by
a mix of attorneys, paralegals, computer/training developers, legal
resource analysts, auditors, and support staff.
The steps we are undertaking will enhance the Department's
operations and work on behalf of the public. Specifically, this
initiative will strengthen the Department's identification and
prevention of employee actions that would or would appear to be
motivated by private, pecuniary, or associational interests, rather
than an impartial assessment of the public interest.
Historical Context. To provide further background to the Committee
in connection with its review of these issues, following is an
understanding of how we came to where we are on the issues of financial
disclosure, outside consulting arrangements, and awards at NIH.
a. Financial Disclosure. The degree to which the public may have
access to the personal financial information of employees at NIH is
governed by federal law and OGE regulations. The Ethics in Government
Act and implementing regulations in 5 C.F.R. part 2634 provide for two
types of financial reporting: (1) public disclosure of detailed
information about assets, income, liabilities, and outside affiliations
on a report form called the SF 278; and (2) a less intrusive,
confidential version known as the OGE 450. On the SF 278, filers must
disclose income amounts and asset values within broad categories, by
checking, for example, a block indicating a figure between $1,001 and
$15,000, and so on. The OGE 450 does not ask for any disclosure of
amounts, only the identity of holdings and income sources, in other
words, the information necessary at a minimum to assess conflicts.
By statute, the public SF 278 filing requirement is reserved
exclusively for highly paid, senior employees, such as Senate confirmed
Presidential appointees, non-career and career members of the Senior
Executive Service, Schedule C political appointees in the General
Schedule, uniformed service officers in the Public Health Service
Commissioned Corps at pay grade O-7 or above, Administrative Law
Judges, and employees in other pay systems if the lowest rate of basic
pay for that pay plan exceeds $104,927 per year. The confidential OGE
450 basically is filed by career employees in the General Schedule,
generally at grade levels 12 or above, and by special Government
employees who do not serve beyond 60 days. Under current law, increased
public disclosure can occur only through a process of demonstrating to
OGE that the duties of a particular position B that would not
ordinarily be required to file publicly under the existing rules B is
nevertheless equivalent to the positions that do file. This process is
required because many of the alternative pay systems at NIH do not have
minimum rates of basic pay that exceed the threshold.
In 1997, the Ethics Division wrote to the Director of OGE asking
for an interpretation of the law to require employees hired under the
authority of Title 42, Section 237, establishing the Senior Biomedical
Research Service (SBRS), to file SF 278s if the actual annual salary
received by the employee was equal to or above 120% of the rate of
basic pay for GS-15, Step 1. The letter urged that these employees be
required to file public financial disclosure forms and argued that not
doing so would be ``inconsistent with what would seem to be the
prevailing rule in the post-employment context [and] appears contrary
to the purpose of the public financial disclosure requirement.
Conceivably an . . . employee with a salary equivalent to an Assistant
Secretary would not be required to file a Public Financial Disclosure
Report . . . [A]ll SBRS employees with such salary above 120% of the
GS-15, step 1, level should be automatically required to file a Public
Financial Disclosure Report.''
On February 11, 1998, the Director of the OGE declined that request
and responded that for purposes of the public financial disclosure
requirement, the term ``rate of basic pay'' was defined as ``the lowest
level of pay authorized for a position's pay grade.'' Director Potts
opined that the definition of ``rate of basic pay'' for SBRS employees
is the lowest step or entry level pay authorized for a particular pay
grade or range. Thus, since the entry level minimum pay authorized for
SBRS positions is set by statute as the minimum rate payable for GS-15,
and since that will always be less than the Ethics in Government Act SF
278 threshold of 120% of GS-15, Step 1, the SBRS employees would not be
required by the Ethics in Government Act to file public financial
disclosure reports. Like the SBRS employees hired under the authority
of Section 237, the employees hired under the authority of section
209(f) (who do not have any fixed rate of basic pay) have a ``rate of
basic pay'' that is less than the statutory SF 278 threshold.
Although, for the reasons stated above, ``Title 42'' employees are
not statutorily defined as SF 278 public financial disclosure report
filers, it is our understanding that all of the NIH Institute and
Center Directors who were appointed under section 209(f) continued to
file public financial disclosure form SF 278s even during the time they
were not required to do so. To ensure that this continues to be the
case, as well as to increase transparency with respect to the next
level of senior employees identified by NIH, we have been successful in
securing an OGE equivalency determination for 93 positions that
requires, as of February 6, 2004, the Directors, Deputy Directors,
Scientific Directors, and Clinical Directors within each NIH Institute
and Center to file publicly available SF 278s. This determination was
in response to our letter of January 12, 2004. Following our request
that NIH identify other positions with equivalent authority and
responsibilities that meet the statutory test, we recently forwarded to
OGE a list of another 506 positions for this special classification.
b. Outside Consulting and Financial Interests. HHS employees
currently are required by an agency supplemental regulation to seek
prior approval only for professional or consultative activities,
teaching, speaking, or writing, and board service. They submit an HHS
Form 520 that solicits detailed information about the proposed
activity, and each operating division may specify various levels of
review, which may start with the supervisor and end with the DEC.
The HHS Form 520, which was designed in 1982 and has since remained
virtually unchanged. It does not require the applicant to specify the
amount of compensation to be received in connection with the outside
activity. Until recently, it was not understood that this information
would be relevant to the outside activity approval process because the
requisite legal analysis focuses on the identity of the payor and the
nature of the outside activity. This information is critically
important and so I have taken steps, as DAEO, consistent with the
Privacy Act, to obtain this data in the future for all outside activity
requests.
Approval requires an assessment of whether the proposed outside
activity violates any statute or regulation, including the OGE
Standards of Ethical Conduct for Employees of the Executive Branch or
the HHS supplemental ethics regulation. Included in the OGE Standards
is the requirement that the proposed activity cannot create an actual
or apparent conflict that would result in recusals that would
materially impair an employee's ability to do his job.
In evaluating conflicts, the reviewer must address two provisions
that form the core of Federal ethics law. A criminal statute, 18 U.S.C.
208, deals with an ``actual conflict'' due to the employee's own or
imputed financial interest in the resolution of a government matter. A
regulatory provision in the OGE Standards, 5 C.F.R. 2635.502,
principally addresses disqualifications called for when an ``appearance
of a conflict'' arises from a ``covered relationship.''
Under section 208 of the criminal code, to avoid a conflict of
interest that results, for example, from stock ownership or outside
employment, a federal employee must not participate personally and
substantially in a particular matter that, to his knowledge, directly
and predictably affects his own financial interest or that of his
outside employer. To prevent an ``appearance of a conflict'' that
results from serving in a role short of employment, for example, as an
advisor, consultant, or other type of independent contractor
compensated with fees and expenses, a different rule applies[6 CFR
2635.502].
Both sections are disqualification provisions in that they do not
prohibit the acquisition of an asset or relationship, rather they bar
actual ``participation'' in a potentially conflicting matter, either
personally or through the direct and active supervision of the
participation of a subordinate. However, neither section is triggered
by mere knowledge of, or official responsibility for, a particular
matter. In short, under 5 C.F.R. 5501.106(d)(4), prior approval to
engage in an outside activity ``shall be granted,'' provided there are
no other statutory or regulatory impediments.
In addition, a number of statutes and regulations do preclude
certain outside activities. For example, if an employee sought approval
to be a lobbyist, the anti-representation statutes, 18 U.S.C. 203
and 205, would be implicated. If the activity were clearly one that
should be done as an official duty, then approval would be denied,
under 18 U.S.C. 209, as an improper salary supplementation. Another
regulation prohibits the use of public office for private gain 5 CFR
2635.702.
Another regulation, 5 C.F.R. 2635.807, precludes compensation,
subject to certain exceptions, if an employee wants to teach a course,
deliver a speech, or write a book that relates to his official duties.
(Consulting, technically, is not covered by this section, but the
analysis does provide guidance in evaluating many outside activities.)
For career employees, compensation is precluded if, among other things,
the teaching, speaking, or writing deals in significant part with any
current assignment (or one completed within the last year) or any
ongoing policy, program, or operation of the agency. However, the
provision contains an important explanatory note. A career employee may
receive compensation for ``teaching, speaking, or writing on a subject
within the employee's discipline or inherent area of expertise based on
his educational background or experience even though the [activity]
deals generally with a subject within the agency's areas of
responsibility.''
Finally, there are also special ethical restrictions that focus on
the receipt of earned income by political appointees. Under Executive
Order 12,731, issued by the first President Bush and modifying
Executive Order 12,674, certain Presidential appointees may not receive
``any earned income for any outside employment or activity performed
during'' their Presidential appointment. Similarly, the Ethics in
Government Act limits the annual amount of outside earned income,
including honoraria, that highlevel political appointees such as
noncareer members of the Senior Executive Service may receive. This
year, that limit is $23,715.
As noted earlier, outside activities must also comply with
applicable provisions governing the avoidance of actions creating an
appearance of violating the ethical standards, including the
prohibition against use of official position for an employee's private
gain or for the private gain of any person with whom the employee has
employment or business relations or is otherwise affiliated in a non-
governmental capacity.
As can readily be seen, supervisors, ethics program officers, and
the DECs, in particular, have difficult assessments to make when
reviewing outside activity requests. For example, at NIH, review of the
requests often necessitates an ability to analyze the relationship
between technically complex official scientific duties and similarly
complex outside activities, both of which might be in the same general
field of expertise. Even when the activities are approved, individual
employees remain personally responsible for abiding by their recusal
obligations and avoiding violations of any other applicable provisions.
These responsibilities are exacerbated by mergers, acquisitions, joint
ventures, partnerships, and even name changes, within industry that, on
any given day, may make it difficult to know whether one has a conflict
to avoid.
As outlined in the Blue Ribbon Panel report, prior to 1995, NIH had
stringent internal policies that barred certain outside activities,
limited the amount of outside compensation, capped the number of hours
that could be spent in outside work, and precluded the receipt of stock
or stock options as compensation. However, during a program review
conducted in 1995, OGE notified NIH that its requirements went beyond
the 1993 executive-branch wide Standards of Ethical Conduct. By
Executive Order, OGE was required to ensure uniformity within the
executive branch with respect to the core ethics requirements. OGE did
not permit agencies unilaterally to impose ethics requirements or
policies that were more restrictive than the OGE Standards, absent the
submission to OGE for its approval a supplemental regulation with
adequate justification. The then NIH Director did not pursue that
option, and the internal policies at NIH were changed to conform to the
case-by-case evaluation process prescribed in the OGE regulations.
Therefore, whether NIH employees can hold ``drug or biotech''
stocks or consult with companies in these industries is governed by the
application of OGE regulations. Currently, conflicting stock holdings
are subject to a de minimis exception that allows employees to work on
specific party matters as long as the value of the affected stock does
not exceed $15,000 and on a general matter if the value of any one
affected holding does not exceed $25,000, subject to a $50,000 cap when
cumulating all affected interests. Also, NIH employees can consult with
various companies involved in scientific research, if the legal
requirements are satisfied.
c. Awards. Another important issue is whether NIH employees should
be allowed to receive bona fide awards from outside entities with
interests affected by NIH programs and operations. Depending upon the
resolution of these questions, it is conceivable that the NIH Director
might be barred from receiving the Nobel Prize in Physiology or
Medicine because, as we understand, the awarding entity on behalf of
the Nobel Committee is the Karolinska Institute, which collaborates in
research matters with NIH.
Bona fide awards for meritorious public service or achievement are
conceptualized as gifts. Gifts to executive branch employees are
governed by 5 U.S.C. 7353, which bars the solicitation or acceptance
of anything of value from persons or entities defined as prohibited
sources, subject to such reasonable exceptions as the supervising
ethics office for the executive branch, by regulation, deems
appropriate. OGE implemented this statute in the Standards of Ethical
Conduct for Employees of the Executive Branch at 5 C.F.R. Part 2635,
Subpart B. These rules expressly permit employees to accept bona fide
awards and cash incident thereto from most prohibited sources, e.g.,
contractors, grantees, regulated entities, applicants for governmental
action, etc., including organizations a majority of whose members are
of the enumerated type, provided that the award is determined by agency
ethics officials to be part of an established program of recognition,
as defined in regulatory criteria. Specifically, under 5 C.F.R.
2635.204(d)(1), the reviewer must ascertain whether the award is made
as part of an established program of recognition for meritorious public
service or achievement:
(1) Under which awards have been made on a regular basis or which is
funded, wholly or in part, to ensure its continuation on a
regular basis; and
(2) Under which selection of award recipients is made pursuant to
written standards.
This exception to the prohibited gifts rule is unavailable,
however, if the awarding entity is a special type of prohibited source,
i.e., a person or entity who ``has interests that may be substantially
affected by the performance or nonperformance of the [award
recipient's] official duties.''
As OGE notes in their testimony today, ``one possible reading'' of
this phrase could be to bar an agency official from receiving an award
from any entity that has matters pending under that individual's
official responsibility, i.e., from any entity or person doing business
with the recipient's office, or it could specify a ``situational''
approach predicated on the interpretive assumption that the use of
terms such as ``performance'' and ``duties'' suggests that some actual
involvement by the official must at least be reasonably foreseeable.
Included with the Committee's initial inquiry on this subject was an
opinion of the Congressional Research Service that suggests the former
interpretation. When NIH asked for help in preparing a response to the
Committee's inquiry and the Congressional Research Service analysis, I
drafted a White Paper describing the existing policy and its
derivation.
That paper pointed out that, because the above-quoted phrase
appears in OGE's regulation, the phrase's meaning is ultimately a
matter for OGE deliberation, that OGE has not formally opined on it,
and that OGE may well choose a different approach than that of the
Department. Furthermore, the paper observed an alternative to OGE
clarification: that AFederal departments and agencies were authorized
to issue, jointly with OGE approval, supplemental ethics regulations to
establish prior approval procedures for outside activities, to impose
prohibited financial holdings requirements, and to address ethics
issues unique to the programs and operations of the respective
agencies.@
Today, the Acting Director of OGE provides in her statement the
first definitive written guidance on the subject. OGE's analysis
articulated in her testimony today does not adopt a bright line.
Moreover, some of the factors relied upon by HHS are factors she has
articulated. We are required to implement the OGE interpretation, of
course, absent a change in law, OGE regulation, or, one other important
possibility. As mentioned in the White Paper provided to NIH and, in
turn, to the Committee last July, agencies are ``authorized to issue,
jointly with OGE approval, supplemental ethics regulations to . . .
address ethics issues unique to the programs and operations of the
respective agencies.'' Therefore, if NIH policymakers decided to go so
far as to outright prohibit the receipt by all or certain NIH officials
or employees of all or some awards from outside entities with which NIH
interacts, a request for such a provision could be included in a
supplemental regulation submitted for OGE approval.
In addressing the issue of awards, it is necessary to guard against
monetary awards and prizes that may appear to be little more than a
payment for delivering a speech. As noted earlier, federal employees
cannot receive compensation for speaking that relates to their official
duties within the meaning of a very detailed regulation, 5 C.F.R.
2635.807. Moreover, a criminal statute, 18 U.S.C. 209, bars federal
employees from receiving a supplementation of salary for performing
their official duties, and another, 18 U.S.C. 201, proscribes illegal
gratuities tied to an official act. But a bona fide award for
meritorious public service or achievement and any money that is
associated with the honor are considered gifts, rather than
compensation. As you can readily see, there is a continuum between the
permitted activity on the one hand B accepting a prestigious award with
the prize money and then delivering the speech that is routinely
expected of the honoree at the award presentation B and the prohibited
activity on the other B accepting money to deliver a speech in the
guise of receiving an award.
Unfortunately, the ethics rules do not provide us much guidance in
distinguishing between the two scenarios. Fortunately, the Acting
Director of OGE in her written statement submitted today has endeavored
to tackle these issues and has even sent us in the direction of tax law
for help in determining whether an award is ``intended primarily to
provide gratuitous honorific recognition of achievement'' or is instead
``primarily compensatory in nature.'' I am grateful to Director Glynn
and her staff for providing this valuable assistance.
It must be considered that even though particular conduct may be
permitted under the applicable statutes and regulations, and even where
employees sincerely believe there is no appearance of impropriety in
the conduct, there may be instances where employees should exercise
common sense and prudence to abstain from the conduct. However, ethics
officials are not empowered to compel that abstention.
In conclusion, the Blue Ribbon Panel's recommendations are
certainly a helpful starting point. But we remain open-minded and
interested to hear from NIH regarding its evaluation of the
recommendations. As the Department moves forward with respect to the
recommendations and requests from NIH, we will carefully consider what
steps should be taken. At the same time, HHS, and, in particular, the
expanded Ethics Division [of the Office of General Counsel], will
continue accelerating and implementing our plans to independently audit
ethics programs in the Department's components, ensure extensive
education and training, increase transparency in the form of thorough
and accurate disclosure, and provide advice and ethics counsel to the
nation's premier professionals in the ever-changing field of biomedical
research.
We would also very much welcome hearing from the Committee about
what changes it believes are required to strengthen the ethics rules,
policies, and procedures at NIH. HHS will continue to cooperate with
the Committee as the Committee addresses these important issues. In
this manner, working together, our two branches of government can
achieve our collective goal of ensuring public confidence in agency
programs and operations through whatever means will best accomplish
that objective. The objective is especially meaningful and important
because so too is the mission of NIH to generate knowledge which will
advance our ability to care for human ailments and improve the lives of
all Americans.
Thank you for the opportunity to speak with you today. I would be
pleased to answer any questions that you may have.
Mr. Greenwood. Thank you, Mr. Swindell.
Dr. Kington, good morning.
TESTIMONY OF RAYNARD S. KINGTON
Mr. Kington. Good morning. Mr. Chairman, members of the
subcommittee, I am the Deputy Director of the National
Institutes of Health. I am also the Deputy Ethics Counselor at
NIH as well as co-chair of the NIH Ethics Advisory Committee.
The Director of NIH appointed me as the DEC, Deputy Ethics
Counselor, on January 12, 2004. At the time of my appointment
the Director expanded the role of the DEC's jurisdiction over
the immediate senior staff and institute and center directors
to include institute and center deputy directors, scientific
directors, clinical directors, extramural program directors.
In regard to this group of the most senior managers at NIH,
I am directly responsible for reviewing and approving
applications to permit various outside activities pursuant to
the ethic regulations. As Dr. Zerhouni testified before this
subcommittee last week, he created the NIH Ethics Advisory
Committee, or NEAC, in the Office of the Director to provide
independent peer review of activities involving outside
organizations.
The NEAC, which conducted its first meeting on January 20
of this year advises the NIH Deputy Ethics Counselor on
conflicts of interest and helps to ensure the activities
involving acceptance of compensation from outside sources
receive uniform oversight at the NIH.
NEAC reviewed applications for proposed activities with
outside organizations that stand the greatest chance of posing
risks to NIH's objectivity or appearances thereof including
where an award is valued at $2,500 or more, where total income
from an activity from an outside organization exceeds $10,000
or is unknown, where outside compensation is in the form of
equity, or when the activity involves a drug or biotech company
or where the activity involves any senior NIH leadership such
as scientific or clinical directors.
The committee is co-chaired by myself and the Deputy
Director for Intramural Research, Dr. Michael Gottesman. It
consist of 10 rotating members and two ex officio ethics
advisors all of whom are full-time Federal employees. The
rotating members are nominated by the institute and center
directors and appointed by myself and Dr. Gottesman.
Membership represents the categories of employees
submitting proposals to the NEAC including two IC directors,
deputy directors, scientific directors, clinical directors,
extramural directors, and other OD, Office of the Director,
senior staff. During the centralized NIH review committee
members review each proposed activity to assess whether it
creates an actual or an apparent conflict of interest. The
committee reviews the proposals based on criteria set forth and
the standards of ethical conduct for employees of the executive
branch promulgated by the U.S. Office of Government Ethics and
the Department of Health and Human Services Regulations.
To ensure oversight activities that had already been
approved prior to the creation of NEAC. We also instructed that
all existing consulting relationships with pharmaceutical or
biotechnology firms be stopped and resubmitted to the NEAC for
its review and input before they could be reapproved and, if
appropriate, continued by the NIH ethics counselor.
I am pleased to answer any additional questions you might
have about the current NIH ethnic program. Thank you.
Mr. Greenwood. Thank you, Dr. Kington.
Mr. Maskell.
TESTIMONY OF JACK MASKELL
Mr. Maskell. Mr. Chairman and members of the subcommittee,
thank you for the invitation to present testimony in this
matter today. I am a legislative attorney with the American Law
Division in CRS and have worked there on legal and legislative
issues concerning ethics and Government for about 30 years.
I began working with the subcommittee staff a year ago
concerning the legal issues of large cash awards or prizes
being given by private laboratories or clinics for the
directors of the Institutes of NIH. In the course of that work
the scenario that developed was as follows:
An agency of the Federal Government makes grants for
research or clinical studies to a private facility totaling
millions of dollars a year. That private facility then gives a
substantial cash award or prize of several thousand dollars to
the Director of the very Federal agency making those grants.
One does not need to have an intricately detailed knowledge
of Federal law and regulations on ethics to see the obvious
appearance problems and potentials for more serious
consequences in that scenario. Beyond any mere appearance
problem, however, this scenario raised specific questions of
violations of Federal ethics regulations, and the statutes
underlying them.
I prepared a fairly detailed analysis of some of the legal
and ethics issues involved for the subcommittee, and with the
subcommittee's permission, I have appended that analysis to my
statement today.
Simply put, it appears that an agency head, with
administrative and operational authority over all aspects of
that agency's functions and programs, should not under Federal
law and regulation be accepting cash gifts, awards or prizes
from a private grantee of his own agency, that is, a private
source that is dependant upon and so interested in the official
duties, responsibilities and powers of that administrator.
The regulatory exception to the general gift ban for bona
fide awards or prizes for meritorious service applies only when
the donor of the award is a sufficiently independent source.
The standard is that the donor may not ``have interest that may
be substantially affected by the performance or nonperformance
of the employee's official duties.'' The example specifically
given in the Office of Government Ethics regulations of a
permissible award is an NIH official receiving the Nobel Prize.
The Department of Justice, analyzing the awards issue under a
related criminal statute, explained that acceptable bona fide
awards must come from donors who are ``detached from and
disinterested in the performance of the public official's
duties.''
I believe it would strain credibility to argue that a
grantee regularly receiving millions of dollars in grants from
a Federal agency is ``detached from'' or ``disinterested in''
or ``independent of'' the duties, powers, and responsibilities
of the Director of that agency.
Even when the agency head or other supervisory personnel
are not directly participating in the award of a grant, or
actually participating in certifying the private entity as a
``comprehensive'' treatment facility, the actual authority over
those subordinate employees making the decisions, promotion,
pay and work assignments and other things, the inherent
influence of supervisors and agency heads over such subordinate
employees, and the natural inclination of employees to want to
please their superiors, all counsel against such agency heads
and management personnel receiving cash awards from these
private grantees under the regulation.
While there certainly may be some leeway in the
interpretation of the language of the regulation, the Supreme
Court, in a unanimous decision authored by Justice Scalia in
1999, has given some guidance by explaining fairly clearly that
a private entity has interests that ``may be substantially
affected by the performance of'' an official's public duties
when that official ``has the capacity to exercise governmental
power or influence in the donor's favor,'' regardless of
whether there is any specific, particular matter on the desk of
the official relating to that private entity.
In fact, if there is a particular matter pending before the
official relating to the private entity at the time of the cash
payments, questions of both the application of criminal laws as
well as ethics violations could be implicated.
That Supreme Court decision, known as the Sun-Diamond case,
related to criminal charges concerning the then Secretary of
Agriculture for accepting gifts of travel and entertainment
from private entities regulated by his Department. The
indictment charged the parties ecretary with the giving of
``illegal gratuities'' under the Federal bribery statute. There
were no allegations that the Secretary ever did any official
act for the donors, or that any specifically identified
official matter was pending before the Secretary involving
those donors.
The Independent Counsel argued before the Court that the
mere position of the Secretary, and the authority and power of
the Secretary to affect the interests of the donor were enough
to invoke the felony ``illegal gratuities'' prohibition upon
making or accepting gifts or payments from them.
The Supreme Court, however, disagreed with the Independent
Counsel, and Justice Scalia, writing for a unanimous Court
explained in dicta that there is a multi-layered web of ethics
laws and regulations in place for Federal officials, and that
while such so-called ``status gifts'' are not necessarily
``illegal gratuities'' (because they can not be tied to any
specific, identified official act), they do violate the
language of the express regulation that we are discussing
today, that is, they are gifts from a donor who has interests
that may be substantially affected by the public duties of the
official because the public official ``is in the position to
act favorably to the giver's interest,'' that is, the official
has the ``capacity to exercise governmental power or influence
in the donor's favor.''
It is obvious that a Director of a Federal agency has the
official capacity, position and authority to exercise
governmental power or influence which may affect the fortunes
and interests of a grantee of that agency. Merely because a
Director might have ``delegated'' certain grant functions to
subordinates does not relieve or divest the officer of his
official authority and responsibility. This is how the levels
of responsibility and accountability are constructed in the
Federal service.
If we are to err on the side of caution, the overall public
interest would seem to dictate broadly prohibiting those
ultimately responsible for grant decisions from personally
benefiting from cash prizes, awards, or other such gifts given
by grateful recipients of those Federal grants.
Thank you and I am willing to answer questions that you may
have.
[The prepared statement of Jack Maskell follows:]
Prepared Statement of Jack Maskell, Legislative Attorney, Congressional
Research Service
Mr. Chairman and Members of the Subcommittee: Thank you for the
invitation to speak to you today on the matter of ``awards'' from
private sources. My name is Jack Maskell, and I am a legislative
attorney with the American law Division of the Congressional Research
Service. I began working with the subcommittee staff a little more than
a year ago concerning the legal issues of private cash ``awards'' or
``prizes'' being given to the directors of the Institutes of the
National Institutes of Health from private laboratories or clinics. In
the course of that work, the scenario that developed was as follows:
An agency of the Federal Government makes grants for research
or clinical studies to a private laboratory/ clinic in the sum
of tens of millions of dollars a year. That private laboratory/
clinic then gives a cash ``award'' or ``prize'' of several
thousand dollars to the Director of the very federal agency
making those grants.
One does not need to have an intricately detailed knowledge of
federal law and regulations on ethics to see the obvious ``appearance''
problems and potentials for more serious consequences in that scenario.
In fact, preventing appearances of impropriety and increasing
confidence in the public's perception of the fairness of the
administration of federal programs is one of the principal purposes
behind federal ethics regulations and laws. Crandon v. United States,
494 U.S. 152, 164-165 (1990); H.R. Rpt. No. 748, 87th Cong., 1st Sess.
4-6 (1961); 5 C.F.R. 2635.101(a).
Upon further research and analysis it became clear that even beyond
any mere ``appearance'' problem, however, this scenario raised specific
questions of violations of federal ethics regulations, and the statutes
underlying them. I prepared a fairly detailed analysis of some of the
legal and ethics issues involved for the subcommittee, and with the
subcommittee's permission, I have appended that analysis to my
statement today.
Simply put, it appears that an agency head, with administrative and
operational authority over all aspects of that agency's functions and
programs, should not under federal law and regulation be accepting cash
gifts, ``awards'' or ``prizes'' from a private grantee of his own
agency, that is, a private source that is dependant upon and so
interested in the official duties, responsibilities and powers of that
administrator. This is particularly the case with certain private
clinics and laboratories which have a continuing ``certification,'' as
well as a substantial and continuing grant, relationship with the
agency.
As a brief background, federal law now prohibits the receipt of
``gifts'' by federal officials from ``interested parties,'' or what are
also called ``prohibited sources.'' In the executive branch there are
two general categories of interested parties. The first are those that
are prohibited sources agency-wide, that is, for everyone in the
agency, and includes those private entities seeking official action
from, doing business with, or that are regulated by one's agency. 5
U.S.C. 7353(a)(1); 5 C.F.R. 2635.203(1)-(3). The second category
are those that are prohibited sources for a particular officer or
employee in question, that is, a restriction which is personal to the
particular official--and that includes those ``whose interests may be
substantially affected by the performance or nonperformance of the
individual's official duties.'' 5 U.S.C. '7353(a)(2); 5 C.F.R.
2635.203(4).
While most gifts may not be accepted from either category of
interested parties (agency-wide or personal), there is a specific
exception in executive branch regulations for the receipt of a bona
fide award or prize for meritorious public service, when the donor of
the award is a sufficiently independent source. Specifically, the
awards exception allows an official to accept a bona fide award under
certain circumstances from someone who is not in that second,
``personal'' category of interested parties, that is, an entity which
does not have ``interests that may be substantially affected by the
performance or nonperformance of the employee's official duties.'' 5
C.F.R. 2635.204(d)(1). The example specifically given in the Office of
Government Ethics regulations, is an NIH official receiving the Nobel
Prize. 5 C.F.R. 2635.204(d), note. The Department of Justice, analyzing
the ``awards'' issue under a related criminal statute, explained that
acceptable bona fide awards must come from donors who are ``detached
from and disinterested in the performance of the public official's
duties.'' 8 Op. O.L.C. 143, 144 (1984).
It would strain credibility to argue that a grantee regularly
receiving millions of dollars in grants from a federal agency is
``detached from'' or ``disinterested in'' or ``independent of'' the
duties, powers, and responsibilities of the Director of that agency.
Even when the agency head or other supervisory personnel are not
directly participating in the award of a grant, or actually
participating in certifying the private entity as a ``comprehensive''
treatment facility, the actual authority over those subordinate
employees making the decisions, the inherent influence of supervisors
and agency heads over such subordinate employees, and the natural
inclination of employees to want to please their superiors, all counsel
against such agency heads and management personnel receiving cash
awards from these private grantees under the regulation.
While there certainly may be some leeway in the interpretation of
the language of the regulation, the Supreme Court, in a unanimous
decision authored by Justice Scalia in 1999, has given some guidance by
explaining fairly clearly that a private entity has interests that
``may be substantially affected by the performance of'' an official's
public duties when that official ``has the capacity to exercise
governmental power or influence in the donor's favor,'' regardless of
whether there is any specific, particular matter on the desk of the
official relating to that private entity. United States v. Sun-Diamond
Growers of California, 526 U.S. 398, 405-511 (1999). In fact, if there
is a particular matter pending before the official relating to the
private entity at the time of the cash payments, questions of both the
application of criminal laws as well as ethics violations could be
implicated.
That Supreme Court decision, known as the Sun-Diamond case,
involved a 31-count criminal indictment against the then Secretary of
Agriculture for accepting gifts of travel and entertainment from
private entities regulated by his Department. The indictment charged
the Secretary with the acceptance of ``illegal gratuities'' under the
federal bribery statute. There were no allegations that the Secretary
ever did any official act for the donors, or that any specifically
identified official matter was pending before the Secretary involving
those donors. The Independent Counsel argued before the Court that the
mere position of the Secretary, and the authority and power of the
Secretary to affect the interests of the donor were enough to invoke
the felony ``illegal gratuities'' prohibition upon accepting gifts or
payments from them. The Supreme Court, however, disagreed with the
Independent Counsel, and Justice Scalia, writing for a unanimous Court
explained in dicta that there is a multi-layered web of ethics laws and
regulations in place for federal officials, and that while such so-
called ``status gifts'' are not necessarily ``illegal gratuities''
(because they can not be tied to any specific, identified official
act), they do violate the language of the express regulation that we
are discussing today, that is, they are gifts from a donor who has
interests that may be substantially affected by the public duties of
the official because the public official ``is in the position to act
favorably to the giver's interest,'' that is, the official has the
``capacity to exercise governmental power or influence in the donor's
favor . . .'' Sun-Diamond, supra at 408, 411.
It is obvious that a Director of a federal agency has the official
capacity, position and authority to exercise governmental power or
influence which may affect the fortunes and interests of a grantee of
that agency. Merely because a Director might have ``delegated'' certain
grant functions to subordinates does not relieve or divest the officer
of his official authority and responsibility. As noted by the United
States Court of Appeals, the head of an agency who delegated authority
to a subordinate official Adid not, however, divest . . . himself of
the power to exercise his authority or relieve him of his
responsibility for action taken pursuant to the delegation.'' Skokomish
Indian Tribe v. G.S.A., 587 F.2d 428, 432 (9th Cir. 1978), see NLRB v.
Duval Jewelry Co., 357 U.S. 1, 7-8 (1958). As stated simply by
Professor Bayless Manning, one of the drafters of the model federal
conflict of interest laws in the 1960's: ``[T]he head of a department
or agency would have `under his official responsibility' all matters in
the department or agency.'' Manning, Federal Conflict of Interest Law,
at 207-208 (Harvard University Press 1964). That is how the system of
responsibility and accountability is constructed in the federal
service. Because of the actual authority over subordinate employees and
their promotions and pay, the inherent influence of supervisors and
agency heads over such subordinate employees, and the natural
inclination to please one's superiors, it would appear that the reasons
behind the ethics rule do not necessitate the actual or the reasonably
foreseeable active participation in a specific matter by such
supervisory personnel for them to fall outside of the narrow ``awards''
exception.
Financial disclosure. The framework of the public financial
disclosure issues is that certain personnel in the Institutes earning
up to $200,000 a year in federal salary are seen as exempt from the
statutory requirements for public financial disclosure. This has
apparently come about by virtue of the Institute's authority under 42
U.S.C. 209(f) and (g) to hire ``special consultants'' and experts
without regard to civil service rules. The pay established by the
agency for such positions ranges from $38,000 to $200,000. Under this
authority the Institutes have reportedly hired high-level
administrative personnel, including apparently directors, but since the
``pay range'' under this authority begins at $38,000, below the
statutory threshold for disclosure, the agency has exempted those hired
under this authority from public financial disclosure. Report of the
National Institutes of Health Blue Ribbon Panel on Conflicts of
Interest Policies, Draft of May 5, 2004 at 20, 29-31.
The exemption from filing for those in a ``pay range,'' when the
lowest amount in the range is below the statutory threshold, is not
necessarily required by the language of the federal law, but is rather
an interpretation of the law by the Office of Government Ethics. The
federal law merely says in relevant part that public disclosure is
required from:
each officer or employee in the executive branch . . . who
occupies a position . . ., in the case of positions not under
the General Schedule, for which the rate of basic pay is equal
to or greater than 120 percent of the minimum rate of basic pay
payable for GS-15 of the General Schedule . . . 5 U.S.C.
appendix, 101(f)(3).
The law itself does not specifically say anything about pay bands,
or the lowest level in any given pay range. The Office of Government
Ethics has determined, however, that the statutory language and intent
of the law means that the ``basic pay'' for a ``position'' is the
lowest possible pay, that is, the so-called entry level or beginning
pay, for any particular pay range, rather than the pay actually
received by a particular incumbent in that position.
It should be mentioned here that in the legislative branch we do
not follow OGE's particular interpretation of the law (with respect to
similar language) applying to legislative branch employees, and that
when an employee in the legislative branch reaches the actual annual
rate of pay that is comparable to the statutory threshold (120% of a
GS-15), then that employee must file a public disclosure, regardless of
any minimum pay possible for that ``pay band'' or ``pay range.''
The Office of Government Ethics has explained that the intent of
the disclosure law was to cover a ``position'' rather than a particular
employee, and that the coverage of the disclosure law ``is determined
by the employee's level of responsibility'' and that the lowest level
of pay possible defines that responsibility (OGE Letter to DAEO's, No.
98 x 2). In most cases, this is perfectly logical and effective,
particularly where there may be a number of ``positions'' in an
occupational series, and several corresponding pay bands to which an
employee may be progressively promoted or appointed. The pay ranges may
then be fairly correlative to responsibility and, of course, ``level of
pay'' is a more easily determined and definable standard than is
``level of responsibility.'' However, where there is merely an
authority to hire and no positions and pay statutorily defined, or
merely a maximum rate of pay, then the lowest permissible pay rate may
not fairly describe the responsibility of those in the upper echelons
of pay and authority. In some cases a rigid application of the ``lowest
possible pay'' interpretation does not conform to the actual facts on
the ground. Under their title 42 authority, for example, it has been
explained that the Institutes hire managers, supervisors and even
directors. Clearly, their positions and levels of responsibilities are
significantly different from and greater than ``consultants'' and
advisors at the lower end of that possible pay range.
Policy makers must, of course, balance the interest of full
disclosure for public officials with the privacy interests of federal
employees and officials, and the possible ``nuisance'' factors of
public disclosure and its effect on recruitment and retention of
qualified personnel. However, these policy decisions should not be
confused with any constitutional ``rights to privacy'' of public
employees with regard to financial matters. The federal courts
examining the issue of privacy rights have determined that an implied
right to privacy exists under several possible provisions of the
Constitution when there is involved ``intimate'' family and personal
relationships and decisions, such as the decision concerning
procreation and child-rearing. Whalen v. Roe, 429 U.S. 589 (1977). The
courts have not, as of yet, expressly extended any constitutional right
to privacy, however, to a public official's financial matters or
interests, noting that ``[f]inancial privacy is not within the autonomy
branch of the right to privacy,'' that is, it is not within the Asphere
of family life constitutionally protected by the right of privacy.''
Duplantier v. United States, 606 F.2d 654, 669 (5th Cir. 1979), cert.
denied 449 U.S. 1076 (1981) [upholding the federal Ethics in Government
Act public disclosures for federal judges], citing Plante v. Gonzalez,
575 F.2d 1119, 1132 (5th Cir. 1978), cert. denied 439 U.S. 1129 (1979).
______
Memorandum December 4, 2003
TO: House Committee on Energy and Commerce, Attention: Alan Slobodin
FROM: American Law Division
SUBJECT: Cash ``Awards'' and ``Prizes'' to Agency Heads from Grantees
of the Agency
This memorandum is prepared in response to the Committee's request,
as discussed with counsel Alan Slobodin. The American Law Division
previously provided a legal analysis to your Committee, dated May 20,
2003, discussing federal law and interpretation concerning the receipt
of cash gifts, including ``awards,'' by an agency head from a grantee
of that official's agency. In response to the Committee's subsequent
inquiry to that agency, the Committee received an unsigned memorandum
(or ``white paper'') from the Department of Health and Human Services,
dated July 11, 2003, which attempted to justify the receipt of cash
awards by the head of an agency in the Department, the National Cancer
Institute of the National Institutes of Health, based on a particular
exemption to the executive branch gifts regulation. The Committee has
asked for a legal analysis of the HHS response.
The Department memorandum would construe the gifts restriction, and
the narrow exemption in it for bona fide ``awards'' to federal
officials from disinterested sources, in such a permissive manner as to
condone the personal enrichment of the Director of an agency directly
from a source receiving significant grant funding from his agency. The
reasoning employed by the Department obscures and overlooks the obvious
and serious ethical implications in this scenario. On its face,
allowing the top administrator and final decision maker of an agency to
receive cash ``awards'' or ``prizes'' from those private entities
concerning whom the agency must make determinations involving millions
of dollars in grant funds implicates the precise conflicts of interest
and ethical issues that are addressed in various criminal laws,
statutes on gifts, and standards of conduct regulations. As developed
below, under the common understanding of the language used in the gift
regulations and exemptions, and under relevant administrative rulings
and examples, as well as legal interpretations by the Supreme Court,--a
private grantee of the Federal Government clearly ``has interests that
may be substantially affected'' by the official powers and duties of
the Director of the grantor federal agency, and as such, may not be the
source of substantial gifts of cash, even in the form of ``awards,''
given to that particular Government official.1
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\1\ 5 U.S.C. 7353(a)(2); 5 C.F.R. 2635.202, 2635.203(d),
2635.204(d); 8 Op. O.L.C. 143, 144 (1984); Office of Government Ethics
[OGE] Advisory Opinions Nos. 83 x 11 (July 26, 1983), and 92 x 7
(February 26, 1992); see United States v. Sun-Diamond Growers of
California, 526 U.S. 398, 405-411 (1999).
---------------------------------------------------------------------------
Background. The limitations and restrictions on gifts, and the
prohibitions on private salary supplementation of federal employees
are, as noted by the Office of Government Ethics, ``aimed at preventing
the Government employee from becoming beholden to anyone in the private
sector who might affect the independence or judgment of that
employee.'' 2 There is, of course, a grave concern that
official decisions may actually be influenced, even subtly influenced,
when a private recipient of federal largess ``awards'' the responsible
federal official with cash in appreciation of his public
duties.3 Such conduct not only provides a potential
lucrative reward for those past decisions favorable to the grantee, but
also provides an opportunity for a potentially generous ``incentive''
for future official conduct favorable to the grantee by that official
and other agency officials who are possible future recipients of such
``awards.'' In addition to actual influence over official decision-
making, however, there is an extended concern that permitting such
conduct diminishes the confidence of the public in the independent,
impartial and even-handed administration of federal
programs.4 The Supreme Court has noted the important
interest of the Government in adopting rules to avoid even ``potential
conflicts of interest in the performance of governmental service'' to
``maintain[ ] the public's confidence in the integrity of the federal
service.'' 5
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\2\ Office of Government Ethics, Opinion 81 X 31, October 2, 1981,
in Informal Advisory Letters and Formal Opinions, 1979-1988, at 210;
Paul H. Douglas, Ethics in Government, at 45-49 (Harvard University
Press 1952); Roswell B. Perkins, ``The New Federal Conflict of Interest
Law,'' 76 Harvard Law Review 1113, 1137 (1963), discussing 18 U.S.C.
209.
\3\ Id.; the late Senator Paul Douglas, explained in his treatise
Ethics in Government, supra at 44, that often ``the corruption of
public officials by private interests takes a more subtle form'' than
outright bribes, through indirect financial support which may ``put the
public official under such a feeling of personal obligation that the
latter gradually loses his sense of mission to the public . . .''
Douglas noted that sometimes subtle ``shifting loyalties'' from the
community to narrow private interests may lead an official to make
decisions favorable to ``his private benefactors and patrons'' while
all the time ``the official will claim--and may indeed believe--that
there is no causal relationship between the favors he received and the
decisions which he makes.''
\4\ ``The proper operation of a democratic government requires that
officials be independent and impartial; . . . and that the public have
confidence in the integrity of its government.'' H. R. Rpt. No. 748,
87th Congress, 1st Session, 4-6, House Judiciary Committee (1961). The
Office of Government Ethics has recognized the imperative to ``ensure
that every citizen can have complete confidence in the integrity of the
Federal Government . . . '' 5 C.F.R. 2635.101(a).
\5\ Crandon v. United States, 494 U.S. 152, 164-165 (1990).
---------------------------------------------------------------------------
To address the ethical issues inherent in the receipt of things of
value by federal officials from private sources when there exists any
``nexus'' between the interests of the donor entity and the official
duties and responsibilities of the recipient federal official, there
has developed in the Federal Government a multi-layered structure of
criminal laws, general statutes, and standards of conduct regulations
which seek to regulate these situations. The criminal laws include the
federal bribery statute which provides criminal penalties for any
federal official who receives something of value ``in return for''
being influenced in the performance of an official act; the ``illegal
gratuities'' clause of the same bribery statute which prohibits the
receipt of things of value that are connected to official duties in
particular ways,--received ``for or because of'' a particular official
act performed or to be performed by the officer or employee; and a
criminal conflict of interest provision which prohibits federal
employees in the executive branch from working on or being involved
``personally and substantially'' in any official particular matter in
which they have a personal or imputed financial interest.6
In addition to these provisions of criminal law, it should be noted
that a specific criminal provision of federal law also prohibits the
receipt of money or things of value intended as private
``compensation,'' or as a salary supplementation, for one's official
duties performed for the United States Government.7 Under
this latter provision, 18 U.S.C. 209, there has been developed and
recognized by the Department of Justice an exemption from the criminal
law for bona fide awards to federal officials for their public service
from sources ``detached from'' and ``disinterested in'' the area of
responsibilities of the recipient federal official.8
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\6\ 18 U.S.C. 201(c)(1)(B); 18 U.S.C. 201(b)(2);18 U.S.C.
208.
\7\ 18 U.S.C. 209.
\8\ 8 Op. O.L.C. 143, 144 (1984).
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Statute and General Regulations on Gifts. In addition to the
provisions of federal criminal law noted above, there are non-criminal
statutes of general applicability, as well as administrative
regulations governing the acceptance of gifts and other ``self-
enriching'' activities of federal officials.9 The principal
statutory provision in federal law regarding gifts from private sources
was adopted as part of the Ethics Reform Act of 1989,10
codifying for the most part somewhat similar ethical rules and
limitations on the receipt of gifts by federal employees which had been
in effect for the executive branch since 1965 by way of Executive Order
and agency regulations.11
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\9\ As noted by the Supreme Court there is now ``an intricate web
of regulations . . . governing the acceptance of gifts and other self-
enriching actions by public officials.'' United States v. Sun-Diamond
Growers of California, 526 U.S. 398, 409 (1999).
\10\ P.L. 101-194, Sec. 303, November 30, 1989, 103 Stat. 1746.
\11\ See Executive Order No. 11222, Section 201, May 8, 1965 (now
superseded by E.O. 12674, April 12, 1989), and former regulations, 30
F.R. 12529, October 1, 1965, 5 C.F.R. 735.202.
---------------------------------------------------------------------------
The current law on gifts from outside sources, codified at 5 U.S.C.
7353, prohibits the receipt of ``anything of value'' by a federal
official from what have come to be known as ``prohibited sources.'' In
the current gifts law, the ``prohibited sources'' are expressly set out
in two separate categories of persons or entities, to include those
persons:
(1) seeking official action from, doing business with, or (in
the case of executive branch officers and employees) conducting
activities regulated by, the individual's employing entity; [5
U.S.C. 7353(a)(1)] or
(2) whose interests may be substantially affected by the
performance or nonperformance of the individual's official
duties. [5 U.S.C. 7353(a)(2)]
Under the gifts statute, the supervisory ethics offices for
particular employees and officials may issue regulations detailing the
gift limitations and providing reasonable exceptions to the general
prohibitions.12 The Office of Government Ethics has issued
gift regulations under this statutory provision for the executive
branch of Government, setting out numerous restrictions and exemptions
to the general prohibition. Under the regulations, the Office of
Government Ethics sets out the categories of what constitutes a
``prohibited source'' from whom things of value may not be received as
follows at 5 C.F.R. 2635.203:
---------------------------------------------------------------------------
\12\ 5 U.S.C. 7353(b).
---------------------------------------------------------------------------
(d) Prohibited source means any person who:
(1) Is seeking official action by the employee's agency;
(2) Does business or seeks to do business with the employee's
agency;
(3) Conducts activities regulated by the employee's agency;
(4) Has interests that may be substantially affected by performance
or nonperformance of the employee's official duties; or
(5) Is an organization a majority of whose members are described in
paragraphs (d)(1) through (4) of this section.13
---------------------------------------------------------------------------
\13\ 5 C.F.R. 2635.203(d).
---------------------------------------------------------------------------
Regulatory Exemption for Certain Bona Fide Awards. Based on the
guidance and principles developed in the Department of Justice's
exemption for bona fide awards under 18 U.S.C. 209, the Office of
Government Ethics promulgated an exception from the gifts prohibitions
for certain ``bona fide awards'' for meritorious public service given
by certain entities to federal officials when the recipient federal
officials are not in positions to affect the interests of the donor of
the award or prize. The current regulatory exemption provides as
follows, at 5 C.F.R. 2635.204:
(d) Awards and honorary degrees. (1) An employee may accept
gifts, other than cash or an investment interest, with an
aggregate market value of $200 or less if such gifts are a bona
fide award that is given for meritorious public service or
achievement by a person who does not have interests that may be
substantially affected by the performance or nonperformance of
the employee's official duties or by an association or other
organization the majority of whose members do not have such
interests. Gifts with an aggregate market value in excess of
$200 and awards of cash or investment interests offered by such
persons as awards or incidents of awards that are given for
these purposes may be accepted upon a written determination by
an agency ethics official that the award is made as part of an
established program of recognition:
(i) Under which awards have been made on a regular basis or
which is funded, wholly or in part, to ensure its continuation
on a regular basis; and
(ii) Under which selection of award recipients is made
pursuant to written standards.
The examples given by the Office of Government Ethics and the
rulings by that agency, as well as the Department of Justice
interpretations under 209, have demonstrated that a bona fide award,
to fit the exemption, must (among other qualifications for a cash
award) come from a person, group, or entity that is to a certain degree
``independent'' of the recipient public official, in the sense that the
public official is not in a position to act favorably to the giver's
interests. The Department of Justice has expressly stated that the
exemption from the criminal statute at 18 U.S.C. 209 that it has
recognized for bona fide awards to federal officials from outside
sources, must come from donors who are ``detached from and
disinterested in the performance of the public official's duties.''
14
---------------------------------------------------------------------------
\14\ 8 Op. O.L.C. 143, 144 (1984).
---------------------------------------------------------------------------
The example expressly provided in the published regulations of the
Office of Government Ethics uses the Nobel Prize to illustrate the type
of ``award'' from independent sources that may be received by a federal
official:
Example 1: Based on a determination by an agency ethics
official that the prize meets the criteria set forth in
2635.204(d)(1), an employee of the National Institutes of
Health may accept the Nobel Prize for Medicine, including the
cash award which accompanies the prize, even though the prize
was conferred on the basis of laboratory work performed at
NIH.15
---------------------------------------------------------------------------
\15\ 5 C.F.R. 2635.204(d), note.
---------------------------------------------------------------------------
Similarly, an advisory ruling from the Office of Government Ethics
provided another example of when the receipt of a bona fide award by a
particular official would not raise ethics and conflict of interest
concerns, that is, again, when the recipient/awardee is not in a
position to exercise official duties or responsibilities that may
substantially affect the interests of the donor:
A nonprofit organization presents its annual award consisting
of $5,000 and a medallion for ``Greatest Public Service
Performed by an Elected or Appointed Official'' to an employee
of the Bureau of Prisons. The organization applied long-
standing written criteria in judging all of the candidates. The
organization has no relationship with the Bureau of Prisons.
Because it is a bona fide award for public service, it is not
intended to compensate the employee for his services to the
Bureau of Prisons and would not violate section
209.16
---------------------------------------------------------------------------
\16\ OGE, Memorandum, DO-02-016, ``18 U.S.C. 209 Guidelines,''
July 1, 2002, see OGE Advisory Letter 83 x 10. Emphasis added.
---------------------------------------------------------------------------
Where there existed apparent or potential conflicts of interest for
employees of an agency with respect to the donor entity, however,
because those employees worked in a subject ``area'' of interest to the
donor, the Office of Government Ethics, in applying an earlier version
of the exemption, found that the requisite independence or
disinterestedness of the donor was not present, and that the awards
could not be accepted.17
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\17\ OGE Opinion 83 x 11, July 26, 1983.
---------------------------------------------------------------------------
The Office of Government Ethics has not published an interpretation
specifically addressing the issue of the head of an agency receiving
cash ``awards'' from a grantee of that agency. There is, however, no
ruling from the Office of Government Ethics which interprets this
narrow exception from the general gifts prohibition for bona fide
``awards'' in such a manner as to allow the personal enrichment of a
federal official, such as an agency Director, from any entity, such as
a grantee of the Director's agency, which is so vitally concerned with
and connected to the area of official responsibilities and powers of
the intended recipient. Under the general principles of the
administrative and regulatory exemptions, a grantee of an agency can
hardly be said to be ``detached from'' or ``disinterested in'' the
official duties and responsibilities of the Director of the grantor
federal agency. As explained below, such conduct not only raises
general ethics and conflict of interest concerns and appearances, it
appears to specifically violate the express prohibition on gifts from
interested parties.
Meaning of Phrase ``Interests That May Be Substantially Affected''
by the Officer's Duties. The regulatory exception for bona fide awards
thus does not allow, for obvious ethics and conflict of interest
reasons, a public official to receive an award from an entity which is
in the ``fourth category'' of regulatory ``prohibited sources,'' that
is, from an entity that ``has interests that may be substantially
affected'' by the performance or nonperformance of that official's
public duties. The Memorandum from the Department of Health and Human
Services admits its confusion and lack of understanding of the plain
language of this category of ``prohibited sources'' in the OGE
regulations.18 The Department ``white paper'' speculates
that this fourth category in the regulations could not mean
``grantees'' of the agency because, it argues, such entities are
already covered by the regulations in another category of prohibited
sources, that is, those doing business with the agency. Such an
interpretation, the Department ``white paper'' argues, would create a
meaningless ``tautology'' that an employee could ``accept an award from
a ``prohibited source'' provided that it is not a `prohibited source,'
'' 19 and the Department eventually concludes that the
provision does not limit an award to the agency's director merely
because the donor is a grantee of that agency.
---------------------------------------------------------------------------
\18\ ``Analysis of Ethics and Related Issues Concerning the Receipt
of Lecture Awards by National Institutes of Health Employees,'' 2-3,
July 11, 2003.
\19\ Id. at 3.
---------------------------------------------------------------------------
The Department's expressed confusion concerning the categories of
``prohibited sources'' may be substantially clarified, in the first
instance, by looking at the explanations of the Office of Government
Ethics in its advisory opinions and rulings. OGE has explained that the
first three categories of ``prohibited sources'' in its regulations
(which correspond to the first category of prohibited sources in the
statute, 5 U.S.C. 7353(a)(1)) are intended as ``agency-wide''
prohibited sources of gifts.20 That is, that such entities
in the first three categories are ``prohibited sources'' from whom
gifts may not be received by everyone employed in the particular
agency, regardless of the employee's duties, responsibilities or
functions. The ``fourth category'' of prohibited sources in the OGE
regulations (which corresponds to the second, separate category in the
statute, 5 U.S.C. 7353(a)(2)), however, is not merely a repetitious
statement of, or another, agency-wide limitation, but rather is
intended to be a restriction which is personal for the particular
public official in question, and is dependant upon the incumbent's
official authority, powers and duties.
---------------------------------------------------------------------------
\20\ OGE Opinion 94 x 5, February 7, 1994.
---------------------------------------------------------------------------
Thus, an entity such as a research laboratory and treatment
facility which receives grants from a federal agency and has a
continuing relationship with that agency,21 would be a
``prohibited source'' of ``gifts'' generally for every officer and
employee in the agency under one of the first three regulatory
categories of prohibited sources (those seeking action from, doing
business with, or regulated by the agency). However, that laboratory
would also be a ``prohibited source'' under the fourth category of the
regulations, and thus a ``prohibited source'' even of ``awards,'' only
if the particular officer in question were in a position to exercise
governmental authority which could substantially affect the interests
of that grantee.22 Clearly, a laboratory/facility which is a
``grantee'' of a particular agency may be a ``prohibited source'' for
general ``gifts'' for every officer and employee of the agency (merely
because of the laboratory's status as an agency ``grantee'') and, at
the same time, may also be a ``prohibited source'' for the Director of
that agency for an ``award,'' because the Director's general
supervisory, administrative and operating authority relative to all of
his agency's decisions may, obviously, have a substantial effect on the
interests of the laboratory/facility. It is thus the ``status'' of the
position that the intended recipient holds, and the incumbent's ability
or capacity to exercise governmental authority affecting the donor
entity, that is the relevant measure of the application of the fourth
``prohibited source'' category.
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\21\ In the facts provided by the Committee, one grantee facility
which gave the agency Director a several thousand dollar ``lecture
award,'' the Arizona Cancer Center of the University of Arizona,
advertizes itself as a ``National Cancer Institute-Designated
Comprehensive Cancer Center'' (http://www.azcc.arizona.edu). In the
relevant time period, in Fiscal Year 1999, for example, the University
of Arizona received grants from the National Cancer Institute in the
amount of $22,193,000, and contracts in the amount of $237,000; and in
Fiscal Year 2000 received grants from NCI in the amount of $25,249,000
and contracts in the amount of $486,000. Fact Book, National Cancer
Institute, 1999, at E-12; Fact Book, National Cancer Institute, 2000,
at E-11.
\22\ Employees in the agency who are in jobs that do not involve
the making, evaluation, approval, or oversight of grants to that
laboratory/facility, nor supervising those who have such
responsibilities, would still be prohibited from receiving ``gifts''
from that facility (merely because of its status as a grantee of the
agency), but would not be prohibited from receiving a bona fide award
from that laboratory/facility because their particular responsibilities
do not affect its interests.
---------------------------------------------------------------------------
In further clarification of the phrase used in the regulatory
exemption, the Supreme Court of the United States clearly explained
that for a particular public official, this ``fourth category'' of
``prohibited sources'' in the Office of Government Ethics regulations,
from whom things of value may not be received because the donor has
``interests that may be substantially affected'' by the duties of the
official, relates to those situations where the public official ``is in
a position to act favorably to the giver's interests,'' that is, where
the public official has the ``capacity to exercise governmental power
or influence in the donor's favor,'' regardless of whether there is a
particular, identifiable matter immediately before the
official.23 The clause in the ethics regulation thus clearly
is directed at the powers and responsibilities of the office of the
incumbent recipient, rather than the immediacy of any particular matter
and, in the case of a grantee of a federal agency, would obviously be
applicable to the Director of the agency who has final statutory,
administrative and operational authority over the agency decision-
making vitally affecting the interests of the donor entity.
---------------------------------------------------------------------------
\23\ United States v. Sun-Diamond Growers of California, 526 U.S.
398, 405-411 (1999).
---------------------------------------------------------------------------
In United States v. Sun-Diamond, the Supreme Court analyzed a
prosecution of a federal official, the Secretary of Agriculture, under
the ``illegal gratuities'' clause of the bribery statute for his
receipt of various gifts from business entities which could be affected
by the exercise of the Secretary's official duties because they had
businesses that were regulated by the Department. It should be noted
that for a number of years, in several federal circuits, so-called
``status gifts'' were successfully prosecuted as ``illegal
gratuities.'' 24 Status gifts were things of value received
by an official which were given because of that employee's official
position in the Government, that is, given to an officer or employee
who ``was in a position to benefit'' the private donor entity. The
United States Government in Sun-Diamond argued unsuccessfully for that
specific interpretation in the case of the Secretary of Agriculture:
---------------------------------------------------------------------------
\24\ United States v. Niederberger, 580 F.2d 63, 69 (3rd Cir.
1978), cert. denied, 439 U.S. 980 (1978)(golfing trips for I.R.S.
officer paid for by Gulf Oil Corp. when officer was merely ``in a
position to use his authority in a manner which could affect the gift-
giver''); United States v. Allessio, 528 F.2d 1079, 1082 (9th Cir.
1976), cert. denied, 426 U.S. 94 (1976)(gift to prison administrator).
---------------------------------------------------------------------------
The Independent Counsel asserts that ``section 201(c)(1)(A)
reaches any effort to buy favor or generalized goodwill from an
official who either has been, is, or may at some unknown,
specified later time, be in a position to act favorably to the
giver's interests.'' Brief for United States 22 [Court's
emphasis]. The Solicitor General contends that 201(c)(1)(A)
requires only a showing that a ``gift was motivated, at least
in part, by the recipient's capacity to exercise governmental
power or influence in the donor's favor'' without necessarily
showing that it was connected to a particular official act.
Brief for United States Dept. of Justice as Amicus Curiae 17
[Court's emphasis].25
---------------------------------------------------------------------------
\25\ 526 U.S. at 405-406.
---------------------------------------------------------------------------
The Supreme Court, however, found that for a violation of the
``illegal gratuities'' provision, there must be some particular,
identifiable ``official act'' to which the gift is
connected.26 The Supreme Court noted in Sun-Diamond that so-
called ``status gifts,'' that is, gifts to a federal official which
were prohibited ``by reason of the recipient's mere tenure in office''
because they were in a position to act favorably on the donor's
behalf,27 were not necessarily ``illegal gratuities,'' but
rather would come within, be regulated by, and would violate the OGE
regulations on gifts. Specifically, the unanimous court found such
gifts, that is, things of value given to a public official who has the
capacity to act favorably on the donor's behalf at some time, to be
gifts which would violate the regulations expressly prohibiting the
receipt of gifts from anyone who ``has interests that may be
substantially affected by performance or nonperformance of the
employee's official duties:''
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\26\ 526 U.S. at 406.
\27\ 526 U.S. at 408.
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[I]t is interesting to consider the provisions of 5 C.F.R.
2635.202 (1999), issued by the Office of Government Ethics . .
. The first subsection of that provision, entitled `General
prohibitions,' makes unlawful approximately (if not precisely)
what the Government asserts [the statute] makes unlawful:
acceptance of a gift ``[f]rom a prohibited source'' (defined to
include any person who ``[h]as interests that may be
substantially affected by performance or nonperformance of the
employee's official duties . . .'' 28
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\28\ 526 U.S. at 411, citing to the gifts regulations at 5 C.F.R.
2635.203(d)(4).
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The Supreme Court in Sun-Diamond thus explicitly explained that the
prohibition in the executive branch regulation on accepting gifts from
one who ``has interests that may be substantially affected by the
performance or nonperformance of the employee's official duties,'' is a
prohibition on receiving things of value from private sources by a
federal official who is merely ``in a position to act favorably to the
giver's interests,'' that is, that the recipient public official has
the ``capacity to exercise governmental power or influence in the
donor's favor.'' 29 There need not be any identifiable,
particular governmental matter currently before, or ``on the desk of,''
the official to violate this provision of ethics regulation under the
Supreme Court explanation. In fact, if there is a particular,
identifiable matter involving the donor-entity immediately before the
Government official who is at the same time receiving significant cash
``awards'' or other gifts from that entity, there may very well be more
than merely an ``ethics'' violation of the gift regulation, but rather
potential felony violations of federal criminal law.30
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\29\ 526 U.S. at 405, 411.
\30\ The timing of the offer and receipt of things of value, in
relation to a particular official matter actually pending before a
recipient Government official is a relevant circumstantial
consideration in determining the requisite ``intent'' needed for an
``illegal gratuity,'' that is, the intent to be rewarded or compensated
for a particular official act. United States v. Biaggi, 853 F.2d 89,
99-100 (2nd Cir. 1988), cert. denied 489 U.S. 1052 (1989), evidence of
required intent to reward may be inferred from the size of gift, and
``the nature and sequences of events''; United States v. Jennings, 160
F.3d 1006, 1014, 1017-1018 (4th Cir. 1998), (referring to federal
bribery law at 18 U.S.C. 201 and similar language at 18 U.S.C. 666,
regarding bribery and gratuities in federally funded programs):
``Direct evidence of intent is not necessary,'' but may be inferred
from circumstances including timing and sequences of gifts and acts.
Note also 18 U.S.C. 209, where donor's interest in immediate official
matter, although clearly not necessary for a violation, may arguably
provide further evidence of ``intent to compensate'' and ``appearance
of a conflict of interest . . . sufficient to violate 209.'' United
States v. Moore, 765 F.Supp. 1251, 1254 (E.D.Va. 1991). The law at
209 has been described as a conflict of interest statute ``in the
strictest sense,'' that is, an ``employee does not have to do anything
improper in his office to violate the statute,'' but rather his special
status as a government employee ``makes an unexceptionable act
wrongful--wrongful because of the potential dangers in serving two
paymasters.'' Association of the Bar of the City of New York, Special
Committee on the Federal Conflict of Interest Laws, Conflict of
Interest and Federal Service, at 55-56 (Harvard University Press 1960).
There may also be other considerations of felony violations when a
public official actually participates ``personally and substantially''
in a particular agency matter in which the official has his own
personal, financial interest. 18 U.S.C. 208.
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Authority of Agency Director. As a general matter, it is obvious
and beyond reasoned argument that a Director of a federal agency has
the official capacity and authority to exercise governmental power or
influence which could have a favorable or unfavorable impact on the
interests of a grantee of that agency, particularly an entity with a
continuous grantee and certification relationship with that federal
agency. In fact, under federal law, the Director of the agency in
question, the National Cancer Institute, has express administrative
control and statutory authority over all of the relevant functions of
the Institute,31 and thus oversees the grant functions,
administration and oversight of grantee programs.32
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\31\ 42 U.S.C. 285a-1, 285a-2.
\32\ According to the NCI web-site (http://www3.cancer.gov/mab/
hnc1.htm), the Office of the Director ``(1) Serves as the focal point
for the National Cancer Program; (2) develops a National Cancer Plan
and monitors implementation of the plan; (3) directs and coordinates
the Institute's programs and activities; and (4) develops and provides
policy guidance and staff direction to the Institute's programs in
areas such as program coordination, program planning, clinical care and
administrative management.''
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One may not convincingly argue, under either general or conflict-
of-interest-specific legal principles, that an agency grantee has no
interests which may be substantially affected by the official
authority, duties and responsibilities of that agency's Director merely
because the Director has ``delegated'' certain functions regarding
grants to subordinate officials. A delegation of authority by a federal
official is not a divestiture of official authority or
responsibility.33 As noted by the United States Court of
Appeals, the head of an agency who delegated authority to a subordinate
official ``did not, however, divest . . . himself of the power to
exercise his authority or relieve him of his responsibility for action
taken pursuant to the delegation.'' 34 In fact, the Supreme
Court has found that an official may not administratively divest
himself of statutory authority.35
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\33\ Skokomish Indian Tribe v. General Services Administration, 587
F.2d 428, 432 (9th Cir. 1978).
\34\ Skokomish Indian Tribe, supra at 432. For conflict of interest
purposes it may be noted that the act, decision and discretion of
delegating certain authority or not delegating authority, to whom such
authority is delegated, and the nature--reviewability, timing, extent--
of such delegation may involve, in themselves, the exercises of
official duties that may substantially affect a grantee.
\35\ NLRB v. Duval Jewelry Company, 357 U.S. 1, 7-8 (1958); Equal
Employment Opportunity Commission v. Exchange Security Bank, 529 F.2d
1214, 1218-19 (5th Cir. 1976).
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A superior thus clearly has ``official responsibility'' for, as
well as ``official authority'' over, the actions of those subordinate
officials in the chain of authority and command in his federal
agency.36 The assignment, review, oversight, and supervision
of official actions of subordinate employees, as well as the express
authority retained by that official to direct the overall functions and
programs of the agency, are all among the official responsibilities and
duties of a federal officer such as an agency Director. In explaining
the conflict of interest principles in the concept of the ``official
responsibilities'' of a federal officer, Professor Manning expressly
noted that: ``[T]he head of a department or agency would have ``under
his official responsibility'' all matters in the department or
agency.'' 37
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\36\ See, for example, definition of ``official responsibility''
for purposes of certain criminal conflict of interest laws as including
``direct administrative or operating authority, whether intermediate or
final, and either exercisable alone or with others, and either
personally or through subordinates, to approve, disapprove, or
otherwise direct Government action.'' 18 U.S.C. 202(b). Emphasis
added.
\37\ Bayless Manning, Federal Conflict of Interest Law, at 207-208
(Harvard University Press 1964).
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It should be emphasized that there is not a requirement under the
gifts prohibition/``award'' restriction that the recipient official
must actually participate ``personally and substantially'' in any
current governmental matter affecting the donor/grantee for the
prohibition on awards to apply, as there is under several criminal
conflict of interest laws.38 As noted, the restrictions on
awards from interested parties is concerned, for obvious ethical and
conflict of interest reasons, with the power to exercise governmental
authority in the donor's favor, that is, it is concerned with the
status of the recipient official vis-a-vis the donor, and not with
whether such authority is actually exercised in a particular,
identifiable matter. Like many conflict of interest rules, this
regulation does not require actual corruption, loss by the Government,
or wrongful official acts, but rather is preventative and prophylactic
in nature, and thus is, as the Supreme Court noted concerning another
conflict of interest law, ``directed not only at dishonor, but also at
conduct that tempts dishonor.'' 39 Under the relevant legal
and administrative interpretations of, and the plain meaning of the
language employed in the gifts/``award'' limitations, therefore, an
entity such as a cancer research and treatment facility which has a
continuing grant and certification relationship with a federal agency
such as the National Cancer Institute, clearly has interests that may
be substantially affected by the actual, statutory operational,
administrative and supervisory duties, responsibilities and authorities
of the Director of that agency, and may thus not be a source of cash
``awards'' to that Director.
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\38\ While not requiring ``personal and substantial'' participation
in a particular governmental matter affecting the donor to incur the
prohibition on ``awards,'' even that much stricter criminal standard of
responsibility and duties would not, as discussed by Roswell Perkins,
``create a loophole for the lazy executive in the chain of command who
may not have bothered to dig into the substance'' of a particular
matter. Roswell Perkins, ``The New Federal Conflict of Interest Law,''
76 Harvard Law Review 1113, 1128 (1963).
\39\ United States v. Mississippi Valley Generating Co., 364 U.S.
520, 549 (1960). The language of the regulatory limitation prohibiting
an ``award'' when the donor entity has interests that ``may be''
influenced by the official duties of the recipient indicates a focus on
potential performance or influence. The Supreme Court noted in another
ethics context, that the Government ``appropriately enacts prophylactic
rules that are intended to prevent even the appearance of wrongdoing .
. .'' Crandon v. United States, 494 U.S. 152, 164 (1990).
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SUMMARY/CONCLUSION
1. A federal official in the executive branch may not, under federal
ethics regulations, receive a cash ``award'' or ``prize,'' even
a ``bona fide award,'' from a donor which has interests that
may be substantially affected by the performance or
nonperformance of the official's governmental
duties.40
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\40\ 5 U.S.C. 7353(a)(2); 5 C.F.R. 2635.202, 2635.203(d),
2635.204(d).
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2. An entity is not a ``disinterested'' nor ``detached'' source, and
specifically has interests that ``may be'' substantially
affected by the performance or nonperformance of the official
duties of a federal officer when that officer is ``in a
position to act favorably to the giver's interests,'' that is,
when he has the ``capacity to exercise governmental power or
influence in the donor's favor.'' 41
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\41\ United States v. Sun-Diamond Growers of California, 526 U.S.
398, 405-411 (1999); 8 Op. O.L.C. 143, 144 (1984); OGE Advisory
Opinions Nos. 83 x 11 (July 26, 1983), and 92 x 7 (February 26, 1992).
There need not be a particular identifiable matter before or ``on the
desk of'' the official for the regulation to apply, and if there is
such an official matter immediately before the officer while he is
receiving things of value, gifts and cash from that entity, then other,
more serious criminal violations may be implicated.
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3. The Director of a federal agency has the official authority,
responsibility and duty to direct, oversee, manage and
supervise the agency decisions regarding the making of grants
and the continued certification of certain grantee entities,
may not divest himself of such authority and responsibility by
way of delegation, and thus, obviously, has significant federal
authority, power, capacity and official responsibilities that
may substantially affect the interests of such a grantee of
that agency.42
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\42\ 42 U.S.C. 285a-1, 285a-2. NLRB v. Duval Jewelry Company, 357
U.S. 1, 7-8 (1958); Skokomish Indian Tribe v. General Services
Administration, 587 F.2d 428 (9th Cir. 1978). An official need not have
``personal and substantial'' participation in a particular matter for
the regulation to apply (Compare to 18 U.S.C. 208).
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4. The federal gift restrictions, therefore, prohibit the Director of a
federal agency such as the National Cancer Institute from
personally enriching himself by accepting large cash ``awards''
or ``prizes'' from grantees of his own agency.
Mr. Greenwood. We thank you very much, Mr. Maskell.
Dr. Varmus.
TESTIMONY OF HAROLD VARMUS
Mr. Varmus. Thank you, Mr. Greenwood. Thank you and your
colleagues for holding this hearing and giving me an
opportunity to speak. I agree with you that if there are
concerns about ethics practices of the NIH that the vit
unshanum on those practices will be useful to maintain the
integrity and utility of the NIH.
I have been asked to speak about some historical matters so
I will be addressing some of the questions Ms. DeGette raised
in her opening statement and not the specific cases that you
mentioned in your opening comments, Mr. Chairman.
What I would like to do is give you a brief historical
review of the situation, comment a bit on the evolution of
views about management of conflict of interest and ethics
matters, and comment on the current status of issues at the
NIH.
My current opinions are based on three phases of my career.
First, as a faculty member at the university of California
during the 1970's and 1980's; second, as Director of the NIH
from 1993 to 1999; and, finally, in my current capacity as the
head of an academic health center in New York.
Some brief history. During the 1970's and 1980's biomedical
research was profoundly transformed by the birth of the
biotechnology industry. This enterprise, as you know, has
generated some remarkable products, hepatitis B vaccines, human
insulin, hormones that we use to protect patients undergoing
chemotherapy, major advances the public welcomes.
The growth of this industry was also remarkable because it
depended heavily on an unusually intimate relationship between
industry and the nonprofit sector, especially scientists and
academic institutions. These scientists are largely supported
by Federal funds. They are often in State universities, receive
public salaries. They are nearly always beneficiaries of
Federal research grants.
They were not simply the authors of information that was
used by the biotech industry. They were also intimately
involved in the development of that industry as founders,
consultants, board members, collaborators, and the source of
newly trained employees.
Now, in that period there was no uniformity of practice
with respect to how academic institutions managed the many
potential conflicts and outside activities conducted by their
employees. Government scientists, especially those working as
bench scientists in the intramural program of the NIH were
subject to much more severe limitations.
Despite the fact that they are neither regulators of non-
Government research nor responsible as bench scientists in the
intramural program for awarding grants and contracts in
distinction to scientists of the NIH who work in the extramural
program that awards grants and contracts.
In fact, you could argue that Government scientists in the
intramural program have position descriptions very similar to
those of academic scientists at universities and health
centers.
Now, when I came to the NIH as director in the fall of
1993, it was quite clear from a number of sources that the
intramural research program was held in relatively low esteem
by outside scientists and morale was low. That is well
documented by a long article that appeared in Science Magazine
in August 1993 and other pieces of evidence that included the
inability to recruit scientists from the outside. Nearly all
recruits were people who had been trained within the NIH, and
it was also apparent from the well-documented loss of many of
the most prominent scientists at the NIH to academic or
industrial sectors.
This was not simply due, in my view, to the restrictions on
outside activity interactions but that certainly was a
component, both the limitations on industrial interactions and
restrictions on other outside activities including bans and
honoraria and so forth. One of the things that I did when I
came to the NIH was to try to restore the NIH, especially the
intramural program, to its former high regard.
We brought together a distinguished group, our own Blue
Ribbon Panel, to look at issues of management, evaluation
procedures, facilities.
Then in 1995 when we were advised by the Office of
Government Ethics that NIH had dramatically improved its
oversight of outside activities which had been critically
reviewed several years earlier, and that we were advised that
NIH had come into compliance with less restrictive policies
employed by other Federal agencies, I lifted the restrictions
as another step toward making the NIH intramural program more
welcoming to outside scientists.
Included in that lifting of restrictions was the explicit
directive that all outside activities would be carefully
reviewed by ethics officers to ensure they did not interfere
with the conduct of official duties.
Later I also sought permission from the Department to
expand the use of alternative pay scales, again as part of a
multi-factored approach to improving the intramural research
programs assigned to equality.
I believe that in the aggregate those steps have been
successful. The intramural program does have the very high
regard in these scientific communities that it had 20 years
ago. It competes effectively with academic institutions for
outstanding job candidates at the junior level. Many of its
current leaders have been brought to the NIH in the last decade
in the extramural community.
It is difficult to know how much to ascribe that to changes
in compensation, policies governing outside activities, to new
buildings, to the altered reputation itself, or to improved
management practices. But to give you one example, the vaccine
research center, a brand new entity on the campus, has
successfully recruited 10 new outstanding staff to conduct
research in the pursuit of an AIDS vaccine and the director of
the vaccine research center advises me that if he did not have
the salary capabilities conferred by Title 42 and the ability
to offer the possibility of outside activities, that he would
have had a very difficult time in making those recruitments.
There have been many changes in the approach that the
extramural community has made; that is, the academic community
has made to issues of outside activities over the last 4\1/2\
years since I left the NIH. A number of important cases and
meetings have brought to the attention of this community the
need for clear definitions of what conflicts of interest are
when they pertain to individuals and institutions.
More attention has been given to conflicts of commitment;
that is, situations in which excessive reimbursement or unusual
amounts of time given to an outside activity may deflect
attention to the prime interest of an academic scientist. We
are paying more attention to appearance of conflict of
interest. Complicated cases are now reviewed by conflict of
interest committees composed of scientists, administrators,
lawyers, and many informed lay persons.
I have testified, of course, to Dr. Zerhouni's Blue Ribbon
Panel. I agree largely with the recommendations the Blue Ribbon
Panel has made. I have emphasized the continued importance of
allowing participation in outside activities including
consulting for industry to maintain the vibrancy of the
intramural research program to ensure that the talents of its
members are fully utilized for the benefit of society, and to
provide the tools necessary for effective recruitment and
retention of outstanding scientists.
I have also argued in contrast to the policies we have put
in place in the mid-1990's that rules of engagement now need to
be more explicit, more restrictive. We have learned something
over the last several years. Some reasonable limits in the
number of hours devoted to and the amount of compensation
received from an outside activity.
I have suggested that senior personnel such as institute
and center directors who are responsible for the award of
grants in the development of programs be barred from certain
activities. I have applauded Dr. Zerhouni's creation of his
trans-NIH committee, the so-called DEAC. I commend him for
trying to enlarge the group of intramural scientists who must
provide full general disclosure. I believe in disclosure.
Final actions by the Director of NIH on these and other
matters addressed in the panel's report should take into
consideration your deliberations here, public comments on the
report, the views of NIH employees and others. I appreciate the
efforts you are making, Mr. Chairman, to study these complex
issues and I will be pleased to respond to any questions you
might have. Thank you for indulging me with my slightly
overlong presentation.
[The prepared statement of Harold Varmus follows:]
Prepared Statement of Harold Varmus, President, Memorial Sloan-
Kettering Cancer Center
Mr. Chairman and Members of the Committee: Thank you for an
opportunity to speak with you about rules governing the outside
activities of scientists employed by the National Institutes of Health
(NIH) and about my views of the recommendations recently made to the
NIH Director by the panel he established to review practices related to
conflicts of interest. I welcome the public discussion of these topics,
because the NIH is of such importance to the future of biomedical
research and health care, and the conduct and management of its
research program are therefore matters of general concern.
My current opinions about the complex issues being addressed at
your hearing today are based on my experiences in three phases of my
career--first, as a faculty member at the University of California, San
Francisco, Medical School from 1971 to 1993; second, as the Director of
the NIH, from 1993 to the end of 1999; and, third, as the current head
of the Memorial Sloan-Kettering Cancer Center (MSKCC) in New York City.
Each of these phases offered lessons that are pertinent to our
important discussion here today.
Phase 1: Birth of the biotechnology industry
It helps to begin with some history. During the 1970's and 1980's,
biomedical research was transformed by advances in molecular biology
and genetics that led to the development of recombinant DNA technology.
Once the government and the scientific community reached agreement
about reasonable means to monitor the safety of these new methods, an
industry based on them--the biotechnology industry--was born and grew
rapidly, especially in the Bay Area, where I was working. Soon this new
enterprise generated and began to manufacture some of its now numerous
products--such as human insulin, hepatitis B virus vaccine, and
hormones that protect the bone marrow after cancer chemotherapy--major
advances in health care that help to justify to the public the major
investment that our country has made in basic biomedical sciences.
The growth of the biotechnology industry was also remarkable
because it depended heavily on an unusually intimate relationship
between the industry and the non-profit sector, especially scientists
in academic institutions. These academic scientists, largely supported
by public funds (often salaried by state universities and nearly always
beneficiaries of Federal research grants), were not only the authors of
the published knowledge on which the biotechnology industry was built;
they were also the founders, the consultants, the board members, the
collaborators, and the sources of newly trained employees for the
companies. Different academic institutions displayed a wide range of
attitudes towards these activities, without consensus on the nature or
seriousness of any potential conflicts and often without clear
guidelines for preventing or governing them.
One indisputable feature of this change was the enhanced fertility
and frequency of relationships between the academic and industrial
sectors. In contrast, government scientists, such as those working in
the intramural program (IRP) of the National Institutes of Health, were
more likely to be subject to limitations to their participation in
these productive and interesting interactions, despite the fact that
they were neither regulators of non-government research nor responsible
for awarding grants and contracts. In fact, in most ways, the
government scientists in the IRP could be viewed as having position
descriptions very similar to those of academic scientists at
universities, health centers, and research institutes: to perform not-
for-profit research, largely with public funds, with the intention that
the findings will be useful for the control of disease. (The major
differences between IRP and academic scientists are related to funding
mechanisms, review procedures, and the speed of the IRP's response to
new health threats.)
Phase 2: Strengthening the NIH IRP
The governmental restrictions, however, on industrial interactions
and other ``outside activities'' (such as bans on honoraria for
speaking, editing, and writing), combined with less generous salary
scales and many concerns about the management of research activities in
the Federal agency, contributed to the relatively low esteem in which
the IRP was held by outside scientists and to the low morale in the
program when I arrived at the NIH as Director in the fall of 1993.
Worrisome consequences of these attitudes included ineffective
recruiting of new staff from the external scientific community (it was
reported that 70% of recently recruited staff had been trained in NIH
laboratories) and the recent loss of some of NIH's most prominent
scientists to the academic or industrial sectors. (Some of these issues
are discussed in a lengthy news article that appeared in Science
magazine in August, 1993; J.Cohen, ``Is NIH's Crown Jewel Losing
Luster,'' Science 261: 1120, 1993.)
As a proud product of the NIH intramural training program in the
late 1960's, when it was considered to be in an extraordinarily
productive phase, I was intent on trying to return the IRP to its
earlier stature in my new position. To achieve this, my colleagues and
I energetically and successfully followed the recommendations made by a
panel of distinguished investigators that we convened to address
concerns about management, evaluation procedures, and facilities in the
IRP (Report of the External Advisory Committee of the Director's
Advisory Committee and Implementation Plan and Progress Report,
November 17, 1994). I sought permission from the DHHS, again
successfully, to expand the use of alternative pay scales, including
the Senior Biomedical Research Series, and alternative hiring
authorities, such as Titles 38 and 42. When advised by the Office of
Government Ethics in 1995 that NIH had dramatically improved its
oversight of outside activities, following a critical appraisal in
1991, and should come into compliance with the less restrictive
policies employed at other Federal agencies, I lifted the restrictions
as another step towards making the NIH IRP more welcoming to
outstanding scientists, with the explicit understanding that all
outside activities would be carefully reviewed by ethics officers to
insure that they did not interfere with the conduct of official duties.
In my estimation--and, I believe, in the estimation of most of the
scientific community--the IRP has largely regained its stature and its
productivity. It competes effectively with academic institutions for
outstanding job candidates at the junior level, and many of its current
leaders have been brought to the NIH campus in the past decade from the
extramural community. It is difficult, of course, to know how much to
attribute the improved status of the IRP to changes in compensation,
policies governing outside activities, new buildings, altered
reputation, or improved management practices. But, to offer one
example, the Director of the new Vaccine Research Center (VRC) has told
me that he would have been unable to recruit most of the seven junior
and three senior scientists he has hired at the VRC since his arrival
in 1999 if he did not have Title 42 authorities to offer salaries
competitive with those provided at outside institutions; furthermore,
while his new staff members fully understand the need for careful
review of their outside activities for conflicts of interest and
commitment, they would have been discouraged from coming to the NIH if
it were considered unethical to use their general knowledge to advance
the practical use of new information by consulting for industry.
Phase 3: Growing sophistication of approaches to outside activities
During the nearly four and a half years since I left the NIH for
MSKCC, I have closely observed and participated in the evolution of
attitudes at academic health centers towards outside activities,
particularly those that involve the for-profit, industrial sector. In
view of the dangers posed by conflicts of interest in clinical
research, many academic health centers--acting alone and through their
associations--have re-examined their rules for the conduct of clinical
research. They have also sought clear definitions of conflicts of
interest that affect individual investigators or entire institutions,
and they have applied them to the conduct of basic laboratory research
as well as clinical research. As a by-product of these deliberations,
more attention is now also given to the conflicts of commitment that
result from the devotion of relatively extensive time to, or the
receipt of relatively generous reimbursement from, an outside activity.
Furthermore, academic institutions increasingly appreciate the
importance of even the appearance of conflicts of interest or
commitment, since a perceived potential for conflict can undermine
public confidence in medical research.
Importantly, the accumulated experience with a wide variety of
outside activities undertaken by employees at many non-profit research
institutions indicates that complicated cases are generally uncommon,
but difficult to judge by a simple rule book. For this reason, many
academic centers, including our own at MSKCC, have established conflict
of interest committees, composed of scientists, administrators,
lawyers, and informed laypersons, to review unusual and complex
situations on a case-by-case basis and make recommendations to
institutional leaders for the management of those cases.
Advice to the Blue Ribbon Panel
These more sophisticated approaches to management of outside
activities in academia should also be applied to the NIH IRP, as I
maintained when I testified before the Blue Ribbon Panel that Elias
Zerhouni, Director of the NIH, recently assembled to advise him about
conflict of interest policies. More specifically, I emphasized the
continued importance of outside activities, including consulting for
industry, to maintain the vibrancy of the IRP, to ensure that the
talents of its members are fully utilized for the benefit of society,
and to provide the tools necessary for effective recruitment and
retention of outstanding scientists. I also argued that rules of
engagement need to be more explicit and frequently revisited--and
revised if necessary--while remaining consistent with the cardinal
principle of non-interference with the performance of official duties.
I applauded Dr. Zerhouni's creation of a trans-NIH conflict of interest
committee and his already successful efforts to enlarge the group of
IRP scientists required to provide full public disclosure, not just
internal disclosure, of their compensated outside activities. I also
argued that some reasonable limits should be placed on the number of
hours devoted to and/or the amount of compensation received from an
outside activity. Finally I recommended that senior NIH personnel, such
as Institute and Center Directors, who are responsible for the award of
grants or the development of extramural programs and who are unable to
recuse themselves in favor of an appropriate superior should not be
permitted to engage in outside activities involving potential or actual
beneficiaries. (I also proposed some of these policy changes in written
testimony submitted to the Labor-HHS Subcommittee of the Senate
Appropriations Committee on January 15, 2004.)
In general, I agree with the Blue Ribbon Panel's recommendations,
as presented to your Committee last week by Bruce Alberts and Norman
Augustine, with a few qualifications. I believe that exclusion of
senior Institute and Center personnel from consulting for industry or
academia should be based on function (namely, formulation or funding of
extramural programs as opposed to direction of intramural research),
rather than seniority or title. I also believe that exemptions should
be permitted from the ban on reimbursement with equities if reviewed
favorably by the trans-NIH conflict of interest committee. Final
actions by the NIH Director on these and other matters addressed in the
Panel's report should take into consideration public comments on the
report, the views of NIH employees and grantees, and the opinions
formed by this Committee and the Congress as a consequence of these
hearings.
I appreciate the efforts you and your colleagues are making, Mr.
Chairman, to study these complex issues by holding this series of
hearings. Your actions and views can have important consequences for
one of the world's most esteemed research organizations.
I would now be pleased to respond to any questions you might have.
Mr. Greenwood. That is quite all right. Thank you, Dr.
Varmus.
The Chair would recognize the Chair of the full committee,
Mr. Barton, for purposes of inquiry for 10 minutes.
Chairman Barton. Thank you, Mr. Chairman. I may not have 10
minutes of questions but I do have a few. I want to start with
Ms. Glynn. On page 4 of your testimony you say, and I am
quoting from it, ``It would be somewhat peculiar to say that
the agency had and other senior management essentially may
never receive an award from anyone involved with the agency.''
Well, I am not sure I think that is so peculiar so why would it
be peculiar if we just had a blanket categorization that you
couldn't receive a cash award?
Ms. Glynn. I think you have to remember that the rule we
are talking about, the one promulgated by my office, is an
executive branch-wide rule so it would have similar
applicability at DOD, for example, and NIH. We are very
concerned when we promulgate these rules that we don't go
overboard while trying to address the issues that are present
at one particular agency.
For example, at DOD you would have to assume that virtually
every company in the country would be a prohibited source for
Secretary Rumfeld to receive an award from because virtually
every major corporation in the country----
Chairman Barton. I may be misinterpreting your testimony
but I am talking about cash awards. I am not talking about
getting a plaque for good guy of the year.
Ms. Glynn. That is right, sir.
Chairman Barton. Where there is a cash stipend that goes
with it.
Ms. Glynn. Yes, sir. I understand that. That is the reason
we came up with this test that affords at least a small modicum
of flexibility. Frankly, I would say, for example, in the DOD
example I just gave there is no way that Secretary Rumfeld
would ever be approved to accept an award from Northrup Grumman
or Lockheed Martin. But by contrast, Coca Cola or Disney does
do business with DOD and they might conclude that any matters
involving Coca Cola or Disney is far removed from any of the
work that he would do.
Chairman Barton. I am checking with the House Ethics
Committee and the Congressional Research but I am not aware
that a Member of Congress while he or she is in Congress can
receive any kind of a cash award. It is just not done and there
are 435 of us so there are 434 watchdogs. At least whatever the
other party is, you know they are going to watch us like a hawk
and we watch them.
Ms. Glynn. Sure. The President in an executive order has
issued an outside earned income ban for all Presidential
appointees. But one exception to that ban is our regulation
that allows these bona fide awards. Once again, I think the
head of NIH, if he were eligible to receive a Nobel prize would
probably not want to have to turn that prize down even though
it involves a cash award.
Chairman Barton. Well, not just in NIH and FDA but
Government-wide how many Federal employees each year either
receive or are offered cash awards? Are we talking about
hundreds, thousands, tens of thousands?
Ms. Glynn. We have no data on that, but I'll be honest,
with my informal discussions with agency ethics officials in
preparation for this hearing, awards at other agencies are
infrequent.
Chairman Barton. Infrequent?
Ms. Glynn. Yes, sir.
Chairman Barton. Could you ask your staff to compile
whatever inquiries you have--is it a requirement that if one is
offered a cash reward, they have to touch base with your
department?
Ms. Glynn. No, it is not a requirement but we certainly
could do a sort of informal survey of major agencies.
Chairman Barton. Should it be a requirement? Should we
require by statute that any Federal employee that is offered a
cash award has to have it cleared by your office or some
office?
Ms. Glynn. I hate to invite that little bit of extra work.
Maybe perhaps for a certain level of employee; I am not sure
that I would want every GS-9 who gets offered a cash award to
have to clear it through our office.
Chairman Barton. So under current statute someone--there is
no requirement that any person offered a cash award touch base
with your group?
Ms. Glynn. No, sir.
Chairman Barton. So it is all voluntary?
Ms. Glynn. They have an ethics official. Remember the
ethics program is a decentralized program so there is a
designated ethics official at every agency. That person would
normally be involved in the approval of such awards.
Chairman Barton. But do they----
Ms. Glynn. They are not required to consult with us,
though.
Chairman Barton. So yours is purely----
Ms. Glynn. Anecdotal evidence.
Chairman Barton. [continuing] a service that is available
if they want to use it.
Ms. Glynn. Yes.
Chairman Barton. It is not mandatory.
Ms. Glynn. Yes, sir.
Chairman Barton. Okay. Now, Mr. Swindell, you are the
person, I believe, that on Dr. Clausner's request to receive
the award from the University of Pittsburgh, you are the one
that said that was okay. Is that right or wrong?
Mr. Swindell. Yes, sir. I am the one that signed that
approval and it is not a decision that I look back on with
fondness or pride.
Chairman Barton. Okay.
Mr. Swindell. I think the situation was one where I relied
too uncritically on the direction and information provided to
me by General Counsel Rabb at that time. In that regard, let me
provide some background of how we had to operate back in that
prior administration.
We and other attorneys in the Office of General Counsel at
that time had been specifically instructed to provide advice
and evaluate issues based on whether any reasonable argument
could be made that a particular course of action was legally
supportable. The view was that the decisionmakers, the
political appointees and other senior officials were to be
responsible and accountable themselves for the choices that
they made. To say no to anything the lawyers would have to
demonstrate that was the only real possible answer.
Chairman Barton. Now, wait a minute. That is the political
guidance that came to you or that is your----
Mr. Swindell. I will read to you, Mr. Chairman, a copy of a
note to a file that I wrote 10 years ago in 1994. I was a staff
attorney in the Ethics Division at that time. I provided the
committee a copy of the note. If you will permit me to quote
from it because I think it is pretty interesting.
Chairman Barton. These are your words?
Mr. Swindell. These are my words written to a note to the
file in 1994.
Chairman Barton. Okay.
Mr. Swindell. This is 3 years before the Clausner award. It
said, My supervisor indicated to me that the General Counsel
instructed him to confine ethics advice to purely legal
answers. We are no longer to provide observations about the
wisdom of particular actions or policy or how things may appear
on the front page of the Washington Post or possible political
ramifications of options.
These matters are for policymakers. The General Counsel
does not desire career objective view as a check on official
actions. We are to decide only if there is a legal objection,
i.e., whether the action or option is legally supportable under
the law and regulations.
My supervisor, in turn, instructed me to carry out the
General Counsel's wishes. He said that he had written a note to
the file to document this instruction and advised me to do the
same. There may arise situations where when we comply with
these instructions and are prevented from providing full
counsel----
Chairman Barton. I have the gist of it. So what you are
basically saying is as long as at some point in the past you
have written a note to the file to cover your bottom, it is
okay. Whatever the guys on top tell you to do, you are going to
find a way to do.
Mr. Swindell. Well, essentially----
Chairman Barton. Tell us your title at HHS right now.
Mr. Swindell. It is Associate General Counsel.
Chairman Barton. For what?
Mr. Swindell. For ethics.
Chairman Barton. For ethics?
Mr. Swindell. That is right. I can assure you that we do
not operate under this type of advice under the current
administration.
Chairman Barton. And what was your title in 1994?
Mr. Swindell. I was a staff attorney in the ethics
division.
Chairman Barton. For ethics.
Mr. Swindell. Yes, sir.
Chairman Barton. Okay.
Mr. Swindell. The problem is----
Chairman Barton. So, as I understand that note, though, the
direction is even though you are in the ethics division, you
are not supposed to use any ethics. You are supposed to use
your legal training to render the decision that the political
higher ups ask you to render.
Mr. Swindell. It is a fair criticism to render the precise
answer and allow the individual to take the risk of the
appearance.
Chairman Barton. Okay. Does an associate general counsel or
an assistant general counsel in HHS and ethics, is it ever
ethical to just resign or to say, ``I can't do that,'' and give
you what my real opinion is?
Mr. Swindell. Well, there was a restrain on us. I checked
my bar rules to make sure. The bar rules require lawyers to
provide counsel on ethics, political, social, and so forth.
They also say the client waive those.
Chairman Barton. Do you view the job of the Ethics Division
as a watchdog for the integrity of the American people or as a
lapdog for whoever the superiors happen to be at the time? That
is a serious question.
Mr. Swindell. It is a very serious question. Unfortunately,
I do not view it the bad way. I view it as we want to do the
right thing. I have devoted a dozen years of my career to
working on ethics. I was very concerned about the restraints on
us. I kept being reassured that the officials would be
responsible for the risk of their assessment of what people
think about them.
Chairman Barton. My time has expired. I want to ask a
question of Dr. Varmus very quickly.
You were an NIH director in the mid-1990's and my briefing
book says you are the one that made the decision to life the
restrictions on consulting at NIH. Is that true?
Mr. Varmus. Yes. Of course, in consultation with other
people.
Chairman Barton. But it was your ultimate decision. In
hindsight do you think the decision you made then, if you had
to make it today knowing what you know now, would you make the
same decision?
Mr. Varmus. As I have indicated, I think we have learned a
lot about the problems of managing this kind of--these outside
activities and the difficulties of appearance of conflicts and
I would do it somewhat differently as I have indicated in my
testimony.
Chairman Barton. Okay. Thank you, Mr. Chairman.
Mr. Greenwood. If the gentleman will yield, I want to
clarify one thing. I know he has no time to yield but, Mr.
Swindell, you said you received those directions from your
superior. Would you identify your superior?
Mr. Swindell. My superior at that time, his name was Jack
Kress.
Mr. Greenwood. Jack Kress with a C or a K?
Mr. Swindell. K-R-E-S-S.
Mr. Greenwood. And did Mr. Kress indicate to you what
motivated him to render that advice to you, whether he had been
chastised from someone in a superior position to him or what
the genesis of that was?
Mr. Swindell. It was my understanding that this came after
a performance review that he had. In fact, about 6 months----
Mr. Greenwood. And who would have been reviewing his
performance?
Mr. Swindell. The General Counsel Harriet Rabb. In fact,
about 6 months later my supervisor shared with me a criticism
he had received from the General Counsel about a memorandum
that I had drafted for the supervisor's signature that stated
that certain conduct would not be prudent. She said that this
was our old problem of giving opinions about appearances rather
than just stating legal conclusions backed by law.
Mr. Greenwood. Did you ever have a sense of what motivated
Ms. Rabb to do that, whether someone in a superior position to
her had----
Mr. Swindell. I don't know.
Mr. Greenwood. Okay. The gentlelady from Colorado is
recognized for 10 minutes.
Ms. DeGette. Thank you, Mr. Chairman. Mr. Swindell, you had
mentioned with the Chairman's example that that waiver was
given under the previous administration but the waiver that was
given to Tom Scully was given under this administration.
Correct?
Mr. Swindell. Are you talking about a conflict of interest?
Ms. DeGette. Yes, sir.
Mr. Swindell. Yes, the Scully waiver.
Ms. DeGette. Right. That was the one on May 12, 2003.
Right?
Mr. Swindell. I am not sure.
Ms. DeGette. Okay. Now, in that situation basically you
recommended that HHS Secretary Thompson issue a waiver to Tom
Scully who was the head of CMS--we all know him--so that he
could negotiate employment with persons having matters before
Mr. Scully which included lobbyist and law firms with drug
companies and health care companies as their clients. Is that
right?
Mr. Swindell. Yes, I prepared the document that the
Secretary signed.
Ms. DeGette. Now, Mr. Scully told you in his memo, and I am
quoting, ``These entities are likely to have substantial
interest in matters pending before the Department and Mr.
Scully has responsibility for such particular matters that may
affect the financial interest of the firms with which he may
seek employment.'' Is that correct?
Mr. Swindell. I will be able to explain in a moment the
process.
Ms. DeGette. Okay. I understood but that is what he said to
you in his memo. Right?
Mr. Swindell. I am not sure there was a memo to me.
Ms. DeGette. Okay. Actually, this is your memo.
Mr. Swindell. This is my memo to the Secretary.
Ms. DeGette. Right. So did you write those words?
Mr. Swindell. If they are in the document I wrote those
words.
Ms. DeGette. Okay. Now----
Mr. Swindell. Actually, a staff attorney prepared it.
Ms. DeGette. The HHS regulations on post-employment
restrictions state that current employees who have begun
seeking or negotiating for non-Federal employment must recuse
themselves from participating in any official matter that
involves the perspective employer including a legislative
initiative or policy initiative that affects the perspective
employer as a member of a defined class. Is that right?
Mr. Swindell. If it is in the document, that is right.
Ms. DeGette. Now, have you ever given the kind of waiver
you gave to Mr. Scully to a Senate confirmed official while he
was the agency lead on a major piece of legislation?
Mr. Swindell. I don't know about the specifics about
legislation but there have been many waivers like that granted
in the past including one approved by President Clinton with
regard to Donna Shalala when she was head of HHS and talking to
universities. Of course, universities----
Ms. DeGette. Well, but at this time this was right in the
middle of Mr. Scully's negotiations with Congress on the
Medicare bill, right?
Mr. Swindell. As it turns out----
Ms. DeGette. May 2003.
Mr. Swindell. I think afterwards that was the case.
Ms. DeGette. Right.
Mr. Swindell. By the time he came to me I was not aware of
what all he was involved in.
Ms. DeGette. He didn't tell you he was involved in those?
Didn't your memo exactly say that he had substantial interest
pending before----
Mr. Swindell. That is a presumption that would be the case,
that there would be industries----
Ms. DeGette. Now, did anybody tell you to give Mr. Scully
this waiver? You said before your boss told you. That was your
decision?
Mr. Swindell. No. The manner in which we deal with
conflicts of interest when someone leaves the Government, I
will be happy to explain the process and why it is important.
Ms. DeGette. Okay. Briefly, please.
Mr. Swindell. Section 208 of the criminal statute and some
regulations require employees to recuse from matters once they
start talking about employment.
Ms. DeGette. Right. Did Mr. Scully recuse himself from
negotiating the Medicare bill?
Mr. Swindell. I don't know whether he recused from
negotiating the Medicare bill. The key point is there are some
narrow distinctions in the law itself that talk about two types
of matters, the particular matters of general applicability and
particular matters involving specific parties.
The ethics concerns for the particular matters of general
applicability are less than they are for a particular matter
involving specific parties. The idea is if you are someone like
the head of an agency and you are talking with someone in the
agency that you regulate, then you are going to be recused from
doing your job totally. It means that you----
Ms. DeGette. Well, not really. Only if you are looking for
another job and there is a major bill pending before Congress
that affects lots and lots of people to whom you are applying
for a new job. Right?
Mr. Swindell. If the same situation was with Donna Schlala,
the idea is that the agency head, if they start talking with
someone when they are trying to leave the agency, they will
have recusal obligations that are very, very extensive and
basically can't do their job.
Ms. DeGette. Okay. Well, I understand but when Donna
Shalala--I really do understand but here is the thing. Did you
then as part of your waiver to Mr. Scully say, ``Now, don't
negotiate specific pieces of legislation with Congress in which
these folks may have a financial interest.''
Mr. Swindell. No, because a piece of legislation is a
particular matter of general applicability which is what the
waiver covered.
Ms. DeGette. So how many times have you given those types
of waivers to senior government officials like the one to Mr.
Scully?
Mr. Swindell. Well, first of all, they are issued by
management, not me. These are signed by the Secretary or
Assistant Secretary.
Ms. DeGette. Okay. So it was the Secretary.
Mr. Swindell. The Secretary approved it.
Ms. DeGette. Okay. But it was your recommendation?
Mr. Swindell. Sure.
Ms. DeGette. Okay. I am sorry. Maybe we will have another
round and we can explore this further.
Mr. Swindell. I would be happy to provide the Congress with
a statement explaining the law.
Ms. DeGette. That would be super. That would be great.
Now, Dr. Kington, I actually got all the different statute
books that had the different ethical rules in it. It seems to
me there are lots of ethical rules, Ethics in Government Act,
Privacy Act, Freedom of Information Act, the internal NIH
rules. Is this causing some confusion and angst among your
researchers as to what they can and can't do right now?
Mr. Kington. Fortunately, we have a large staff of
attorneys mostly who advise us on compliance with the law.
There are multiple laws involved and it is challenging to get
the precise answer.
Ms. DeGette. Right. I am sure the attorneys love that. I
used to be an attorney. My question is about the researchers.
Are they feeling confused about----
Mr. Kington. Certainly now when we are in this period of
transition, yes. We try to give them as much direction as we
possibly can given what we know about the law.
Ms. DeGette. Okay. Dr. Varmus, when you assumed the
directorship of the NIH, did you find that the institutes were
populated with second-rate scientists?
Mr. Varmus. There were some, yes. There were many reasons
to believe the review processes had not been stringent enough.
NIH had not been able to recruit the best people to come into
these staff positions. There was much reason to believe based
on both conversations and reportage that the NIH intramural
program did not have the--was not held in the esteem which it
was held 10 to 20 years earlier.
Ms. DeGette. And do you think that was mainly or solely
because of the issue of outside compensation?
Mr. Varmus. As I have indicated in my testimony and in my
statement, Ms. DeGette, only partly. There are many other
reasons having to do with management and review processes. It
is a complex situation and we tried to deal with matters across
the board.
Ms. DeGette. And, you know, you probably wouldn't be
surprised to hear last week in our hearing some of the
testimony was that the younger scientists, the people doing a
lot of the basic research at NIH right now, and since you came
in in the mid 1990's, morale is pretty good now. Also
interestingly, most of these researchers aren't receiving this
outside compensation. Would that surprise you?
Mr. Varmus. That doesn't surprise me, no. I think the issue
is not simply whether you are active in that process but
whether the intramural program scientists who don't have
responsibilities for regulation, for making grants, whether
they have the opportunities that their equals on the outside
have. I think it is a simple matter----
Ms. DeGette. And it is not so much for them about
compensation as about research opportunities. Wouldn't that be
fair to say?
Mr. Varmus. Well, it is a mixture. What kind of atmosphere
obtains the intramural program. Do people feel like they are
second-class citizens. Do they not have the opportunity even if
they don't use it to undertake consultations to carry out
outside activities.
Remember that not all of the outside activities are
concerned with industrial relations. In many cases this is just
a matter of honoraria for talks and special publications. When
I came to the NIH the whole intramural program was called the
honorarium ban in which matters of writing special kinds of
review articles or giving lectures could not be compensated as
they were for people on the outside. It created an atmosphere--
--
Ms. DeGette. You know, I have got to say this happens to
Members of Congress all the time. I get invited to speak to
groups and they might invite somebody from private industry or
something to speak and give them a cash award. When I go, I get
a really nice placque. We all have rooms full of them. But for
me it is the honor of going and speaking to the group. I know
that someone else from a university or somewhere else might be
allowed to take a cash award. Truly, most of these folks it is
about the prestige of the event.
Mr. Varmus. As a former Presidential appointee, I feel your
pain about not getting awards.
Ms. DeGette. It is actually not painful for me.
Mr. Varmus. We have to also recognize that an intramural
scientist is very different from a legislator or very different
from someone who runs an agency. It creates an atmosphere that
people don't find attractive when they are making choices of
jobs when they can go to a place where the world seems open to
them where very similar kinds of work are being done at a
university laboratory, for example, as opposed to going to the
NIH. The NIH is just----
Ms. DeGette. I just have one more question because under
this Blue Ribbon Panel recommendation, the senior appointees at
the NIH would not be able to accept these kinds of awards as I
understand it. It would just be the more junior researchers who
aren't getting them right now. My question is why not make a
more bright line rule and at least set some pretty clear
standards so people wouldn't be confused about it.
Mr. Varmus. Because I think we have to distinguish not
between juniors and seniors. We have to distinguish between
those who have certain kinds of functions. Every opportunity
has a risk and I don't deny that there are risks. That is why
we have the NIHEAC and why we have rules. I, too, now would
argue that it is useful to have some guidelines that will
prevent conflicts of commitment and outright conflicts of
interest. I don't think it is appropriate to ban all these
activities because they do have utility. It is not difficult to
imagine someone saying, ``Gee, it seems a shame to have all
these talented people at the NIH who are unable to provide any
advice.''
Ms. DeGette. Let us be clear and then I am finished. I
appreciate the Chairman's indulgence. No one is suggesting that
we ban all these outside activities. What we are talking about
is what we do about compensation. We can explore that further.
Thank you.
Mr. Greenwood. If the gentlelady would yield, certainly a
CRDA is a perfectly acceptable manner by which the scientists
at NIH get to work collaboratively with private sector
scientists to produce excellent results for the public for
which there is no compensation.
Mr. Varmus. I agree.
Mr. Greenwood. I have not come to the point where I am
prepared to say there should be no outside compensation but I
think it is important to note that even if we did, that would
certainly not be an impediment to the NIH scientists working
collaboratively in the private sector for the good of mankind.
Ms. DeGette. And reclaiming the time that I don't have, I
concur with the Chairman which is I am not to the point where I
think we should ban it but I think there are so many issues
here and they are very complex that I think it should be a real
consideration.
Mr. Varmus. And they are concerned. Even those of us who
are outside of Government now in the academic sector feel this
very acutely. We have all been revising our rules, changing the
way in which we monitor our investigators to avoid the same
kinds of conflicts you are worried about because, indeed, many
of our people are supported, almost all of them are supported
with public money they receive from the NIH and many of them at
public institutions like State universities have other kinds of
public monies. These are major concerns.
Mr. Greenwood. The Chair thanks the gentlelady. The Chair
would note--first, the Chair would ask unanimous consent that
the document binder be incorporated into the record. Without
objection it is.
The Chair would note that there is a series of votes in
process right now so we are going to have to recess probably
until 12:30. We apologize to the witnesses for keeping you that
much longer but it will take us that long to get through the
series of votes and get back here. The committee is in recess
until 12:30.
[Whereupon, at 11:37 a.m. the subcommittee recessed to
reconvene at 12:37 p.m.]
Mr. Greenwood. A quorum being present, the hearing will
reconvene, and the Chair recognizes himself for 10 minutes for
purposes of questions. And I am going to begin with you, Mr.
Swindell.
Your testimony on page 4 states that HHS employees must
address the concerns of the many while avoiding the appearance
or fact of undue influence by the few. Is that correct?
Mr. Swindell. I don't have a copy.
Mr. Greenwood. And you agree that HHS employees attempt to
accomplish avoiding appearance of undue influence in part
through legal advice provided by your division, or, if they are
political appointees, from you as the HHS designated agency
ethics official. Is that correct?
Mr. Swindell. Yes, I am.
Mr. Greenwood. Okay. Well, I didn't ask you if that is who
you were. I said, ``And you agree that HHS employees attempt to
accomplish avoiding the appearance of undue influence in part
through legal advice provided by your division, or, if they are
political appointees, from you as the HHS designated agency
ethics official.''
Mr. Swindell. The HHS Ethics Division--its principal
clientele are the political appointees. The DECs who run the
programs within the Department do the ethics in those
components, and as needed, and they consult the Ethics
Division.
Mr. Greenwood. Okay. So, for example, in 1996 when Dr.
Clausner was offered a $30,000 award from the University of
Pittsburgh, he sought advice on whether to accept this award.
Is that correct?
Mr. Swindell. He came to the General Counsel to seek advice
about that.
Mr. Greenwood. Okay. In 1996, the first time out.
Mr. Swindell. The first time out.
Mr. Greenwood. When the answer was no.
Mr. Swindell. Okay. I was not the head of the office then,
but you are right, I do recall. That is right.
Mr. Greenwood. Okay. And the advice he was given was that
he could not accept the award, is that right?
Mr. Swindell. That is correct.
Mr. Greenwood. Okay. If you go to Tab 10, that binder right
in front of you there, you will see a memo by the Ethics
Advisor at the National Cancer Institute, Dr. Maureen Wilson,
advising Dr. Clausner to decline the award because the
University of Pittsburgh was a prohibited source. Can you
identify that?
Mr. Swindell. Yes.
Mr. Greenwood. Okay. Am I characterizing that document
correctly?
Mr. Swindell. Correct.
Mr. Greenwood. It is a memo by Wilson advising Clausner to
decline the award, because the University of Pittsburgh was a
prohibited source. Okay.
Do you know who Michele Russell Einhorn is?
Mr. Swindell. She was an attorney in the Ethics Division at
that time.
Mr. Greenwood. Okay. If you go to Tab 12, you will see Ms.
Russell-Einhorn sent you an e-mail on October 7, 1996, that
included another e-mail. Do you see that?
Mr. Swindell. Yes.
Mr. Greenwood. In the message she sent to you and others
she writes about a phone call with the Office of Government
Ethics and the OGE which said Dr. Clausner could not accept the
award for three reasons: an ongoing lawsuit involving
Pittsburgh and the National Cancer Institute, a contract
dispute between Pittsburgh and the National Cancer Institute,
and the fact that Pittsburgh is a grantee contractor in a
cooperative group trial participant funded by the NCI. Do you
see that? Okay.
Mr. Swindell. Yes.
Mr. Greenwood. So you were aware that Ms. Russell-Einhorn
had consulted the Office of Government Ethics and was told that
Dr. Clausner could not accept the award from the University of
Pittsburgh. Is that right?
Mr. Swindell. I was an addressee among all of the staff
members. I was not focusing on NIH issues at that time, but I
obviously know about this.
Mr. Greenwood. I didn't ask you if you were the only one
who knew about it. I was asking you if you knew about it.
Mr. Swindell. I would have received the message. I don't
know if I would have focused on it at the time.
Mr. Greenwood. Would you have read it?
Mr. Swindell. I would assume I would have read it.
Mr. Greenwood. Okay. In 1997, you were aware about OGE's
past advice when the University of Pittsburgh offered the award
again to Dr. Clausner but this time with a $40,000 cash gift.
Is that right?
Mr. Swindell. Yes, I looked--asked the staff to look and to
see what had happened.
Mr. Greenwood. Okay. Did you confer with the Office of
Government Ethics regarding the 1997 Pittsburgh award?
Mr. Swindell. That is something I have tried to think
whether we did or not. I have a visual impression in my mind
that a staff member was talking to me about some aspect of the
opinion, about the reasonably foreseeable language, but no one
can indicate that we made any--no record that we talked with
them.
Mr. Greenwood. What would be the routine, standard
operating procedure?
Mr. Swindell. It varies, depending upon what the issue is,
if there is confusion. Obviously, when I looked at this, I
thought we were going in the right direction with the concept
about what we call a bad prohibited source, something that is--
there is really something going on precisely at the time, the
timing--and, yes, it talks about being a grantee, but I am
afraid I didn't really pick up on that.
Mr. Greenwood. I mean, isn't that a huge red flag?
Mr. Swindell. If that had been the answer----
Mr. Greenwood. Isn't the fact that Pittsburgh--the
University of Pittsburgh was a grantee, isn't that a gigantic
red flag?
Mr. Swindell. Of course it is. But it is an exception to
the gift rules for getting gifts from grantees, to get a bona
fide award.
Mr. Greenwood. Right.
Mr. Swindell. So the concept exists that one could get a
bona fide award from a prohibited source. This is the crux of
the issue that the General Counsel and the Acting Director of
OGE has now given us guidance as to what--how we analyze this.
You know, trying to think back 7 years and what was in my
mind with the General Counsel asking--there were about six
lawyers working on this issue, asking questions, trying to find
out about what the University of--the Dixon Prize was, its
connection to the University of Pittsburgh.
If the answer had been the mere fact that it was a grantee,
that would have been the end of it from--OGE could have said,
``It is a grantee; that is the end of it.'' So in grappling----
Mr. Greenwood. Why was that difficult to find out?
Mr. Swindell. It is not difficult to find out. As I said, I
am not sure whether we called or not. I just don't have any
records that we did.
Mr. Greenwood. Were you aware that Dr. Wilson sent a memo
dated October 1, 1997, to Dr. Clausner raising concerns about
the Pittsburgh award? If you look at Tab 22, it might refresh
your memory.
Mr. Swindell. I assume she is giving the results of
whatever we have been finding out about the University of
Pittsburgh.
Mr. Greenwood. Did you talk with her regarding your
recommendations in the memo?
Mr. Swindell. I don't recall.
Mr. Greenwood. Did you agree with her recommendations?
Mr. Swindell. I guess the recommendation is that Dr.
Clausner would have to assure that he didn't have matters
pending in front of him that were consistent with the opinion.
So to the extent that that is the case, I would agree with it,
but----
Mr. Greenwood. So you would agree with her?
Mr. Swindell. Mr. Chairman, as I explained earlier, the
whole result of this opinion was very technical, trying to see.
The General Counsel was obviously interested. We were under an
obligation to take a look at this, and if there was no legal
way to stop this award, then it was not our duty to stop it.
The individual was supposed to take the heat for this kind of
decision and the appearance of this kind of decision.
Mr. Greenwood. Wait a minute. Wait a minute. You are not
allowed to take money from prohibited sources, correct?
Mr. Swindell. You are not allowed to receive a gift from a
prohibited source.
Mr. Greenwood. Right. Okay. And a source becomes prohibited
de facto if the source is a recipient of the entity headed by
the guy who is going to take the money, right?
Mr. Swindell. It is a----
Mr. Greenwood. What is the hard part?
Mr. Swindell. Well, I will defer to the Office of
Government Ethics to explain better than I can. But there is an
exception to this idea that you can't get gifts from prohibited
sources. It focuses on whether the entity is a--whether the
offeror of the award is an entity that has interest that can be
substantially affected by the performance or non-performance of
the----
Mr. Greenwood. All right. Where is the cloudy part in that?
Mr. Swindell. Well, it doesn't say agency head. If the idea
is you are going to--if that means the same thing as grantee,
then it is a circuitous argument. You can't have--they can't be
the same. It can't be just a grantee, because you have got an
exception to a rule for grantees. So it had to mean something
different.
Mr. Greenwood. Let me ask Mr. Maskell. Do you think there
is anything cloudy about this? Maybe I am missing something. It
looks like a no-brainer to me.
Mr. Maskell. I understand I am preaching to the choir here,
but no, I--the problem is you have two sets of prohibited
sources. The first three you have are agency-wide prohibited
sources. That is someone who does business with, is regulated
by, or seeking action from the agency--everybody--that includes
grantees and contractors.
But the other prohibited source, the fourth prohibited
source, is personal to the individual. That is why it is not
duplicative, and that is why it is not circuitous. The fourth
one is personal, and it says if that source can be--has
interest that can be affected by the performance and non-
performance of that individual's official duties, then they
cannot accept even an award from them. I thought it sounds
pretty clear to me that----
Mr. Greenwood. I will bet it is crystal clear to you.
Mr. Maskell. [continuing] an agency head has that
authority.
Mr. Greenwood. And if you were told don't--if it was your
job, if you had Mr. Swindell's job at the time, and you were
told--I know this is hypothetical----
Mr. Maskell. I know.
Mr. Greenwood. [continuing] but if you were told, ``You
can't say no''--even if they put this incredible restraint on
you, which is, ``You can't say no, if there is any legal
reason--there has to--using the letter of the law is the only
guidance here.'' Would you still find any difficulty in the
letter of the law prohibiting this?
Mr. Maskell. I can't speak to the political pressures that
Mr. Swindell felt at that time. But that is----
Mr. Greenwood. I am not asking you to. I am just saying, is
there any question----
Mr. Maskell. That is probably another reason to have a
bright line. I personally would have cited that rule, and I
would have cited 18 U.S.C. Section 209 and said you are not
allowed to----
Mr. Greenwood. Mr. Swindell, do you think there was any
political pressure involved here?
Mr. Swindell. There was pressure, obviously, to provide the
advice that--according to the instructions. Obviously, the
person who renders that advice, to tell us how to give advice,
obviously was a political appointee. But I don't think politics
entered into it.
I think what we have----
Mr. Greenwood. You don't think Clausner was trying to get
friends of his to give him a green light on this?
Mr. Swindell. That is certainly possible, but I don't have
any facts to know that. I think----
Mr. Greenwood. Dr. Wilson wrote--let me interrupt you. She
wrote, ``Given that the litigation was only recently settled,
the major issue to be overcome is the appearance that the NCI
agreed to cooperate with Pittsburgh to settle the litigation,
including the monetary payments, as well as other tangibles and
intangibles, and that this award is being made as a result of
that agreement.'' Did you see that memo?
Mr. Swindell. Yes, and that is what--that is the point, is
that he is going to have to assess those appearance situations
personally and assume those risks. I think it is very good that
Jake Wilson wrote that.
Mr. Greenwood. Well, let me just finish here. Just a
second. Whether you read this memo or not, do you agree with
the NCI Ethics Advisor that there is an appearance issue to be
overcome? That you got, right?
Mr. Swindell. I got that.
Mr. Greenwood. And you had it then. You knew that there was
an appearance issue.
Mr. Swindell. Yes. I was very--a number of us were
concerned about the looks of that. Sure.
Mr. Greenwood. Okay. As the designated agency ethics
official for the Department of Health and Human Services, did
you advise Dr. Clausner about the appearance of undo influence
or conflict of interest in his accepting a $40,000 cash gift
from a grantee institution involved in a lawsuit with the
National Cancer Institute that had recently been settled?
Mr. Swindell. I didn't personally give him advice other
than what was in the opinion.
Mr. Greenwood. Do you know whether anyone said to him,
``This looks like hell, but we are not going to''----
Mr. Swindell. The communications with Clausner were from
the General Counsel. I don't know what she would have said.
Mr. Greenwood. Did you address the appearance issue in your
memorandum to Dr. Clausner?
Mr. Swindell. I think it stresses in there--it is very
careful. It stresses in there about the fact that he is going
to have to make his determination in accordance with the
limitations and what the meaning of it was.
Mr. Greenwood. Wait a minute. Did you address, did you say,
did you indicate anything about the appearance problem?
Mr. Swindell. I don't recall what is in the memo precisely.
Mr. Greenwood. Go to Tab 23 and look at your memo there.
Mr. Swindell. Okay.
Mr. Greenwood. My question is: in your memo to Clausner,
did you say--did you address the appearance issue, or did you
just address the strictly legalistic--give a strictly
legalistic response, pursuant to what you had been instructed
to do----
Mr. Swindell. Right.
Mr. Greenwood. [continuing] by your superior, a la per the
note in the file?
Mr. Swindell. You are correct. It doesn't look like that I
really stressed that issue with him.
Mr. Greenwood. You weren't supposed to, right? You had just
been told--you had been told----
Mr. Swindell. That is right. I mean, I wanted to make sure
that he attested to things. I remember that was one important
thing to me, that he--that we apprised him what the law was
that we understood, and that he was supposed to attest to the
facts, that he didn't have anything, you know, within the
meaning of the rule in front of him, because I wanted to make
sure that he was understanding that.
Mr. Greenwood. But basically you said technically--
technically, the Emperor has clothes on, but the fact that you
appeared to everybody else to have no clothes on, you didn't
bother to incorporate that into your memo.
Mr. Swindell. Well, certainly, as I said, this is--I was in
a difficult situation back then. I was new. I was an acting
person only there for just, you know, a few months when this
occurred. I agree this could have been done a lot better.
Mr. Greenwood. Okay. The gentlelady from Colorado is
recognized.
Ms. DeGette. Well, I just wanted to--are you yielding to
me?
Mr. Greenwood. No, it is your turn.
Ms. DeGette. Oh, great. But following up on the chairman's
questions, Mr. Swindell, you have said several times that in a
situation like Dr. Clausner's situation it is a personal
determination. And, in fact, in your memo, after going through
all of the standards, on page 5 of your memo you do say you
will need to apply this interpretive guidance to your own
situation. But here is----
Mr. Greenwood. I am sorry. I made an error.
Ms. DeGette. Go ahead.
Mr. Greenwood. Mr. Stearns has not had a first round.
Ms. DeGette. Okay.
Mr. Greenwood. So----
Ms. DeGette. Can I just follow up on your question just
with this--on your questioning, Mr. Chairman?
Mr. Greenwood. In think in fairness----
Ms. DeGette. Okay.
Mr. Greenwood. [continuing] do that on your time. We will
give Mr. Stearns his shot now. We will give you as much time as
you would like.
The gentleman from Florida is recognized.
Mr. Stearns. Thank you, Mr. Chairman. Are we have 5 minutes
or----
Mr. Greenwood. Ten minutes.
Mr. Stearns. Ten minutes. Okay, good. I have three
questions.
Let me just start--I have a subcommittee that deals with
oversight on financial accounting standards, and we are having
a debate on whether stock options should be expensed. And I
guess last week's advisory--Blue Ribbon Panel of the Advisory
Committee to the Director examined the conflict of interest
that NIH employees eligible to engage in compensation outside
of professional activities, should they receive compensation in
the form of stock options or other equities for their service.
And so, Dr. Kington and Ms. Glynn, these are questions for
you. And I will start with you, Ms. Glynn. It seems to me that
offering these stock options to these individuals creates some
problems. The Financial Accounting Standards Board would like
to expense all of these, so that the people who invest in these
companies know what stock options are being provided.
And lo and behold, these have all been kept pretty silent.
And so I guess my question is--the current compensation
involving stock options, is that ethical? Is it protecting the
stockholders, the taxpayers, the patients? I guess everybody
involved.
And then for you, Dr. Kington.
Ms. Glynn. I think the major problem in permitting
acceptance of either stock or stock options as a form of
compensation is that it creates a kind of continuing financial
interest in the company, so that even after your consulting
work is completed you continue to have a conflict of interest
with anything affecting that company, because, in effect, you
are sort of an owner of the company.
So from that perspective, what that means is that once your
consulting concludes you must continue to be recused from
matters involving the company. What we have is, then, a
potential for not only recusal during the consulting period but
a continuing recusal once the consulting is finished, and that
is problematic.
I have heard--and, you know, from OGE's perspective we are
certainly not experts on this, but I have heard that one of the
problems in barring stock options or stock as compensation is
that it tends to favor payers that are from bigger established
organizations that can afford to pay scientists cash versus the
smaller startup types that don't have any cash to pay, and this
is all they can afford.
Now, understand, I am not taking any position on that,
because it sort of begs the question of whether the consulting
was proper to begin with, whether it is paid in cash or stock
or stock options.
Mr. Stearns. Dr. Kington?
Mr. Kington. Well, NIH fully recognizes the problem with
payment to employees who consult with stock options, and we
were very receptive to the Blue Ribbon Panel's recommendation
that that not be allowed.
Mr. Stearns. Yes. Because, you know, these people that have
the stock option then will try to promote the company. And the
ways they can do it are varied and multiple, and you can't--no
one knows about it.
Mr. Varmus. Can I comment just briefly on that, Mr.
Stearns?
Mr. Stearns. Sure.
Mr. Varmus. First of all, NIH employees are allowed to own
stock.
Mr. Stearns. Oh, no, no. Yes, they can own stock in a----
Mr. Varmus. So if you buy stock, you become interested in--
--
Mr. Stearns. Well, we are talking about stock options that
are given to you.
Mr. Varmus. I understand. I understand. But I think that
the holding of stock--I am just commenting on Ms. Glynn's
remark--you know, that doesn't necessarily create a conflict of
interest. It just means you have an interest in----
Mr. Stearns. But this is your own money that you make after
the bottom line, after you pay taxes, you invest. This is
compensation that is part of the----
Mr. Varmus. It is an alternative means of compensation, and
I think----
Mr. Stearns. Do you disagree with these two people?
Mr. Varmus. I do a little bit, in the sense that I think
one of the reasons that the NIHEAC was established, the NIH
Ethics Advisory Committee, is to look at issues of that kind,
because there are instances in which companies simply don't
have much capital to spend on consultants, and----
Mr. Stearns. Well, if these people are--why should they be
working for the NIH when they get--they are consulting for this
company and they are getting stock options?
Mr. Varmus. Well, if we do entertain the idea of
consultation, and we think that is potentially valuable in both
directions, it seems to me that the----
Mr. Stearns. Well, let me give you a hypothetical.
Mr. Varmus. Yes.
Mr. Stearns. You are working for NIH, and you are under
retainer with a company to advise them--Company X. And they
have ground-breaking technology, and they offer you stock
options. And they are paying you, and you are getting paid by
NIH, and you are sharing the information from them with the
NIH. Should you get stock options from them without making it
public that you are getting these stock options? Is that what
you are saying, it should be----
Mr. Varmus. No, I am not.
Mr. Stearns. [continuing] private?
Mr. Varmus. No, I am all for disclosure----
Mr. Stearns. I think we are talking about----
Mr. Varmus. [continuing] and I am all for discussing each
of these instances on a one-by-one basis. I think there could
be conditions under which reasonable people would say that the
fraction of the total stock being held by the employee is
extremely small, that the----
Mr. Stearns. It depends upon what the stock does, whether
it is small or not, and it depends upon the stock option.
Mr. Varmus. Well, as a fraction of the total company stock
issue, that--I think that----
Mr. Stearns. I mean, if they gave them $100,000, eventually
it could be worth $4 million. That would be quite an incentive
for this person.
Mr. Varmus. Well----
Mr. Stearns. How does he keep his conflict of interest
separate?
Mr. Varmus. Well, the conflict of interest, of course,
would arise if there were some situation in which the conflict
arose. The assumption is that----
Mr. Stearns. So you disagree with the Blue Ribbon Panel of
the Advisory Committee to the Director on this.
Mr. Varmus. I think that being cautious about stock is very
appropriate, and I am just arguing for what I think we have all
been arguing for in a sense, that in some cases the nature of
the compensation should be a matter for, in a sense, case
adjudication. And that the reason we have at all our
institutions committees to look at these is to try to be sure
that we don't write a blanket rule that obviates the
possibility of----
Mr. Stearns. So you think if the company gives a flat fee
that is the same as stock options.
Mr. Varmus. No, I am not saying that.
Mr. Stearns. I mean, wouldn't a flat fee be more ethical
than getting a stock option, which is based upon the
performance of the company?
Mr. Varmus. All of these--as we learn from these
experiences, they are all different. And I--you know, I take
your point, and I think the stock options are more problematic.
But I would opt in my ideal world for a more flexible policy,
that is all.
Mr. Stearns. Have you taken stock options in a situation
like I just described?
Mr. Varmus. Not at the NIH, of course, but I did as a----
Mr. Stearns. When you were working for NIH, did you get----
Mr. Varmus. No, no. No, absolutely not.
Mr. Stearns. Okay.
Mr. Varmus. I, as a Presidential appointee, gave up
everything that could remotely be considered----
Mr. Stearns. That is my point. As a Congressman, I----
Mr. Varmus. But I was in charge of the NIH.
Mr. Stearns. I mean, I don't get stock options, and there
is no one in this room that gets stock options. And if you are
working for NIH, you are advocating they should get stock
options with a company they are consulting instead of--that is
what you are advocating.
Mr. Varmus. What I am arguing is that people at NIH have
different functions. The Director of NIH----
Mr. Stearns. Well, they are Government employees, though.
Mr. Varmus. Yes, but some--but Government employees who
work in the intramural program as----
Mr. Stearns. Well, why should we make an exception for NIH
if we don't make it for the Congressmen and Senators and
Presidents?
Mr. Varmus. I think the functions are very different. This
is obviously a complicated issue, but it is one that I think is
important to bring up, that----
Mr. Stearns. Well, I think you can get into conflict of
interest, and I think the Blue Ribbon Panel and the Advisory
Committee to the Director made that clear.
Let me move on. I just have so much time. I have to stop
you.
Mr. Varmus. They didn't say conflict of interest. They said
conflict of the commitment.
Mr. Stearns. Let me say I--the question I have now--on
February 10, the NIH Office of Management Assessment forwarded
a final advisory report from the HHS Office of Inspector
General for review of a conflict of interest allegation
concerning a Board of Scientific Counselors ad hoc reviewer.
NIH Deputy Director Michael Gutzman and NCI Director Andrew
von Eschenbach were among the recipients of this report. In
this report, the IG recommended that the National Cancer
Institute modify its process for selecting ad hoc reviewers to
allow a principal investigator to object in writing directly to
the Board of Scientific Counselors' Executive Secretary if he
or she believes the selected BSC ad hoc reviewer has a conflict
of interest.
I guess the question is: has this recommendation been
implemented? Anybody?
Mr. Kington. This is the first I have heard of that
recommendation.
Mr. Stearns. Okay. Another question is, based upon this
report, we know that NIH intramural researchers know in
advance. I think the staff has advised--probably advisable, Dr.
Kington, that you should follow up in writing on this, since
this was provided in writing with the recommendation. And I
guess we in the Oversight Subcommittee see--think not only
should you know about it, but it should be implemented.
So I guess the fact that you, one, don't know about it, is
a concern of ours. And then, two, give you a chance to answer,
come up to speed, and then see if you can implement it.
Mr. Kington. We would be happy to respond.
Mr. Stearns. Okay. And last, Mr. Chairman, if you bear--
forbearance here, based on this report we know that NIH
intramural researchers know in advance who is on the list of ad
hoc reviewers and who can object if they think a proposed
reviewer has a conflict of interest.
This is like the preemptory challenges in courts where each
side gets a chance to strike against a potential juror they
don't like. Given that intramural researchers have this right,
why shouldn't a private partner negotiating a CRADA with
intramural researchers know if those researchers are consulting
for the competition?
Let me repeat that--with intramural researchers know if
those researchers are consulting for the competition. Shouldn't
a private partner in the CRADA have the right to know and the
right to object to a perceived conflict of interest? Dr.
Kington? It is a little hard to understand the question. It is
sort of laid out as--sometimes we lay these questions out to
get them on the record, and that is the way this question is,
so----
Mr. Kington. I will refrain from commenting.
Mr. Stearns. Well, no, we are asking you to comment. You
are forced to comment here.
Mr. Kington. Clearly, any time there is a situation in
which the Government has entered into a CRADA with another
private company, we have decided that is the best way that we
can achieve some scientific goal. And, obviously, we should be
very concerned if there is a possibility of an appearance of
conflict with an employee who might be involved with a
competitor. So, yes, there should be some--that is of concern.
Mr. Stearns. I guess it is just public information that the
intramural researcher knows this information, whereas a private
partner in CRADA does not. And I guess we are saying that
shouldn't this private partner have this right, too, so we have
transparency here? Does that make sense?
Mr. Kington. On the face of it, yes. I mean, we absolutely
want our partners to have faith that we are reasonable
partners, that we are actually committed to working with them.
So, yes, we would be concerned about appearance of--we should
be concerned about appearance of conflict of interest.
Mr. Stearns. And so that this private partner should be
told, should have the right to know, and the opportunity to
object if there is perceived conflict of interest?
Mr. Kington. I am not sure if that necessarily has to be--
and I want to make that comment as a policy. There is no
question that we should do whatever is necessary to remove the
possibility of a serious conflict or appearance of conflict of
interest, and we are committed to that, however we could
achieve that.
Mr. Stearns. Yes. Well, I honestly feel you are--you want
to do that. So if you don't mind, you might tackle this
question, too----
Mr. Kington. I would be happy to.
Mr. Stearns. [continuing] in your reply, and we can look at
it.
I thank the chairman.
Mr. Greenwood. Now the gentlelady from Colorado is
recognized.
Ms. DeGette. Thank you, Mr. Chairman.
Okay. Mr. Swindell, if you will recall, we were having this
discussion about who--how we decide what standards to apply. In
your memo, you had said to Dr. Clausner, ``You will need to
apply this interpretive guidance to your own situation.''
And I think you said in response to the chairman's
questions that his interpretive guidance would be sort of how
would it look to the public or would it pass the smell test?
Would that be accurate?
Mr. Swindell. That is essentially what the General Counsel
said. The smell test or The Washington Post test was something
that we don't advise about.
Ms. DeGette. Now, at this time, Dr. Clausner was the
Director of the National Cancer Institute, right?
Mr. Swindell. That is correct.
Ms. DeGette. But, you know, so one would hope he might have
a press liaison to help him figure that out. But how is
everyone else going to figure that out? It seems to be a very,
very nebulous standard.
Mr. Swindell. That is a very good point, and that is the
problem with it.
Ms. DeGette. Right.
Mr. Swindell. And that is why we are not going to operate
under that and haven't operated under that kind of analysis
about these questions.
Ms. DeGette. But even under the new guidelines there seems
to be a lot of personal discretion as to whether there are
conflicts that I am not sure any ethics board could address.
Mr. Swindell. It is difficult. I mean, the idea is is that
the statutes and the regulations to some extent are intended to
codify what an appearance is. And we have tried to, in our
advice-giving now, since the very beginning of this
administration when I spoke with Governor Thompson's people
when they came in and actually discussed how we would give
advice in the problems we had, that what we will do is we will
counsel what we believe the law means, what the regulations
mean, and the regulations themselves in part--some aspects of
what an appearance is, but that we will try to also give advice
about what we will call perception or optics.
Ms. DeGette. But which is a moving target, isn't that fair
to say?
Mr. Swindell. It is.
Ms. DeGette. Yes. Now, Dr. Varmus and others have talked
about how employees at NIH, while public employees, are
different than, say, Congressional employees. And I should add
for the record it is not just Members of Congress, it is our
staffs, it is all of the employees of the U.S. Government.
I wanted to ask you, Ms. Glynn, because I got to thinking,
what are the ethical standards with respect to outside
compensation and award, say, for the EPA employees? Because we
have employees over there who are doing scientific
environmental research.
Ms. Glynn. Right. Can I address something else before I
answer that question?
Ms. DeGette. If we have time at the end, you can address
that.
Ms. Glynn. Okay. I mentioned in my oral statement, there is
one broad, bright line rule for the entire executive branch,
and that is in the rule published by my office. And as far as
outside employment or activities is concerned, that rule is
that the outside activity can't be such a conflict with your
job that it would require recusal essentially from most
important aspects of your job.
But a second part of that rule is that the outside activity
can't be prohibited by a statute or any other regulation, and
another regulation is that it can't be an appearance of a
conflict of interest. It can't be use of public office for
private gain----
Ms. DeGette. So do researchers over at the EPA get outside
income? Do you know?
Ms. Glynn. And, remember, each agency is allowed to
implement, supplement----
Ms. DeGette. Right.
Ms. Glynn. [continuing] more difficult, you know, more
stringent.
Ms. DeGette. Yes, I understand.
Ms. Glynn. Okay. EPA, for example, does--for certain
categories of employees--does have more stringent rules. It is
not exactly across the board, but it does have more stringent
rules.
My impression is that this is not a problem--this
compensation issue is not a problem at most science agencies,
however.
Ms. DeGette. Okay. What about the NSF or the CDC? Do you
know if they have supplemental rules?
Ms. Glynn. Mr. Swindell can speak better than I can about
CDC, but NSF definitely has supplemental rules as well.
Ms. DeGette. And do they allow their researchers to take
this type of outside compensation?
Ms. Glynn. There is no broad prohibition on it. There are
some prohibitions, but not an across-the-board prohibition.
However, once again, based on my conversations--informal--with
ethics officials at these agencies it is not that common to
permit employees to receive compensation there.
Ms. DeGette. Okay. Mr. Chairman, I think it would be very
helpful--maybe Mr. Maskell or someone could supplement the
record by giving us the standards at all of the Government
agencies about what kinds of outside compensation are allowed
for the employees.
Ms. Glynn. Sure. I mean, you can actually find them in the
Code of Federal Regulations----
Ms. DeGette. Yes, we have got that.
Ms. Glynn. [continuing] you have back here. But they are
all listed there.
Ms. DeGette. That would be helpful.
Mr. Varmus. It is important, Ms. DeGette, to note who is--
--
Ms. DeGette. Yes, sir.
Mr. Varmus. [continuing] what functions are being performed
by the agency. So the NSF, for example, makes grants but
doesn't have the equivalent of an intramural research program.
There are no scientists doing scientific work in the National
Science Foundation. They are developing grant programs and
administering grants.
Ms. DeGette. That is a really good point. Thank you, Dr.
Varmus. But, you know, and that kind of leads into my next
level of questioning, which is the researchers at NIH are
primarily doing basic research. Is that right?
Mr. Varmus. It depends what you mean by ``basic.'' There
are many who are doing clinical research, if you are
contrasting laboratory and research with patients. But it is--I
think we have to define the term ``basic research.''
Ms. DeGette. Well, okay, let me put it in a different way.
Mr. Varmus. They are not doing applied research.
Ms. DeGette. Most of the private companies don't have a big
investment in basic research.
Mr. Varmus. Actually, many of them do now. That is a major
change that actually came about during the growth of the
biotechnology industry, and many fundamental findings have been
made in the biotech industry. And now large pharmaceutical
houses have acquired those companies, have engaged themselves
in basic research. The continuum is much more complex than it
was 30 years ago.
Ms. DeGette. You know, it is interesting because I was
talking to, actually, some of the pharmaceutical
representatives who said that the bulk of the basic research is
still being done at NIH, and that----
Mr. Varmus. Or with NIH dollars, because that----
Ms. DeGette. Or with NIH dollars, and that----
Mr. Varmus. [continuing] over 80 percent of our money--of
NIH's money goes to universities and academic health centers
and colleges.
Ms. DeGette. Right. So I guess my question is, for some of
the scientists coming in, especially the newer scientists who
are the ones that theoretically these new ethical rules would
apply to, I am not sure I buy the fact that these people would
not be--these top flight folks would be attracted to NIH if
their outside compensation were greatly constrained or even
eliminated, because many of them are doing basic kinds of
research and not the advanced kinds of research. Would you
disagree with that?
Mr. Varmus. Well, the choice that most are making is
whether to go to the NIH intramural program to do research or
to do essentially very, very similar work under somewhat
different terms. And I don't mean simply financial terms, but
in terms of review and response to a different kind of system
of organizing research at universities, academic health
centers, colleges, universities. That is the usual choice.
Ms. DeGette. With NIH dollars in many cases at those
academic centers.
Mr. Varmus. And salaries being set independently and
different sets of rules. So it is a different environment, and
it has seemed I think--and especially in the 1980's--more
favorable to most to work in the extramural community as
opposed to the NIH.
Ms. DeGette. Now, when you were--I assume you participated
in trying to recruit folks to come to NIH when you----
Mr. Varmus. Absolutely.
Ms. DeGette. [continuing] were there. And did these folks
tell you that their decision of where to go was in part--I
mean, how important was the outside compensation?
Mr. Varmus. Very important, especially for the people I was
recruiting, because I was recruiting people at the upper end of
the spectrum.
Ms. DeGette. Right. Who now, of course, won't be entitled
to that, many of them.
Mr. Varmus. Pardon me?
Ms. DeGette. Now many of those folks won't be entitled to
that compensation. So do you----
Mr. Varmus. Well, but the----
Ms. DeGette. [continuing] think now we are going to----
Mr. Varmus. Ms. DeGette, we have two issues on the table
with respect to compensation. One is the outside activities,
and we are all agreeing that for certain high-level people
those should be prohibited or restricted.
Ms. DeGette. Right.
Mr. Varmus. But there are also salary issues, which we are
not discussing today, that are very important with respect to
using pay scales such as those that are allowable under Title
42 that make compensation more competitive with the kinds of
salaries that we have talked about.
Ms. DeGette. You know, I used to sit on a college board,
and we used to have these big debates vis-a-vis the economics
department and say, ``Well, you know, these people could go to
private industry, and maybe we should pay the economics
professors, you know, $200,000 a year, and we should pay the
classics professors $20,000 a year.''
And those were really tough discussions that we had, and I
think those discussions are endemic throughout the academic
world, and particularly difficult when you are talking about
biotechnology and all kinds of cutting edge research.
But, you know, the problem I think we have is that, No. 1,
I don't think we can make the assumption that people are simply
going to the NIH because of outside compensation. And, No. 2, I
think we have continuing tough, tough issues about conflicts of
interest which only get murkier, not clearer, the more levels
of ethics rules that we try to place, especially because of the
nature of research.
And this is really, I think, what we are struggling with
now. And I don't know the solution, but I just don't
fundamentally agree with the premise that this outside--if we
really constrain this outside compensation, so long as we
continue to allow collaboration, that that is going to severely
affect the quality of research scientists at NIH. That is just
my view.
Mr. Greenwood. The Chair thanks the gentlelady.
The gentleman Mr. Walden is recognized for 10 minutes.
Mr. Walden. Thank you, Mr. Chairman.
Mr. Swindell, you were Acting Director of HHS Ethics
Division at the time Dr. Clausner requested to receive the
Dixon Prize in 1997, weren't you?
Mr. Swindell. That is correct.
Mr. Walden. Okay. And as I recall, in your testimony you
said there was sort of an edict from up above about not giving
anything more than just a description of the law, correct? I
mean, that----
Mr. Swindell. That is correct.
Mr. Walden. [continuing] may not be the lawyerly--that is
correct?
Mr. Swindell. That is correct.
Mr. Walden. Was there a reason to believe that if you
didn't follow the instructions, to ignore appearance issues,
that that might affect you getting a permanent appointment? Was
it that kind of a feeling in the----
Mr. Swindell. No. At the time, there was actual concern
within the whole Ethics Division that it would be dissolved and
moved into another division. I had no desire to have to give
any advice to the General Counsel for the purpose of personal
advancement.
The Ethics Division at the time, they were going to merge
it into what was called the Business and Administrative Law
Division.
Mr. Walden. Why would they want to do that? What was the
talk?
Mr. Swindell. Well, there were difficulties I think with my
supervisor about how we gave ethics advice, which, of course,
precipitated this direction of how we were supposed to get----
Mr. Walden. And who was your supervisor then?
Mr. Swindell. Jack Kress.
Mr. Walden. And who did Jack Kress work for?
Mr. Swindell. Harriet Rabb.
Mr. Walden. And was this coming from both Mr. Kress and Ms.
Rabb?
Mr. Swindell. I read into the record earlier today,
Congressman, that--I wrote a note to the file that indicated
that my supervisor had told me that the General Counsel
directed us to provide precise legal issues, that we weren't
supposed to give advice about the appearances of things.
Mr. Walden. I mean, I just find that amazing. You know,
when I get counsel, I want to know all of the potential
ramifications, so I know----
Mr. Swindell. As I mentioned earlier----
Mr. Walden. With ethics, it is about appearance as much as
legality in public service.
Mr. Swindell. Obligation, yes. And it was a difficult
circumstance to be in.
Mr. Walden. Was Harriet Rabb the one who contacted you
about the Pittsburgh award regarding Dr. Clausner?
Mr. Swindell. Yes.
Mr. Walden. And she was, what, the General Counsel?
Mr. Swindell. She was the General Counsel.
Mr. Walden. Is it standard operating procedure for the HHS
General Counsel to get involved in award receipt requests of
this nature?
Mr. Swindell. I would not normally think so.
Mr. Walden. Did it happen any other time with her?
Mr. Swindell. No, not that I can recall.
Mr. Walden. Do you recall any other HHS General Counsel
ever getting involved in other requests of this nature?
Mr. Swindell. No, I don't recall another one.
Mr. Walden. What made this one so special, do you think,
that it rose to the level of----
Mr. Swindell. I do not know why this was so special, but it
was obviously--she wanted an answer. It was very difficult to--
she was somewhat inscrutable, because she also seemed to
understand that this was unseemly. But nevertheless--so I don't
know what her directions were.
Mr. Walden. What makes you say that she seemed to
understand it was unseemly?
Mr. Swindell. She would frown about the fact, you know, he
is trying to make a big deal about getting some money. You
know, I just think----
Mr. Walden. Mr. Clausner.
Mr. Swindell. Yes.
Mr. Walden. Dr. Clausner.
Mr. Swindell. Dr. Clausner.
Mr. Walden. Do you recall Harriet Rabb contacting you on
behalf of any other official for this kind of award? Or was
this just a very unique situation?
Mr. Swindell. I thought it was very unique, yes.
Mr. Walden. Did you or anyone else ever inquire as to why
she was involved in this?
Mr. Swindell. Why she was in this? No, did not.
Mr. Walden. Just one of those things that came down from
above, and you read the law and gave your interpretation?
Mr. Swindell. We had lawyers and a couple of divisions
looking at it--the Public Health Division, Ethics Division--and
trying to evaluate the nature of the award, because there were
some issues about whether it was coming from a foundation or
whether it was coming from a university, and so forth.
Mr. Walden. Were they under the same constraints that you
were in terms of not being able to offer opinion outside of
just the strict statutory reading?
Mr. Swindell. That was generally the way the lawyers were
supposed to operate in the Office of General Counsel was we--I
assumed they felt that lawyers were making policy--you know,
making decisions that were left to decisionmakers.
Mr. Walden. And was the theory that if you put something in
writing that showed there might be evidence--or it might have
the appearance, let us say, of conflict, that, therefore, that
would be taken into account.
Mr. Swindell. I think that would be a problem if we did. As
I said, we had an earlier circumstance where I had drafted a
memorandum where I said some conduct would not be prudent,
trying to get into the appearance of it. And my supervisor was
told it--I had drafted it for my supervisor's signature.
And he had come back from his performance appraisal saying
that was the same old situation of us giving advice about
appearances. And, you know, he was rebuked for that, and told
me as well. So there was clear understanding how we were
supposed to----
Mr. Walden. And that was Jack Kress?
Mr. Swindell. Yes.
Mr. Walden. Okay. So he was rebuked, and I assume by that
he was rebuked by Harriet?
Mr. Swindell. Harriet Rabb.
Mr. Walden. Harriet Rabb. Do you think this went all the
way up to the secretarial level?
Mr. Swindell. I can't speak to that.
Mr. Walden. Did you also approve Secretary Shalala's
appearance in that famous milk mustache ad?
Mr. Swindell. That was done not only with my looking at the
issue but the Public Health Division lawyers--the idea being
that the Government ethics rules don't govern the conduct of an
agency acting as an agency.
Mr. Walden. Yes.
Mr. Swindell. And that, therefore, this had been vetted
through the agency, it was part of a joint initiative with the
National Cancer Institute dealing with child and immunization
diseases, and so forth. And so it came up through that vetting.
The determination was that there was legal authority under the
Public Health Service Act, so the Associate General Counsel for
Public Health Service was also involved.
It had come up earlier in the administration--and I
concurred with my boss at the time, Jack Kress--that we didn't
think that it was legal for her to do it at that time.
Mr. Walden. Why?
Mr. Swindell. As I recall, the milk mustache text of the ad
had some language in it that talked about health care reform at
the time, and it almost was the point of lobbying with respect
to pending legislation. So we had that concern.
Obviously, the appearance concerns that she would have to
take, and she was advised about, that obviously people could
criticize her.
Mr. Walden. So it was somewhat controversial in the Ethics
Division?
Mr. Swindell. Controversial in the Ethics Division and the
ethics community and the press. But bare minimum legality, the
Public Health Division--the Public Health Service Act, you
know, says--it says a lot of language in there about the
Secretary having authority to encourage health promotion
activities, you know, and it was thought that this would be a
method of reaching teenagers. It was popular to make them drink
milk, and, therefore, you know, have strong bones.
Mr. Walden. Builds bodies in seven ways.
Mr. Swindell. Yes.
Mr. Walden. Or whatever it is. Is it true that you framed
the milk mustache ad and hung it on your office on your wall?
Mr. Swindell. It was everywhere, and it was there to remind
me that that was the kind of advice that I was supposed to
provide. Every day we would sit up there and see the
Secretary's milk mustache.
Mr. Walden. Now, what do you mean by that, that it was the
kind of advice you were----
Mr. Swindell. Well, it is a precise--it is another example
of a legal determination and allowing the policymaker to take,
you know, whatever responsibility for----
Mr. Walden. And they take the heat.
Mr. Swindell. [continuing] adverse perception.
Mr. Walden. Okay. Is that ad and picture still on your
wall?
Mr. Swindell. Of course not.
Mr. Walden. When did it come down?
Mr. Swindell. The very first day of the new administration.
Mr. Walden. All right. Okay. I think that is all the
questions I have at this point, Mr. Chairman. Thank you.
Mr. Greenwood. Milk grows strong bones, but something else
has to draw--create strong backbones. There wasn't a lot of
that going on.
Dr. Varmus, how did you get authorization--actually, is
it--yes, it is my turn, isn't it?
Ms. DeGette. I guess.
Mr. Greenwood. Yes, okay. I get a second round.
How did you get authorization to convert NIH directors from
full-time continuous positions into Title 42 special
consultants?
Mr. Varmus. I don't remember all of the details, Mr.
Chairman, but there was definitely consultation with the
Department to interpret the existing rules. I know that there
was a fairly severe time limit on Title 42 classification, and
we couldn't work this very well on a 1-year basis, and we were
given the authority from the Department to make appointments,
non-tenured appointments for 5 years under Title 42.
So this was the result of discussions that I and the Office
of Human Resource Management had with the Department.
Mr. Greenwood. Did that include the Office of General
Counsel?
Mr. Varmus. Yes.
Mr. Greenwood. Were you advised----
Mr. Varmus. And presumably with the Office of Personnel
Management at the Department. I don't remember exactly what
conversations occurred, but we were able to make a few
appointments in that category I believe as early as 1997, late
1997 or 1998.
And then I--one of my last acts before leaving was to write
a letter to Kevin Therm, who was then the Deputy Secretary,
asking for permission to extend the use of Title 42 for
incoming people who we thought might be more easily recruited
with the higher pay scale that we could pay under Title 42.
And there was a legal interpretation of whether people
under Title 42 would be--could act as opposed to just being
consultants, and I believe the language says ``assist and
consult'' or ``assist and advise,'' and that was viewed as
reason to allow----
Mr. Greenwood. Didn't that feel like a circumnavigation of
the intent of the law to you?
Mr. Varmus. Not to me. I thought that--and we were looking
for flexibility to adapt to circumstances that were making it
very difficult to----
Mr. Greenwood. But didn't that exist--doesn't Title 42
exist, and wasn't its origin the notion that sometimes you need
to bring in specialists for a limited period of time to
consult? And that is why Congress created that opportunity, and
that was--it was never Congress' intent to say, ``Well, the new
guys come in under Title 42.'' I mean, I----
Mr. Varmus. Well, it wasn't my idea that it would be all of
the new guys either. So we were trying to find--it seemed to me
that the language was consistent with an interpretation that
would say we were bringing in people to do high-level positions
who would not be tenured, would come in perhaps for a few
years, and would serve as experts. Obviously, I didn't make
this decision single-handedly.
Mr. Greenwood. Well, what you were advised as to the
position of the HHS General Counsel for widespread use of Title
42 conversion?
Mr. Varmus. That it was a legal application of the
provision.
Mr. Greenwood. Who advised you of that?
Mr. Varmus. I can't remember all of the people involved,
but certainly the General Counsel herself, and Kevin Therm as I
recall. I don't remember specifically, and I don't want to----
Mr. Greenwood. Okay.
Mr. Varmus. [continuing] since I am under oath. But I know
the----
Mr. Greenwood. Do you have any idea how many people in NIH
are under Title 42 now?
Mr. Varmus. I am told it is a lot--it is many more than
were on Title 42 when I left. I don't know the exact number.
Mr. Greenwood. Do you know order of magnitude?
Mr. Varmus. It is probably in the range of several hundred
or a thousand.
Mr. Greenwood. Would you be surprised if I told you it was
more like minimally 1,400? Or, actually, 4,000?
Mr. Varmus. I am somewhat surprised, but until I heard the
circumstances I wouldn't react to it.
Mr. Greenwood. You wouldn't be shocked to know that the
policy that you enacted on your way out has enabled 4,000
people to----
Mr. Varmus. Well, I didn't enact the policy, Mr. Chairman.
I asked for permission to enlarge----
Mr. Greenwood. That is what I mean. That is what I mean. I
am not--we don't need to parse words here. I am just--it was
your idea, correct?
Mr. Varmus. I supported it, yes.
Mr. Greenwood. It wasn't your idea?
Mr. Varmus. Well, I didn't know a lot about Title 42 to
begin with. But I began to learn about it, and it looked like a
reasonable mechanism for us to use in specific circumstances to
recruit people who were being paid very high salaries in
academia and----
Mr. Greenwood. I understand that. But the text of the law
says special circumstances. Okay? And when I tell you that
there are 4,000--we think there are 4,000 people at NIH who are
now salaried, paid under special--for special--special
consultants, does that seem to you--does that not strike you as
something run amok?
Mr. Varmus. I would say it is a number that surprises me. I
wouldn't have thought it would be that large.
Mr. Greenwood. Okay. When you became the NIH Director in
1993, were you aware that NIH was collecting information on
compensation amounts for outside consulting arrangements?
Mr. Varmus. I am not sure I understand the nature of the--
--
Mr. Greenwood. When you became Director in 1993, were you
aware that the NIH was collecting information on compensation
amounts for outside consulting arrangements, that they were
routinely gathering that information?
Mr. Varmus. There was a limit on the amount that could be
acquired, so I assume that--I don't know what you mean by the
term ``collection.'' That is what I am interested in. I assume
it was being monitored because there was a restriction,
especially on money from consultation from single source.
Mr. Greenwood. Okay. In May 1991, the scientists published
a story entitled ``NIH Struggling to Regulate Employees'
Outside Income.'' The article states that at the time NIH had
begun to collect followup information from scientists about
what they were paid for outside activities.
The information was to be used as part of a review of the
NIH salary structure to compare incomes of NIH scientists with
their counterparts in the private sector. Dr. Philip Chen, then
Associate Director for Intramural Affairs to NIH, stated, ``We
may use that information as an argument in favor of the need to
modify the salary structure to become more competitive with the
outside world.'' NIH has been unable to provide the committee
the amounts NIH employees receive from past outside activities.
In fact, NIH was not collecting this information until
recently, but NIH did collect this information in the past as
the article discusses. NIH was using the information to
determine whether salaries needed to be adjusted.
At the time, outside consulting was allowed to help make
employee income competitive with the outside, although it was
capped at $25,000. Isn't it true that the consulting was viewed
as compensation for the employee?
Mr. Varmus. Yes, but not Government compensation. But yes,
part of the compensation package.
Mr. Greenwood. And wasn't the collection of this
information discontinued when the cap was lifted?
Mr. Varmus. As far as I know, it was.
Mr. Greenwood. And isn't it true that NIH came up with
another way to compensate employees in order to make their
salaries competitive with the private sector Title 42? In other
words, in the good old days, in the old days, they collected
information to see how much people were making from consulting
agreement, so they could show that, in fact, how needy they
must be to have to go out and collect these outside--arrange
this outside consulting. And then that information was then
used to support the notion that we needed to use Title 42 to
increase the compensation.
Mr. Varmus. My sense was from the discussions that I had
that the Title 42 pay scale was advocated in part--in greater
part by comparison of NIH salaries with salaries that people
were receiving in academic institutions from which we were
trying to recruit them.
Mr. Greenwood. Well, where I am trying to go with this is
the NIH gathered information about outside activity in order to
bolster the argument that the scientists at NIH--the intramural
scientists--were underpaid, and it did that and justified the
Title 42 application.
And then the question is, so that being the case, why
continue--why is it a good policy to continue with the outside
consulting agreements when we have already attempted to solve
the problem through Title 42?
Mr. Varmus. Well, I see where you are going, Mr. Chairman.
But to the best of my recollection, most of the arguments that
we made were not based on compensation, because, in fact, a
moderately small amount--number of NIH employees were engaged
in consulting. What troubled me more was the difficulty of
recruiting to the NIH people who were making amounts that were
considerably in excess of what we could offer in the
conventional GS or SES pay scales.
Mr. Greenwood. Now, when you were Director, did you employ
retention bonuses?
Mr. Varmus. Occasionally.
Mr. Greenwood. Could you describe a retention bonus and how
that system works?
Mr. Varmus. It was quite a rare phenomenon, but it usually
would occur when someone was being offered a job on the outside
and had a written demonstration that a job was honestly
offered, not simply an idle comment. We would then apply for a
retention bonus to help retain that person, and these were
usually fairly modest sums.
Mr. Greenwood. Give me an example.
Mr. Varmus. Oh, it might be--I am conscious of being under
oath. I can't remember the numbers exactly, but in the range of
$25 to $50,000.
Mr. Greenwood. Okay. And you say it was rarely used? Could
you give us an order of magnitude of the number of times that
you think it was used while you were Director?
Mr. Varmus. Well, used in situations where I would be
making the appeal for the retention bonus, I don't believe it
would be more than 10 to 20 times perhaps, maybe less than
that.
Mr. Greenwood. Were you the only person at the NIH that
could approve a retention bonus?
Mr. Varmus. No. I would have to consult with my former
colleagues to know whether--there were some pay scales in which
a retention bonus could be given by an Institute Director.
During our time at the NIH, some personnel responsibilities--
some personnel authorities were delegated to Institute
directors.
I mean, it is possible in some pay scales and categories
that a retention bonus could be developed for an employee of an
institute, and I would not have been involved.
Mr. Greenwood. You said that you were surprised to hear
that as many as 4,000 NIH personnel could be under Title 42
now. Can you justify that? Do you think--could you make the
argument today that but for Title 42 that anything like 4,000
employees at NIH would go walking away because they are
underpaid?
Mr. Varmus. Well, I would have to look--I would have to
hear more about how and why it was done, and whether the pay
ranges are actually different from what people would have been
assigned if they were in the regular GS series. I don't know
the full particulars. I have been away for----
Mr. Greenwood. Why else would they be under Title 42 if it
weren't for salary----
Mr. Varmus. I don't know, Mr. Chairman. I know I would--
having heard the number, I will be interested to find out. But
I honestly can't tell you I have heard the----
Mr. Greenwood. And you said that you had set up the policy
so that new hires could come in under Section 42. Did you--was
it your idea that people would be able to convert their status
to Title 42?
Mr. Varmus. That was a possibility, sure.
Mr. Greenwood. Pardon me?
Mr. Varmus. That would be a possibility, if someone were
being promoted, for example, or doing exemplary work or being
lured away as a retention mechanism. It would seem to me to be
a possible use of the Title 42.
Mr. Greenwood. If I told you 21 out of 27 Institute
directors converted to Title 42, would that seem like a
reasonable occurrence to you?
Mr. Varmus. I am less surprised by that than I am by the
number itself, because Title 42 is particularly useful in the
higher ranges of the institution.
Mr. Greenwood. Okay. Final question for you, Mr. Swindell.
When did you--you were acting in your position for 3 years. Is
that correct?
Mr. Swindell. Yes, sir.
Mr. Greenwood. Did you find that extraordinary, to be in an
acting mode for all of that time? I mean, didn't you feel
like--did you frequently say at yearly reviews, ``When am I
going to be permanent instead of under this Sword of
Damocles?''
Mr. Swindell. Yes, I certainly felt that it was unusual.
Mr. Greenwood. Did anybody ever give you an explanation as
to why you were held in limbo land all that time?
Mr. Swindell. No, they never did. And, of course, if I
brought up our future, it is likely the future could have been
that we just were put into another division. So I----
Mr. Greenwood. Did you ever feel that your acting status
was a way to make you cooperate?
Mr. Swindell. Well, a fair criticism from somebody looking
at it from that----
Mr. Greenwood. I am not--I am asking you if you ever felt
that way.
Mr. Swindell. Felt?
Mr. Greenwood. Did you ever say to yourself, ``I know why I
am only Acting. That is to make me behave''?
Mr. Swindell. Well, I don't think I felt that directly, no.
I mean, I think I tried to do the best I could.
Mr. Greenwood. Did you ever think, ``If I don't give my
superiors what they want, I won't get to be made--a permanent
position''?
Mr. Swindell. Did I ever feel if I don't give what they
want--I just tried to be a professional, to follow the
instructions that were given me.
Mr. Greenwood. Okay. All right. Thank you, lady and
gentlemen of the panel. Appreciate your contribution today, and
you are excused.
The Chair would call our second panel consisting of Dr.
Lance A. Liotta, M.D. and Ph.D., Chief of the Laboratory of
Pathology at the National Cancer Institute, Dr. J. Carl
Barrett, Ph.D., Director, Center for Cancer Research at the
National Cancer Institute; Dr. Anna D. Barker, Ph.D., Deputy
Director, Advanced Technologies and Strategic Partnerships at
the National Cancer Institute; and Dr. Emanuel Petricoin, Lead
Microbiologist, Center for Biologics Evaluation and Research,
at the Food and Drug Administration.
Welcome. You may have--I don't know whether you were here
at the beginning of this hearing, but as I told the first panel
of witnesses, that pursuant to the custom of this committee we
take our testimony under oath. And so I would request if any of
the four of you object to giving your testimony under oath.
Okay. I see no objection.
I also should advise you that. pursuant to the rules of the
House and of this committee, that you are entitled to be
represented by an attorney. Do any of you choose to be
represented by an attorney? Dr. Liotta, you are represented by
an attorney. Would you identify your attorney, or would you
have your attorney identify himself into the microphone,
please?
Mr. Morton. Mr. Chairman, Charles Morton on behalf of Dr.
Liotta.
Mr. Greenwood. And Dr. Petricoin, your attorney--would your
attorney please identify himself?
Mr. Schatzow. Michael Schatzow, S-C-H-A-T-Z-O-W, on behalf
of Dr. Petricoin.
Mr. Greenwood. Thank you.
And I assume Dr. Barrett and Dr. Barker are not represented
by counsel? Okay.
Well, in that case, would you rise and raise your right
hand?
[Witnesses sworn.]
Mr. Greenwood. Okay. You are under oath, and I believe, Dr.
Liotta, you have an opening statement?
Dr. Liotta. Yes.
Mr. Greenwood. And you are recognized for 5 minutes to give
that opening statement. Welcome.
TESTIMONY OF LANCE A. LIOTTA, CHIEF, LABORATORY OF PATHOLOGY;
ACCOMPANIED BY J. CARL BARRETT, DIRECTOR, CENTER FOR CANCER
RESEARCH; ANNA D. BARKER, DEPUTY DIRECTOR, ADVANCED
TECHNOLOGIES AND STRATEGIC PARTNERSHIPS, NATIONAL CANCER
INSTITUTE; AND EMANUEL PETRICOIN, LEAD MICROBIOLOGIST, CENTER
FOR BIOLOGICS EVALUATION AND RESEARCH, FOOD AND DRUG
ADMINISTRATION
Mr. Liotta. Thank you, Mr. Chairman, and members of the
committee, for the opportunity to appear before you today to
discuss my role as a scientist at the NIH and my various
collaborative efforts. I am humbled to contribute to the NCI
goal to create scientific knowledge and rapidly translate this
knowledge to reduce suffering due to cancer.
I grew up loving science. My father was a science high
school teacher. Both of my parents encouraged my
inquisitiveness and creativity. I received my Ph.D. and M.D.
from Case Western Reserve University in 1976, and then came to
the Cancer Institute immediately as a resident in pathology. I
then became Chief of the Laboratory of Pathology.
And over my 28-year career at NCI the research supported by
the Cancer Institute in my lab has generated more than 500
scholarly publications, 300 in the last 10 years. This
productivity is only a reflection of the wonderful colleagues
and collaborators working in the special environment of the NIH
and the NCI, as well as the vision and support of the
leadership.
My research accomplishments span a wide range of scientific
and clinical disciplines all aimed at fighting cancer. Cancer
metastases is the major cause of suffering and death.
Scientists in my laboratory discovered a series of novel genes
and proteins which regulate cancer invasion and metastasis.
These discoveries are now moving forward in clinical studies
and clinical trials.
My NCI laboratory also invented new technology called
laster capture microdissection, which has enabled investigators
for the first time to pluck out molecules directly from cancer
cells in a human biopsy specimen. This was developed through
research created with Arcturus and is now in use in more than
1,000 labs worldwide and has generated many thousands of
publications.
We created a unique joint agency initiative with NCI and
the FDA called the clinical proteomics program. The goal was to
translate discoveries about proteins, the functional machinery
of the cell, into direct patient benefit as fast as possible.
Under the CPP, the clinical proteomics program, we developed a
new way to study cancer biopsies, which could map the deranged
protein circuitry of the cancer patient's tumor--individual
tumor.
The promise of this approach is improved therapeutic
efficacy with lower toxicity using a panel of drug treatment
individualized for that patient's tumor, and this technology
has already been translated to research in ongoing clinical
trials.
The great hope is that improved detection of early stage
cancer will produce more cancer cures. We set out to develop a
new approach to discover markers for cancer. In 1998, under our
clinical proteomics program, we proposed that there existed in
blood thousands of previously unknown markers that might
reflect what was shed into the blood from early stage cancer.
We generated data in our lab from an instrument called a
mass spectrometer, and generated large amounts of data that we
needed to analyze with a pattern recognition algorithm. We
tried many pattern recognition algorithms, and then published
early results that showed that our hypothesis might be true.
We then tried Correlogic Systems software, and it looked
promising. This resulted in a publication in Lancet and
subsequently a CRADA with Correlogic. I want to point out that
that CRADA had a limited work scope to use Correlogic software,
and we were free to use other software before, during, and
after.
We then moved on to discover, in collaboration with our
colleagues at NCI Frederick proteomics facility, thousands of
new markers and identified them, never before known in the
blood. And because the U.S. Government is steward of this list
of new markers, it is not in the CRADA--of any CRADA we have--
we believe this can have broad public health benefit, which
will stimulate the large diagnostic industry.
This committee is investigating outside activities by NIH
scientists. Because I have had outside activities during the
course of my career, let me address this issue. I take my job
as a dedicated public servant very seriously. I believe that I
have upheld and maintained the highest ethical standards in all
of my official capacities.
I have consulted with the appropriate personnel and
endeavored to follow the regulations within NIH guidance and
obtained guidance at all times when it was needed with respect
to such regulations. I would never knowingly engage in a
conflict of interest and would immediately cease such activity
if there were a change in the circumstance that led me to
believe that an approved activity had become one which had a
potential conflict.
My only recent paid outside activity has been an approved
consulting agreement with Biospect. And I want to assure you,
Mr. Chairman, that I never consulted with Biospect about my
CRADAs, never consulted with them about my Government work, and
this was explicitly excluded in my consulting agreement, along
with my--the other exclusions in my ethics package.
My work on this consultation was placed on hold during the
NIHEAC rereview of outside activities concurrent with the Blue
Ribbon Panel. Last week I learned new information relative to
this activity that Biospect requested raw data which we make
publicly available to anyone. Because this new information
might create even the slightest potential perception of a
conflict, I immediately withdrew this activity. That is because
my Government mission is sacred to me.
In conclusion, I am honored to serve as a scientist in the
intramural program of the NCI. I have cherished the opportunity
to participate in the creative intellectual environment that I
feel is unparalleled in the world.
[The prepared statement of Lance A. Liotta follows:]
Prepared Statement of Lance A. Liotta, Chief of the Laboratory of
Pathology and Chief of the Section of Tumor Invasion and Metastases in
the Center for Cancer Research, National Cancer Institute, NIH
Thank you Chairman Greenwood and Members of the Committee for the
opportunity to appear before you today to discuss my role as a
scientist at the NIH and my various collaborative efforts.
I grew up loving science. My father was a science high school
teacher. Both of my parents encouraged my inquisitiveness and
creativity. I began inventing things at an early age. By college I was
spending my summers working and inventing solutions for the Dupont
Corporation at its Experimental Station in Wilmington, Delaware. I have
always had a passion to be an inventor, and today I have over 80
patents and patents pending, which list me as an inventor.
My interest in medical diagnostics and pathology began during my
undergraduate years (1965-1969). At that time I began doing research
that led to patents for diagnostic test technology for infectious
disease, as well as, general blood and body fluid testing
methodologies. While in medical school, I was employed part time as a
medical laboratory technician for the medical student health clinic. I
was responsible for blood, culture and urine analysis, including the
report generation. This training allowed me to gain exposure and
expertise within the broad field of diagnostic testing methodology, and
pathology diagnostic service labs.
I received my Ph.D. in Biomedical Engineering from Case Western
Reserve University (``CWRU'') in 1974. Two years later, I graduated
from CWRU's M.D./Ph.D. program with my M.D. My Ph.D. work focused on
mathematical modeling and experimental analysis of cancer invasion and
metastasis. Cancer metastasis is the very definition of malignancy and
causes this disease to be lethal. My Ph.D. allowed me to gain broad
expertise in instrumentation, computer algorithms, mathematical
modeling, and experimental animal models of cancer and analysis of
clinical pathologic material. The results of my research convinced me
that a major medical need was an improved understanding of when and why
cancer becomes malignant. Because I was enrolled in the M.D./Ph.D.
program, my Ph.D. research was supervised by both the Pathology
Department of the Medical School and the Biomedical Engineering
Department.
In parallel with my Ph.D. studies, I worked to achieve an M.D. with
an eye toward a career as a research pathologist. For this reason, I
took special clinical rotations in diagnostic monitoring and diagnostic
pathology laboratory services. When I considered the next stage of my
career, the NIH intramural program offered a superb environment that
would support my creative freedom to pursue research contributions that
could benefit public health.
Within 7 years of joining the NCI, as a pathology resident, I
became Chief of the Laboratory of Pathology and Chief of the Section of
Tumor Invasion and Metastasis, now part of the Center for Cancer
Research. In these capacities I have three types of intramural duties:
clinical service, training of research and clinical fellows, and cancer
research. I am very proud of the outstanding clinical service provided
by my laboratory staff to the NIH. We are responsible for all anatomic
pathology service for the entire NIH. Our Lab hosts a world-class
residency program. Here we recruit and train research-oriented
pathologists who become academic leaders. My research contributions,
supported by the NCI program, have generated more than 500 scholarly
publications. This productivity is only a reflection of the wonderful
colleagues and collaborators working in the special environment of the
NIH, as well as the vision and support of the NCI and NIH leadership.
I am proud to have further served the NIH as the Deputy Director
for Intramural Research under NIH Director, Dr. Bernadine Healy. I
played a major role in setting up the Intramural Human Genome Program.
This job gave me a great appreciation of the significant ways in which
the NIH environment has continued to attract top-notch minds.
My research accomplishments to date span a wide range of scientific
and clinical disciplines, including:
Cancer Metastasis--My work along with my collaborators is
recognized as a groundbreaking effort to investigate the process of
tumor invasion and metastasis at a molecular level. In the mid 1970s,
we proposed and experimentally demonstrated the linkage between
angiogenesis onset and tumor invasion and metastatic dissemination. We
proposed the concept of metastasis suppressor genes. Consequently,
scientists in my Laboratory of Pathology discovered a series of novel
genes and proteins, which regulate cancer invasion and metastasis,
thereby providing new strategies for cancer diagnosis and treatment. As
a demonstration of the originality of these discoveries, all are
covered by U.S. government-owned patents, both issued and filed.
New Technology for Micro Analysis of Tissue--My laboratory has
invented technology in the fields of pathology diagnosis,
microdissection and proteomics. Our group invented Laser Capture
Microdissection (LCM), which was developed through a research CRADA
(Cooperative Research and Development Agreement) with Arcturus, Inc.
and, thereby, rapidly commercialized. This technology is now in use in
more than 1000 labs worldwide. The technology has enabled investigators
for the first time to make broad discoveries in genomics, functional
genetics, and is now extending into personalized medicine. This
partnership is a prime example of what the NIH CRADA mechanism is
designed to do: turn bench research into practical applications.
Clinical Proteomics Program--We created the first joint agency
initiative between the NCI and the FDA in 1998 to develop new
technology for the discovery of proteins important for cancer diagnosis
and therapy, using actual human tissue and body fluids. Dr. Emanuel
Petricoin of the FDA and I serve as co-directors. This initiative is
now called the NCI/FDA Clinical Proteomics Program (CPP).
Individualized Cancer Therapy--Under the CPP, we proposed that LCM,
combined with a new type of protein array, also developed in the CPP,
constituted a new paradigm for patient-tailored medicine. The promise
of this approach is improved therapeutic efficacy with lower toxicity,
using a panel of drug treatments, individualized for the patient's
tumor. This technology has already been translated to use in patients.
It is being applied to patient tissue biopsies, conducted before,
during and after experimental therapy, as part of ongoing NCI Clinical
Center Trials.
Diagnostic Tools for Detection of Early-Stage Cancer--Another major
initiative has been in the field of early detection of cancer. In 1997,
based on our initial studies, we hypothesized that a large number of
previously undiscovered and unknown protein markers were generated in
the tissue and spilled into the blood, as a record of the disease state
or the physiologic state. This hypothesis predicted that cancer
developing in the tissue contained or shed proteins, which could be
used as a test for early diagnosis. Our challenge was not knowing the
identities of these molecules.
Proteomic Pattern Diagnostics--In 1998, in order to explore the
potential existence of this new list of diagnostic markers, we applied
mass spectrometry for fingerprinting analysis of tissue and blood. This
was a well-established technology, but had not yet been applied to
microdissected tissue. Even though we did not know the identity (name,
sequence) of the molecules underlying the pattern fingerprints we
recognized that this data supported our hypothesis that a large
treasure-trove of previously unknown diagnostic markers existed. In our
early studies, we analyzed our mass spectral data using visual graphing
and the pattern recognition software that was commercially available.
As we reported publicly at the American Association of Cancer Research
in 1999, our results indicated the existence of a rich source of
unknown markers in cancer tissue. We also reported on the first
evidence of mass spectral fingerprinting diagnosis of cancer. Prior to
this public disclosure, the U.S. government filed patents on this
concept.
Our next step, during the fall of 1998 and spring of 1999, was to
look in great depth at human serum samples from cancer and non-cancer
patients, using a variety of analytical methods. We realized, based on
our previous findings and expertise, that a large number of pattern
recognition approaches existed for spectral analysis, including
applications to mass spectrometry. Subsequently, under a government
material transfer agreement, Correlogic Systems software was employed
to analyze our mass spectral data. The result was a publication in the
LANCET, describing the potential research feasibility of using mass
spectral fingerprints in serum for early stage ovarian cancer
detection. Based on this reduction to practice, a patent jointly owned
by the U.S. Government and Correlogic was filed. I am named as an
inventor on this application. This promising research collaboration was
extended to explore additional research applications under a research
CRADA. This CRADA did not include the identity of the molecules
themselves, nor did it constrain the U.S. government from its ongoing
evaluation and use of other pattern recognition methods. Instead, the
CRADA was aimed at evaluating the use of Correlogic's software for
additional research topics.
The impact of this work from 1998 to 2002 is best exemplified by
the fact that at the latest meeting of the American Association of
Cancer Research, hundreds of scientists reported on exploring this
field of proteomics pattern recognition, using a variety of methods.
An Abundance of New Diagnostic Marker Candidates
Our lab's consistent goal has been three-fold. 1) identification of
the proteins predicted to exist by our original hypothesis, 2)
continuous posting of our raw mass spectral data in the public domain,
as a public service and with unfettered, full access (i.e., others have
analyzed our raw data with their own pattern recognition methods and
have published excellent results); and, 3) translation of these
discoveries to patient benefit with the highest degree of scientific
rigor, as rapidly as possible.
To that end, under the CPP, we have recently invented next-
generation technology (patent applications solely owned by the
Government and advertised in the Federal Register), which allows us to
amplify and identify the new molecules we proposed to exist. Through
the use of this government technology, and in collaboration with
colleagues in the NCI-Fredrick proteomics facility, we have now
identified thousands of specific proteins with diagnostic potential,
which were previously unknown to exist in the blood. Because the U.S.
government is the steward of this information, we believe that it can
have broad public health benefits and will stimulate the large
diagnostic industry of the U.S.
I have been the recipient of over 30 awards for achievement in
cancer research and translational medicine. In addition, I have
received numerous PHS Commissioned Corps awards, including the NIH
Director's award, the Merit Award, the Distinguished Service Medal, the
Meritorious Service Medal, the Surgeon General's Medallion, and the
Surgeon General's Exemplary Service medal. Mr. Chairman, with the
committee's permission, I would like to include my C.V., which provides
further details concerning my publications, patents, and related career
information.
According to published information, this committee is investigating
outside activities by NIH scientists. Because I have had outside
activities during the course of my career, let me address this issue. I
take my job as a dedicated public servant very seriously. I believe
that I have upheld and maintained the highest ethical standards in all
of my official capacity over the years as Chief of the Laboratory of
Pathology, Chief of the Section of Tumor Invasion and Metastasis, and
former Deputy Director for Intramural Research. At all times, I have
endeavored to follow the regulations governing outside activities. I
have consulted with the appropriate personnel within the NIH when
guidance was needed with respect to such regulations. I would never
knowingly engage in any conflict of interest and would immediately
cease such activity if there were a change in circumstance that would
lead me to believe that an approved outside activity had become one
which involved a conflict.
The research CRADA with Correlogic was signed in April 2002. At
that time, Correlogic was a software company with an established
proprietary pattern recognition software using a genetic algorithm with
a lead cluster analysis. The purpose of the CRADA was to study the
application of Correlogic's specific algorithm to analyze spectral data
that had been generated and would be generated by the NCI/FDA Clinical
Proteomics laboratory (``the Lab'') from blood samples run on the
commercially available SELDI-TOF mass spectrometer that the Lab had
purchased in 1998. The CRADA's goal was to find unique discriminating
patterns of unknown entities revealed by Correlogic's proprietary
algorithm applied to raw mass spectral data the Lab had generated, and
would generate. I began an NCI approved consulting with Biospect in
December, 2002. My understanding was that Correlogic was a software
company, in contrast with Biospect, that I understood to be a
scientific instrument company. When I began consulting with Biospect, I
understood Biospect was in the early stages of developing a new
instrument and scientific technology which employed its proprietary
chemistry to separate and identify molecules. I understood Biospect
desired to explore the use of blood and body fluids from animal and
human sources with the goal of discovering molecules for biological and
medical applications.
In view of new information obtained within the last week, I ended
my outside activity with Biospect. This activity had been approved
repeatedly by my supervisor and the NCI Deputy Ethics Counselor. During
this past week I specifically learned that Biospect requested certain
information from the NIH. For me, this caused concern. As a result, I
terminated my relationship with Biospect effective immediately.
When I first came to the Cancer Institute at the NIH in 1976 to
join the pathology residency program, I was fresh out of medical
school. I so loved the climate of intellectual freedom there, that I
decided to stay. Here it is 28 years later. I am very proud to be a
part of the NIH and the NCI. I am humbled in my hope that any of my
contributions may have added to the international renown of those
institutions. I have always been thrilled to work with colleagues who
are so very dedicated to save lives and reduce suffering through the
advancement of scientific knowledge.
In closing, Mr. Chairman, I wish to express my gratitude to the
CCR, NCI, NIH and PHS for giving me the opportunity to serve the public
benefit within a special creative environment that respects its
scientists as individuals. Here at the NIH a critical mass of
scientists from multiple agencies can work together to further
scientific knowledge and employ this knowledge for the common goal of
saving lives.
Mr. Greenwood. Thank you, Dr. Liotta.
Dr. Petricoin, do you have an opening statement, sir? Okay.
You are recognized for 5 minutes.
TESTIMONY OF EMANUEL PETRICOIN
Mr. Petricoin. Thank you, Mr. Chairman. Mr. Chairman, I am
pleased to be here today, so that I may provide answers to the
best of my ability to any questions that you may have and to
share with you any relevant insights.
My name is Dr. Emanuel F. Petricoin, and I am a senior
investigator in the Office of Cell, Tissue, and Gene Therapies
in the Center for Biologics Evaluation and Research at the U.S.
Food and Drug Administration.
I have been a U.S. Government employee since 1993, and I
have been honored to spend the entirety of my post-graduate
career in the Public Health Service. I understand from the news
coverage and your letter of invitation that you are
investigating NIH ethics concerns, consulting arrangements, and
outside awards.
I appreciate the seriousness with which you are taking this
investigation. I hope that I can provide information that will
help you. I believe that my outside activities, all of which
were submitted, reviewed, and approved, according to the
procedures in place, were performed to the highest ethical
standards.
I believe I followed, to the best of my ability, not only
instructions but also the intent of the ethics guidelines. On
May 7, 2004, I was informed that Biospect, with whom I had an
approved outside activity, had been recently and now considered
based on a rereview to be a significantly regulated entity. As
a result of this new classification, this approval had been
revoked.
Upon notification of that decision, I immediately and
without hesitation, ended this outside activity. I want to note
that my approved outside activity with Biospect was listed on
all of my filed OGE 450 forms, the executive branch
confidential financial disclosure report. And even that as of
the last review cycle, in the winter of this year, this
activity was found not to be in question.
Mr. Chairman, I heard your opening statements, and I wanted
to assure you that at no time did I directly consult with
Biospect about the work and our research created with
Correlogic, or provide them with any secret or non-public
information. Moreover, I believe that my consulting agreement
prohibited that very specific activity conducted with
Correlogic under our research CRADA.
Mr. Chairman, ever since I can remember, I have wanted to
be a scientist. My family always jokes with me about how they
never recall me wanting to do anything else. From the time I
won my first science fair ribbon in the fourth grade until
today, I have never envisioned myself doing anything else.
I am also Washington, D.C. local. I remember as a child
driving by the NIH and naval hospital and staring in disbelief
at the size of the buildings and that everyone inside were all
scientists. I stand before you today as an individual who I
believe has been trying to make a difference in the public
health, especially in light of my father's death from a sudden
heart attack when I was 21 and my mother's current battle with
breast cancer.
My time spent in high school and college working first as a
patient transporter, then in a microbiology and clinical
laboratory, solidified my decision to work in an area of
science that could directly affect people's lives. I could not
wait to go to college. I drove headlong into the microbiology
major, receiving my Ph.D.--my degree in 3 years and my Ph.D. in
5 years.
My Ph.D. research focused on the analysis of genes,
proteins, and surface molecules for gonorrhea vaccine
development. I was immediately drawn to a project that did not
seem esoteric but might allow me to contribute to work that
could actually lead to a vaccine some day.
During my thesis work, I gained expertise in immunology,
cell biology, biochemistry, protein chemistry, protein
separation and fractionation methodologies, and was introduced
into mass spectrometry analysis. During my part-time employment
at the Southern Maryland Hospital, I gained valuable expertise
in tissue and body fluid collection methods, and in clinical
sampling, handling, and storage methods.
Moreover, I became adept and fully trained using a variety
of robotic and microfluidic technologies. This combined
experience and research in diagnostic practice was the basis of
my choice to seek a post-graduate career in translational
medicine on my continuing journey for bench to bedside
applications.
From 1990 to 1993, I was a National Research Council fellow
in a post-doctoral position in the Division of Cytokine Biology
at FDA. I was very interested in a career with cancer-based
applications, and because of my Ph.D. training realized that
new classes of molecules and proteins were being developed
which may really have an impact some day.
As icing on the cake, I was able to work in an FDA facility
at the NIH, the Nation's premier research institute and my
childhood fantasy. From my post-graduate work I gained valuable
expertise in signal transduction biology, protein interaction
technologies, protein phosphorylation, and cytokine biology.
As I entered the twilight of my post-doctoral training, I
was intent on being a research scientist working for direct
patient benefit. My time spent as a post-doctoral student at an
FDA facility reviewed a different, but equally important,
aspect of the translation and delivery of medical benefit to
the bedside that I had not recognized before. And I was
impressed by the FDA scientists I interacted with.
I successfully competed for a publicly advertised, tenured
track, U.S. Government position in 1993 and was tenured in the
Center for Biologics Evaluation and Research in 1998. And I am
proud that my entire post-graduate career has been spent as a
U.S. Government scientist working at the Food and Drug
Administration.
In 1997, as a result of a series of highly cited
publications from the laboratory of Dr. Lance Liotta, I decided
to work with him on a joint interagency agreement and entered
into an agreement where we were focusing on translation of
research at the bench to bedside practices.
I finally realized my dream job--working at the FDA and
learning about the process of delivering safe and effect
medicine to the public. Let me explore and expand my scientific
talents which link back to the times of my laboratory
experience at a hospital as a college freshman.
Mr. Chairman, I certainly receive many outside activity
requests every year. Almost all of these are dismissed
immediately, because they are invitations which directly relate
to my official duties as an FDA employee and my ongoing U.S.
Government scientific research.
I consider only those requests that invite me to
participate not because of my U.S. Government position and FDA
expertise, but because of my general scientific expertise built
up over the years. In those instances where I choose to pursue
the opportunity, I always submit an HHS 520 form, Request for
Outside Activity.
This approval form--request form is then approved or
declined after due diligence under currently established
procedures. I would never knowingly pursue any activity which I
felt would run counter to this process. And I certainly would
never knowingly pursue or continue any outside activity which I
felt was in conflict with a career spent as a scientist in the
pursuit of public and patient benefit.
In closing, Mr. Chairman, I wish to express my gratitude to
CBER, the FDA, and the Public Health Service, for providing me
a working environment and research funding support for a body
of work which I believe is highly successful and is one that I
am extremely proud of.
I will answer, as best I can, any questions you and the
panel have for me.
[The prepared statement of Emanuel Petricoin follows:]
Prepared Statement of Emanuel F. Petricoin, Senior Investigator, Office
of Cell Tissue and Gene Therapies, Center for Biologics Evaluation and
Research
Mr. Chairman, I am pleased to be here today so that I may provide
answers, to the best of my ability, to any questions that you may have
and share with you any relevant insights. My name is Dr. Emanuel F.
Petricoin III, and I am a Senior Investigator, in the Office of Cell,
Tissue and Gene Therapies in the Center for Biologics Evaluation and
Research, within the US Food and Drug Administration. I have been a US
Government employee since 1993, and have been honored to spend the
entirety of my post-graduate career in the Public Health Service.
I understand from the news coverage and your letter of invitation
that you are investigating NIH ethics concerns, consulting arrangements
and outside awards. I appreciate the seriousness with which you are
taking this investigation. I hope that I can provide information that
will help you. I believe that my outside activities, all of which were
submitted, reviewed and approved according to the procedures in place,
were performed to the highest ethical standards. I believe I followed,
to the best of my ability, not only the instructions but also the
intent of the ethics guidelines. On May 7th, 2004, I was informed that
Biospect, with whom I had an approved outside activity, had been
recently and now considered, based on a re-review, to be a
significantly regulated entity. As a result of this new classification,
this approval had been revoked. Upon notification of that decision, I
immediately and without hesitation ended this outside activity. I want
to note that my approved activity with Biospect was listed on all of my
filed OGE 450 forms (Executive Branch Confidential Financial Disclosure
Report), and that even as of the last review cycle, this activity was
found not to be in question.
BACKGROUND REGARDING MY CAREER
Ever since I can remember, I have wanted to be a scientist. My
family always jokes with me about how they can never recall me wanting
to do anything else. From the time I won my first science fair ribbon
in the 4th grade until today, I have never envisioned myself doing
anything else. Mr. Chairman, I am a Washington DC local. I remember as
a child, driving by the NIH and the Naval Hospital and staring in
disbelief at the size of the buildings where everyone inside were all
scientists!! I stand before you today as an individual who I believe,
has been trying to make a difference in the public health, especially
in light of my father's death from a sudden heart attack when I was 21
and my mother's battle with breast cancer. My time spent in high school
and college working first as a patient transporter, then in a
microbiology and clinical laboratory, solidified my decision to work in
an area of science that could directly affect people's lives.
I could not wait to go to college. While many of my friends and
dorm mates waited until their sophomore years to declare a major, at
the University of Maryland I charged headlong into the Microbiology
major, received my degree in 3 years, and received my PhD in
Microbiology in five years in 1990. My PhD research focused on the
analysis of genes, proteins and surface molecules for gonorrhea vaccine
development. I was immediately drawn to a project that didn't seem
esoteric, but might allow me to contribute to work that could actually
lead to a vaccine some day. During my thesis work, I gained expertise
in pathogenic microbiology and infectious disease analysis, immunology
and cell biology, biochemistry and protein chemistry, protein
separation and fractionation methodologies, and mass spectrometry
analysis of molecules within complex biological and bacterial samples.
I successfully identified and characterized the first gene for a
gonorrhea surface molecule that later became considered for a potential
vaccine target. We employed a variety of protein analytical techniques,
and were one of the first scientific groups to successfully employ mass
spectrometry to analyze the sugars attached to lipids on the surface of
disease-causing bacteria. Moreover, as a consequence of my PhD studies,
I became facile in the handling of clinical specimens and body fluids
as well as diagnostic testing methods for bacterial characterization.
During my part-time employment at Southern Maryland Hospital, I gained
valuable expertise in tissue and body fluid collection methods,
clinical sample handling and storage methods, and clinical diagnostic
technology. Moreover, I became adept and fully trained using a variety
of robotic and microfluidic technologies. This combined experience in
research and diagnostic practice was the basis of my choice to seek a
post-graduate career in translational medicine--on my continuing
journey for bench-to-bedside applications.
POST-DOCTORAL CAREER
From 1990 until 1993 I was a National Research Council Fellow in a
post-doctoral position in the Division of Cytokine Biology, CBER/FDA. I
was very interested in cancer-based applications, and because of my PhD
training, realized that new classes of molecules and proteins were
being developed which may really have an impact someday. However, the
scientific community lacked knowledge about the way these proteins
communicated with cells and what really caused cells to grow, die and
spread uncontrollably. I was drawn to a laboratory which was focused on
trying to understand how a widely known protein, interferon, actually
worked and caused cancer to die or quelled viral infections. As icing
on the cake--I was able to work at an FDA facility that was at the
NIH--the Nation's premier research institute and my childhood fantasy.
During my post-graduate work, I gained valuable expertise in signal
transduction biology, protein-protein interaction methodologies,
protein phosphorylation, and cytokine biology. For the first time, our
laboratory identified and characterized members of a signaling pathway
that later became the well known ``JAK-STAT'' pathway. This pathway is
now thought to regulate and be involved in viral disease, inflammation,
and cancer. Additionally, during my post-doctoral fellowship, I was
able to extend my graduate expertise using mass spectrometry and
protein separation methods by employing new proteomic technologies.
Using these tools, I identified and sequenced a new protein, produced
by many different cancer cell lines. This protein was experimentally
demonstrated to interfere with interferon activity.
JOINING FDA/CBER
As I entered the twilight of my post-doctoral training, I was
intent on being a research scientist working directly for patient
benefit. My postgraduate work on the NIH campus made me realize that
the unique environment provided by a vibrant scientific community all
striving for translational medical benefit was the place I wanted to
stay. My time as a post-doctoral student in an FDA facility revealed a
different but equally important aspect to the translation and delivery
of medical benefit to the bedside that I had not recognized before. I
was intrigued and impressed by the FDA scientists I interacted with. I
was intrigued by their unique combination of bench-side research
talents as well their understanding of what it took to get a biologic
approved for clinical benefit. I decided that I could blossom in such a
role and was ecstatic that in 1993, I successfully competed for a
publicly advertised tenure-track US Government position. I was tenured
in the Center for Biologics Evaluation and Research in 1998, and am
proud that my entire post-graduate career has been spent as a US
Government scientist working at the US Food and Drug Administration.
FDA/NCI COLLABORATION ESTABLISHED
In 1997, as a result of a series of highly cited scientific
publications from the laboratory of Dr. Lance A. Liotta of the NCI, I
contacted Dr. Liotta to discuss potential collaborative opportunities
to use proteomic analysis of laser capture microdissected human
cancers. This discussion resulted in the first joint Interagency
Agreement (IAG) between the FDA and the NCI. The focus of this IAG was
to work jointly together to develop and test new proteomic technology
for clinical and translational applications. I had finally realized my
dream job. Working at the FDA and learning about the process of
delivering safe and effective medicine to the public let me explore and
expand my scientific talents which linked back to my times as a college
freshman working in a hospital lab.
Based on our combined research and clinical expertise, we embarked
on a variety of research projects that employed a variety of emerging
proteomic technologies for discovery of diagnostic biomarkers and
therapeutic targets. The overarching goal was to develop and evaluate
methods for personalized medicine and early detection of cancer as a
means to provide translational public health impact with a high degree
of scientific rigor and an eye towards rapid patient benefit. This goal
has been a consistent cornerstone of our joint collaboration. During
the past 6 years, our program has successfully developed a number of
new exciting proteomic technologies, with over 90 publications to our
credit. These publications are the direct result of a talent pool of
highly creative scientists both within the program itself as well as
our fantastic set of scientific collaborators outside the program. We
have entered into several documented US Government Material Transfer
Agreements (MTA) and US Government Cooperative Research and Development
Agreements (CRADA) that have proved highly successful. Within each of
these agreements and arrangements we sought a clear path to
facilitating and translating our work to public benefit without
constraining our ability to maintain the necessary independent and
creative freedom that has served us so successfully. In addition to the
need to maintain creative freedom to operate, we are driven by a
transparent process of proteomic data dissemination into the public
domain. We are proud that as US Government scientists, we were the
first group to offer all of our mass spectral data in the public
domain, and continue to provide all of our data to the entire
scientific community as a public service. This public dissemination of
data and transparency has been commended by the National Cancer
Advisory Board. We are also proud that while we were the first group to
demonstrate the use of mass spectrometry based protein fingerprinting
for cancer applications in the spring of 1999, recently hundreds of
scientists at the latest meeting of the American Association of Cancer
Research (April 2004) are reporting independent success using a variety
of different approaches. Our raw data has been downloaded over 500
times in the past two years, and scientists, from around the world,
including a 2002 National Medal of Science Winner, named by President
Bush as one of the nation's leading scientists, have published
extremely exciting results using our raw data as the basis of their own
pattern recognition methods and tools.
Our ongoing work continues to accelerate. We have recently invented
new technology that is wholly owned by the Government and has been
advertised in the Federal Register. This has allowed us to identify
thousands of new biomarker molecules that may be useful for cancer and
disease diagnosis. We believe that this new diagnostic information
archive, never before known to exist in the blood, may contain
important information for the detection of many diseases--not just
cancer. We hope that this information can translate into broad public
health benefit.
I certainly receive many outside activity requests every year.
Almost all of these I dismiss immediately because they are invitations,
which directly relate to my official duties as an FDA employee and my
ongoing US Government scientific research. I consider only those
requests that invite me to participate not because of my US Government
position, but because of my general scientific expertise which
encompasses my lifetime as a scientist, and whose activities are
directly unrelated to my government job. In those instances where I
chose to pursue the opportunity I always submit an HHS 520 form for
approval. This approval form is approved or declined after due
diligence under current established procedures. I would never knowingly
pursue any activity which I felt would run counter to this process, and
I certainly would never knowingly pursue or continue any outside
activity which I felt was in conflict with a career spent as a
scientist in the pursuit of public and patient benefit.
In closing, Mr. Chairman, I wish to express my gratitude to CBER,
the FDA and PHS for providing for me a working environment and research
funding support for a body of work which I believe is highly successful
and is one that I am extremely proud of. I will answer, as best I can,
any questions you may have for me.
Mr. Greenwood. Thank you. Am I pronouncing--is it
Petricoin?
Mr. Petricoin. Yes, sir.
Mr. Greenwood. Okay. I am advised that neither Dr. Barrett
nor Dr. Barker have opening statements. Is that correct? You do
not have opening statements. Okay. But you are prepared to
answer our questions. Very good. Thank you.
All right. And before I begin, because one could not miss
the passion in both of your statements, Dr. Liotta and Dr.
Petricoin. There is no one who is questioning that you are a
splendid scientist. There is no one questioning that you have
chosen careers that are highly valuable to mankind.
It is an unusual phenomena for Federal employees to work--
at the same time they are Federal employees to work in the
private sector as well. And it obviously raises a host of
ethical issues. And what this hearing is about, and what this
committee is about, is trying to sort our way through these
ethical issues.
We know things have gone wrong at the NIH ethically. We
know that there are well-document instances of that. We are
trying to understand the underlying rules, policies, culture,
that has--that leads to this, and that is why you find
yourselves in front of us today. I am sure you would rather be
almost anywhere else, but I am going to proceed with questions
and hope you will understand the spirit in which they are
given.
Let me start with you, Mr. Petricoin. Some of these
questions are elementary, but I am--just follow with me here.
Dr. Petricoin, do you accept a Government check?
Mr. Petricoin. I accept a Government check, sir, is that
what you----
Mr. Greenwood. Yes.
Mr. Petricoin. Yes.
Mr. Greenwood. When do you get paid? You need to pull the
microphone, make sure it is on and close to your mouth. Okay.
When do you get paid? Every 2 weeks?
Mr. Petricoin. Yes, sir.
Mr. Greenwood. Okay. And you put that check in a bank
account and you spend the money.
Mr. Petricoin. Yes, sir.
Mr. Greenwood. Okay. And when you joined the FDA, you were
briefed on ethics, is that correct?
Mr. Petricoin. Yes. There was ethics training that I
attended.
Mr. Greenwood. Very good. You have received annual
training?
Mr. Petricoin. Yes.
Mr. Greenwood. Okay. You have received ethics counseling?
Mr. Petricoin. Ethics counseling, sir? The annual ethics
training.
Mr. Greenwood. Have you ever spoken to Vincent Tolino in
the Ethics Office?
Mr. Petricoin. Yes, sir.
Mr. Greenwood. Okay. Was that for counseling from Mr.
Tolino?
Mr. Petricoin. Yes, sir. There was times when Mr. Tolino
would advise me.
Mr. Greenwood. Right. So I am just trying to distinguish
that between routine--that and routine training. Are you with
me? Okay, sir.
You knew the restrictions included--and you knew that there
were restrictions on certain outside activities, correct?
Mr. Petricoin. Yes, sir.
Mr. Greenwood. Okay. And you knew that restrictions include
no outside consulting with significantly regulated entities
like Biotechnology companies, is that correct?
Mr. Petricoin. Yes, sir. I realized there were restrictions
on these significantly regulated entities.
Mr. Greenwood. Is Biospect a biotechnology company?
Mr. Petricoin. When Biospect approached me in 2002, it was
my understanding that they were an instrument company that was
developing technology for protein separation, fractionation,
and identification. I looked at the FDA yellow book, which
lists the significantly regulated entities. They were not
listed.
And according to what was on the Ethics homepage, the next
step was to see if greater than a certain percentage--I think--
I believe to the best of my recollection it is 10 percent--of
their gross revenues were regulated by the FDA. Since this was
apparently a new company, a startup company, the focus of their
efforts was, in fact, to find out applications for this tool.
Mr. Greenwood. Did you decide it was not a biotechnology
company?
Mr. Petricoin. Yes, sir, based on the fact that the next
determination was on my looking at the FDA website.
Mr. Greenwood. Was there any question in your mind that it
was a technology company?
Mr. Petricoin. Yes. I think it was a technology company.
Mr. Greenwood. Why do you think it called itself
biotechnology--Biospect?
Mr. Petricoin. Well, the determination of a significantly
regulated entity, when there isn't a revenue stream, is that to
the best of my understanding that all of its activities are
solely regulated by the FDA. And in terms of what my
understanding of Biospect was, that did not appear to be the
case. There is many areas that are--of science and technology
that the FDA does not regulate.
Mr. Greenwood. So you thought it could--I just want to--did
you think it was a biotechnology company?
Mr. Petricoin. Not necessarily. I think that----
Mr. Greenwood. I mean, not--I am not asking you based on
the yellow book. I am saying, you look at this company, you see
what it does, what its mission is, and you know it is a
technology company. You know it uses mass spectroscopy. And it
is working with biological materials, is it not?
Mr. Petricoin. Yes.
Mr. Greenwood. So, I mean, wouldn't it seem on the surface
to be a biotechnology company, if ever there was one?
Mr. Petricoin. Well, not necessarily, because as I looked
at those companies that were also on the list of approved
entities, there were many entities which did technology that
directly related to biotechnology, for example.
Mr. Greenwood. Okay. All right.
Mr. Petricoin. And so I submitted the approval to those
that could make the decision better than I. I am a scientist,
not a lawyer, so I----
Mr. Greenwood. That is fine. Okay. So if you would turn to
Tab 27 in that notebook in front of you. That is what you just
referenced. That is your request for approval of an outside
activity, which you submitted to the FDA. And you provided
information on the form about Biospect and the agreement you
were engaging in with them.
Okay. Where did you get the information that you needed
about the company to fill that form out?
Mr. Petricoin. This was based on an invitation letter and
discussions with one of the principals that contacted me to see
if I would be interested in consulting.
Mr. Greenwood. Okay. And what was your understanding of
what you were being hired to do?
Mr. Petricoin. Basically, the understanding that I was
operating under, and I operated under during the entire time,
would be to survey the public domain for applications of their
technology, including selling the machine itself all the way
to, you know, environmental monitoring to discovering new
molecules associated with disease.
Mr. Greenwood. Okay. And did you use the same contract as
Dr. Liotta with Biospect?
Mr. Petricoin. Yes. Of course changing the name, things----
Mr. Greenwood. Changing the name, of course. Would you
please look at Exhibit A from Dr. Liotta's contract, which is
at Tab 32 of the binder on the table. The second paragraph
reads, ``Consulting services will relate to general
professional knowledge in medical diagnostic technology,
clinical sample acquisition, preparation, fractionation,
separation, storage, and stability, regulatory filings, and
regulatory inspections related to clinical pathology
laboratories, e.g. CAP, CLIA, GMP inspections, and 510(k) or
PMA filings for new diagnostic tests.''
Dr. Petricoin, are any of these things things that are
regulated by the FDA?
Mr. Petricoin. Yes, sir. But I would like to point out that
my consulting agreement, which I can provide to the committee,
dramatically differs from those statements.
Mr. Greenwood. But that is what the company does. The
company does those things. I mean, this isn't--I am not asking
you whether you were doing things for the company that are
themselves regulated. Obviously, the FDA doesn't regulate the
looking up--reviewing material in the public domain, but the
FDA regulates many of the things that the company does.
Mr. Petricoin. The appearance of what Dr. Liotta would
provide them as a consult does not necessarily to me reflect
that they had solely wanted to do FDA regulatory mission-
related work.
Mr. Greenwood. Okay.
Mr. Petricoin. I think at the time they were exploring
every option.
Mr. Greenwood. But isn't it quite abundantly clear that
they were interested in getting a medical device approved by
the FDA?
Mr. Petricoin. I think they were exploring every option,
sir.
Mr. Greenwood. They couldn't use the device, the device
couldn't be used if it were not approved by the FDA, could it?
Mr. Petricoin. Actually, that's not to my knowledge true,
sir. I think that there are things like home brew testing,
which the FDA does not have regulatory authority.
Mr. Greenwood. Home what?
Mr. Petricoin. A home brew type testing.
Mr. Greenwood. Beer?
Mr. Petricoin. Oh, excuse me. It's a, the home brew is the
reference to a diagnostic testing that certain laboratories can
perform if it's housed in one location. At this definition, I
am not an expert.
Mr. Greenwood. Okay, but you don't need a 510(k) for that,
correct?
Mr. Petricoin. Yes, a 510(k) is an FDA. But CLIA
Mr. Greenwood. Was there any, I'm trying to get at, was it
not abundantly clear that this company was interested in
getting FDA approval for its equipment?
Mr. Petricoin. It was not abundantly clear to me. My
understanding was they were looking at every aspect of science
and technology. And science and technology being such a huge
field, and the regulations that I saw in place on the FDA
website, where
Mr. Greenwood. Wasn't the wonderful promise, or isn't the
wonderful promise of this technique, this device, that it is
going to be able to allow for us to have very advanced
diagnoses of potential cancer victims? Isn't that what it's all
about?
I mean isn't that what they're, isn't that the grandeur of
their idea?
Mr. Petricoin. Not to my understanding.
Mr. Greenwood. Okay.
Mr. Petricoin. That they had really no specific application
that they were looking at. They had developed the technology
and platform and they were looking at avenues to use them.
That's what my consultation was, was to look into the public
domain at where any application, where technology such as this
could possible by used.
Mr. Greenwood. Why do you think they wanted you?
Mr. Petricoin. I assume because of my expertise and my
reputation.
Mr. Greenwood. In general, but not, not because of your
expertise in the way FDA works?
Mr. Petricoin. Absolutely not.
Mr. Greenwood. Okay.
Mr. Petricoin. At no time did they ever ask me, nor did I
give any advice on FDA.
Mr. Greenwood. I understand that. Did your consulting
agreement with Biospect include this language? I think you said
it is different. Your consulting agreement with Biospect did
not include the language that I just had you look at in Title
32, Tab 32, rather?
Mr. Petricoin. That's right. And I would be happy to
provide the committee with my consulting
Mr. Greenwood. Okay, we would appreciate that. Is
Correlogic working on pattern-recognition based technology?
Mr. Petricoin. Yes, sir.
Mr. Greenwood. Okay. And we--oh, I'm sorry. Is Biospect
working on pattern-recognition technology? Pattern-recognition
based technology, is Biospect working on that?
Mr. Petricoin. The first time that I heard that Biospect
was working with pattern analysis, was when my Center Director,
Jesse Goodman, brought me into his office.
Mr. Greenwood. Who did?
Mr. Petricoin. Dr. Jesse Goodman, the Center Director for
Center for Biologics Evaluation and Research.
Mr. Greenwood. Right.
Mr. Petricoin. He brought me into his office and informed
me that, upon a recent re-review, the FDA had determined that
Biospect had become a significantly regulated entity, and he
used the terms pattern analysis that they had found. And that
was the first that I had heard reference to that.
Mr. Greenwood. Do you know who Peter Levine is?
Mr. Petricoin. Yes, sir.
Mr. Greenwood. Who is he?
Mr. Petricoin. I believe his title is the CEO of Correlogic
Systems.
Mr. Greenwood. Do you ever recall having a conversation
with him about his unhappiness with regard to your arrangement
with Biospect?
Mr. Petricoin. The recollection that I have of that
conversation was that Mr. Levine was unhappy with the fact that
there seemed to be a lot of former NCI employees in the
company.
Mr. Greenwood. But he didn't--was he aware that you were--
had this arrangement with Biospect?
Mr. Petricoin. I believe so, sir.
Mr. Greenwood. How would he have known that? Did you tell
him?
Mr. Petricoin. I
Mr. Greenwood. Did you ever tell
Mr. Petricoin. No. Mr. Levine had that information because
on one of the instances in which Dr. Liotta and I went up to an
office facility, a temporary facility where we share joint
secretarial services, they were both actually shared by
Biospect and Correlogic.
Maybe even in some ways highlighting how little we--there
was no concern on our part. And so we went up there and Mr.
Levine saw us and asked what we were doing up there, we weren't
having a CRADA meeting? And we told him that we were up here at
a
Mr. Greenwood. Why wouldn't you have volunteered that
information to him prior to that time?
Mr. Petricoin. I didn't see any need to. There was no
overlap in my mind. Correlogic, in my mind, sir, was a software
company that was using algorithms to look for hidden patterns
in mass spec data. And those would be fingerprints that could
be used for diagnosis. Biospect, my understanding was, it was
an instrument company.
It was building a platform of protein separation. It was
entirely different. And thus, in my mind, there was really no
reason to talk to Mr. Levine.
Mr. Greenwood. When you were first made aware of these
concerns that Mr. Levine had, did you consider terminating your
consulting agreement with Biospect?
Mr. Petricoin. I know because I thought his concerns really
relayed to the number of former NCI employees that were
Mr. Greenwood. So he never expressed to you that he was
unhappy that you were working with Biospect?
Mr. Petricoin. I think he was unhappy that we, that, you
know, Dr. Liotta and I had an outside activity that were
perhaps taking away our time. I, my recollection of the
conversation was that he expressed some question about why
there were so many former NCI employees in the company.
Mr. Greenwood. Why do you think he had that concern?
Mr. Petricoin. I guess he felt that this, you know, was
nepotism going on here? I don't know. He just said that didn't
smell right to him. And I said I didn't know that that was
illegal.
Mr. Greenwood. Dr. Barker, Correlogic made a complaint to
NCI, did it not? Could you characterize that?
Ms. Barker. Yes, in July 2003, actually Dr. Von Eschenbach
informed me that Dr. Ren Archer, who was a consultant of
Correlogic's, actually I think represents them in their, some
of their marketing activities.
He's with Hill and Knowlton had complained to him that he
felt as though there might be some issues surrounding Dr.
Liotta's consultancy with a competing company, with which the
NCI had a CRADA. And he represented that company, which was
Correlogic. So I spoke with Dr. Archer and he shared that
concern with me, and I assured him that we would examine Dr.
Liotta's consultancy agreement and I would actually get back to
him on that.
And that's the only time it's ever been raised. It hasn't
been raised in meetings, but it was raised in that
conversation.
Mr. Greenwood. Dr. Barrett, what was the issue that you
were looking at, at the time?
Mr. Barrett. Which time are you referring to, Mr. Chairman?
Mr. Greenwood. The reference that Dr. Barker just made.
Mr. Barrett. Oh, okay. So, I had, we had originally
approved the outside activity in 2002. And when Dr. Barker was
contacted by the representative from Correlogic, I then re-
reviewed the material that was available, and called Dr. Liotta
in.
At that point I, the question on the table, as I understood
it, was whether or not there was any conflict between the
outside activity and the ongoing CRADA that we had with
Correlogic.
And so I called Petricoin in, as well, to discuss how this
might impact, if at all, the CRADA.
Mr. Greenwood. There wasn't a question of were they or were
they not NCI officials and how many NCI officials, you were
interested in the question of whether there is a conflict of
interest?
Mr. Barrett. Right. I was unaware of the NCI former
employees being members of
Mr. Greenwood. My time has expired. Now, the gentlelady
from Colorado.
Ms. DeGette. Thank you, Mr. Chairman. And Dr. Liotta and
Dr. Petricoin, I want to add to the Chairman's sentiments. I
think both of you are dedicated public servants and researchers
and we do have to go into this.
But I do not question your dedication to research or
ethics. Although I think these case studies are good examples
of some of the concerns we have, Dr. Liotta, starting with you,
and also I want to ask you some of these same questions, Dr.
Petricoin.
In your written statement, and you alluded to this in your
oral presentation. You said that when you first came to the
Cancer Institute at the NIH, you were fresh out of medical
school and you really loved the climate and intellectual
freedom. Is that a correct paraphrase?
Mr. Liotta. Yes.
Ms. DeGette. Do you still love that climate of intellectual
freedom there?
Mr. Liotta. Absolutely.
Ms. DeGette. I would assume that's one of the best things
about being at the NIH is being able
Mr. Liotta. I love
Ms. DeGette. Is your microphone on, sir?
Mr. Liotta. Yes, that's why I stay at the NIH, because of
that intellectual and creative freedom.
Ms. DeGette. Right. Would it be fair to say that you don't
stay at the NIH because of your ability to do outside
consulting or get speaking fees?
Mr. Liotta. I stay at the NIH because I'm dedicated to the
mission, particularly of the Cancer Institute.
Ms. DeGette. And, Dr. Petricoin, I was also struck both by
your oral testimony and your written testimony. And I actually
have a 14 year old daughter who is like this.
Who is so excited by the concept of researching and being a
scientist. And you said in your written statement you remember
as a child, driving by the NIH and Naval Hospital, and staring
in disbelief at the size of the buildings where everyone inside
were all scientists, right?
And so I'm going to ask you the same question. What you
really love to do is the science, right? Now, I'm sorry, you
need to say words for the record.
Mr. Petricoin. Yes.
Ms. DeGette. Now, so I have the same question, is you do
this because of the science, is that what makes you stay at the
FDA or is it because of the outside contracts and speaking fees
you're able to attain?
Mr. Petricoin. No, ma'am, I stay at the NIH and the FDA
because of the intellectual freedom and the creative science
and the ability to hopefully make a public health difference.
Ms. DeGette. And that's why you went there a little over 10
years ago, right?
Mr. Petricoin. Yes, ma'am.
Ms. DeGette. Now, Dr. Liotta, you testified that you ended
your outside activity with Biospect last week, when you learned
that Biospect had requested certain information from the NIH.
What was that information?
Mr. Liotta. That was information that was publicly
available to everyone who asked for it, as part of our effort
to disseminate the raw data from our studies to anyone who
requests it.
Our goal is to develop new diagnostic technology to fight
cancer, so we want as many people to be working on that as
possible.
Ms. DeGette. Right.
Mr. Liotta. So we provide that data freely.
Ms. DeGette. But somehow you thought, because they were
requesting that data, that then created a conflict of interest
for you?
Mr. Liotta. Because I found out, unbeknownst to me, that
they had requested that data, then I could not be completely,
absolutely sure that they weren't going to studying something
that might overlap in my, with my government work.
Even though my consulting agreement, specifically by name,
excluded
Ms. DeGette. But because there was then a
Mr. Liotta. Because of that potential. And I discussed it
with my, with Dr. Barrett and Dr. Wilson, and I voluntarily
withdrew that outside activity because I didn't want to have
even the slightest possibility.
Ms. DeGette. Thank you. How did you find out about that
request?
Mr. Liotta. Mr. Pugash, from the NCI, told me.
Ms. DeGette. And, and just last week?
Mr. Liotta. That's correct.
Ms. DeGette. And how, did he say how he learned about it?
Mr. Liotta. He said that in preparation for this hearing,
the Technology Transfer Branch had been trying to study
everything that they could, that was relevant. And this, a
document came up that reflected a request by Biospect that came
in.
This was part of a turnkey system that I had no
decisionmaking role in, and it just went from one office to the
next.
Ms. DeGette. Did he tell you if they found anything else
that affected ongoing agreements between NIH Scientists and
outside companies, as a result of the request for this hearing?
Mr. Liotta. No, not that I recall.
Ms. DeGette. Okay. Well, at least we're doing some good,
Mr. Chairman, I guess. I, now have you ever learned information
in the midst of a consulting agreement that caused you to
withdraw from the agreement, or was this the first time?
Mr. Liotta. This was the first time.
Ms. DeGette. Okay. And this agreement, the original
agreement was approved by ethics officials?
Mr. Liotta. That's right. The original agreement was
approved, and in fact developed in concert with ethics.
Ms. DeGette. Okay, so they actually helped you develop the
agreement?
Mr. Liotta. That's right. They added language to it, they
reviewed it and worked together with me to develop this
agreement.
Ms. DeGette. Okay, now, Dr. Petricoin, you work at the FDA.
So your ethics requirements are a little different. I think
that's important to put out at this hearing. Is that correct?
Mr. Petricoin. Yes, ma'am. It is a significantly regulated
entity.
Ms. DeGette. Significantly tighter restrictions, right? And
that's because your agency is actually approving these drugs,
right?
Mr. Petricoin. Yes, ma'am.
Ms. DeGette. Now you have received honoraria and/or
expenses to speak to a number of groups, including Pfizer, 3M,
other private companies who clients include pharmaceutical and
biotech firms, correct?
Mr. Petricoin. Yes, ma'am.
Ms. DeGette. About how many over the last ten or so years?
Mr. Petricoin. I believe I have about 20 outside activity
requests in my file.
Ms. DeGette. About 20 outside activity--are these, now how
many for honoraria for speaking?
Mr. Petricoin. I believe I have only a few for, that have
given me honoraria for speaking.
Ms. DeGette. Okay.
Mr. Petricoin. I have many that, or I have a number for
travel reimbursement.
Ms. DeGette. Oh, so you actually went and spoke at some
places but didn't receive honoraria, right?
Mr. Petricoin. Yes, ma'am.
Ms. DeGette. Now when you get invited to speak at
something, do you go because of the honor and prestige of
speaking, or because you might receive an honorarium?
Mr. Petricoin. It depends on the nature of the invitation.
For me it's always the ability to learn when I go and give a
talk.
Ms. DeGette. Okay.
Mr. Petricoin. I hope to learn something. And so if they
invite me because of my general scientific expertise, it's not
related to my FDA expertise or my FDA job, I can, under ethics,
submit a request for approval for both an honoraria and a
travel expense.
And I put that request forward and the FDA Ethics Office,
and whatever process
Ms. DeGette. Right, but the reason you go is to learn, as
you've just said, not because you're going to get paid, right?
Mr. Petricoin. That's right. My first level decision isn't
how I can get more money?
Ms. DeGette. Right. Well, I'm asking you, I'm not asking
you this to be insulting in any way, because that would be
exactly the way I'd be if I were you. Some people are saying
that there won't be these collaborations between NIH or FDA
Scientists without money involvement.
I don't buy that premise. I don't know if you do. Do you
buy that premise?
Mr. Petricoin. I do not think that anyone should be making
a decision about how they advance their professional career,
especially as a Scientist, where the first determinate is am I
going to be making more money.
I believe personally that it should be about learning.
Ms. DeGette. And you're sort of early in your career at the
FDA. Dr. Liotta, you're sort of mid-career, I'd say. What's
your view on that?
Mr. Liotta. I'm at the NIH, and I stay there because of the
medical mission and goal of taking science to the public
benefit.
Ms. DeGette. And not because of the ability to get outside
consulting fees or honoraria, correct? Would that be fair?
Mr. Liotta. That is not my primary reason, no.
Ms. DeGette. Okay. Now, Dr. Petricoin, every time you spoke
at one of these--now you wouldn't be allowed to speak, and
maybe I'm wrong. You wouldn't be allowed to speak at these
outside conferences if it did, if it did have a conflict with
your FDA job, right?
Mr. Petricoin. I was
Ms. DeGette. I mean that wouldn't be, you wouldn't even put
it in, right? What you're saying is you're invited to speak at
these because of your scientific experience outside the FDA,
right?
Mr. Petricoin. Yes, ma'am.
Ms. DeGette. And every time one of these speaking
engagements does get approved by--or every time you have one,
it's approved by your superiors, right?
Mr. Petricoin. Every outside activity that I've ever put
in, has gone into the process of approval.
Ms. DeGette. And that would be Amy Rosenburg or Phil
Naguchi, correct?
Mr. Petricoin. Yes, those are the two first-line approving
officers, because the triage that is supposed to take place, is
that you first discuss your outside activity with your
immediate supervisor.
They were my immediate supervisors at that time. Hopefully,
they would best know what I was doing in the government.
Ms. DeGette. And they did approve these outside
engagements?
Mr. Petricoin. Yes, ma'am.
Ms. DeGette. Now I want to talk to you about an activity
that was approved in February of this year. I realize you
didn't actually end up going, but I think it's a good case
study.
This is an EGFR Seminar sponsored by Imclone Systems, one
of our very favorite groups in this subcommittee, and Bristol
Meyer Squibb, both who have received a good deal of publicity
because of, of course, their submissions to your agency for
approval of the drug Herbatax.
Now, were you aware that Herbatax has come before CBER for
approval?
Mr. Petricoin. Yes, ma'am.
Ms. DeGette. And it's likely to come there again. It's been
there several times for approval of other indications, because
it's only been approved for one indication, right?
Mr. Petricoin. Yes, ma'am.
Ms. DeGette. Now were you aware of that when you accepted
the invitation to pay for you to participate in the seminar at
the Trump International Beach Resort in Florida?
Mr. Petricoin. I was unaware, when I first accepted, that
this was a pharmaceutical sponsored and paid for event. When I
learned that I just simply said I'm not going.
Ms. DeGette. Well, with all due respect, I've got the
program here, and it says on the top, Imclone Systems,
Incorporated and Bristol Meyer Squibb Company, 2004 EGFR
Summit. So, did you not have that?
Mr. Petricoin. To the best of my recollection, I had an e-
mail from Dr. Jose Baselga, who was a Scientist at Vanderbilt
University, asking me if I would like to come and talk.
And I said that, you know, it depends on the nature of the
talk, I could give the talk. And he said to me I'll forward you
and agenda descirbing the nature of the talk that I was to give
to him. I understood that I could do this as an outside
activity from Dr. Baselga.
Ms. DeGette. Oh, okay.
Mr. Petricoin. And when he forwarded me the agenda, I
attached on this
Ms. DeGette. Right. But see, here's why we're all a little
confused up here. Because you submitted, and she just handed
you a copy of the Request for Approval of Outside Activity. Did
you fill that out?
Mr. Petricoin. I did, based on the
Ms. DeGette. Based on the stuff from the guy from
Vanderbilt, right? And it was approved here by your
supervisors, right?
Mr. Petricoin. Yes, ma'am.
Ms. DeGette. But if you take a look at Number 16, it says
additional information attached, yes, and then it says agenda,
and here's the agenda, right?
Mr. Petricoin. I understand your concern, ma'am. I didn't
go because when I looked at it, when I looked at the agenda,
the detail of the agenda, I said whoa, wait a minute.
Ms. DeGette. Well, well, well, well, wait a minute. You put
in for the approval and attached the agenda.
Mr. Petricoin. Yes, ma'am.
Ms. DeGette. So did you later decide that it would be a
problem to go?
Mr. Petricoin. Yes, ma'am.
Ms. DeGette. After it was approved?
Mr. Petricoin. Yes, ma'am.
Ms. DeGette. Oh, okay. Now, but the other thing I find
interesting is you say you later saw an ethical problem because
it was pharmaceutically sponsored, right?
Mr. Petricoin. Yes, when I
Ms. DeGette. But your supervisors had that information
right in front of them when they approved it, didn't they?
Because they had the agenda attached.
Mr. Petricoin. It appears so, ma'am.
Ms. DeGette. Now, right, he just said he did. So now, okay,
here's the other thing. Another FDA official actually did
attend in your place, right?
Mr. Petricoin. No, ma'am. A Scientist from our laboratory
attended on the U.S. Government
Ms. DeGette. Right, and they were not paid an honorarium or
expenses, right?
Mr. Petricoin. No, ma'am.
Ms. DeGette. So that's a different, that's even another
interesting point from this whole, this whole transaction is,
someone else went to speak and they obviously didn't do it
because there was payment involved, they did it to present the
scientific issues, right?
Mr. Petricoin. Yes, ma'am.
Ms. DeGette. And aside from the ethical issues that it was
sponsored by pharmaceutical companies, let's say it hadn't.
Let's say it had been sponsored by Vanderbilt University and
you had been asked to speak. Would you have also been willing
to go and speak if there were no honorarium involved in this?
Mr. Petricoin. Would I have been willing to go and speak if
there were no honorariums?
Ms. DeGette. If the ethical objections weren't there?
Mr. Petricoin. Yes, I would have gone to learn.
Ms. DeGette. Okay. I have no further questions. Thank you,
Mr. Chairman.
Mr. Greenwood. I don't want to belabor that, but just tell
me if I have this wrong. You said, Dr. Petricoin, that when you
saw, it was when you saw the agenda, that's when you realized I
can't do this?
Mr. Petricoin. That's right. I said I can't do this because
this has all
Mr. Greenwood. Did you see the agenda before or after you
attached it to your application for approval?
Mr. Petricoin. Well, I obviously had the agenda, I attached
it to my approval. I don't think I looked at the agenda, to be
honest with you, sir, because I
Mr. Greenwood. You understand why that would make us wince?
Mr. Petricoin. Yes. So I believe, to the best of my
recollection, that I filled out the outside activity, stapled
the agenda on it
Mr. Greenwood. Maybe you were focused on the sunny isle
beach Florida part of the thing and not what it says up here.
Where it says, at the very top line, Imclone Systems
Incorporated and Bristol Meyer Squibb Company.
Mr. Petricoin. To me, sir, that would indicate, in my mind,
that I didn't look at it at all when I attached it, because
that would have been the first thing I would have seen.
To the best of my recollection, no excuse about being busy,
we're all busy. I probably just stapled it on and
Mr. Greenwood. I'm going to buy that, because it's hard to
believe
Mr. Petricoin. That it would be there in black and white.
And when I saw that, I basically said, you know, there's no
doubt it says Imclone Systems Incorporated, so it makes it
pretty obvious.
Mr. Greenwood. All right. Let me address some questions to
Dr. Barrett and Dr. Barker. There's an LA Times story out
today, I don't know if you've seen it.
It says FDA Chief launches internal inquiry of payments.
And there's a paragraph that says the Director of the NIH, Dr.
Elias A. Zerhouni, said to a spokesman late Monday that he
would not stand behind one of the arrangements involving Chief
of the National Cancer Institutes Pathology Laboratory.
The matter demonstrates the need for systemic review. So
this is referring--pardon me? I'm sorry, systemic reform. And
by that I am relating to Bio--consulting agreement between the
Laboratory Chief, Dr. Lance A. Liotta, and Biospect, Inc., of
South San Francisco ended Friday.
So, if this story is to be believed, Dr. Zerhouni, after
being briefed on this subject, said he wouldn't have approved,
or he disapproves of the relationship between Dr. Liotta and
Biospect, Inc.
Were either of you present at the briefing with Dr.
Zerhouni that led to this statement?
Ms. Barker. I was not. Dr. Kington, I assume is still here,
he might want to comment. But I was not, nor was Dr. Barrett, I
don't believe.
Mr. Barrett. No, I was not. Dr. Kington came to a meeting
we had at the NCI on Friday, I suppose, and he called me
yesterday to say that this was, they were asked for a quote,
basically.
Mr. Greenwood. And was it explained to you, was it made
clear to you why Dr. Zerhouni said that he wouldn't stand
behind this arrangement?
Ms. Barrett. It was not abundantly clear. I think he
certainly had some concerns and I think there were some
caveats, in my recollection, from my conversation with Dr.
Kington about, you know, if all the circumstances were as
portrayed, that Dr. Zerhouni would make that decision and I
think that would be
Mr. Greenwood. Do you concur in that decision? Do you both
concur in Dr. Zerhouni's conclusion, retrospectively?
Ms. Barker. I concur.
Mr. Greenwood. Okay.
Mr. Barrett. Yes.
Mr. Greenwood. Now do you think that this was, these
arrangements were approved, and now are disapproved because
simply because of new information that had surfaced? Or is it
because of new policy that's come into play?
Ms. Barker. Let me just reflect a minute on the way we came
to re-approve this. In responding to your first question, after
this issue was raised, and Dr. Barrett and Dr. Wilson re-
reviewed this at my request. And I think you probably have that
re-review.
And based on the information available and what you've
heard in terms of the lack of any evidence of overlap, they re-
approved and reported back to me that they were re-approving
this.
And I think that, in answer to you question, I think new
information in view of what I've heard in the last, as little
as a week, actually, that the Biospect scope is certainly
expanded, I think, relative to what Dr. Liotta was led to
believe the scope of that company was.
Mr. Greenwood. In what way?
Ms. Barker. I think the issue of pattern recognition that
you brought up was never part of what Dr. Barrett actually
reviewed when he re-approved this.
Mr. Greenwood. You did not know that at the time of the re-
approval, Dr. Barrett?
Mr. Barrett. At the time of the original approval, and the
time of the re-review of that, there were basically three areas
that I was focusing on.
One was whether or not there was overlap with the official
duties of Dr. Liotta, with this outside activity. And
Mr. Greenwood. And were there?
Mr. Barrett. There were not. In fact, the consulting
agreement had very explicit, exclusionary language to assure
that to be the case. And when originally is was approved, that
was added to the language to assure that.
And when I re-met with Dr. Liotta, he re-affirmed that that
was true. The second issue was whether it, there was any non-
public information being revealed, and there was not.
And there was not for two reasons, I'm sure. One is because
I trust Dr. Liotta's judgment, but also we've made a very
conscious effort to put this information out to the public
domain as part of our mission to really speed this research up.
So, in fact, there was very little non-public information
that could have been released. And the third issue was whether
or not this influenced his performance or official duties.
And in particular, this related to the CRADA. And it was my
discussions with Dr. Petricoin and Dr. Liotta that reassured me
that, in fact, we were doing everything we possibly could to
facilitate the development of the clinical trial to confirm and
extend the original findings of Dr. Liotta and Petricoin.
The issue of the competition, the direct competition
between the two companies, was one that was less clear in the
past than it is currently. So it is really that appearance of
potential conflict based upon that information that I think has
led us to be more cautionary.
So it's a combination of Dr. Zerhouni's memorandum that, in
fact, we should do everything in our power to assure there's no
appearance of conflict of interest, as well as our standard
procedures where we
Mr. Greenwood. Let me ask Dr. Liotta and Petricoin, did
either of you ever tell the folks at Correlogic about your
outside activity with Biospect?
Mr. Petricoin. I could answer.
Mr. Greenwood. And I think you said no, that we, and the
way they found out was they found you using a common secretary
pool, right?
Mr. Petricoin. That's correct, sir.
Mr. Greenwood. And Dr. Liotta, you never told the folks at
Correlogic about your work with Biospect?
Mr. Liotta. No, I did not.
Mr. Greenwood. Okay. Now it would seem to me, that since
you're working with these two companies, and they're doing
similar things, that it would be a natural for you to say, oh,
by the way, yesterday I was up talking to these guys I'm
working for at Biospect, and an interesting point came up.
I mean it would seem to me that, in the course of these
activities, that it would be hard to avoid mentioning to the
folks at Correlogic, your work with Biospect, wouldn't it?
Mr. Liotta. No, I didn't
Mr. Greenwood. Help me understand that.
Mr. Liotta. I didn't see any need to, because
Mr. Greenwood. No, no, no, no, no, I'm not asking you if
there was a need to. I'm saying it would hard to avoid if you
weren't under restraint. If you had no reason to not mention to
the folks at Correlogic that you were working for Biospect. It
would seem a natural thing to come up in conversations.
You're doing--no?
Mr. Liotta. No, I felt that they were completely different
from what I know about, what I knew at the time that Biospect
was doing. And even today, I have no information that directly
shows me that Biospect is working in the same area covered by
the scope of the Correlogic CRADA.
At the time my understanding of Biospect, was that it was
an instrument company.
Mr. Greenwood. Let me ask you this. Did the folks at
Biospect know you were doing the CRADA with Correlogic?
Mr. Liotta. I don't know, I did not discuss that with them?
Mr. Greenwood. Same with you, Dr. Petricoin?
Mr. Petricoin. Yes, my recollection is I had no discussion
with either of them about each other at all.
Mr. Greenwood. And you, and that wasn't because you were
refraining from talking to the two companies about one another,
that was just because it never came up? There was never any
Mr. Petricoin. Exactly. I mean, from my side, sir, there
was never, there was never any overlap and the need to even
discuss the science. Correlogic, the software company, had
developed a specific algorithm.
Many algorithms were out there. In fact, we were using
other algorithms in our U.S. public job. The CRADA with
Correlogic gave us the freedom to use any algorithm.
In fact, President Bush's National Science Winner, used an
algorithm that he developed and published a great paper using
our public data.
So Correlogic's algorithm was specific to them. I saw no
overlap whatsoever between an instrument company that was
basically building a platform to identify molecules. It just
didn't occur to me, sir.
Mr. Greenwood. And how many papers did you publish with
Correlogic?
Mr. Petricoin. We have six, I believe sir. And one that's
coming out next month. A very high impact journal on our
continuing work for ovarian cancer.
Mr. Greenwood. And those are cooperative pieces between the
two of you? When you six, those are all co-authored by Dr.
Liotta and Petricoin?
Mr. Petricoin. I believe so, sir. I could get you that
exact number, if you would like it.
Mr. Greenwood. And did you write papers with the other
company, with Biospect?
Mr. Liotta. No.
Mr. Petricoin. No.
Mr. Liotta. Never say any written material at all from
Biospect concerning the, you know, experiments or their data.
Mr. Greenwood. It's true that your reputations in this area
were a result of your work with Correlogic, is that fair to
say?
Mr. Liotta. I don't believe so.
Mr. Greenwood. No?
Mr. Liotta. Our reputations in this work, with regard to,
if you're referring to mass spectrometry analyzed by pattern
recognition evidence, we began studying that in `97 and `98,
and presented it at the American Association of Cancer
Research.
We used many commercial, several commercial methods of
analyzing this data. And then after we had already presented it
publicly, we, for the first time, we then entered into a
material transfer agreement with Correlogic.
And then ultimately a CRADA. And that scope of that CRADA
was limited to the use only of their type of software. We
remained free to use any other type of software as we had done
in the past during the CRADA, and continued to do.
Mr. Greenwood. Okay.
Mr. Liotta. That CRADA was specifically about their
software. And all the data, before, during and after, has been
generated by our Lab.
Mr. Greenwood. When the Biospect folks contacted you, did
they tell you why they had selected the two of you? What
brought the two of you to their attention?
Mr. Petricoin. I believe they contacted us separately, and
I would hope that it was because of my scientific reputation
and expertise.
Mr. Greenwood. And how would the folks at Biospect have
known about that?
Mr. Petricoin. I would assume looking in the public domain
or talking to people. You know, talking to, you know, due
diligence was probably talking to other scientists. I don't
know, sir, they didn't tell me.
Mr. Greenwood. Do you have an opinion as to why Biospect
would have hired Dr. Strum from NCI?
Mr. Petricoin. I don't.
Mr. Greenwood. She was a technical transfer officer, right?
Mr. Petricoin. I, being at the FDA I don't want to--I'm
under oath
Mr. Greenwood. Dr. Liotta, do you know?
Mr. Liotta. Yes, that's right. And ethics, when I reviewed
this with my ethics officer and discussed the outside activity,
it was clearly known and factored into the review that,
particularly the re-review that former Cancer Institute
employees were members of that company.
And, in fact, the person who invited me was a former NCI
employee. And that was, that letter and that request and the
name of the individuals on the original request for the outside
activity and it was reviewed and ended up in the approval
packet.
Mr. Greenwood. Okay. Do you think it was a coincidence that
they hired these three people?
Mr. Liotta. I can't speak for their motivations
Mr. Greenwood. You're a smart guy. I mean, you're a smart
man. What do you think motivated them to choose these three
employees for their company? To choose you?
Mr. Liotta. I really can't speculate on why they would
Mr. Greenwood. They chose you, they chose Petricoin, they
chose Strum. All involved in Correlogic. They chose the three
of you when you were all involved in Correlogic. Did you
question why that would be?
Mr. Liotta. I never questioned why that would be, because
in my mind Correlogic and Biospect were completely different
companies with completely different missions. And it didn't
even seem like it would even be relative.
Mr. Greenwood. Okay, well let me just wrap up this way,
before I yield to the gentlelady from Colorado. Oh, Mr. Walden,
I'll yield to him in a moment.
We're trying to set public policy here. And I'd just like
to know, from all four you, and I just ask you to each go down
and briefly answer this question before I go to Mr. Walden.
And that is, what do you think the policy should be with
regard to the situation in which you have employees working on
a CRADA, as part of their regular function, their regular
activities, and at the same time working for, doing outside
activity with a private company, and the CRADA company not
knowing about the work with the potential competitor, with this
other company?
Do you think, as a matter of public policy, that they
should have the right to know, while you're in their shop
working with them, on company time, on taxpayer time, that
you're out moonlighting, if you will, with another company?
Don't you think, do you think that they should have the
right to know that? Is it good public policy for them to know
it? Or is it good public policy for them to be kept in the
dark?
Mr. Liotta. Are you addressing the question to me?
Mr. Greenwood. Yes, I'm addressing it to each of you down
the line.
Mr. Liotta. I don't think I can comment on public policy
that's a higher level than myself. I think that each case
should be considered on an individual basis and the ethics
office, when they review
Mr. Greenwood. Didn't you testify before the Blue Ribbon
Panel on this subject? Did you not testify
Mr. Liotta. I testified before the Blue Ribbon Panel.
Mr. Greenwood. On policy? I mean did you suggest any policy
to the Blue Ribbon Panel?
Mr. Liotta. I don't recollect exactly what I said to the
Blue Ribbon Panel. I don't know whether it could be interpreted
as policy or not.
Mr. Greenwood. Or recommendations for practice?
Mr. Liotta. I gave them my opinion, but I don't know.
Mr. Greenwood. Okay, well that's all I'm asking for, is
your opinion now. I'm not asking you to set policy, I'm just
asking for your opinion. Tell us what you think about this
whole matter that we've been investigating all afternoon?
Do you have any regrets about it? Do you think everything
went perfectly well and we're making a big stink out of
nothing?
Mr. Liotta. In some way I think it shows that the way the
ethics system works, it produces a very good result. Because
even when I did, presented the application for the outside
activity to begin with, normal course of action is for the
ethics office to review whether I have an CRADAs that might
relate to the outside activity.
So there's a checkpoint there, and a series of checkpoints.
And then the way even this was handled recently, I think is the
way the process should work, if new information comes up.
And then another checkpoint that was put in right in the
beginning was the extra special delimiters in the consulting
agreement, because we could not predict where a company would
go in the future.
And so what I'd be concerned about, is that a CRADA partner
who also can't predict where some other company would go into,
would just turn down everything because, and that would
potentially, you know, cause a lot of new complications in how
outside activities are reviewed.
So I, my opinion is that the way the system works in terms
of factoring that into the individual situation, is one good
way to do it.
Mr. Greenwood. Dr. Petricoin, your thoughts?
Mr. Petricoin. Well I certainly think we need more advice
that sheds more light than heat. And I think that's what we're
trying to do. I do think I'm concerned about the idea of a
CRADA partner knowing what perhaps their NIH comrades are doing
on the outside, only to the extent that they would claim that
the field of science and technology is their domain, and
therefore, in essence, if you drew it to the most absurd, there
would only be one CRADA, the very first one.
Because, by nature, there might not even be other CRADAs
that you could do, if you drew it. I just think that we have to
be careful, and I think we were trying to be. You know, trying
Mr. Greenwood. Let me--you think that it would be harmful
if the CRADA participants knew about the outside activity of
their NIH CRADA partners?
Mr. Petricoin. No, sir, I don't think it would be harmful.
I think that we should try to instill ideas that basically will
allow more illumination, more transparency.
Mr. Greenwood. Okay, all right, I misunderstood you. Dr.
Barrett.
Mr. Barrett. The purpose of the NIH and the National Cancer
Institute is obviously to do everything in our possible power
to move forth the science and to reduce the burden of cancer.
The groundbreaking work of Dr. Petricoin and Dr. Liotta
which, and I think it is clearly their work that has been the
driver for these new discoveries, represents a very important
work.
And we want to do everything in our power to assure full,
expedient development of that work. I think the answer to your
question directly is, is should their be a policy? I think
absolutely there needs to be a policy.
There needs to be some definition of conflicts of interest.
It's very difficult in these relationships to really understand
how two entities might be competitive, competitors of each
other or not.
I think we try to do due diligence in this particular
circumstance and try to define very clearly the scope of the
consulting activities, yet we seem to have this appearance of
conflict, and I think that's unfortunate and takes away from
really the mission of what we're trying to do.
So I would be very supportive of some clear guidelines any
policy.
Mr. Greenwood. Dr. Barker, do you have anything to add?
Ms. Barker. I can't add much. I would, just a couple of
things. The Cancer Institute is particularly interested in
CRADAs. The biotechnology industry is really sort of a deliver
vehicle for the cancer world right now. And so to improve on
the CRADA process should be our goal.
And I was struck with the amount of review that went into
this ethics review. So it's, I think there is no fault here
relative to our intent to really look at this very, very
carefully.
I think that review worked pretty well. The issue, though,
that you've raised is a really complex one.
Mr. Greenwood. Didn't the review occur because there was a
complaint, though?
Ms. Barker. Yes.
Mr. Greenwood. I mean it wasn't normal activity?
Ms. Barker. It was no normal activity, that's correct. But
the issue you raised, which is going to bare, I think, some
real consideration in terms of how we might change policy, is
going to be critically important.
Because as, I think Dr. Liotta said, you can't really
determine, I mean having been in the biotechnology industry at
some phase in my life, you never quite know where a company
might go from where they start.
So I think transparency, having our investigators
completely reveal who they are working for, who they might be
consulting with or what relationships they might have, and let
the companies make their decisions then on that basis.
But I think we've got to be a little careful. This is a
very complex question and
Mr. Greenwood. What's the downside of sharing the
information?
Ms. Barker. I think there is no downside to sharing the
information, if in fact we have, we can actually continue the
same success rate with our CRADAs. I think the thing we want to
be careful of is that we don't actually make it more
bureaucratic or more difficult to do a CRADA.
And right now our investigators do disclose actually. You
know, if they have a, they can't have a consulting arrangement
if they have a CRADA with the same company. They can't do that.
So we're saying now, is not only that, but you can't also
be consulting for a company that might be a competitor of a
company you're going to do a CRADA with.
So making that value judgment is going to be an interesting
challenge for us as we make policy around this. But I think
you're right, absolutely disclose it, and then basically let
the policy drive the way the CRADAs are going to be developed.
Mr. Greenwood. I thank you all. I apologize to my
colleagues for my flagrant abuse of the clock.
Mr. Walden. But it is your clock.
Mr. Greenwood. Mr. Walden.
Mr. Walden. Thank you, Mr. Chairman. Dr. Barker, I want to
follow up with you on that point. When did you make the
decision regarding this issue involving competitor agreements
not being allowed?
Ms. Barker. To my knowledge, that decision has not been
made. I think this is the first issue that's come forward of
this nature. There may be others that I'm not aware of, but
this is the first one, at least, that we've seen in the Cancer
Institute.
And we examined it very carefully. Dr. Von Eschenbach asked
me to do due diligence on it, we did that. Dr. Barrett re-
reviewed it, Dr. Wilson re-reviewed it. And based on the
evidence that was there, this still basically qualified in
terms of our ethical requirements. So, it's the first one like
this that's come forward.
Mr. Walden. Let me make sure I understand what you said. So
you said this still qualifies under your ethics requirements.
Does that mean they could still be working for both companies?
Or doing the CRADA and working for Biospect?
Ms. Barker. I think that's what it says, under the current
rules, yes.
Mr. Walden. Are you comfortable with that?
Ms. Barker. I'm not comfortable with that. But, you know,
we've said that, I think both Dr. Barrett and myself have said
that, given what we know now, and going back and doing this
over again, you probably would have disapproved this
consultancy.
Mr. Walden. Do you have, or the people who should have, do
you have the information you need to evaluate other such
agreements and conflicts? I mean is the mechanism there to
acquire that information?
Is that information publicly disclosed adequately so that
whoever needs to do the review can get access and make that
decision?
Ms. Barker. I honestly don't know the answer to that
question.
Mr. Walden. Does anyone on the panel know the answer to
that? Dr. Barrett?
Mr. Barrett. I think it's, we've made a very strong attempt
at the NCI, and I would gather that we actually probably do
better than the average Institute does in that context. But,
yet, I think the answer is, it's still not adequate. And we've
been actually talking about how to approve access to data bases
and, for example, the disclosure of the confidentiality
disclosure agreement that Dr. Liotta mentioned, you know, was
not available to us until just recently.
So I think there are very specific things that can be done
to improve the process and we're trying to do that.
Mr. Walden. Thank you. Dr. Liotta, first of all I want to
commend both of you for the research that you're doing. My own
mother died of ovarian cancer. I know it's a very, very, it's a
very terrible form or cancer, and so I commend you for that.
And I don't want you to go away from here thinking that we
don't appreciate the research that you're doing. We're trying
to, public policy people trying to make sure that research,
wherever it's done, is done in a way where we don't have, even
by accident, conflicts.
Because I think the integrity of the process is really
important. If you turn to Tab 28, and I think we'll put this up
on the screen, I believe.
You'll find your request for approval, the Biospect
Consulting Agreement. And the thing that strikes me is on the
form, which I understand is an HHS Form 520, there's a question
that says do your official duties relate in anyway to the
proposed activity? You responded no.
Related to professional confidence, but not an official
responsibility for the use of government funds. That was your
response. And however, on Dr. Petricoin's HHS Form 520 for
Biospect, when asked whether his official duties relate in
anyway to the proposed activity, he marked yes, and elaborated,
and I quote. Invited because of my scientific expertise. I'm
just curious if you can account for the differences in
responses to the same question, and I'd ask that of each of
you.
Mr. Petricoin. Well, I can certainly respond from my end,
in that I probably shouldn't have marked yes. In some ways I
was doing it to even the fullest disclosure because in my mind
I am, the accumulation of my scientific expertise.
Mr. Walden. Sure.
Mr. Petricoin. And so I simply yes out of the instinct that
I can't separate my brains. I'm a Scientist that just continues
to learn.
Mr. Walden. Only Steve Martin can do that.
Mr. Petricoin. Right. So I think in retrospect, I should
have marked no, and put I was invited for my general
Mr. Walden. But I think you hit upon an issue. And that is
you have this collection of knowledge and scientific ability.
You can't park part of it somewhere out of reach, right?
I mean that's why you checked yes. And doesn't that kind
of, do you see how we get to where we're at in terms of is
there a conflict between the CRADA and Biospect.
I mean how could you, when you're doing whatever you're
doing with Biospect, sort of park everything you know that may
be associated with the CRADA, from playing over here. Now,
maybe you can. I don't know how.
Mr. Petricoin. Well, I think the challenge is when
companies change their business focus without you being
involved in that.
Mr. Walden. Sure.
Mr. Petricoin. My background isn't a business developer,
I'm just a Scientist. And so I wasn't asked to participate in
Biospect to determine, you know, their business development.
And so that can change without me even knowing it, and in
fact, it obviously did. And I think that
Mr. Walden. So you could get dragged into a conflict
outside of your control and outside of the original
decisionmaking process in the 520.
Mr. Petricoin. Certainly a company has every right to do
what it wants to do, and my consultancy was so different from
what I was doing with Correlogic, that there was never, there
was the ability to partition that.
And in fact I never was at a point in any time where I
thought that that was at issue.
Mr. Walden. Dr. Liotta, do you want to comment briefly on
this point?
Mr. Liotta. I don't know about the, you know, the check
boxes relating to Dr. Petricoin, but I would say that his
explanation sounds reasonable to me concerning the fact that he
might view a request for consulting having some, his total body
knowledge about
Mr. Walden. But you checked no on the same box. I guess
that's the point. And so you felt nothing you're doing related.
Mr. Liotta. Yes, I had general medical expertise in, and in
field of Pathology and I have a PhD in Biomedical Engineering.
And I have even patents in medical testing.
Personal patents way back before I came to NIH. And so I do
have professional knowledge about some of the topics that might
be relevant.
Mr. Walden. I guess that's what I'm having trouble
understanding. Why do you think they even have Question 9 on
the form then? Because it looks to me like, and again you guys
are doing this research, but the two companies had a lot in
common.
Let's go to Tabs 30 and 31, if you want to look in the
book, where you'll see information from the two companies
websites. And I know, didn't one of you have something to do
with website information or something, working with the
company?
Mr. Liotta. We were not involved in Biospect's website but
at the time of the original request for the outside activity,
the information about Biospect was surveyed and studied by the
Ethics Office, as well as any information that I had.
Mr. Walden. Right, but
Mr. Liotta. They did an independent review of the two
companies if they were looking at the issue about the CRADA, I
don't know whether they were. But they
Mr. Walden. So the Ethics Office looked at both companies
and said given
Mr. Liotta. I don't know whether they looked at both
companies. I know they must have looked at Biospect to see what
Biospect did, because they do their own review and re-review.
Mr. Walden. Well, okay. Do you see where maybe we get some
questions coming here. Let me read you Correlogic's mission
statement. It says, and I quote.
Correlogic's mission is to advance the early identification
of various cancers and other disease and to accelerate the new
drug discovery process by applying its proprietary software to
the development of proteomic and other biomarkers.
Then you turn to Biospect's website, and it states, and I
quote. Biospect is an emerging life sciences company founded in
2002, that is developing technology for identifying and
assaying protein biomarker patterns. What's the difference
between the two?
Mr. Liotta. I think there still could be, with knowing even
that, that there still could be very big differences. Because
from what I know about Correlogic, Correlogic is a software
company.
And they're applying their specific type of pattern
recognition algorithm, at least within the CRADA, to data that
we generate.
Mr. Walden. And then what's Biospect do?
Mr. Liotta. And Biospect, to the best of my knowledge, then
and now, is they were an instrument company and they were
developing a new, proprietary platform for chemistry
separation.
So an instrument company, software company. They seem
completely different to me.
Mr. Walden. So you don't see any, they're in completely
different, other than the fact they are both working on this
sort of detection, one from an instrument side, one from a
logarithm side, there's no conflict?
Mr. Liotta. One is a software that you use to analyze data
that's already produced, in this case, by commercially
available instruments. The other is a new instrument under
development and measuring proteins is something 30 different
kinds of instruments in a clinical lab do. When you do
measurements in any clinical lab, it's proteins that you're
measuring.
Mr. Walden. All right.
Mr. Liotta. So, you know, whatever the instrument was that
Biospect was working on, which they did not reveal to me. I did
not see any schematics, no data, experimental results from any
of their instruments.
So the instrument itself is what they apparently were
working on, and they asked my opinion about what they could use
it to test for, in a generic sense.
And that was my role with Biospect. So I couldn't see how
that had anything to do with software to analyze patterns.
Mr. Walden. I see.
Mr. Liotta. And particularly certain specific kinds of
software, which is really what the Correlogic system is.
Mr. Walden. All right, Dr. Petricoin, how about your role,
Biospect versus Correlogic?
Mr. Petricoin. Sure, my role with Biospect was basically to
survey the field of science and biology in a way, looking for
potential applications of their machine, their tool, their
discovery tool.
And try to point them in directions where I thought, you
know, they could apply that.
Mr. Walden. Why then, Dr. Barker, maybe I can go to you.
Why then, if that's the case, do you, did you say earlier that
you thought there is a conflict here between the two? What am I
missing?
Ms. Barker. I don't, I said in light of what we see now,
that Biospect has put up on their website, then I think it's
very, very difficult considering that this work is focuses
around using Correlogic software for pattern recognition and
they are actually using that word on their website.
Biospect was using those two words on their website. I
think it would make it extremely difficult to prove this, which
now looks like overlapping scopes.
Mr. Walden. And, in deed, you backed off the Bio--you with
drew the Biospect agreement?
Mr. Liotta. That's correct, that's true.
Mr. Walden. And that involved both of you?
Mr. Petricoin. Yes, sir.
Mr. Walden. All right. And when did that occur?
Mr. Liotta. I withdrew it, it was on hold based on the
NIHEAC re-review, and then I learned this new information,
discussed it with my boss and withdrew voluntarily this outside
activity.
Mr. Walden. When was that?
Mr. Liotta. Last week.
Mr. Walden. The end of last week, or beginning?
Mr. Liotta. Around the 12th?
Mr. Walden. May 12? Have you done any consulting with
Biospect since February? Either of you?
Mr. Petricoin. Since February, I believe so.
Mr. Walden. How recently do you, and on what terms?
Mr. Petricoin. The best of my recollection in March, sir.
Mr. Walden. Dr. Liotta?
Mr. Liotta. I believe that I had no new assignments in the
past 2 months that I dealt with, because I was on hold. But I
do recall that I sent one e-mail to Biospect in that timeframe.
Mr. Walden. Okay. When did you start consulting with
Biospect?
Mr. Liotta. I think it was December, it was approved
December, 2003, I think. Or 2002, I started a couple of months
later, I actually got the first assignment.
Mr. Walden. Dr. Petricoin?
Mr. Petricoin. Excuse me, sir?
Mr. Walden. When did you start consulting with Biospect?
Mr. Petricoin. Approximately the same time. I think my
agreement began December 1, 2002, and I believe my first
assignment was in the beginning of 2003.
Mr. Walden. Beginning of 2003, first assignment?
Mr. Petricoin. Yes.
Mr. Walden. Dr. Liotta, there's some information here under
Tab 33, that lists money earned to date as $49,375 in
consulting fees. Proposed annual rate $39,000 or $3,250 a
month. Are those accurate numbers?
Mr. Liotta. Yes, those are accurate numbers.
Mr. Walden. Okay. And this is, what period of time does
this cover?
Mr. Liotta. I think that was just a summation of what it
would be per year at the rate of whatever the current
Mr. Walden. I see. But that's the annual, $39,000?
Mr. Liotta. It's $3,120 a month.
Mr. Walden. Well, we had $3,250.
Mr. Liotta. I mean $3,100.
Mr. Walden. The document shows $3,250 a month.
Mr. Liotta. $3,250, okay.
Mr. Walden. But what about this $49,375 consulting fees,
when was that earned? Do you see where I'm looking on this
sheet?
Mr. Liotta. Yes. I don't know how that was calculated, but
it might reflect the fact that in the beginning of the
consulting, I was receiving $5,000, and then it switched----
Mr. Walden. A month?
Mr. Liotta. A month, $5,000 a month. And then it switched
and it was reduced, and that was reported in my renewal
application of this outside activity.
Mr. Walden. Okay. I think that ends the questions I have,
thank you, gentlemen.
Mr. Greenwood. Just a final question for Dr. Liotta and
Petricoin. Your agreement with the company was 1 day a month,
is that correct for both of you?
Mr. Petricoin. Yes, sir, initially. I'll answer for myself.
It was 2 days per month, and that was reduced to 1 day per
month.
Mr. Greenwood. And Dr. Liotta?
Mr. Liotta. Yes.
Mr. Greenwood. Same thing?
Mr. Liotta. Similar.
Mr. Greenwood. And how do you do that? Just, how do you do
that? Literally 1 day of the month you, instead of going to NIH
or the FDA, you drive to Biospect and sit in their building all
day? How does that work?
Mr. Liotta. In my case, I did all the work for Biospect at
home, on my computer, and surveyed publicly available
information to analyze questions that they had.
And then I synthesized those, that publicly available
information, into short reports, which then was presented to
Biospect, maybe once every 2 or 3 months.
Mr. Greenwood. Okay, and Dr. Petricoin, how did you manage
it?
Mr. Petricoin. Pretty much the same way. My job, as I
stated, was to kind of survey the public domain for
opportunity. And I would do that at home on my computer. And I
would synthesize the information and most often
Mr. Greenwood. So what do you do, you call the office and
you say to somebody at FDA or NIH, I'm not going to be in today
I'm working for Biospect? How does that work?
Mr. Petricoin. No, most of my work was done on the weekends
or when I got home from work. So it wasn't like I would take a
whole day off or compartmentalize time.
Mr. Greenwood. So you didn't take any, neither one of you
took time off of your regular work week for this?
Mr. Petricoin. Not, so to give you the full story, there
was about three or four times, to my recollection, that we
actually went up to Biospect's office.
Mr. Greenwood. Where was that?
Mr. Petricoin. On Democracy Boulevard. This was the shared
office space.
Mr. Greenwood. Right. Is that like an incubator or
something?
Mr. Petricoin. Yeah, it's where they have like shared
secretarial, I guess support for these companies that are
either offsite or--and we met with them and that was usually
during the day or during the end of the day, and I would take
annual leave.
Mr. Greenwood. You would take annual leave to do it?
Mr. Petricoin. Yes, yes, sir.
Mr. Greenwood. Dr. Liotta?
Mr. Liotta. To the best of my recollection
Mr. Greenwood. Pretty much the same thing? And when you're
at your regular jobs, do you have issues of them calling you at
work or, I mean does that happen?
Mr. Petricoin. The amount of time spent consulting from my
end, was really to look into the public domain. It was really a
relationship of me spending a lot of time kind of synthesizing
information at home, looking around, nesting that down and then
giving it to them, and them doing with it what they want.
There was, most of the time when we talked with them, it
was by, they set up a tele-conference. We'd call in from our
cell phones, and that could be even on the drive home. And it
might just be sharing what we found.
Mr. Greenwood. So you didn't find, neither one of you found
a so-called conflict of commitment that occurred in conflict
with your job?
Mr. Liotta. If there was even a hint of that I, because in
addition to my research duties I have a lot of administrative
duties. If there was a hint of that I wouldn't have done the
activity at all.
Mr. Greenwood. Thank you. We thank all four--did you want
to say something Dr. Barker?
Ms. Barker. I want to add a comment actually on the
Biospect mission statement that was up there, it's not there
now. But Dr. Barrett when he re-reviewed and approved Dr.
Liotta's consultancy had a different mission statement for
Biospect which we have here, which is really almost unrelated
to the one you have up there.
I mean this one, that one up there speaks to diagnostic
Mr. Greenwood. Why don't you tell us what it says?
Ms. Barker. I'm sorry?
Mr. Greenwood. You can read that to us.
Ms. Barker. It says basically that Biospect will become the
world leader in identifying and assaying highly informative
patterns that reflect in different shape biological states with
minimally invasive procedures, to improve clinical management
of patient health and the drug development process.
There's no mention in here of diagnostics. And if you read
this, everything we're doing in genomics and proteomics today
is moving toward patterns of one sort of the other.
So this was really portrayed at that point as very much a
therapeutics support kind of activity. So the mission statement
for that company really, I think, changed significantly between
when Dr. Barrett review and re-approved this consultancy and
what we saw here today.
Mr. Greenwood. And did the folks at Correlogic buy that
argument?
Ms. Barker. I haven't asked them that question.
Mr. Greenwood. All right. Thank all of you. I hope you
didn't feel that the thumbscrews were tightened too much. I
appreciate your assistance in our difficult task, and this
committee is adjourned.
[Whereupon, the foregoing matter was concluded at 3:16
p.m.]
[Additional material submitted for the record follows:]
Prepared Statement of the Food and Drug Administration, Department of
Health and Human Services
INTRODUCTION
Mr. Chairman and members of the Committee, like its sister agencies
in the United States Department of Health and Human Services (HHS or
the Department), the Food and Drug Administration (FDA or Agency) is a
public health agency. But FDA is unique in the Department because it is
primarily a regulatory agency.
As a result, for more than three decades FDA has had an aggressive
disclosure and review process designed to ensure that its employees do
not have any conflict of interest involving companies and entities that
FDA ``significantly regulates.'' To maintain the public trust in its
public health work, FDA has placed reasonable restrictions on the
financial and employment ties between FDA employees and the entities it
regulates.
At this time, the Agency is confident that the specific matter
described in this statement is isolated. FDA fully anticipates that,
when completed, the review of outside activity requests that we have
commenced will determine that the Agency's professional scientists and
administrators uniformly comply with the Agency's stringent ethics
requirements and that they conduct their regulatory work in fair,
unbiased and impartial manner.
FDA'S HIGH ETHICAL STANDARDS
As a regulatory agency, FDA has a compelling need to monitor and
impose reasonable restrictions on the financial and employment ties of
our employees. FDA meets this standard through strict regulations
governing financial interests and outside activities for all employees
of the Agency. Applicable laws and regulations include the Standards of
Ethical Conduct for employees of the Executive Branch (Title 5, Code of
Federal Regulations (CFR), section 2635), Title 18, United States Code
(USC) section 202-209, and the Department's supplemental standards of
conduct (5 CFR 5501).
HHS's Supplemental Regulations contain FDA-specific provisions that
establish prohibited financial interest rules for employees required to
file a public disclosure report (using form SF 278) or a confidential
financial disclosure report (using form OGE 450), and rules for seeking
approval of outside activities. The prohibited interest regulations
have been in effect since the early 1970's and supersede the Office of
Government Ethics' (OGE) general rules on financial holdings. Under
these FDA-specific regulations, employees who are required to file a
public or a confidential financial disclosure form are prohibited from
holding a financial interest in any organization that is significantly
regulated by FDA. This prohibition extends to the employee's spouse and
minor child(ren), since their financial interests are imputed to the
employee under 18 USC 208. These employees also are generally
prohibited from employment with a ``significantly regulated''
organization.
FDA has established an Ethics Program to help ensure that the
decisions employees make in their official capacity are not tainted by
a conflict of interest or an appearance of a conflict of interest.
FDA's Ethics Program is an integral part of the Agency's overall
operations. The program is fully staffed and dedicated to providing
advice and assistance to FDA employees on ethics related laws and
regulations. The Ethics and Integrity Staff are subject matter experts
on the laws and regulations that form the framework of the FDA Ethics
Program.
OUTSIDE ACTIVITIES
As a consequence of our strict Supplemental Regulations, employees
who are required to file a public or confidential financial disclosure
report are prohibited from having employment with ``FDA significantly
regulated organizations.'' In addition, public and confidential filers
may not participate in consulting activities with any significantly
regulated firm. There is a very narrow exception to this broad
prohibition, which is limited to the practice of medicine, pharmacy,
dentistry, etc. The purpose of this exception is to allow employees to
maintain their professional skills and licenses.
FDA employees are required to seek advanced approval for all
outside employment and certain outside activities with the following
exceptions: participation in activities of a political, religious,
social, fraternal, or recreational organization (unless the position
held requires the provision of professional services or is performed
for compensation other than the reimbursement of expenses). Outside
activities that require approval include, but are not limited to, self-
employment activities, office holding in professional societies,
teaching, writing and speaking activities, consultant or contracting
work.
BIOSPECT, INC.
Dr. Emanuel F. Petricoin is a confidential filer in FDA's Center
for Biologics Evaluation and Research (CBER or the Center). His duties
at FDA do not include reviewing pending applications for approval of
new medical products.
In September 2002, Dr. Petricoin requested approval of an outside
activity to provide consulting services to Biospect, Inc. The request
was reviewed and approved in October 2002 by the Director, Division of
Management Services, CBER. At that time CBER reviewed available
information on the company to determine whether FDA regulated
Biospect's activities, and we concluded that they were not FDA-
regulated.
During a recent review of outside activity requests, CBER
questioned the approval of this outside activity. The Center inquired
about the current status of the company's business and whether an
outside activity with this company is appropriate and approvable.
Further review of Biospect, Inc. identifies the company as an emerging
life science company that develops and identifies protein biomarker
patterns. FDA consulted with HHS and subsequently determined that
Biospect, Inc. participates in activities that are significantly
regulated by FDA, and therefore outside activities with this company
are prohibited for public and confidential filers.
On Friday, May 7, 2004, Dr. Jesse Goodman, Director of CBER met
with Dr. Petricoin and advised that because Biospect, Inc. is now
considered significantly regulated by FDA,
Dr. Petricoin must immediately cease all activity with respect to
Biospect, Inc. Upon being informed of this, Dr. Petricoin immediately
and voluntarily agreed to end all activity with Biospect, Inc.
Accordingly, approval for this specific outside activity has been
withdrawn and this outside activity has ended.
FDA ETHICS REVIEW
Since 1970, review of FDA employees' requests to participate in
outside activities has occurred within the FDA centers, at levels below
that of the Center Director. This was based on the premise that
individual FDA organizations are more knowledgeable about the official
duty activities of their employees and therefore are better able to
identify outside activities that may present conflict of interest
concerns. Within CBER, the approving authority was delegated to the
Director, Division of Management Services.
FDA now believes that this delegation should be at a higher level.
Consequently, on May 6, 2004, the Acting Commissioner issued an interim
policy regarding the approval of outside activities. Under this policy,
FDA Center Directors must review and, if an activity is allowed,
approve all outside activity requests for employees within their
centers. The Commissioner of Food and Drugs will be the approving
official for employees in the Office of the Commissioner, and the
Associate Commissioner for Regulatory Affairs will approve all requests
for the employees of the Office of Regulatory Affairs.
In addition, in light of recent questions about possible conflicts
of interest involving HHS agencies, the Acting Commissioner of Food and
Drugs has directed a comprehensive review of all current outside
activity requests for all FDA employees. Each request is being reviewed
for compliance with applicable laws and regulations by Jeffrey M.
Weber, Associate Commissioner for Management, Dr. Norris Alderson,
Associate Commissioner for Science, and the FDA's Office of Management
Programs, Ethic and Integrity Staff. Once that review has been
completed, FDA will issue a final policy on the review and approval of
outside activities.
CONCLUSION
FDA's commitment to the highest ethical standards in its dealings
with regulated entities remains constant. FDA is confident that the
current review of FDA employees' outside activities will show that the
nation is well served by the dedication of FDA's expert scientists and
physicians and their demonstrated ability to conduct the public
business fairly and impartially. At FDA, we are committed to the
maintaining the highest ethical standards to assure that the decisions
employees make in their official capacity are not tainted by a conflict
of interest or an appearance of a conflict of interest.
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NIH ETHICS CONCERNS: CONSULTING ARRANGEMENTS AND OUTSIDE AWARDS
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TUESDAY, JUNE 22, 2004
House of Representatives,
Committee on Energy and Commerce,
Subcommittee on Oversight and Investigations,
Washington, DC.
The subcommittee met, pursuant to notice, at 10 a.m., in
room 2123, Rayburn House Office Building, James C. Greenwood
(chairman) presiding.
Members present: Representatives Greenwood, Bilirakis,
Stearns, Walden, Rogers, Barton (ex officio), DeGette,
Schakowsky, Waxman, and Dingell (ex officio).
Staff present: Alan Slobodin, majority counsel; Mark
Paoletta, majority counsel; Ann Washington, majority counsel;
Casey Hemard, majority counsel; William Harvard, legislative
clerk; David Nelson, minority investigator and economist; and
Jessica McNiece, minority staff assistant.
Mr. Greenwood. The subcommittee will come to order.
The Chair welcomes our first panel and recognizes himself
for the purposes of making an opening statement.
Good morning. This is the third hearing the subcommittee
has convened about NIH ethics concerns. Two earlier hearings
were held last month, in particular the subcommittee has
focused on consulting arrangements and outside awards because
of the legitimate important and well recognized public interest
in controlling conflicts of interests.
As the United States Supreme Court noted in its 1990
opinion in Kramden v. United States restrictions ``designed to
prohibit and to avoid potential conflicts of interest in the
performance of governmental services are supported by the
legitimate interests in maintaining the public's confidence in
the integrity of the Federal Service.''
Without appropriate controls on conflicts of interest, the
Office of Government Ethics has stated ``The public's
confidence may be seriously compromised where circumstances
suggest public servants are using their positions for private
gain.''
As Dr. Elias Zerhouni, Director of the NIH has said, the
NIH's ``public health mission is too important to have it
undermined by any real or perceived conflicts of interest.''
Our previous two hearings established widespread agreement
that the NIH ethics program needs strengthening. At the first
hearing on May 12 the NIH Blue Ribbon Panel on Conflict of
Interest Policies presented it report and recommendations. Dr.
Elias Zerhouni testified about actions taken in response to
concerns about NIH's management of conflict of interest.
At the second hearing on May 18 the subcommittee
highlighted two cases illustrating conflicts of interest
concern arising from consulting agreement and lecture awards.
The example of a consulting agreement we examined to highlight
the issue is the case of Dr. Lance Liotta of the National
Cancer Institute, Dr. Manuel Petricoin of the FDA and their
arrangement with Biospect, a south San Francisco life sciences
company.
The subcommittee was concerned that Dr. Liotta and Dr.
Petricoin, the leaders for the U.S. Government in a cooperative
research and development agreement known as CRADA with
Correlogic Systems, Inc. of Bethesda, Maryland were allowed to
work as paid consultants for Biospect, a company in the same
filed as Correlogic.
The example we used of an outside award focused on the
circumstances surrounding the decision to allow Dr. Richard
Lausner, then the Director of the National Cancer Institute, to
receive the 1997 Dixon Prize in Medicine from the University of
Pittsburgh. We learned that the hearing that the concerns of
the NCI ethics officer were disregarded and HHS ethics
attorneys were pressured to allow Dr. Klausner to accept the
prize and a check for $40,000.
The award was also of concern because it was offered at a
time when the University of Pittsburgh was both a recipient of
NCI funding as well as a party to a recently settled lawsuit in
which both the NCI and the university were codefendants where
Dr. Klausner had approved the use of $300,000 funding NCI as a
portion of the payment in that settlement.
At today's hearing, the subcommittee will hear testimony
and present information that will provide more insight and
greater detail about the NIH ethics concerns on consulting
arrangements and outside awards.
In addition, the subcommittee will hear testimony and
examine new actions and restrictions proposed by Dr. Zerhouni
aimed at strengthening the NIH ethics program.
With respect to consulting arrangements, the subcommittee
has been compiling information provided both by the NIH and a
number of drug companies about the financial details of deals
that occurred over the last 5 years. The task has proven to be
enormous. It took several months for the NIH and HHS to find a
way to provide these financial details in the first place.
Without a preexisting data base, NIH in responding to the
committee's request has had to rely on each of its 27
institutes and centers to provide information on the
agreements. This has also led to problems of accuracy and
reliability.
More significantly, information received from the drug
companies has revealed a significant number of troubling
discrepancies. So far the committee staff has identified about
100 situations in which the drug company reported a consulting
agreement, but the NIH did not include the agreement in the
data given to the committee. This is essentially disturbing
given that the committee sent request letters to only 20 of the
companies that had the most agreements out of hundreds of
companies on the NIH lists. One hundred is a significant number
from such a subsample of 274.
Consider this example. Pfizer provided information showing
that Dr. Trey Sunderland of the National Institute of Mental
Health had been paid over $517,000 in fees honoraria and
expense reimbursement in connections with consulting activities
for the period 1999 to the present. So far, however, NIH has
reported to the committee that there are no outside activity
request forms covering Dr. Sunderland's activities, nor are
these financial details accounted for in his financial
disclosure reports.
Pfizer has also reported that Dr. Sunderland's associate,
Karen Putman of the NIMH was paid $64,000 in consulting fees
and reimbursement from 2001 to 2004. Some of these fees were
for assisting Pfizer in its program to study biomarkers of
neurological disease. Once again, NIH has no outside activity
request documents accounting for this activity. In fact, NIH
has confirmed that Dr. Sunderland instructed Dr. Putnam not to
clear these activities.
These so called outside activities appear related to their
government work. Dr. Sunderland and Dr. Putnam in their
capacities at NIMH published a major study in 2003 on the value
of potential markers for identifying people with Alzheimer's
Disease.
These discrepancies between information provided by the
drug companies and the NIH and this example raise the specter
of a substantial number of outside drug company and
biotechnology consulting agreements involving NIH scientists,
which were not even reported or submitted for clearance at NIH.
Because of the grave concerns this presents, the subcommittee
will further investigate these agreements that were not
reported to the NIH. As a result, the subcommittee is not yet
in a position to release the listing of the NIH consulting
agreements today.
The concern that there is a substantial number of outside
deals that are conducted in total secrecy even from the NIH is
not implausible. For example, the committee has recently
learned that Dr. Alan Moshell, Skin Diseases Branch Chief and
Program Director of the National Institute of Arthritis and
Musculoskeletal and Skin Diseases, was retained as an expert
witness reportedly at a rate of $600 per hour in a number of
private product liability lawsuits involving the drug,
Accutane, which is used to treat severe acne. HHS and NIH have
reported to the committee that Dr. Moshell did not file outside
activity request forms for these activities, even though HHS
and NIH acknowledge that Dr. Moshell should have disclosed
these activities to NIH and should have filed an outside
activity request separately for each expert-witness activity to
obtain approval. In 1985, Dr. Moshell filed an outside activity
request and obtained approval to conduct clinical practice as a
dermatologist. This request form did not specifically cover
service as an expert witness, but Dr. Moshell has indicated
that he did not believe that a specific request form was needed
for that purpose.
In addition to these new concerns on outside activities,
the subcommittee has also learned of additional information
about the case study involving Dr. Liotta, Dr. Petricoin, and
their outside agreement with Biospect while working on the
Correlogic CRADA. We will hear about this new information
later. But let me provide one example of our concerns.
At the May 18 hearing, Dr. Liotta testified under oath that
his work at Biospect had been ``placed on hold'' since February
2004 pursuant to Dr. Zerhouni's directive that all existing
consulting relationships with pharmaceutical or biotechnology
firms be stopped and resubmitted to the newly created NIH
Ethics Advisory Committee known as (NEAC) for review and input,
before such activities could be reapproved, if appropriate.
Further, Dr. Liotta confirmed his activities with Biospect
were on hold in response to the following e-mail from the NIH
Ethics Director, Holli Beckerman Jaffe, dated May 5, 2004:
``Please also confirm with him that while he has not received
any payments since February (in other words, he was last paid
in February), he has not consulted with Biospect since
February; the arrangement has been put on hold until he
receives approval from Dr. Kington. I know I'm beating a dead
horse, but I want to be very clear on the facts. It's in the
best interest that we have all the facts and no uncertainty.''
The subcommittee has now recently received records from
Predicant Biosciences, the new name for Biospect. These records
show that Dr. Liotta received and cashed checks from Biospect
dated March 1, April 1, and May 1, 2004. These transactions all
occurred during the period that Dr. Liotta claimed that the
Biospect agreement was ``on hold.''
Although the subcommittee will not be releasing the
consulting agreements listings at this time, we will be
releasing information pertinent to consulting arrangements and
outside awards. That information includes statistical
information about: The activities of the NEAC, use of Title 42
authority, and the list of the 77 scientists who appeared on
the NIH consulting agreement list who are also principal
investigators on CRADAs.
I ask unanimous consent to put the binder of hearing
documents, including this information, into the record. Without
objection, it will be included in the record.
On the issue of lecture awards, the subcommittee is
releasing the list of awards that NIH provided to the committee
and identified as responsive to our request for information on
``lecture awards.'' In addition to the lecture awards list, the
subcommittee has identified additional issues in connection
with award approvals for Dr. Klausner. For example, Dr.
Klausner as the Director of the National Cancer Institute is a
Presidential appointee and must have his award requests
approved by the HHS Designated Agency Ethics Official. His
award requests cannot be approved by an official at the NIH.
The committee has identified two instances in 1997 in which the
Deputy Director of NIH, not the HHS Ethics Official, approved
Dr. Klausner's awards.
In another case, an award to Dr. Klausner from the
University of Arizona was approved by an HHS ethics attorney
who did not have a written delegation of approving authority
for awards of Presidential appointees. In that same case, the
first-class travel for Dr. Klausner was improperly approved as
part of the award-approval process because a first-class travel
approval request must go through a separate approval procedure.
This mistaken approval reportedly occurred because the HHS
travel manual did not track all of the applicable requirements
contained within the GSA regulations with regard to acceptance
of first-class travel from a non-Federal source.
These additional issues deepen our concerns about what has
happened in the NIH ethics program. However, Dr. Zerhouni
appears before this subcommittee to present a comprehensive set
of proposed additional restrictions, in addition to other
recent actions, to improve the NIH ethics program. I note that
some of the problems, such as deliberate misconduct, cannot be
easily addressed by any kind of ethics proposals, no matter how
strong the restrictions. That said, this set of proposals has
some positive features to commend it. In the area of outside
awards, based on my understanding of the proposals, the
combination of the pre-screened list of awards, the additional
guidance from the Office of Government Ethics, the NEAC review,
and the prohibition of any cash to an official responsible for
a funding decision with the entity offering the award, should
address the concerns.
In the area of management process changes, I understand NIH
will create an electronic data base for tracking ethics matters
and HHS will have increased resources to conduct random audits.
These are constructive and substantial changes. In the area
of drug-company consulting, Dr. Zerhouni is not proposing a
total ban. However, Dr. Zerhouni is offering a number of
substantial restrictions that will curb some of the kinds of
cases that are of the greatest concern. Those restrictions
include a prohibition on outside consulting for senior
leadership positions, expanding public disclosure requirements
to cover an additional 600 NIH employees, NEAC review, and
limits on income and time. I am withholding judgment on this
part of the package; my position will be based in part on what
I learn at today's hearing. However, I have already reached the
conclusion that whatever final action is taken on outside
consulting, it should take place in the context of legislative
changes regarding the use of Title 42 authority.
The widespread use of so-called ``special'' compensation
authorities intended for consultants in Title 42 to boost the
pay of continuing, full-time NIH employees looks highly
questionable on policy, if not legal, grounds. The data
provided by HHS shows nearly $5 million in retention bonuses
were paid to 444 Title 42 employees for the period of July 1,
1999 to May 1, 2004. The use of retention bonuses along with
the questionable use of Title 42 is part of the gaming that has
occurred with the salaries of NIH scientists. Recent data shows
almost one-third of new NIH employees were hired under Title 42
authority in 2003. The gaming must end. I am prepared to
support a straightforward approach to providing good salaries
to NIH scientists, worthy of the crown jewel of the U.S.
Government.
Dr. Zerhouni, I know you are ready to work with me. Your
proposals and your testimony will receive a respectful hearing
from me. You have shown yourself as a serious and constructive
partner with the subcommittee in addressing these ethics
issues.
I welcome Dr. Zerhouni and the other witnesses to today's
hearing. I note on the second panel we will hear from Peter
Levine, the President of Correlogic Systems, and Dr. Jonathan
Heller, the Vice President for Information and Project Planning
at Predicant Biosciences, the new name for Biospect.
I note that Mr. Levine, although he is cooperating with the
committee, is appearing pursuant to a subpoena.
Finally, I welcome the witnesses from the National Cancer
Institute who will appear on the third panel.
I look forward to the testimony and to making a stronger
and better NIH.
The Chair yields to the gentlelady from Colorado for her
opening statement.
Ms. DeGette. Thank you, Mr. Chairman.
This is the Oversight and Investigation Committee's third
hearing on conflicts of interest and the National Institutes of
Health. The significance of this issue cannot be understated,
and I expect that today's hearing will provide us with a fuller
understanding of the problems.
The first hearing gave this committee the opportunity to
hear from members of the Blue Ribbon Panel and Dr. Zerhouni. At
that time, I expressed concerns with the scope of the Blue
Ribbon Panel's recommendations. I am pleased that Dr. Zerhouni
is back again with us today to talk about the subcommittee and
to talk about some expansions of some of those issues we talked
about at that first hearing.
After reviewing some of the proposed expansions to the NIH
ethics rules which are being contemplated, I am pleased that
NIH leadership takes these issues seriously and is endeavoring
to restore ethical integrity, but I remain concerned about the
challenges that the absence of what I think is a bright line
task for receipt of outside industry compensation provides. At
the same time we must maintain the integrity of the NIH as our
Nation's premier research institution and to that end, we need
to continue to have the ability to attract the very best and
brightest at all levels of the NIH.
Today we're going to have the opportunity to look at these
additional steps which are being proposed by the NIH regarding
conflicts of interest and to learn about one or more of the
cases that we talked about in our last hearing. As I said at
the previous hearings, these conflicts of interest deserve
scrutiny and they must be resolved. The ethos of the
organization much change, and I know Dr. Zerhouni and his
senior management team agree. These new recommendations are a
necessary step, but there must be a comprehensive effort toward
implementation and elimination of inconsistent standards which
now exist across the 23 institutes.
I am confident that the scientists at NIH can adequately
address the committee's concern and put a better system into
place. But the question remains how do we accomplish this? NIH
may still need to strengthen some of the recommendations even
further to achieve this, and I look forward to hearing from our
witnesses about that.
I would also add that this subcommittee has a long history
of examining these issues and does not take it's investigative
role lightly. The subcommittee's ability to interview witnesses
and uncover issues is part of its very core mission. I am glad
that Mr. Azar is here today to talk about some of these
interviews of government witnesses and HHS and what transpired.
We have been that conflicts of interest at the NIH are
relatively rare, but even rare cases must be prevented
especially when they are as spectacular as we have heard n our
previous two hearings. The public's trust in this remarkable
institution is at stake. These scientists who are entrusted
with taxpayer dollars must answer to their institution and the
public and protect its integrity. The scientists also should
remember their work is the hope for many Americans who are ill
or who are taking care of a family member with an illness.
Their scientific work for some Americans is the difference
between life and death. A conflict of interest or even the
appearance of a conflict of interest could have devastating
effects.
NIH's mission is to uncover new knowledge that will lead to
better health for everyone. But when there are conflicts of
interest, how can we make sure this mission is being carried
out?
I am still concerned about NIH's ability to acquire
information and data on hours spent on outside activities and
also compensation received from outside activities. This is a
very delicate issue and disclosure is the key. Centralization
of ethics review and creation of an electronic data base are
going to be very important. However, as they say the devil is
in the details and we need to find out how exactly outside
activities will be monitored. That is why I go back to the fact
that in the absence of a bright line test it will be very
difficult to eliminate some of the abuses we have seen in the
past.
As the committee has discovered and as we will discuss
today, there is an astounding amount of activity that has not
been under scrutiny or even disclosed. This is an unacceptable
situation. I know that Dr. Zerhouni and his team agree with me,
and I look forward to working with them on this issue.
And thank the Chair for continuing this series of hearings.
And yield back.
Mr. Greenwood. The Chair thanks the gentlelady and
recognizes the chairman of the full committee, the gentlemen
Mr. Barton for his opening statement.
Chairman Barton. Thank you, Mr. Greenwood. And we
appreciate your leadership on this important hearing.
I stated at the last oversight hearing on these NIH issues
that the hallmark of my chairmanship will be to hold agencies
responsibilities and to produce results in better government
and better services and policies for the American people. I am
proud to report that because of your work and Ms. DeGette's
work this is happening with regard to our investigation at NIH.
The committee continues to uncover more and more troubling
information about what has happened in the NIH ethics program.
For example, it appears that there may be a substantial number
of NIH scientists who engaged in outside activities such as
drug company consulting in stealth, that is without any notice
at all or any approval by the NIH. If these suspicions are
confirmed, these unapproved compensated activities would
represent a very serious breach of NIH policy, Federal ethic
regulation and possibly in some cases even criminal laws.
In addition, we are continuing to examine cases. One of the
cases which we reviewed at our last hearing dealing with
conflicts of interest arising out of consulting agreements your
subcommittee has heard and will testimony today about a
remarkable case in which the NIH and FDA scientists who were
collaborating with a private company on a joint invention under
a public/private partnership called a CRADA at the same time
were secretly consulting with their own private partner's
competitor. As a result of those secret deals progress may have
been slowed on the public/private partnership that could have
led to prompt commercialization of a lifesaving ovarian cancer
diagnostic test.
I also understand that the subcommittee may be presented
with information today that raises serious questions about the
accuracy of some testimony that has been received at the last
hearing.
Having said all of that, this subcommittee is getting the
facts. Through oversight we are identifying the issues that
provide a roadmap for solutions. The problems that we are
continuing to uncover at the NIH are further justification for
why this committee needs to reauthorize the NIH for the first
time in over a decade. The committee needs to lead the way in
restoring NIH's luster as the crown jewel for research of the
Federal Government. As Chairman Greenwood has noted, during
this investigation we have uncovered issues of concern and are
continuing to uncover still more. It is unpleasant to face the
harsh truth about the results of the apparently lax ethic
culture at the NIH and the poor judgment and perhaps even
misconduct of some individuals at that illustrious institution.
Having said that, it is a process that we must go through to
ensure that NIH will continue to be the world's premier medical
research medical institution. NIH's work is too important to
allow it to be hindered by questions about the integrity of its
scientists, and therefore the scientific process.
Our oversight is not just about identifying problems. We
want to stimulate solutions. In this regard I am very pleased
to read that both HHS and NIH seem to be getting the message
about our concerns over the NIH's ethics program. And Dr.
Zerhouni's testimony, which I have read, indicates that he is
serious about improving the ethics at the agency in which he is
director of. He is making his agency responsible to the
Congress and to the American people. He has a plan, and I think
it is a good plan, and I think this committee should give it
serious consideration. Because of the enormity of the taxpayer
investment in NIH and the enormity of the responsibility
entrusted to NIH, it is critical that we, when I say ``we'' I
mean the Congress and the NIH administration, work together to
make sure that NIH remains the standard for medical research in
the world. I am pleased to say that it looks like we are making
progress in this regard.
While we need to work with Dr. Zerhouni to establish
solutions, we must do all that we can do to stop things like
from ever happening again. And just as NIH has enormous
responsibility to the American people, this committee has the
responsibility to conduct the kind of oversight that brings
these problems to light and then helps find solutions to
prevent them from happening again.
I want to commend Ranking Member DeGette for her excellent
work and her staff's work, and Mr. Dingell for the full
committee staff work on this effort. We are doing oversight in
the proud tradition of the Energy and Commerce Committee, and I
think the end result is going to be good for the American
people.
I also want to compliment Dr. Zerhouni. Your testimony
about proposed solutions is excellent. To the extent that we
need to back you up with legislative language in that statute,
we are very willing to do that once we finalize what needs to
be done.
With that, Mr. Chairman, I would yield back.
Mr. Greenwood. The Chair thanks the gentleman.
And he recognizes the ranking member of the full committee,
the gentleman from Michigan, Mr. Dingell.
Mr. Dingell. Mr. Chairman, good morning.
Thank you for recognition, and let me commend you for
opening this inquiry, for holding this hearing and for
insisting that Mr. Azar testify despite the opposition of the
Department of Health and Human Services.
The ethics concerns at the NIH, National Institutes of
Health and the Food and Drug Administration, FDA, merit the
full attention of this subcommittee, as do efforts to hinder,
obstruct, delay or otherwise impede the work of this
subcommittee.
We are still learning how far and wide the problem of
outside payments goes. When NIH initially refused to compel its
employees to disclose the extent of consulting dollars received
from drugs and biotech companies, you and Chairman Barton
surveyed 20 drug companies for their payments to NIH employees.
The companies responded regarding some 264 contracts with
scientists employed at NIH. When comparing these contracts with
the information ultimately submitted to us by the NIH, the
staff discovered that some 100 of the 264 consulting contracts
were not reported to NIH. What else is out there?
We, as well as NIH and FDA, have a duty to ensure that this
probe does not harm research or regulatory approvals. But
ignoring the problems at FDA and NIH is not an option. The
research community, the health care industry and the American
people simply cannot tolerate a system where the state of our
technology is sold to the highest bidder. We cannot tolerate a
system where the development of lifesaving drugs and biologics
may be delayed while the auction is being conducted. Nor can we
tolerate hinderance and obstruction by the Department of Health
and Human Services. Officials in charge of legislative affairs
and some misguided government lawyers have tried to stifle the
investigation in which we are now engaged. They have sought to
stonewall our requests for documents and interviews and
otherwise have sought to prevent the Congress and the American
people from discovering very serious problems.
This subcommittee over the years has seen to it that the
truth is produced with the cooperation of those who were being
investigated or without their cooperation. And there are many
who have had reason to repent in a very real way the failure to
cooperate with this committee. I hope that those who will
appear this morning and others who will be inquired of by the
subcommittee will keep this thought in mind.
Moreover, I would note that we find that the curious
reluctance of the Inspector General here to do more than desk
audits is unacceptable. The American people have the right to
know what is going over at the Department. I support all
efforts to enforce that right, and I will do everything I can
to see to it that there is no obstruction of the business of
this committee.
I thank you, Mr. Chairman.
Mr. Greenwood. The Chair thanks the gentleman and
recognizes the Oregon, Mr. Walden for his opening statement.
Mr Walden. Thank you, Mr. Chairman. I am going to waive my
opening statement.
Mr. Greenwood. The gentlelady from Chicago, Ms. Schakowsky.
Ms. Schakowsky. Thank you, Chairman Greenwood and Ranking
Member DeGette for convening today's hearing, the third in a
series of oversight opportunities to review concerns about
ethics at the National Institutes of Health and the consulting
arrangements and outside awards of NIH personnel.
This issue is so critical because it goes to the integrity
of science and the safety and efficacy of medical technology
upon which the American public and medical community rely.
Consumers and their caretakers in the medical field, rely on
sound science for guidance on the most appropriate types of
care. Consumers need to know that the science upon which their
doctors rely is based on legitimate evaluations and not tainted
by side deals. I think most American consumers would assume
that cash, stock, stock options and other types of pay for
outside consulting arrangements that NIH personnel have with
drug companies and others in industry, would be against the
rules. I know I was surprised to hear that some senior
officials at NIH received cash gifts as part of the awards
given to them by some of the same companies that receive
funding from NIH. In some cases, it appears that these deals
could amount to more than the regular salaries of some NIH
personnel. It is hard for me to accept any argument that NIH's
medical scientists or senior personnel need to enter into such
agreements. These agreements are not just a question of a
little moonlighting, they are day-lighting too, with the very
prescription drug and medical device companies whose science
NIH is supposed to objectively evaluate.
Why can't NIH commit to finding scientists who will do
their jobs for the salary they agree to receive without doing
lucrative side deals outside of the office?
Even the appearance of such behavior is damaging and NIH
and other agencies must take action to ensure the proper
safeguards are in place to prevent such activities. So, today,
I am looking forward to hearing the response to concerns raised
by this subcommittee. I hope the response will include
immediate and concrete steps to remove even the appearance of
questionable ethics at NIH. Anything short will be
unacceptable. Thank you.
Mr. Greenwood. The Chair thanks the gentlelady.
And recognizes the chairman of the Health Subcommittee, the
gentleman from Florida, Mr. Bilirakis for an opening statement.
Mr. Bilirakis. Thank you very much, Mr. Chairman.
The past two hearings you have held on this issue have been
extremely informative, to say the least. And I am sure we all
appreciate the opportunity to have another chance to discuss
these concerns with officials from the NIH.
Dr. Zerhouni, thank you so much for coming here today. You
have always been extremely generous with your time and
unbelievably helpful in all of your efforts, and ours I might
add. I commend your efforts to improve conflicts of interest
management at NIH by creating the Blue Ribbon Panel that
created guidelines for revamping the review of consulting
arrangements and outside awards, and expanding the number of
NIH employees who file internal and public financial disclosure
reports. Once again you have taken the initiative to ensure
that NIH is operating to the best of its ability.
I have gotten to know Dr. Zerhouni fairly well recently
because just in this Congress alone, my Subcommittee on Health
has held five hearings to highlight research activities at the
NIH and to educate members and others about the work that the
NIH is doing so that we can better assess how to help them to
better met their stated mission.
Now that our hearings have concluded, Chairman Barton and I
are committed to passing bipartisan legislation to reauthorize
the NIH. It is something we have high hopes of being able to
do.
One thing that we would like to accomplish with this
reauthorization package is to strengthen the role of the
Director of the NIH. And I look forward to hearing from Dr.
Zerhouni about how we could be helpful to him in implementing
the recommendation to the Blue Ribbon Panel.
And, Dr. Zerhouni, if I do not get around to asking you
that specific question, I would ask now that you might submit
in writing to us what we can do in the law to strengthen your
role.
As I said before, if there are more transparency with
respect to these consulting fees and awards, such as making the
information more public, then maybe there would not be the need
for a high level of concern.
I along with you, Mr. Chairman, would like to thank and
welcome the other witnesses here today, and look forward to
hearing particularly this panel's testimony.
Thank you, Mr. Chairman.
Mr. Greenwood. The Chair thanks the gentleman.
And recognizes the gentleman, Mr. Rogers for an statement,
who passes.
That being said, we welcome Dr. Zerhouni and Mr. Azar.
Thank you for being here.
As you know from previous experience, it's the custom of
this committee to take testimony under oath. And do either of
you object to taking testimony under oath? Do either of you
wish to be represented by counsel?
[Witnesses sworn.]
Mr. Greenwood. Before I recognize you for your opening
statement, Dr. Zerhouni, let me say what I have said in public
as many times as I can. I know that this is not a lot of fun
for you and the NIH to go through this very public process of
oversight, but I consider you to be as ethical a person as I
know. I consider you to be a partner with me and with this
committee in our efforts to tighten up the ethics, and I am not
proud of our relationship, and look forward to your testimony,
and you are recognized to give it.
TESTIMONY OF HON. ELIAS ZERHOUNI, DIRECTOR, NATIONAL INSTITUTE
OF HEALTH; AND ALEX AZAR, II, GENERAL COUNSEL, U.S. DEPARTMENT
OF HEALTH AND HUMAN SERVICES
Mr. Zerhouni. Thank you, Mr. Chairman, for your kind words,
and you have my commitment to continue to be partners in this
issue. I want to thank the members of the subcommittee.
I am here to testify about my proposal to overhaul the
ethics system and its process, its management and its controls.
We have worked very closely with my colleague, Mr. Azar in the
Office of General Counsel to come up with what we believe could
be a proposal that will not only strengthen, but completely
overhaul, completely transform the way we manage ethics at our
Federal agency.
The events and arrangements that have been the subject of
the subcommittee's oversight was, as you know, rooted in the
significant loosing of NIH ethics rules and policies that
occurred in 1995. These changes were the results of converging
interests at the time. NIH's desire to strengthen the research
enterprise to the use of ``innovative'' recruitment and
retention policies. And the second was a governmentwide change
in ethics policies.
In retrospect I believe that the new rules were not
sufficient to guard against the perception of conflict of
interest or reality of conflict of interest.
Further, I have reached the regrettable conclusion that
some NIH employees have violated these lenient rules in that
the agency's ethics system did not adequately guard against
these violations, both in the content of the rules, in the
process to manage the rules and in the controls that should
have been independent and formal.
So I am completely committed, and you have my pledge, that
any employees who violated the rules will be subject to
appropriate panels. I am looking forward to work as diligently
as we can with the committee. I know Mr. Azar is also committed
to do the same. We intend to cooperate. We want to cooperate.
If there is any perception that we did not, we want to correct
that. And you have my word and my colleagues at the Department
who do believe in the same thing.
It is clear that our public health mission is too
important, really, to have any shadow of a doubt that what NIH
does is in the public's interest first and foremost. And it is
really regrettable to me and painful to me that the actions of
a few may have tainted the good work of thousands of scientists
who have not participated in any of these actions and who work
daily at NIH to solve the mysteries of disease and advanced
treatments and cures for these diseases. So I think it is
important that we move diligently, I believe, to completely
change the system of ethics at NIH.
I will summarize, and you have my testimony in writing, but
I would like to summarize the salient points, not to take too
much of your time, of what is it that we are proposing and the
core principles that we are trying to follow.
No. 1, in terms of industry consulting. I think it is
absolutely important to build a firewall between the employees
at NIH who have any authority whatsoever in grant making or
contract making from any consulting with industry. That means
that the entire senior leadership, including directors, reports
to directors, deputy directors, scientific directors, clinical
directors and all staff involved in making decisions for
contract and grants in the extramural components of NIH be
prohibited, period. And this is a total damp.
We also want to protect the agency from any further
perception of conflict of interest, and we are going to do this
by restricting very strongly the activities of scientists who
have no authority over the extramural activities or granting
activities within NIH.
I would like to point out that NIH is both a Federal agency
that distributes grants, but also a very advanced research
laboratory with scientists who we recruit to do things for the
government of public health interests. It is important to look
at that in a different light, and I know that it would be so
much easier to just ban outright the activities. And, as you
know, I have made the point that perhaps we should look at
that, and I would like you to keep an open mind about why we
believe it should be done that way.
However, that being said, I think strict restrictions
should be put in place. No. 1, I do not believe that stock or
stock options should be used as payments for any outside
activity for anyone at NIH. And I intend to prohibit any of
such relationships.
Stock and stock payments create an inextinguishable
conflict, and I do not wish to have that.
Second, I will prohibit the holding of stock in individual
biotechnology and pharmaceutical companies for all employees
that file a public or confidential public disclosure report of
any kind and establish and establish for all employees a $5,000
de minimis in terms of individual stock ownership of theirs
with their direct family for nonfilers. And we will insist that
divestiture occur.
I think this will create a scrubbed environment, I believe,
for ethics at NIH so that we will no longer have any of these
issues.
In addition, because I am concerned about conflict of
commitment, who is the employee working for the Government or
some other entity, I will go further than what the Blue Ribbon
Panel proposed. I will limit annual compensation from all
outside activities with industry to 25 percent of the
employee's base salary, and no more than half of such income to
come from any one source. And limit the time spent engaged in
all activities with industry to 400 hours annually.
This is a set of rules which will not create a incentive
because the compensation for outside activity will then be
equal to the rate of compensation for official activities.
We will also publicly disclose all outside activity with
industry. We will have a data base, we will find ways to make
sure that the following principle is followed: If you cannot
disclose it publicly, it will not be allowed. Period, end.
We will prohibit membership, and this is a recommendation
that I am making, a proposal I am making which was not part of
the Blue Ribbon Panel. Mr. colleague Mr. Azar helped me
tremendously in defining those relationships. Any membership on
corporate boards will be prohibited for all employees. I
believe that membership in boards is a conflict of commitment
and fiduciary responsibility. I want my employees to be
responsible to NIH, period. However, we will allow limited
service on scientific advisory boards for ad hoc participation,
and again, not for any of the senior employees. Only the ones
that are in the laboratories. Because there is value there and
we need to make sure that it is reviewed centrally, but it be
allowed.
In addition, in terms of rewards I think this is an issue
that you have raised, and I have to say that I reviewed all the
cases that came to my attention, worked with you. And I believe
that there are awards that are very legitimate. There are
awards that relate to the meritorious accomplishments of a
scientist, sometimes before they came to NIH. I think it would
be unwise for us to prevent the recruitment of a director who
may be a potential recipient of a Nobel Prize or a Laska Award,
or many other prices that have a long established life, that
have a process that is independent on any granting institution
in the sense of having a foundation and a clear process, an
open process of nomination, an open process of awarding the
award. But to do so, we are proposing something pretty novel.
We're going to scrub, essentially, every award out there. We're
going to create a list, we're going to submit that list and the
criteria of that list to our independent advisory committee to
the Director of NIH, which is law, in statute. And we're going
to ask them is the Nobel Prize okay. Is the Laska Award okay?
Is this prize okay? Does it fit the characteristics. And then
we'll create a public registered list, if you will, of
acceptable awards for NIH scientists.
Now, further, if the award is received by an NIH employee,
it will still be reviewed by a central committee, central
advisory ethics committee for the following issues.
If the official offered the award is responsible for a
funding decision with the entity offering the award, either
directly the person, the employee, or through a subordinate--
this is really an extension of rules that I think is very
drastic and very important to understand. And I think we owe it
to Mr. Azar who made the recommendation, that the receipt of
the award may be prohibited and indefinitely the receipt of the
cash component of the award will be prohibited.
In determining whether an award creates a real or apparent
conflict of interest, the new act will consider how the
employee can effect the interests of the entity so that we do
not end up with just formal analysis, but a wider analysis not
just directly related to the entity that offers the award,
either directly or through the actions of a subordinate.
Pre-screened award lists will be maintained by the NIH
ethic office publicly posted, updated regularly and the name of
any NIH employee who is a recipient of an award would also be
posted publicly.
I think it is important also to impose restrictions not
just on relationships with industry, because as I have looked
at potential for both real and perceived conflict of interest,
I find also that consulting with nonprofits, grantee
institutions can be a concern. So I am going to propose that we
prohibit this for all employees.
You may ask, as Congresswoman DeGette asked me, why are you
more strict for nonprofit grantee universities than you are for
industry? Well, the difference is that grantee institutions
come and ask for public money. Industry pays for the outside
activities of the scientist. And in every case where we need to
have science advice given to our grantees, we will do so after
determination by supervisory review under an official duty
scheme rather than an outside activity scheme which will
prevent personal rewards of any kind in that kind of a
relationship.
Consulting with nonprofits, nongrantee institutions is
another issue. There we do not have the potential of conflict
of interest in terms of disbursement of funds. In this case we
will prohibit it, nonetheless, for senior leadership, people
who have grant making or contract making authority, and we will
determine by supervisory review whether there's any overlap
between official duty and that activity.
So even though you may be director of institute X, if you
are to serve on a nonprofit disease related group, we will
prohibit that for senior leadership but we will allow it for
nonsenior, nonauthority type leaders.
Clinical practice, we do need to maintain the clinical
skills of our doctors at NIH, and the clinical center is
hyperspecialized and there is not enough for them to maintain
the general scales, and we would like to continue to allow that
within limits of commitment. Because it doesn't present a
conflict of interest, but also limits of the marketbasket that
we will see around the metropolitan area. If you are a
radiologist, you will be allowed to make more than a
radiologist in academic practice in this marketplace.
The reason I want to do this is to avoid what I call the
perverse incentive. If an outside activity is rewarded at a
higher rate, you have the perverse incentive to favor that
outside activity. I want to eliminate that.
Seven, academic pursuits. Pure academic pursuit. Working a
general textbook, editing a journal, writing an article, a peer
review article, doing continuing medical education, teaching a
course at the university level; those are the core of the
activities of our scientists. I really do not wish to restrict
those activities. I think it would be unwise to do so.
Public financial disclosure reports, we have already
extended our request to OGE from 93 positions to 508 position
that will be publicly filed. We are asking also the
recommendation of counsel for NIH authority to determine 278
filing status for its employees so that we can adapt quickly to
the changes.
In addition, step nine, we will also review all of our
employees with or without authority involved in human subject
research. I believe personally that this is a different set of
consideration even more important than conflict of interest
with companies because it involves human lives, it involves
advice that we will give to the American public. So all of
those employees will file reports if involved in clinical
research. And we will determine who that is and we will propose
that list.
Finally, I think that no set of rules will be successful
unless you build around them a process, a management process
with strong controls. Here is what I propose to do.
I have already established a centralized committee, the
NEAC committee, and it is doing an outstanding job. But in
addition to that, we will centralize the oversight of every NIH
ethics activity in the Office of the Director. There will be
ethics officers in the institutes, obviously, to help
everybody, but the oversight will be centralized so that there
is no conflict of reporting relationship between the person who
is making the decision for the director or for somebody in that
institute.
We will ethics functions in the supervisory performance
plan. We will add a central director of ethics who will be--all
of the director of ethics will have performance plans and he
deputy director will be in charge of that.
We will initiate random audits, and we are working with our
general counsel to implement that.
In addition to this, I think something that I think is
needed as a tool to in fact provide the response to the
concerns that you have, Congresswoman DeGette, and that is a
full electronic data base that will be cross related between
every step of the activities and every step of the ethics
process in one place. So I can respond to your inquires in 2
weeks rather than 4 months, Mr. Chairman.
And we will extend formal training programs. And you have
my commitment that one of the components of a good control
ethics program is also disciplinary actions. I believe that we
have been lax in making sure that if there is clear violations
of existing rules, that we should really send a message. I
intend to send that message and I will be very forceful in that
regard.
In closing, I hope that you will take my commitment to you
as a very sincere honest commitment that I will do everything
in my power to make sure that NIH resumes it brilliant destiny
as one of the most trusted agency in the Federal Government.
And you have my commitment that I will work very closely my
colleagues here to collaborate with you.
Thank you, Mr. Chairman.
[The prepared statement of Hon. Elias Zerhouni follows:]
Prepared Statement of Elias A. Zerhouni, Director, National Institutes
of Health, U.S. Department of Health and Human Services
Mr. Chairman and Members of the Subcommittee, I am Elias A.
Zerhouni, Director of the National Institutes of Health (NIH) at the
U.S. Department of Health and Human Services (HHS). I am here to
testify about my proposal to strengthen the ethics system at NIH by
changing our rules, practices, and procedures.
I have reached the conclusion that drastic changes are needed as
the result of an intensive review by NIH of our ethics program, which
included internal fact-finding as well as the external review of a Blue
Ribbon panel. This review was prompted in part in response to the
inquiry of this Subcommittee and the bipartisan concerns of Chairman
Greenwood, Ranking Member Deutsch, Congresswoman Degette, and the full
Committee Chairman, Mr. Barton, as well as the Committee's Ranking
Member, Mr. Dingell, and other members of the panel.
The events and arrangements that have been the subject of the
Subcommittee's oversight and NIH's reviews were rooted in a significant
alteration of NIH's ethics rules and policies that occurred in 1995.
These changes were the result of converging interests. The first was
NIH's desire to strengthen the research enterprise through the use of
innovative recruitment and retention policies. The second was a
government-wide standardization of ethics policies, which resulted in a
decision by NIH to change its ethics rules to conform to the new
policies.
As we move forward, I regret that the reputation of NIH has been
challenged over ethics concerns and that the conduct of individual
scientists who have devoted their lives to battling disease and easing
the suffering of millions of patients has been questioned. I believe
the NIH and its employees were operating within rules that allowed or
did not specifically address many of the arrangements that the
Subcommittee has questioned, including lecture awards and consulting
with industry. In retrospect, there was not a sufficient safeguard
against the perception of conflict of interest.
As I have testified previously, our public health mission is too
important to have it undermined by any real or perceived conflicts of
interest. It is imperative that Congress and the American people trust
that the decisions made by our scientists are motivated solely by
public health priorities and scientific opportunities, not personal
financial concerns.
The first step in maintaining such trust was the creation of the
NIH Ethics Advisory Committee (NEAC). The NEAC, an internal NIH
committee, is providing a centralized, consistent, and rigorous review
of all consulting arrangements with pharmaceutical and biotechnology
companies, awards valued in excess of $2500, and all requests from
senior NIH officials. Composed of Institute and Center Directors and
scientific leaders, and with the participation of ethics officials, the
Committee provides unprecedented review by peer scientists of
applications for outside activities and awards. NEAC looks carefully at
each request under its jurisdiction so that, for instance, NIH
employees are not consulting on matters that are related to their
official duties or pose other potential concerns. Only those requests
for approval that have passed muster at the Institute level, by both
the employee's supervisor and the Institute's Deputy Ethics Counselor
(DEC), are forwarded to the NEAC for review. Upon NEAC review, it is
only those arrangements that do not pose conflict of interest concerns
that are recommended for approval and forwarded to the NIH Deputy
Ethics Counselor. As a result of the unprecedented review by peer
scientists now applied to the ethics program, the culture at NIH is
already changing.
On May 12, I testified before this subcommittee about four
principles for change in the NIH ethics program:
1) Enhance public trust in NIH by preventing conflicts of interest
through the restriction of financial relationships that
employees may have with outside organizations;
2) Increase levels of transparency in the NIH ethics program by
requiring much more internal as well as public disclosure of
the details of financial relationships that employees have with
outside organizations, including consulting arrangements and
awards;
3) Balance NIH's ability to recruit and retain the best scientific
expertise while expediting the translation of research
advances;
4) Establish effective monitoring and oversight of employee activities.
Today I am announcing that NIH, working with the HHS Office of the
Secretary, will seek a major reform of the Agency's ethics program by
requesting restrictive rules and by seeking to increase the public
availability of information related to outside activities with
industry. As you know, this process cannot happen overnight. We are
aggressively working with the Office of the Secretary and OGE to make
sure that we have in place a set of rules that ensures the appropriate
ethical oversight while continuing to encourage scientific creativity.
The following framework lays out our attempts to implement the
principles described above.
Principle One: Enhance Public Trust
Prohibited Holdings: We are working to prohibit the holding of stock
in individual biotechnology and pharmaceutical companies as is
done at the Food and Drug Administration. There, all employees
that file either a public or confidential financial disclosure
report are prohibited from holding stocks in significantly
regulated entities. Non-filers are permitted to hold only up to
$5000 of such stock, which is $10,000 below the current federal
rules for de minimis financial interests.
Awards: We are actively pursuing a two-step process. First, any NIH
employee should be prohibited from accepting any award unless
the award has been pre-screened. Such a process would include
an independent advisory committee that includes non-government
individuals and the NIH DEC, and a determination by the DEC
that the award meets the regulatory definition of bona fide.
Second, even if the award has been determined to be bona fide,
specific awards to employees still should be reviewed on a case
by case basis by the NEAC, and approved by the NIH DEC to
ensure that the acceptance of the award does not create a real
or apparent conflict of interest for the employee in relation
to official duties. As an additional restriction, NIH will seek
to prohibit any official--including Institute and Center
Directors--who are responsible, either directly or indirectly
through subordinates, for a funding decision affecting the
entity offering the award, from receiving the cash component of
an award. It is my intention that this restriction will not
preclude the acceptance of cash in the case of certain
exceptional bona fide awards, such as the Nobel Prize. The list
of pre-screened bona fide awards would be posted publicly, as
will the NIH recipients of such awards.
Outside Activities with Industry: While we continue to encourage
consultation with industry as part of official duties, I intend
to prohibit senior NIH employees, as well as all employees
involved in extramural funding decisions or Cooperative
Research and Development Agreements, from consulting with
industry for compensation or any other form of remuneration.
Other employees would be permitted to consult only if the
arrangement has been reviewed by the NEAC and approved by the
NIH DEC, and certain restrictions are in place. These are: 1)
payment may not include stock or stock options; 2) annual
compensation from all outside activities with industry must be
limited, and no more than half of that limit may come from any
one source; and 3) a cap on the number of hours annually that
an employee can spend on all outside activities with industry.
Participation on Industry Boards: I seek to prohibit all NIH
employees from membership on corporate boards of the
pharmaceutical and biotechnology industries. In addition,
employees should be allowed to participate in industry
scientific advisory boards as ad-hoc participants only if such
participation has been reviewed by NEAC, and approved by the
NIH DEC.
Consulting (includes speaking) with Grantee Institutions: While we
continue to encourage consultation with grantee institutions as
part of official duties, I will seek to prohibit all NIH
employees from consulting with NIH grantee institutions for
compensation or any other form of personal remuneration.
Consulting (includes speaking) with Non-profits that are not Grantee
Institutions: I seek to prohibit NIH senior leadership from
consulting with these entities.
Clinical Practice: NIH seeks to limit employee annual compensation
for clinical practice.
Principle Two: Increase Transparency
NIH, working with HHS and OGE, has already increased the number of
senior managers who must publicly disclose their compensated
activities with outside organizations and the amounts received.
This has been increased by 93 positions. We are hopeful that
OGE will grant HHS' recent request to extend public financial
disclosure to an additional 508 positions.
I will seek authority from OGE for NIH to determine which of its
employees must submit public financial disclosures.
We are working towards requiring that outside activities with
industry be publicly disclosed. This will include disclosure to
CRADA partners.
NIH employees will continue to be required to disclose the amount of
compensation earned from outside activities.
I will review the duties and responsibilities of employees who
currently do not file any financial disclosure reports,
specifically those involved in human subjects work, to increase
the number of employees who file such reports to avoid any
involvement in a real or apparent conflict of interest.
Principle Three: Recruit and Retain Best Scientific Expertise While
Expediting Translation of Research Advances
I will encourage NIH scientists to continue teaching, speaking or
writing about their research as part of their official duties.
In order to encourage scientific interactions involving the
exchange of knowledge and the exercise of intellectual leadership by
NIH scientists, NIH will continue to allow certain types of outside
activities--including teaching and lecturing opportunities and
collaborations with the private sector--but only under clear, rigorous
rules meant to eliminate conflicts of interest.
Principle Four: Establish Effective Monitoring and Oversight Mechanisms
I will continue to require that supervisors fulfill their
responsibilities in both reviewing proposed outside activities
and, if NEAC ultimately approves the outside activity, in
monitoring the effect that the activity might have on the
employee's official duties. Before any proposed outside
activity is forwarded to the NEAC for review, supervisors will
be asked to determine whether the activity can and should be
undertaken as part of the employee's official duties, and if
not, whether the proposed outside activity will cause a
conflict, either of interest or of commitment. In addition,
supervisors will be expected to monitor employees' compliance
to ensure compliance with the limitation on hours.
NIH will improve its ability to manage and track approved activities
with outside organizations by increasing the accountability of
managers, creating a centralized system, centralizing review of
senior managers and scientists, conducting random audits of
files pertaining to activities with outside organizations, and
continuing the rigorous review by peers conducted by the NEAC.
NIH will develop and implement a new, more understandable method of
training employees on ethics rules, and we will establish a web
site that displays rules in plain language, updates employees
on regulatory trends and changes and discusses--anonymously--
ongoing cases as examples of best practices or unacceptable
practices.
We are severely restricting the ability of NIH employees to consult
with industry. However, as I have previously testified, the easiest way
to approach this matter would be to ban all consulting with industry. I
do not want to discourage the kind of intellectual excitement and
curiosity that leads our scientists to want to work with industry. I
want to provide an environment for them in which they have the same
kind of professional and intellectual opportunities as their
counterparts in academia. I want the intramural program to continue to
attract the best and the brightest. With these principles in mind, I am
working to strike a careful balance--whereby those individuals in key
decision-making positions will be prevented completely from consulting,
while stringent limits will apply to other employees.
Mr. Chairman, Members of the Subcommittee, in summation, I have
described the three core elements of reforming the ethics process at
NIH. Number one, we are applying review of applications for outside
activities by peer scientists. Number two, we are requiring full
disclosure and transparency in the program. And number three, NIH is
working to reduce, restrict, or eliminate the types of activities about
which this Subcommittee has raised concerns.
Thank you for this opportunity to speak before the Subcommittee on
these matters once again. I would be happy to answer any questions you
may have.
Mr. Greenwood. The Chair thanks the gentleman. And would
wax poetic enough to say that if the NIH is indeed the crown
jewel of research, I think those recommendations will certainly
make it sparkle more than it has in the past.
Dr. Azar, you are recognized for your opening statement.
Did I call you Dr. Azar? Mr. Azar.
TESTIMONY OF ALEX AZAR, II
Mr. Azar. Thank you, Mr. Chairman. And thank you for
inviting me to speak with you today.
As General Counsel for the U.S. Department of Health and
Human Services my office is responsible for providing
representation and legal advice to HHS on a wide range of
issues. By providing such legal services to the Secretary of
HHS and the organization's various agencies and divisions, the
Office of the General Counsel supports the development and
implementation of the Department's programs.
OGC has over 400 attorneys and a comprehensive support
staff located across the United States. Our office has a
diverse and challenging portfolio, with legal issues about
technical rules for agency programs on topics as disparate as
health financing and welfare, as well as a broad range of
general legal issues facing every Federal agency such as
administrative law, personnel and employment law, information
law, and, of course, ethics.
OGC's main role in the area of ethics is through the Ethics
Division's provision of legal advice regarding applicable laws
and regulations to the ethics officials who run the agency's
ethics program. In HHS, the ethics program is overseen by a
Designated Agency Ethics Official, a DAEO, appointed by the
Secretary and who, in our case, also heads OGC's Ethics
Division. The DAEO oversees and coordinates a decentralized
Departmental ethics program. The DAEO also appoints Deputy
Ethics Counselors, DECs, who are senior management officials
chosen by each operating division. Each of these DECs, along
with agency heads and management are responsible for running
ethics programs tailored to the needs of extensive,
geographically dispersed workforces composed of many
professionally trained employees with varied responsibilities.
As managers closest to day-to-day operations, these DECs are
equipped and responsible for identifying and evaluating the
relevant ethics issues in their respective components.
Additionally, the DECs and their staffs possess the scientific
and technical expertise necessary to identify and resolve
ethics issues in situations involving science, medicine, and
other complex fields.
Within their respective operating divisions, the DECs are
responsible for reviewing public and confidential financial
disclosure forms, considering outside activity requests,
providing ethics advice to individual employees, initiating
ethics education and training programs, and ensuring that
violations of the conflicts statutes or the conduct standards
are reported to investigatory authorities and where
appropriate, seeing that disciplinary action is taken.
Individual employees are, of course, ultimately responsible for
their own actions.
As an attorney who has devoted over half of my professional
career to serving the Federal Government and who attaches great
importance to public service, my objective in leading OGC has
been to ensure the best possible legal advice to assist in the
accomplishment of HHS' critical missions. I view the role of
OGC not as making policy, but rather as providing those who do
set policy with the best possible legal advice. This means that
the function of my office is to work to identify the
Department's policy objectives and then to identify the range
of permissible legal options to accomplish those policy
objectives and advise on the legal and other risks associated
with those options. Of course, legal advice is often
accompanied by advice regarding considerations such as
appearances, judgment, and other factors that may be relevant
to the agency's situation. Where there is no established
Government-wide interpretation of a law, it is the Department,
then, which decides which interpretation of law to adopt and
what course of action to take. In so doing, the Department can
appropriately balance the considerations, among many others,
relevant to accomplishing the agency's objectives.
I strongly believe that such advice, including advice about
appearances, is particularly important in the area of
Government ethics; where the law may be arcane and complex, but
where other non-legal factors invariably play a large role.
Consistent with the President's statement that, ``Everyone
who enters into public service for the United States has a duty
to the American people to maintain the highest standards of
integrity in Government,'' I have initiated and led a
successful effort to obtain and dedicate additional resources
to enhance the Ethics Division in OGC. This initiative, which
is already underway, will enhance the ability of the DAEO to
scrutinize and oversee the Department's ethics activities. In
addition, it will dramatically strengthen the ability of the
DAEO to oversee these programs and their officials.
As part of this initiative, the Department will institute
systematic oversight of the ethics programs within the various
operating divisions of the Department through regularized
compliance auditing and program review. The initiative will
increase component accountability for ethics program
implementation, augment financial disclosure review and
training development, and enhance the capabilities of the
Ethics Division and the authority of the DAEO. To my knowledge,
this will make HHS OGC's Ethics Division the largest single
legal office devoted exclusively to Government ethics outside
of the Office of Government Ethics.
These efforts will help ensure that the DAEO is in the best
position to oversee HHS' and NIH's ethics program in the
future. The Department is also committed to helping the
committee understand the past implementation of and compliance
with the current ethics rules at NIH. In this regard, we have
worked hard to solve a number of legal issues relevant to the
committee's work and to support NIH's efforts to identify and
rectify areas of concern. The goal of ensuring public
confidence in the integrity of NIH is one that the Department
shares with the committee and a goal we can best accomplish
together.
The proposal outlined by Dr. Zerhouni today is an important
fruit of that collaborative effort. The proposal was largely
born out of the work Dr. Zerhouni has led to find ways to build
on the recommendations of the Blue Ribbon Panel. The Department
was pleased to see that NIH proposed to take strong steps to
provide additional review of awards and prohibit outside
activities with grantees of NIH by the leadership of NIH as
well as employees involved in the grants process. And the
Department worked with Dr. Zerhouni to strengthen the proposal
even further. The result has been a collaborative effort to
address the issues raised by the committee, including a
proposed prohibition on holding of stock in individual
biotechnology and pharmaceutical companies like that in place
at the Food and Drug Administration. There are also proposed
prohibitions on outside activities by senior NIH leadership
with industry and extensive limitations for all other
employees. As a lawyer, my predisposition is for bright line
rules, such as complete prohibitions, which are easy to
administer and interpret. However, the proposal balances this
consideration with the needs identified by Dr. Zerhouni to
ensure that NIH can recruit and retain the Nation's most
talented scientists and allow them to contribute to the march
of human scientific progress outside the confines of the
workplace.
In conclusion, Mr. Chairman, the Department shares the
committee's commitment to maintaining the highest ethical
standards at NIH and thereby ensuring that the vitality and
promise of NIH is not undermined by any lack of public
confidence in the motivations of its employees and their
conduct. OGC remains committed to helping NIH understand
applicable laws, further identify legal options, and give legal
advice relevant to NIH's ethics program. And the Department
remains committed to cooperating with this committee in its
important work.
Thank you for the opportunity to speak with you today. And
I would be pleased to answer your questions.
[The prepared statement of Alex Azar follows:]
Prepared Statement of Alex Azar, General Counsel, U.S. Department of
Health and Human Services
Thank you for inviting me to speak with you today to discuss ethics
issues at the National Institutes of Health (NIH) relating to
consulting arrangements and outside awards.
As General Counsel for the U.S. Department of Health and Human
Services (HHS) my office is responsible for providing representation
and legal advice to HHS on a wide range of health and human services
issues. By providing such legal services to the Secretary of HHS and
the organization's various agencies and divisions, the Office of the
General Counsel (OGC) supports the development and implementation of
the Department's programs. OGC has over 400 attorneys and a
comprehensive support staff located in many locations across the United
States. Our office has a diverse and challenging portfolio, with legal
issues about technical rules for agency programs on topics as disparate
as health financing and welfare, as well as a broad range of general
legal issues facing every federal agency such as administrative law,
personnel and employment law, information law, and, of course, ethics.
OGC's main role in the area of ethics has been the Ethics
Division's provision of legal advice regarding applicable laws and
regulations to the ethics officials who run the agency's ethics
program. In HHS, as in most large Cabinet Departments, the ethics
program is overseen by a Designated Agency Ethics Official (DAEO)
appointed by the Secretary and who, in our case, also heads OGC's
Ethics Division. The DAEO oversees and coordinates a decentralized
Departmental ethics program. The DAEO also appoints Deputy Ethics
Counselors (DECs), who are senior management officials chosen by each
operating division. Each of these DECs, along with agency heads and
management in each component, are responsible for running ethics
programs tailored to the needs of extensive, geographically dispersed
workforces composed of many professionally trained employees with
varied responsibilities. As managers closest to day-to-day operations,
these DECs are equipped and responsible for identifying and evaluating
the relevant ethics issues in their respective components.
Additionally, the DECs and their staffs possess the scientific and
technical expertise necessary to identify and resolve ethics issues in
situations involving science, medicine, and other complex fields.
Within their respective operating divisions, the DECs are responsible
for establishing a system for reviewing public and confidential
financial disclosure forms, considering outside activity requests,
providing ethics advice to individual employees, initiating ethics
education and training programs, and ensuring that violations of the
conflicts statutes or the conduct standards are reported to
investigatory authorities and where appropriate, seeing that
disciplinary action is taken. Individual employees are, of course,
ultimately responsible for their own actions.
As an attorney who has devoted over half of my professional career
to serving the federal government and who attaches great importance to
public service, my objective in leading OGC has been to ensure the best
possible legal advice to assist in the accomplishment of HHS' critical
missions. I view the role of OGC not as making policy, but rather as
providing those who do set policy with the best possible legal advice.
This means that the function of my office is to work to identify the
Department's policy objectives and then to identify the range of
permissible legal options to accomplish those policy objectives and
advise on the legal and other risks associated with those options. Of
course, legal advice is often accompanied by advice regarding
considerations such as appearances, judgment, and other factors that
may be relevant to the agency's situation. Where there is no
established Government-wide interpretation of a law, it is the
Department, then, which decides which interpretation of law to adopt
and what course of action to take. In so doing, the Department can
appropriately balance the considerations identified by their lawyers
among many others relevant to accomplishing the agency's objectives.
I strongly believe that such advice, including advice about
appearances, is particularly important in the area of government
ethics--where the law may be arcane and complex, but where other non-
legal factors invariably play a large role. Consistent with the
President's statement that, ``Everyone who enters into public service
for the United States has a duty to the American people to maintain the
highest standards of integrity in Government,'' I have initiated and
led a successful effort to obtain and dedicate additional resources to
enhance the Ethics Division in OGC. This initiative, which is already
being implemented this year, will enhance the ability of the DAEO to
scrutinize and oversee the Department's ethics activities. In addition,
it will dramatically strengthen the ability of the DAEO to oversee
these programs and their officials.
As part of this initiative, the Department will institute
systematic oversight of the ethics programs within the various
operating divisions of the Department through regularized compliance
auditing and program review. The initiative will increase component
accountability for ethics program implementation, augment financial
disclosure review and training development, and enhance the
capabilities of the Ethics Division and the authority of the DAEO. To
my knowledge, this will make HHS OGC's Ethics Division the largest
single legal office devoted exclusively to government ethics outside of
the Office of Government Ethics.
These efforts will help ensure that the DAEO is in the best
position to oversee HHS' and NIH's ethics program in the future. The
Department is also committed to helping the Committee understand the
past implementation of and compliance with the current ethics rules at
NIH. In this regard, we have worked hard to solve a number of legal
issues relevant to the Committee's work, as well as to support NIH's
efforts to identify and rectify areas of concern. The Committee's
oversight in this area has also been helpful in identifying areas of
concern. We hope these steps have aided the Committee's work and helped
provide insight into the relevant processes and issues. The goal of
ensuring public confidence in the integrity of NIH is one that the
Department shares with the Committee and a goal we can best accomplish
together. As NIH moves forward, with the help of the Department and my
office, to address those concerns, the Department continues to value
the Committee's informed views and welcome the Committee's suggestions
regarding steps that may be taken to ensure that the tremendous trust
that the Congress and the public place in NIH is as unquestioned as the
vast contributions NIH has made towards advancing the nation's health
and the promise it holds to continue doing so.
The proposal outlined by Dr. Zerhouni today to strengthen the
ethics rules at NIH is an important fruit of that collaborative effort.
The proposal was largely born out of the work Dr. Zerhouni has led to
find ways to build on the recommendations of the Blue Ribbon Panel,
which were a helpful starting point. The Department was pleased to see
that NIH proposed to take strong steps to provide additional review of
awards and prohibit outside activities with grantees of NIH by the
leadership of NIH as well as employees involved in the grants process.
And the Department worked with Dr. Zerhouni to strengthen the proposal
even further. The result has been a collaborative effort to address the
issues raised by the Committee, including a proposed prohibition on
holding of stock in individual biotechnology and pharmaceutical
companies like that in place at the Food and Drug Administration
(whereby such holdings are prohibited for all employees that file
financial disclosure reports, and there is a $5,000 limit on such
holdings by other employees. There are also proposed prohibitions on
outside activities by senior NIH leadership with industry and extensive
limitations for all other employees. As a lawyer, my predisposition is
for bright line rules, e.g., complete prohibitions, which are easy to
administer and interpret. This Committee's oversight work has also
demonstrated the difficulty in applying complicated rules to real world
scenarios. However, the proposal balances this consideration with the
needs identified by Dr. Zerhouni to ensure NIH can recruit and retain
the nation's most talented scientists and allow them to contribute to
the march of human scientific progress outside the confines of the
workplace.
In conclusion, the Department shares the Committee's commitment to
maintaining the highest ethical standards at NIH and thereby ensuring
that the vitality and promise of NIH is not undermined by any lack of
public confidence in the motivations of its employees and their
conduct. OGC remains committed to help NIH understand applicable laws,
further identify legal options, and give legal advice relevant to NIH's
ethics program. And OGC remains committed to cooperating with this
Committee in its important work.
Thank you for the opportunity to speak with you today. I would be
pleased to answer your questions.
Mr. Greenwood. Thank you very much, sir, for your
testimony.
The Chair recognizes himself for 5 minutes.
And let me just again editorially comment that it is
probably the case that the NIH has the most complicated set of
circumstances around which to build an ethical system because
of the outside activity and because of some of the recruiting
issues. But it is my sense that with what you have proposed and
a couple of things that we may need to do legislative, I think
the NIH will end up with the tightest ethical standards
anywhere in the Federal Government.
Let me just be very clear, Dr. Zerhouni, with regard to
outside activity and disclosure. Is it your proposal that all,
every single approved outside activity would be disclosed or is
there----
Mr. Zerhouni. This is my intent. Obviously, we are going to
have to work with the current laws as to what can or cannot be
done and how it can be done. But that is my intent.
Mr. Greenwood. Mr. Azar, what impediments might there be to
full disclosure, public disclosure and to the extent that
there, what might we need to do legislative to overcome them?
Mr. Azar. Mr. Chairman, we believe that it is possible for
us to get to work to get the--it is called the 520 form on
which outside activities are required and approved, to get
those made public. Put them up on the Internet if the NIH
wishes to put them as part of the data base.
What the agency will have to do to do that, and we have
provided them with advice this, will be to either get the
Office of Government Ethics to modify their system of records
under the Privacy Act in which the form 520's kept or something
we could ourselves, create our own system of records in which
the ethics forms, the 520's would be kept, and have listed as
one of the disclosures when you create that system of records
that it would be disclosed automatically on the Internet once
filed.
So these are things that we will work very collaboratively
with NIH to help them achieve their goal, but it is definitely
something that can be done.
Mr. Greenwood. My counsel advises me that the Office of
Government Ethics thinks that there may be some impediments to
that disclosure. And so I ask you to work with us to the extent
that there are any basis for legal challenge to that
disclosure, we would want to clarify that in the
reauthorization statute so that we can have this full
disclosure.
Dr. Zerhouni, given all of the restrictions and controls,
let us be clear. Tell us what kind of outside consulting
arrangement do you envision as being permissible under this
system.
Mr. Zerhouni. Obviously, outside consulting, outside work
for editorial matters, writing a textbook, getting a contract
from a publishing. I am assuming that is not the point of the
discussion.
In terms of relationship with industry, for an employee who
is not in the senior leadership, so let us say for example you
were an expert on West Nile virus or the genetics of a
particular process. And that, in fact, it turns out that the
same technique and the same field of science that you are in is
important because there is, for example, a potential to develop
an alternative treatment for another disease. You may be asked
to consult for that. It is not part of your official duty; that
is where we will define that. And one of the issues----
Mr. Greenwood. Well, clearly, if it is within the scope of
your official duties, you will not be compensated for that?
Mr. Zerhouni. That is not allowed. No, you cannot be
compensated. And the determination now is not going to be done
by an ethics officer alone. It is going to be done by the NEAC,
which has scientists on its board who understand and can get
advice on that field of science.
A good example would be a plant genetics company that wants
to get advice from a human genome researcher. There is no
overlap there. Would we prevent that advice from being given?
No. If some other company says well I want to know about human
genomics in a field that relates to what, that would be
prohibited.
Mr. Greenwood. And we have discussed this before, but I
think it is also important to us and for the public confidence,
that there be very clear rules about allocation of time so that
if someone is literally moonlighting, they are working in the
evening after their normal duties, they are working on the
weekends, if they are using their vacation time, you know that
is fine. But we do need to be clear that we are not paying
people to be sitting at their desks at the NIH and doing work
for which they are being paid by an outside private entity.
Mr. Zerhouni. I take your point. We are establishing a
system that will have, again, recording centrally of the
activities. Four hundred hours is about 6 hours a week; people
can do this 1 hour a day. So it is not very large. It is much
less than universities will do. But I think it is important to
allow that and limit on dollars will also restrict that. But we
will try to put systems--and I agree with the devil is in the
details comment that you made, Congresswoman DeGette. We will
have to work that through, but we intend to monitor that.
Mr. Greenwood. Thank you, Dr. Zerhouni.
The gentlelady from Colorado.
Ms. DeGette. Thank you, Mr. Chairman.
Mr. Azar, I wanted to ask you a couple of questions. One
concern, I mean OGC has, I think you said in your testimony,
over 400 attorneys but they are not all doing ethics. They are
doing all the legal work of HHS, right?
Mr. Azar. Yes, ma'am.
Ms. DeGette. How many of them are concentrating on ethics?
Mr. Azar. We have eleven individuals currently in the
ethics division. The number of attorneys in that, I believe it
is approximately six, maybe seven attorneys.
Ms. DeGette. So six or seven of the 400 attorneys are doing
ethics.
Mr. Azar. Yes.
Ms. DeGette. Now, where are they based? Are they based
throughout the agency or are they based in one office?
Mr. Azar. The head of that office, the Designated Agency
Ethics Officer and Associate General Counsel for Ethics is
located in the Humphrey Building on the same floor that I am
on, right above the Secretary's floor as well as several of the
attorneys. But two of the slots are located physically out at
NIH to assist NIH directly. And then another----
Ms. DeGette. And there, I would assume, they are located in
Dr. Zerhouni's office in the administration office?
Mr. Azar. They are in Building 31, which is where most of
the administrative staff are. Dr. Zerhouni is in Building 1,
but they are with I think most of the center directors in
Building 31. And they are also with--we have a branch of
lawyers that assist the NIH regularly on other substantive
matters, and they are now colocated with them. So there can be
some extra support.
I do not mean to say that the only lawyers who ever touch
an ethics issue are the people in the ethics division.
Ms. DeGette. Sure.
Mr. Azar. For instance, the regional chief counsels will
assist the regional administrators on ethics issues. And all
lawyers should be versed somewhat in the ethnic provision----
Ms. DeGette. Well, one thing I have been concerned about,
and I shared this with Dr. Zerhouni, is when you have 27
institutes and you have ethics personnel dispersed through
those institutes, part of the problem they have had, they have
had no consistency with administering ethical rules. Is that
correct, Dr. Zerhouni?
Mr. Zerhouni. You are correct.
Ms. DeGette. And one of the goals I think of these new
proposed rules which is important is to get it all centralized
into one office so there is one set of standards being applied
and also so that the individuals approving or deciding on
different requests are not immediately there with the
individuals. Correct, Dr. Zerhouni?
Mr. Zerhouni. That is correct.
Ms. DeGette. Now, do you agree with that, Mr. Azar, in
terms of trying to reform the rules here?
Mr. Azar. That is why I think Dr. Zerhouni's efforts to
create the NIH Ethics Advisory Committee, a centralized process
is very good. It also provides a peer review background of
support for the DEC for the entire NIH and helps to centralize
those decisions. And so we can also provide our legal advice,
which we provide them with support as they make those
decisions, we can provide that centrally as well as to the DECs
at each institute. But I think the more things are handled
centrally, I think that is a very important point.
Ms. DeGette. Okay. I want to ask you, I want to turn a
little bit to a different issue. That is the issue of who
exactly do these HHS lawyers who show up at our committee
investigations represent? Now, if you take a look at tab 25 in
the notebook you will find a letter dated April 16, 2002 from
yourself to Chairman Tauzin and Greenwood. Do you recognize
that letter?
Mr. Azar. Yes, Congresswoman.
Ms. DeGette. Now, on page two there is a paragraph at the
top. And that paragraph says in part ``department attorneys who
accompany an employee at FDA to an investigative interview will
not inform any department officials about the substance of the
interview.`` The first sentence of that is ``It is important to
stress that department attorneys represent employees in their
personal capacity.'' Correct?
Mr. Azar. That is what the letter agreed. Yes.
Ms. DeGette. Yes. And that has actually been the
longstanding policy of the department, correct? When you send
attorneys over to represent an individual, they are there
representing the individual?
Mr. Azar. Actually, if I could clarify that. There was an
agreement in 1995 between the prior Administration regarding
dealings with FDA, and it is unclear in the text of it whether
they are operating under official capacity or personal, but
what information would be shared. This was a unique----
Ms. DeGette. Okay. Yes, I understand. However, your letter
to Chairman Tauzin was dated April 16, 2002. And I have got to
say as a former lawyer myself, this is pretty clear what it
says, right?
Mr. Azar. Well, I was trying to clarify that this is not
how the department operates generally. This was and is a
special accommodation that was done with this committee at the
committee's request during the Imclone investigation to do that
matter.
Ms. DeGette. Can you tell me where in this letter it says
that this policy was only in effect for the Imclone
investigation?
Mr. Azar. It refers to the fact, I believe that if I could
look through this, explaining the role of attorneys from the
Office of General Counsel with respect to interviews of FDA
employees in the Erbitux, the Imclone matter.
Ms. DeGette. No. It does not say in the Imclone matter.
Mr. Azar. I am sorry?
Ms. DeGette. I mean it talks about the Imclone matter.
Mr. Azar. It says the Erbitux matter.
Ms. DeGette. That is what was going on then, but it does
not say that this is policy was limited to the Imclone matter.
Plus, why would you have a policy that when lawyers come
over with witnesses that only with respect to one investigation
the policy is this way, but in every other investigation
including ethics at the NIH, that the policy is different?
Mr. Azar. The department generally when we provide counsel,
provides them as official counsel to assist not only the
witness, often at their request, to assist them in preparing to
deal with the committees, to assist them so that they feel more
comfortable in working with the committee and so that they can
be better prepared in assisting the committee.
The committee in the Imclone matter, this was the first
dealing that we had with the committee on this type of matter.
The committee had asked that we clarify their role as personal
counsel. We were happy to do that in that instance.
If I could explain, Congresswoman. We subsequently learned
that I had basically gotten bad advice in terms of what the
role of the attorneys could be. That only the Justice
Department apparently can authorize the representation of
employees in their personal capacity creating a personal
attorney/client relationship.
Ms. DeGette. Okay. Can I just ask one question, because my
time is up? Did you ever inform committee staff that you had
gotten that clarification from the Justice Department?
Mr. Azar. We believed, and I want to start by apologizing
to you and to the members of the committee.
Ms. DeGette. That would be a good start.
Mr. Azar. I want to apologize. We thought in the context of
the FDA in June 2003, in the context of interviews the next
after Imclone, the next interviews, interactions we had with
the committee was regarding an FDA importation proceeding where
John Taylor of his staff were being interviewed. And we had
instructed the line attorneys who were coming over when the
committee asked, you know when they were scheduled to
interview, we had instructed them to make clear to the staff
that they were serving as official counsel, not as personal
counsel. Obviously----
Ms. DeGette. Well, why did you not write a letter like you
wrote in 2002?
Mr. Azar. Obviously, I--obviously I apologize that we--that
we were not clear enough. We thought for lawyers when we say we
are representing in the official capacity not personal
capacity, that--that says it all for us. But----
Ms. DeGette. But you do not have any idea whether they said
that or not?
Mr. Azar. It is my understanding that the lawyer did say it
at the interview with Mr. Taylor. But I do want--I do not want
to try to explain this away. As soon as in the NIH interview
context, as soon--I think it was in the context of Dr. Katz',
scheduling of his interview, as soon as we learned that the
committee was operating under the impression of this Imclone
arrangement, we raised it and said we were not operating under
that assumption, and the department sat down with the committee
to work out an agreement. We now have an agreement to serve as
official counsel but with a restriction on the sharing of
information.
And, again, Congresswoman, I am very sorry if we were not
clear enough in communicating. I had intended that that be
clear. I am sorry that we did not do it clearly enough. And I
just hope you will accept my apology. Certainly it was not from
any bad intent. We just--we always want to try to keep our role
as counsel clear with the committee. And I hope that we will be
able to work on a going forward basis in a productive way under
the agreement.
But that really was our intent. And I am very sorry for
any----
Mr. Greenwood. The time of the gentlelady has expired.
The Chair recognized the chairman of the full committee,
Mr. Barton.
Chairman Barton. Thank you, Mr. Chairman.
Dr. Zerhouni, I want to again compliment you on the
recommendations that you have presented to this subcommittee. I
want to ask a question about the National Institutes of Health
Ethics Advisory Committee. How long has that been established?
Mr. Zerhouni. We established this committee November 2003.
Chairman Barton. November 2003? So it is not yet a year
old?
Mr. Zerhouni. No, it is not yet a year old.
Chairman Barton. And the formal membership are your
institute directors? Are you a member of that committee?
Mr. Zerhouni. My deputy director, who is the--I have
designated as the agency ethics, the DEC for the agency is a
member. My director for intramural science, Dr. Michael
Gottesman is a member.
We have a selection. Not just institute directors. There
are scientists also on the grounds and ethics officers of the
NIH. We recruited Mrs. Holli Beckerman Jaffe who now works in
ethics in my office to oversee that.
I do not sit personally on the meeting.
Chairman Barton. Okay. What is the total membership of the
formal board?
Mr. Zerhouni. I don't have that exact number.
Chairman Barton. Thirty people? Forty people?
Mr. Zerhouni. No, it is about--no, it is small. Ten people.
Chairman Barton. Ten people? Do they have a permanent
staff?
Mr. Zerhouni. Do they have a permanent--well, as I said,
the ethics division of my office, the Office of the Director,
is basically staffing that committee, Ms. Holli Beckerman Jaffe
was recruited.
Chairman Barton. But that is at your--they have no formal
staff of their own? The staff they have are staff that has been
deleted from your office?
Mr. Zerhouni. That is correct.
Chairman Barton. Okay. The recommendation that you
presented to this subcommittee I think are excellent. What has
been the response within the NIH of these recommendation? Are
people resistive or are they supportive, or do they feel like
they have had their hand caught in the cookie jar. I mean, what
is the general reaction?
Mr. Zerhouni. I would say mixed. I talked to the directors
yesterday. I had a special meeting of the institute directors
to go over what I was recommending. I would say that in the
issues that relate to clerical practice, for example, they
really want that to continue and I do not think there is an
issue.
They were very strongly in favor of continuing pure
academic activities. I think the restrictions, they are concern
about the restrictions having two impacts; one is moral in the
troops. And uncertainty of how we solve this issue is also
impacting them and their ability to recruit, and my own ability
to recruit. But most importantly, their concern that over time
it would harm recruiting because----
Chairman Barton. Did any of them show any concern about
maintaining and restoring the public trust?
Mr. Zerhouni. Oh, yes. I should have started with that.
Absolutely, positively. I have polled every single one of them
and they told me the following: Do whatever you need to do to
absolutely remove this cloud from NIH. We will give you our
support.
So I have the total support of all the NIH directors. Goal
No. 1 is to reestablish that public trust.
Chairman Barton. What, if any, legislative action do you
need on these recommendations?
Mr. Zerhouni. This is something that we are evaluating,
obviously, as we speak. There are things that I think we can
implement. There are things that could be handled with
supplemental regulations. I am not clear at this point. This is
still, obviously, a proposal that needs to be worked out. And
if there are changes, we will let you know, Mr. Chairman.
Chairman Barton. Okay. Well, we want to work with you on
that.
I want to read from your prepared testimony on your bullet
that is headed ``Outside activities with industry.'' And I
quote, ``I intend to prohibit senior NIH employees as well as
all employees involved in extramural funding decisions or
cooperative research and development agreements from consulting
with industry for compensation or any other form of
enumeration.''
What has been the response to that recommendation, which I
think is one of your key recommendations?
Mr. Zerhouni. Full support.
Chairman Barton. Full support. So there is no reluctance on
that?
Mr. Zerhouni. No.
Chairman Barton. What about the next one, participation on
industry boards, ``I seek to prohibit all NIH employees from
membership on corporate boards of the pharmaceutical and
biotechnology industries.''
Mr. Zerhouni. Full support.
Chairman Barton. Full support of that one, too.
Okay. My time is about to expire. I want to ask a general
question about our next panel. We have a situation where CRADA
was established with a company called Correlogic. And at some
point in time the NIH scientists who were working on that CRADA
became secretly involved or secret employees of a competitive
company called Biospect. Do you have any general comments on
whether that is a concept that should be supported or
prohibited?
Mr. Zerhouni. This actually was the tipping point for me.
When that happened, that came up to light, I said we need the
complete scrubbing, complete reform. That is not appropriate.
Chairman Barton. But in your opinion that should not be a
general practice that somebody that is working with one company
secretly goes to work for another company? You would agree with
us if we wanted to prohibit that by--I do not know that we need
to do it by statute, but the fact that that should not be
allowed is something that you agree with?
Mr. Zerhouni. I agree with that.
Chairman Barton. Okay.
Mr. Chairman, my time has expired and I yield back.
Mr. Greenwood. The Chair is always prepared to be lenient
with the clock with the chairman, but the Chair thanks the
gentleman for yielding back and recognizes the gentlelady from
Chicago.
Ms. Schakowsky. Thank you. This is the first of the three
hearings that I have attended, so I hope we are not going over
some of the same ground. I want to talk about the basic policy
questions here. It seems to me we are trying to protect the
public interest over the private interest concerns of some
employees of NIH. Why would it be in the public interest to
ever allow any Government employee to sign a contract that
would prohibit that employee from informing the government of
exactly what has been asked of him or her, and what he or she
may have done in fact for a profit-seeking entity that hires
them?
It is my understanding that scientific advisory boards
require confidentiality as do most if not all employment
contracts of any kind in the biotech or drug development
private sector field. How can that in the public interest?
Mr. Zerhouni. Well, first of all, in terms of board
membership, we are prohibiting that. I agree that there is an
issue there.
In terms of the public's interest, I think it is very
important that there is a public interest that is balanced by
three different aspects. One, obviously, is the elimination of
conflict or the appearance of conflict, which is what we are
trying to do.
Second, it is translation of knowledge is encouraged by
Congress. There is a mandate for us to accelerate the
translation of whatever discoveries into real benefit.
Third, I think there is a public interest in having the
ability to recruit an retain the best possible scientists for
Government service. And this is the balancing that I have, you
know, have had to do by prohibiting completely activities or
interactions with industry for those who have authority, that
accomplishes that goal. However, it does not recognize the dual
nature of NIH.
NIH is also a scientific laboratory. And we are recruiting
individuals of the highest competence who we are asking to do
work for the public's interest. So those individuals, you know
I have to compete in the marketplace of ideas and in positions
with 200 other universities. So unlike other Government
employees whose job in the Government is specific to
Government, like myself for example. There is not another NIH
in the private sector that I could be director of. So for me it
is absolutely clear. I am making the choice to serve the
Government. There is no equivalent job.
If I am a scientist with no authority in a pure laboratory
who comes to NIH because we want to work on West Nile virus,
for example, that scientist has knowledge which is really very
precious. To prohibit that scientist from having interaction
will basically go counter to the public interest----
Ms. Schakowsky. I am getting at the confidentiality issue.
Mr. Zerhouni. Okay. Now, in terms of the confidentiality, I
agree with you, and this is what I mean by process change.
In the past what we did is basically there was a self-
declared statement that said well, I am consulting with company
X. What the NEAC is going to do is review the source documents
and pass judgment on the source documents rather than any other
document.
Now, in terms of confidentiality of scientists who have no
authority and so on, sometimes it relates to intellectual
property issues and protection of intellectual property is a
legitimate concern of both the government and the private
industry. So that is the realm where I think you can see the
logic of having confidentiality. But board membership----
Ms. Schakowsky. I guess we have a lot of battles about
that. But if you have someone whose mandate is to advance
scientific discovery and who is also working for a company
where some of that discovery may be defined as proprietary,
then it seems to me that you have a conflict that is not
resolved in the public interest, but rather in the private
interest.
Mr. Zerhouni. Well, in terms of fiduciary responsibilities
if you were a board member or we had an employee relationship
with that company, I would agree with you. We are banning that.
There is no more of these relationships. However, when you talk
about the public's interest, let me give you an example.
Rare disease, no interest from major pharmaceutical
companies. Some small company is trying to do that. Is it in
our best interest to help that company even though the
intellectual property needs to be protected for that company?
It is the same logic that we have in the CRADA relationship
that was an official one, and we disagree that in that context
you should allow somebody to then work for the competitor. We
just had this discussion with Chairman Barton. It is the same
thing in this case. There are legitimate reasons to help
translate technology, and I do not want to ban them.
Ms. Schakowsky. My time is up. But let me just say that it
seems to me whatever we put in place, and I think I would be
inclined to even go further than your recommendations, what
obvious is that oversight--our oversight capacity--has to
really be improved. Because what you are telling us that even
the current rules which we and you have found to be very lax
have not been enforced. And, since we are in such sensitive
areas, my concern would also be that, in the implementation of
any changes you make, the public interest is clearly preserved.
Mr. Zerhouni. Appreciate it.
Mr. Greenwood. The time of the gentlelady has expired.
The gentleman from Oregon, Mr. Walden for 5 minutes.
Mr. Walden. Thank you very much, Mr. Chairman.
Dr. Zerhouni, I want to commend you for your efforts to try
and clean up the mess that you inherited that dates back some 9
years. And I know the work must be difficult trying to balance,
making sure we maintain the best research minds in the world,
working at NIH and not lose them all out to the private sector
and yet deal with these conflicts.
The Los Angeles Times, I think it was back it was back in
December, featured six case studies. I am assuming you are
familiar with that article. How would each of those cases fared
under your proposed restrictions that you have outlined today?
Mr. Zerhouni. Well, clearly if I recall, three of the cases
were two directors of clinical centers. That would be
completely out.
There was a scientific director. That would be completely
out.
There were two others that would be just scientists in the
laboratories. They would be limited to 25 percent at 400 hours
so it would have drastically limited the amount that would have
been done.
Mr. Walden. Right.
Mr. Zerhouni. And we would have reviewed not just their
statement of what the work was, but the specific scientific
content through the NEAC.
So I think that that is pretty much; two of the six would
have been reviewed, three or four of the six would have been
prohibited.
Mr Walden. All right. Prohibited.
I want to get back to this issue of the 400 hours as well.
Because it seemed to me from one of the prior hearings that I
sat through that those hours are outside of the sort of
standard 40 hour work week, correct?
Mr. Zerhouni. That is correct.
Mr. Walden. So when we're talking about somebody can earn--
--
Mr. Zerhouni. Weekend time, vacation time, personal.
Mr. Walden. But it does not eat into the 40 hour work week
or whatever their work week is at NIH?
Mr. Zerhouni. No, it does ont.
Mr. Walden. Okay. Perfect.
And then after reviewing the data produced to the committee
by the various drug companies, the staff discovered some
consulting agreements between Pfizer and a Dr. Pearson Trey
Sunderland to the tone of $517,000 paid to Dr. Sunderland over
a period of 5\1/2\ years in six contracts. NIH apparently did
not provide the committee with any paperwork on these
agreements and the agreements were not itemized on the 520
disclosure forms for Dr. Sunderland.
We have assurances from Pfizer that its reporting of the
agreement is correct as far as Pfizer's internal records are
concerned. When staff questioned the agency about these
agreements, they were not able to provide us with a reasonable
explanation. Have you been made aware of this problem and what,
if any, specific knowledge do you have of the situation?
Mr. Zerhouni. Right. I was made aware of that problem
Friday, I believe, just before--Friday past. And since then my
staff has worked, you know, to look up the records and find out
exactly what the essence of the issue is. But from the
preliminary report that I have I think there is grave concern
here that neither the public disclosure forms, because that
individual is subject to disclosure requirements or the
procedures that should have been in place even by that time
were followed. This is our preliminary evaluation. We will
continue to make sure that what I am saying here is documented.
Mr. Walden. Now if that indeed is the case, would your
recommended changes in the ethics standards----
Mr. Zerhouni. Okay.
Mr. Walden [continuing]. Would they have caught this? Or, I
mean, it sounds like this person if indeed what the preliminary
investigation shows is correct, we have got laws in place.
Mr. Zerhouni. Right.
Mr. Walden. So somebody is still slipping through the net.
How do we do prevent that?
Mr. Zerhouni. Excellent question. That is the relevant
question, I think, Mr. Walden.
No. 1, the fact that we will have a centralized data base
of all the activities is very important.
No. 2, the fact that we want to make public disclosure of
every activity. We will allow any third party player out there
to know who is doing what. So competition between----
Mr. Walden. But what triggers data into the data base? Is
that the filing of the 520?
Mr. Zerhouni. That is right.
Mr. Walden. But if the person does not file a 520, how do
we get at that?
Mr. Zerhouni. Right. Okay. So the random audit system that
we envision is going to be the sort of try to catch back.
Because, obviously, you cannot legislate morality.
Mr. Walden. Right.
Mr. Zerhouni. And that is hard. But through the random
audits we can Google--that is the word now in the English
language--every scientific activity out there and match it
against ours. So any name of any NIH employee would appear in
the Google activity that we would then look and cross-correlate
with our data base. That is our intent.
Mr. Walden. So, okay, with the data base, but again, you
see, you'd be looking for a negative then, because if the
person didn't file a 520, the data wouldn't be in the data
base.
Mr. Zerhouni. Right.
Mr. Walden. But your name would show up.
Mr. Zerhouni. Right.
Mr. Walden. Have you tried that just in this case, for
example?
Mr. Zerhouni. No. It happened Friday. I haven't had the
time to look at that.
Mr. Walden. It would be interesting, because in essence, if
they didn't file a 520, they're not in a data base that doesn't
exist anyway right now.
Mr. Zerhouni. But again, the important component of that
too is through good controls and implementation of disciplinary
rules. I think you will send a message to the community that
there is a new era in ethics, new day.
Mr. Walden. Well, clearly a half a million dollars over
5\1/2\ years is a pretty big problem, so I'm glad that you're
on it.
Thank you, Mr. Chairman.
Mr. Greenwood. The Chair thanks the gentleman and
recognizes the gentleman from California, Mr. Waxman, for 5
minutes.
Mr. Waxman. Thank you very much, Mr. Chairman, Dr.
Zerhouni, Mr. Azar. I'm pleased to see you.
I think it's an important function of the Congress to
oversee how the Government is operating and whether the
President has been a Democrat or a Republican, one of the most
effective ways for Congress to learn about how the Government
is operating is by talking to Government employees who are
actually implementing the policies.
I'm not alone in this view. Throughout the last century,
Congress has repeatedly passed laws protecting its right to
receive truthful information from Federal employees and the
Supreme Court has repeatedly endorsed that right. Yet, in my
decades in the Congress, I don't think I've ever seen an
Administration that has so consistently attempted to deter
Government employees from providing truthful information to
Congress.
We've already heard about the Administration's decision to
send Agency attorneys to these interviews and I gather that
seemed to be some kind of misunderstanding, but I would think
that employees must feel somewhat reluctant to talk when they
are off on their own. That's been the subject of a lot of
discussion today.
I want to ask about a series of other actions by this
Administration whose purpose appears to be to prevent HHS
employees from speaking candidly to Congress and particularly
to Democratic Members of Congress.
I've recently learned of an FDA memo informing employees
that they should refuse to speak to Congressional staff if
called and that if forced, should not speak unless an employee
from the Administration's Legislative Office could sit in and
monitor the conversation.
Mr. Azar, do you acknowledge, would you acknowledge whether
the Administration has adopted a policy barring Government
employees from speaking to Members of Congress or the staff
unless the Administration can hear everything that is said?
Mr. Azar. Congressman Waxman, other than having read
something in the press about that, I'm not terribly familiar
with that particular instance that you've mentioned, but I
would tell you that as far as I understand, if an individual
wishes to speak to Congress in that kind of an interview
oversight setting, we would not, in working with this
committee, for instance, with official counsel, force ourselves
on them. We view it as a service to the employee. If the
employee wishes to speak to Congress without us being present,
I certainly, it would not be my view that we should inject
ourselves.
And so if you would permit, I'd like to look into that
situation at the FDA and get back do you on the----
Mr. Waxman. It's my understanding that whenever an employee
of the Department of Health and Human Services wants to talk to
a Member of Congress or staff, that someone has to be brought
in from the Department.
Mr. Azar. We generally, I know that the legislative
individuals generally try to be available to assist and
coordinate to make sure balls don't get dropped to provide
assistance to the employees, but I can't imagine that if an
employee wished to speak to Congress about matters like that
without Departmental people present, that we would have any
objection to that or want to get in the way of that, Mr.
Waxman.
Mr. Waxman. I appreciate that and I assume the reverse is
also true of a Member of Congress wants to talk any employee.
That employee would feel that he or she would feel that they're
able to talk to us without someone from the Department being
present?
Mr. Azar. If that was their desire, yes.
Mr. Waxman. Earlier this year, it was widely reported that
the Bush Administration ordered the Chief Medicare Actuary not
to respond to requests from Democratic members about the
projected costs of the Medicare Drug Benefit and projected
costs of the bill was absolutely central to the debate about
whether the bill was good or bad policy. And yet, the
Administration insisted and I think is still insisting that
Members of Congress were not entitled to this information. Are
you familiar with that situation?
Mr. Azar. I am, yes.
Mr. Waxman. In addition, I want to point out that from the
beginning of this Administration, I've written to HHS on a
number of occasions seeking information about HHS policies. In
past Administrations, whether Democratic or Republican, letters
have always received a response. They may not have been the
response I was looking for, but we always got a response.
In this Administration, however, it appears that a new
policy of ignoring congressional inquiries has been instituted.
Over 15 of the letters I've sent to HHS since the start of the
Bush Administration have received no response whatsoever,
complete silence. And when my staff has asked for briefings,
many of the requests have never been responded to.
Over 9 months ago, my staff asked for a briefing on the use
of Nonoxynol-9 in condoms. A briefing was scheduled and
canceled, scheduled and canceled and then postponed
indefinitely. No information has been provided. And when
briefings have been provided, long time career Government
employees who have met with our staff have been unwilling to
speak freely with their political bosses listening in. Indeed,
they're hardly willing to say anything of substance. It was
obviously they were seriously intimidated by Administration's
information gatekeepers.
Do you think it's appropriate for the executive branch to
refuse to answer letters from Members of Congress or requests
for briefings?
Mr. Azar. I can tell you that the Secretary has made it a
priority since he's been in office to try to be responsive to
correspondence from Congress. I'd be happy to look into your
articles of correspondence that haven't been responded to.
Obviously, we get--the Department does get a very large volume
of questions and correspondence from Congress and that has to
be handled. But I'll be happy to check into that to see what
the status is of responses to you.
Mr. Waxman. I appreciate that. And the other thing I want
to raise with you is that I've heard that specifically an
employee was told at FDA, or all the employees were told at FDA
that in 2001 by senior officials that career FDA employees were
not to be permitted to speak to congressional staffers and they
specified which ones and if they did, they'd be fired.
Do you think that would be proper? I don't know if you're
familiar with that incident. But do you think that would be
proper?
Mr. Azar. Again, I am not familiar with that and I'd want
to know all of the facts and circumstances around that, but as
I've said, as a general matter, I don't think the Department
tries to get in the way of individuals who would like to speak
with Members of Congress about issues.
Mr. Waxman. I'm going to send you more information about
that incident.
Mr. Azar. Thank you.
Mr. Waxman. In conclusion, I just want to point out that
one of the letters that has remained unanswered was a letter to
you, January 20, 2004, asking for information about ethics
waivers issued to HHS employees related to negotiations for
prospective employment, particularly with regard to Tom Scully.
Is there any reason you haven't answered that letter?
Mr. Azar. My understand is that letter was, as all
congressional correspondence, was referred over to the
Department where that's handled and I had thought that that had
been responded to. I will check on that. I'm sorry if you've
not gotten a complete response. I thought you had gotten your
response on that.
Mr. Greenwood. The time of the gentleman has expired. The
gentleman, Mr. Bilirakis, is recognized for 5 minutes.
Mr. Bilirakis. Thank you, Mr. Chairman. Getting back to the
subject matter of this hearing, Mr. Azar, are you the chief
ethics office for the Department of Health and Human Services?
Mr. Azar. Actually, the way the Government ethics system is
operated, the Secretary directly appoints an official to serve
as the designated agency ethics officer and that individual is
a direct report to the Secretary. And that is a gentleman named
Ed Swindell who testified at the last hearing before this
committee. And he serves as the point of contact, the liaison,
with the Office of Government Ethics and also works with an
overseas, a very decentralized ethics process----
Mr. Bilirakis. You're chief counsel?
Mr. Azar. Exactly, sir.
Mr. Bilirakis. So he works in a----
Mr. Azar. Yes. In his role as Associate General Counsel,
providing the legal advice. He does report to me.
Mr. Bilirakis. He reports to you.
Mr. Azar. He does report tome.
Mr. Bilirakis. Let me ask the question. Prior to this
business having been really brought out in the open by the
newspapers, by this committee, etcetera, was your office aware
of it and if you were aware of it, did you try--I guess what
I'm getting at is is your function or at least the function of
the ethics portion of your office, just to put out fires when
fires arise or is the function to sort of try to keep fires
from taking place? I think you understand what I mean.
Mr. Azar. Yes, I do understand that. It certainly would be
our goal to not just be putting out fires, but to be proactive,
if we could. In this instance, no, I had not been aware of
these issues before the important work of this committee. We've
tried to be very responsive in working with Dr. Zerhouni and
NIH and the rest of the Department in dealing with----
Mr. Bilirakis. Yes, but if we have an Ethics Department
there, or office or whatever you would have called it, I mean
what else do they do other than take a look at whether there
might be breaches of ethics taking place within the Department?
Mr. Azar. A large amount of the work is reviewing the
financial disclosure forms that come in and certifying those,
as well as providing the day to day ethics advice. But your
concern, I think, is very valid, sir. And as a result, we are
implementing a program that will more than double the size of
the ethics office and will for the first time in--as far as I
understand it, within the executive branch, will for the first
time have an oversight function internal to the Department so
that the designated agency ethics officer will have the
capacity to conduct his own audits and oversight of the
performance of the ethics officials throughout the Department.
As I understand it, this would be unique. Currently, there
are periodic edits, periodic audits that happen from the Office
of Government Ethics, which is an independent Executive agency.
So I think your point is well taken and we are working to try
to make that more of our capacity, sir.
Mr. Bilirakis. Well, let me ask you. You've been a public
servant for quite a few years. You didn't indicate here how
many, but still quite a few.
How much of this takes place, if you know, Dr. Zerhouni,
Mr. Azar, let's say in the Veterans Administration? They do a
lot of research, do a lot of--many of their people do the same
sort of thing where they receive stock options and monies, what
not, from some of the people that they work with. We have
universities out there, some public, some private that do a lot
of research. How much of this takes place? If you could sort of
short answer as you can.
Mr. Zerhouni. Right. At NIH, as we've said over the years
it involved about 3 to 4 percent, 5 percent of the employees. I
really can't comment on how much of it takes place in another
Federal agency. Really, I don't know. One thing I can say that
as a Federal agency director, the one thing that hurts you is
what you don't know. So I think we need to put in place
mechanisms as Mr. Azar is suggesting of proactive management.
Mr. Bilirakis. That's the whole point. We haven't. So are--
if it is taking place to any degree to speak of in the VA and
some of these other, maybe these other Departments and in some
of the universities and what not, are they at least aware of
what's taking place here, the hearings and hopefully--do you
know, Mr. Azar?
Mr. Azar. Certainly since Friday, I believe, that when this
committee has asked for information from other Departments, I
think that they're certainly aware of it and from press
coverage, but like Dr. Zerhouni, I'm not familiar with whether
the same types of opportunities for outside consulting
activities and awards present themselves to people outside of
the NIH at other agencies. I don't know. NIH tends to be rather
a unique entity as the crown jewel of biomedical research and
being run really like a research university. I don't know that
there are any other comparable entities in the Government that
would be so attractive and also where there's been a fairly
long-standing congressional and administration policy of
encouraging interaction with the private sector to
commercialize interventions.
Mr. Bilirakis. Let me ask this just very quickly.
Stability, continuity, all very important. I've always kind of
felt that many of the problems we have up here is that there is
a lack of that because everything seems to be tied into
politics and there are changes in Administrations, changes in
the Congress and leadership of the Congress, etcetera,
etcetera.
Dr. Zerhouni, you've given us approximately 10 steps which
sound terrific. God forbid there's a change in Administrations
as a result of November and there would be people here who
would disagree with that, God forbid, but in any case, the fact
is that that sort of thing does take place, even if we're
talking about the end of the 8-year term, 8-year period of
time.
Then what happens? With all your good will and your good
intentions and everything of that nature, do they conceivably
go down the drain because they're no longer the cause of the
new person----
Mr. Zerhouni. That's why I work very hard to find proposals
that would be embedded, structural, that will be embedded in
supplemental regulations, if we need to. And we're working
very----
Mr. Bilirakis. How about embedded in the law?
Mr. Zerhouni. And in addition to that, I think there is a
potential for, depending on what we find, for your help to be
very significant here, and for the questions that you've asked.
I mean is there enough authority? Do we have enough process, do
we have enough controls?
Mr. Bilirakis. Yes.
Mr. Zerhouni. I think that's what we need to do and we're
committed to----
Mr. Bilirakis. We've committed to you and we're trying to
do something with NIH, but we need to also get commitments from
you that you're going to help us do it correctly to help you do
your job better.
Mr. Zerhouni. Yes.
Mr. Bilirakis. Thank you, Mr. Chairman.
Mr. Greenwood. The Chair thanks the gentleman. The
gentleman from Florida, Mr. Stearns, is recognized for 5
minutes.
Mr. Stearns. Good morning, and thank you, Mr. Chairman.
Dr. Zerhouni, I have some slides here in front of me and I
think they're from the second hearing in which they talk about
money received by various scientists at NIH. For example, I
have one here on H. Brian Brewer. He's Chief of Molecular
Disease Branch. Does this ring a bell at all? If not, I can
just have my staff----
Mr. Zerhouni. Not really.
Mr. Stearns. Not really. Can I have someone from our staff
take this down to him and he and I can just go through it?
The purpose of you and I just going over this is to
reiterate again, I think, the whole question does the NIH have
any actual evidence that the NIH scientists have left because
of consulting fees being cut. Before I did that, I just wanted
to take you to slide 8 which is Brian Brewer. And this was
composed, comprised by taking information that we could from
pharmaceutical companies and I guess--and other agencies.
But as you can see, Mr. Brewer, I assume he's a doctor,
received almost $200,000 plus stock between his travel and his
fees at Pfizer, Lipid Sciences and all, Eli Lilly and all these
companies. You can see that.
Now if you don't mind, I'd like you to go over to one which
is a little bit more prodigious in that slide 1, Michael
Brownstein. He's Chief of the Lab of Genetics. This shows that
he has stock valued at almost $2 million, that he obtained,
plus over $27,000 in fees. And when you go through this, take
slide 2, now. We have Ronald Germain. Dr. Germain received
$430,000 in reimbursable expenses or consulting fees, plus
stock options.
Now it seems to me that you have Government employees that
are working at NIH. They have a pretty significant title, yet
they're going out into industry and they're getting not only
reimbursed for consulting fees, they're getting reimbursed for
travel fees and then they get all these stock options.
Now I mean you can just flip through these different
slides. Don't you think this is pretty egregious and totally
unnecessary? Obviously, your statement is we're going to reform
it, but when you look at that, isn't that rather appalling to
see all of that?
Mr. Zerhouni. Yes, and I think we need to really look at
what you're referring to and for example, there's no doubt that
in the case of slide 8, for example, Brian Brewer, with the new
rules that we're implementing, there will be no service on
advisory boards. None of that will be----
Mr. Stearns. I think that's what you can help us through.
When you look at these slides, tell us under your proposal how
this would be prevented?
Mr. Zerhouni. Right, that's exactly what I'm trying to do
here.
I think there would be a major difference. For example, the
consulting would not reach that sum in any 1 year, that a
person can only do 25 percent, if that person is eligible to do
that. Under certain ranks, they wouldn't be.
Mr. Stearns. Mr. Brewer, as Chief of Molecular Disease
Branch be able to do it under your proposal?
Mr. Zerhouni. Yes, he would. He's not someone who does----
Mr. Stearns. He'd still be able to get almost $200,000 plus
stock?
Mr. Zerhouni. No, he will not be able to do that. For
example, Lipid Sciences, Astr Zeneca will be out of the new
system. He cannot do that.
Mr. Stearns. Okay.
Mr. Zerhouni. With the new system. He cannot receive any
stock in the new system. And then, when you look at his
compensation, that compensation will probably be cut in half if
the work that he's doing is justified and reviewed
independently as seen as being independent of what he does
otherwise.
Mr. Stearns. What about in the idea of stock? What are you
proposing?
Mr. Zerhouni. Total ban.
Mr. Stearns. Total ban on stock.
Mr. Zerhouni. Total ban, for everybody.
Mr. Stearns. Okay.
Mr. Zerhouni. And limit on any--I mean, we're totally
banning any compensation in stock or stock options. That's No.
1. And No. 2, we are scrubbing every employee from owning any
individual pharmaceutical buying that stock that has anything
to do with science or potential for consulting and limiting
every other employee to $5,000. Remember, when we put a
prohibition it applies to members of the family too.
So all employees who do not do science, we want to limit
that to $5,000 for one stock. But employees who do science, no
stock.
Mr. Stearns. Do you think your proposal should have been
done some time ago to prevent this?
Mr. Zerhouni. For the benefit of hindsight, yes.
Mr. Stearns. Thank you, Mr. Chairman.
Mr. Greenwood. The Chair thanks the gentleman and notifies
the members and their witnesses we are going to do another
round of questioning here.
The Chair recognizes himself.
Dr. Zerhouni, I note that NIH was notified in February 2004
about information indicating that Dr. Moshell, the Skin Disease
Branch Chief, was testifying as a compensated expert witness in
Accutane cases. It's my understanding that he scheduled to be
deposed in a case no later than July 15, 2004. NIH acknowledges
Dr. Moshell did not notify NIH about these activities and that
he should have notified NIH about them. The only action taken
has been to counsel Dr. Moshell, as I understand it.
Is counseling considered a disciplinary action and is that
a sufficient management response in this case?
Mr. Zerhouni. Yes, in the strategy of managing issues like
that, counseling is part of disciplinary, proactive
disciplinary counseling, if you will. Because I think in this
particular case, what I understand is that the gentleman was
allowed to do clinical practice years ago. And in the meantime
then, as you know, many clinical practitioners will also
testify on cases and decide to be an expert witness, not
realizing perhaps or not knowing perhaps that we have a
prohibition against being an expert witness for anything where
the Government may have either an interest or an involvement.
He was then counseled by our ethics people, I understand.
Mr. Greenwood. Is it your intention to allow Dr. Moshell to
testify without prior approval in the future?
Mr. Zerhouni. No.
Mr. Greenwood. So he'll have to for each and every
opportunity, request that he has to testify.
Mr. Zerhouni. Expert witness is an activity that requires
disclosure and approval.
Mr. Greenwood. Okay. Let me on the same subject, let me go
to you, Mr. Azar.
It's been noticed that Dr. Alan Moshell, who we've just
discussed, the Skin Disease Branch Chief and Program Director,
has been--you heard me talk about the fact that he's been an
expert witness and it has been alleged that Dr. Moshell has
testified that specifically that FDA approved labeling for
Accutane is legally inadequate.
Are you concerned that Dr. Moshil's involvement conflicts
with the public legal position of FDA?
Mr. Azar. Again, I just learned about this recently and I
don't know all of the facts, but if they are as you've
described them, I am very concerned about that and he first
off, he should have sought approval of an outside activity, but
also to serve as an expert witness in a proceeding in which the
Federal Government is a party or in which it has a direct and
substantial interest which I would think the legality of the
FDA's approved label would be such a case the DAEO, the
designated agency ethics officer for the entire department has
to authorize that and would consult with both FDA and with NIH
as to what the Government's interest. But as described, I'm
very concerned about the situation.
Mr. Greenwood. And help me understand the ethical issues
involved here because I'm not personally clear on this because
on the one hand there are, as I understand it, rules and
policies that would prohibit that kind of testimony. Someone
looking at it from the outside would say that sounds like
you're muzzling a Federal employee who might have some
important information that would expose something going wrong
in the Government.
So walk me through the ethical implications of this.
Mr. Azar. I think the basis for the rule and the reason for
concern is the concern of undivided loyalty to your employer,
the Federal Government here, that the Government, United
States, not FDA, but the United States has a position as to the
legality of its label and to have its own agents testifying to
the contrary, I think is very destructive to that position.
And also, there's always the risk that the individual's
title, their position within the Government is used against the
Government, the fact that they are a senior individual at NIH
is used to essentially lend extra credence to their testimony.
Mr. Greenwood. Which makes them more valuable to a
Plaintiff's attorney who would be inclined to pay them
handsomely for that testimony.
Mr. Azar. Exactly.
Mr. Greenwood. So obviously, in circumstances where that
FDA employee might be subpoenaed by the Plaintiff's attorney,
that--he's permitted, he or she would be permitted to testify
under those circumstances, but just not as a voluntary paid
expert witness. Is that right?
Mr. Azar. And actually, in private litigation, if an
official of the Department is subpoenaed in private litigation,
the Department actually is under--they're called the 2-E
regulations. The Department decides whether it's in the
interest of the Government to offer the individual to testify,
even if it's a subpoena in a third party private piece of
litigation. So it should always be subject to what's in the
Government's best interest.
Mr. Greenwood. Dr. Zerhouni, have you been briefed about
the situation involving Pearson Trey Sunderland and Karen
Putnam I mentioned in my opening statement?
Mr. Zerhouni. Yes, last Friday I was made aware of that
situation.
Mr. Greenwood. And I note that Mr. Walden already inquired
about that. My time has expired. The gentlelady from Colorado.
Ms. DeGette. Thank you, Mr. Chairman. At the conclusion of
my questioning, Mr. Azar, I believe you had said that there is
now an agreement as to the rule of HHS counsel when they come
to oversight and investigation hearings. Was that what you had
said?
Mr. Azar. Yes ma'am. That's my understanding, that there
had been a letter from the Assistant Secretary from Legislation
to the chairman of the committee.
Ms. DeGette. Right, that's in Tab 1 of your notebook from
Jennifer Young.
Now I read that letter. Is Ms. Young an attorney?
Mr. Azar. I don't believe so.
Ms. DeGette. Well, first of all, would it surprise you to
know that--and staff can correct me. It's my understanding we
got this letter, but that certainly Democratic staff has not
agreed to this procedure outlined in this letter. Did you know
that?
Mr. Azar. I did not know that.
Ms. DeGette. And I'm told that Republican staff has not
agreed to that procedure either. He confirms that.
Mr. Azar. I'm sorry, then I had a misunderstanding. I had a
misimpression of that. I thought there was.
Ms. DeGette. Right, and this is sometimes the problem--this
is why we're a little worried about the execution of the whole
ethics procedure in general, because communication is a
problem.
And one question I have, again, as someone who used to
practice, you know, when the attorney--when an employee, an HHS
employee is asked to come in and meet with the committee, and
they say that they want a lawyer to accompany them, whose
interest does the lawyer represent?
Mr. Azar. Whenever--outside of the original Inclone
proceeding, whenever our lawyers have met with the individual
witnesses to assist them, they should have always and I believe
they have, they should have always made clear to the
individual, we are official counsel. We are representing the
Department. We are not your personal attorney.
Ms. DeGette. And if you desire personal counsel, then it is
your responsibility to go out and retain that counsel. Did they
advise them of that?
Mr. Azar. I do not know for a fact whether that has been
said, but that is the case, yes.
Ms. DeGette. Well, as someone who has represented a lot of
witnesses, I know people, especially people who are concerned,
get very confused about a lawyer shows up and it's a
congressional investigation and it's under oath. People get
very confused about who's representing them. So I might suggest
to you as part of the overall departmental reforms that you
develop some written guidelines to be given to potential
witnesses, explaining the duties and roles of the HHS attorneys
and also explaining that the person is entitled to outside
counsel of their own.
My concern is if you have a witness who has information
that they want to share with the committee, Republican or
Democratic staff, that maybe not in the best interest of HHS or
whatever, then there's a huge conflict and it's for that
lawyer. You're nodding. I'm sure you agree.
Mr. Azar. I think that's a very helpful suggestion. I can
tell you when I was in practice, that if I were ever
representing a corporation and speaking with an individual
witness, I always did make clear I represent the company. I'm
not your lawyer. You can hire a private lawyer. I just can't
say for a fact that that----
Ms. DeGette. I did that too and I always tried to do it in
writing to the witness.
Mr. Azar. I think that's a good point.
Ms. DeGette. My other request of you would be if you would
please sit down personally with Republican and Democratic staff
of this committee and iron out some written procedures so that
we can know when witnesses come in accompanied by an attorney
who they're representing.
Mr. Azar. I would be very happy to do that.
Ms. DeGette. Thank you very much. I have just one more
question for you, Dr. Zerhouni, now that we're trying to think
of how to iron out these bugs.
I was thinking about Dr. Katz who came in and testified.
You might be familiar with his case. He was the fellow. He was
doing some consulting with a company and the company had a
subsidiary that had business pending, a grand application
pending in front of the NIH and he did not know that this--that
there was any connection when he later found out, I believe,
after he was subpoenaed by this committee or came in to talk to
this committee, he immediately severed the relationship.
So my question is in all of the ethics oversight that
you're trying to do with the centralized electronics, how are
we going to be able to--because as you know, corporate America
and the pharmaceutical industry, in particular, and biotech,
are very--the corporate relationships are very complex. How are
we going to be able to catch those kinds of very real complex?
Mr. Zerhouni. Well, first of all, we just prevent them. So
in the rules that I'm proposing, Dr. Katz being a Director of
an Institute will be completely prohibited, period.
Ms. DeGette. But let's say it's someone who would be
eligible and who honestly himself or herself may not have known
about that. Because Dr. Katz did not.
Mr. Azar. Again, I'm prohibiting every employee that has
any authority in grant funding, contract making, from any
activity of that sort.
Again, this would not happen under the new rules. There's
no way for an individual in the line of command and their
subordinates to be able to influence----
Ms. DeGette. And I guess your testimony is then since
you're prohibiting those individuals, it wouldn't matter for
someone else not in that category if there was----
Mr. Zerhouni. Right. Again, it's the dual nature of NIH.
It's a Federal agency role and it's sort of a scientific
university type activity which has no real power over
allocating grants. But we'll go further than that. We are
saying that our scientists will not consult with potential
grantee institutions so that anybody who would then come and
say I want a grant will not be able, as a university, for
example.
So we're trying to build as much fire walls as we can.
Ms. DeGette. I understand.
Mr. Azar. Congresswoman, I think, and please correct me if
I'm wrong, Dr. Zerhouni, I think in the instance if the
individual has the grant making function under them, even if
they weren't involved, if there's any connection to the grant
making process, they would also be precluded.
Ms. DeGette. And my time has expired. I'm focusing not on
the individual. I'm focusing on the corporate relationship of
the--in particular, the private company that they're trying to
get a grant. But I understand what you're saying, Dr. Zerhouni.
Mr. Greenwood. The gentleman from Florida, Mr. Bilirakis.
Mr. Bilirakis. Thank you, Mr. Chairman. I said in one of
the prior two hearings, maybe in both, I don't remember, that
we've always got to be careful that we do no harm. And whereas
these things that have taken place in the past and we should be
thinking more in terms of today and the future and trying to
keep some of those bad things or at least perceptively bad
things, put it that way, straighten that out, clear it up. I
think it's important that we look to the future.
NIH is so highly thought of in the world. Let's face it.
It's world class. In fact, you and I were in Italy not a few
months ago where they're setting up their own form of the NIH.
So we don't want to do anything to hurt their effort. And maybe
we are doing something to hurt their effort and I hope not.
But let me just put that question to you, Dr. Zerhouni. Are
we doing something here that might be hurting NIH's effort in
terms of their image, their reputation, in terms of
recruitment, in terms of the research in general? Maybe you
could take a full period of time to respond to that.
Mr. Zerhouni. That's the most difficult question I have to
face because again, I have to do a balancing of the analysis
and it is the appropriate question to ask because many times I
get asked what is the evidence that you have that by having
stronger rules we may not be able to recruit or retain.
My position is what is the evidence that we have that we
will do no harm? Because I think at the end of the day we need
to protect that. And I'm trying to find the balance between the
two. A total ban, as I've said, would be detrimental to the
scientific staff who is really unrelated----
Mr. Bilirakis. Detrimental? Disastrous may be even a
stronger adjective?
Mr. Zerhouni. I can't say that because again I don't have
data either way, but I can say for sure that we will have
people who will leave the agency and I think it will be a
factor in recruiting that wasn't as much of a factor to attract
someone from the outside who may have had activities. That
person may have to sever them all.
And I think it relates to what the chairman said. I think
we need to balance compensation and the possibility of
compensation. The field of opportunities for our scientists
should not be so restricted so that it will make it much easier
to just walk across the street and go to a university. We have
200 competitors out there. So I'm concerned about it. But I
think these rules strike a right balance and I wouldn't
definitely say that they would be harmful. They have the
potential to, in some areas, to prevent us from recruiting and
retaining the best, but I don't believe that at this point, I
can't say for sure what the impact would be.
Mr. Bilirakis. I'm raising the question, but I know that
the chairman, both chairmen, Mr. Greenwood and Mr. Barton, are
as concerned as I am, as I think all of us are in this regard.
What is the morale picture at NIH?
Mr. Zerhouni. I would say the morale has been lowered.
Mr. Bilirakis. Lower as the result of some of the things
that we're doing?
Mr. Zerhouni. In part. Yes. I think there are other
factors, obviously. I mean there are budgetary constraints.
There are changes that we're bringing to the administration of
NIH. Obviously, all of those things play a role, but I think
this has damaged the morale, especially of the over 95 percent
of the scientists who have really given their lives to NIH.
Mr. Bilirakis. Yes.
Mr. Zerhouni. It pains them to see NIH painted in such a
negative light, when in fact, they've done all their best to
serve NIH and the country without any of this kind of slide
material that were shown here. That affects morale because
really the core value of NIH is to really serve the public and
do it right and all of the people I know there are really
pained by this and would like to get clarification and let's
move on.
I think my point is performing autopsies on what was is
important, we need to do that. But more importantly here is to
make sure the patient is cured and moves forward.
Mr. Bilirakis. Thank you, Doctor, and I know the chairman
well enough to know that he is just as concerned about those
things as I am and again, with your help,k we are going to
clear this up in the interest of continuing the best research
in the world.
Thank you and thank you, Mr. Chairman.
Mr. Greenwood. The Chair thanks the gentleman. Mr. Stearns
for 5 minutes.
Mr. Stearns. Thank you, Mr. Chairman. Just following up
what my colleague from Florida was talking about. NIH is the
premiere medical research organization in the world and it will
be after it's over and I think it will be better because of
this and I think bringing some transparency here and also
bringing to light some of the problems will make it even
better. So I applaud you for what you're doing this morning in
this your proposal. I guess in looking at the activities
reviewed by NEAC, they looked at 317 and recommended approval
of 234 of these arrangements.
My question is how many arrangements were there last year
for the whole year? In other words, prior to the Act, prior to
NEAC, the NIH Ethics Commission, how many total arrangements
were there?
Can you put your speaker on? I can't hear you.
Mr. Zerhouni. I'm just going to estimate.
Mr. Stearns. Oh sure, I'd just like, as much as possible,
just a complete accuracy of how many arrangements there were.
Mr. Zerhouni. Yes, I'm trying to--all right, I'm going to
give you the numbers I have.
Mr. Stearns. Okay, thank you.
Mr. Zerhouni. Basically, we had about 365 agreements
probably involving about the same number or more, less
employees. That's because over 5 years, we've had about 1500.
So it's about 300, 350 a year.
Mr. Stearns. So about 300 a year, approximately.
Mr. Zerhouni. A little more.
Mr. Stearns. How over how many years did we have this
arrangement?
Mr. Zerhouni. Since 1995.
Mr. Stearns. Okay, so we're talking about 5, 9, almost 10
years. So we're looking at perhaps maybe 3,000 arrangements,
separate arrangements or are we talking about 5,000 or 10,000?
Mr. Zerhouni. About 3,000.
Mr. Stearns. About 3,000.
Mr. Zerhouni. Of those we know, but now we're finding there
are some we don't know about.
Mr. Stearns. And would you, could you make an estimate on
the ones you don't know about, how big that is? Is it 10
percent or 20 percent?
Mr. Zerhouni. No, really, I can't. I mean this is the
information that the chairman was referring to. I don't have
that information. I don't know that, but it's a small amount,
obviously, relative to the total.
Mr. Stearns. Okay, well, let's just use your figures and
say there were 3,000 arrangements since 1995.
Mr. Zerhouni. Right.
Mr. Stearns. Now I don't think all of them fit this
presentation, what is in the slides here, where people are
making almost $2 million in stock or they're making large sums
and reimbursement. Slide 5, Gary Nable made $314,000 in
expenses and travel and things like that.
I guess my question is, Mr. Azar, do you have an Inspector
General on your staff?
Mr. Azar. No sir, the Inspector General is independent and
reports directly to the Secretary.
Mr. Stearns. Do you have anybody on staff that could be an
investigator?
Mr. Azar. We really don't have any kind of investigative
capacity. With this enhanced ethics function, we'll have some
auditors and the ability to do that.
Mr. Stearns. That's my question. Once this is in place, do
you have any way to investigate what's happening?
Mr. Azar. The way the ethics program would work is we will
have this enhanced ethics division function for oversight and
auditing.
Mr. Stearns. Okay.
Mr. Azar. Each deputy ethics counselor in this
decentralized ethics program should also--is also responsible
for oversight of the functions and the conduct of the program
within their operations.
Mr. Stearns. So the NIH will have a set of investigators
too?
Mr. Azar. Well, the NIHAC, the NIH Advisory Committee, as
well as the NIH Office----
Mr. Stearns. So the Commission will have its members and
they'll have a step group, a subgroup that they can go through
for investigation Because we can put in place all these things
and the Commission can recommend, but the question will be what
happens in the future if there's no one checking it?
Mr. Zerhouni. This is a very good question and Item 10 of
the grid that I testified to, we actually mentioned the fact
that we're going to initiate random audits as part and parcel
of the process of control of the ethics program.
Mr. Azar. But I think also, the Inspector General's office
could also be used also to come in and do audits and
evaluations of the program, once we get these changes in place.
Mr. Zerhouni. My experience with that, Mr. Stearns, is that
our audits are a very good way of identifying vulnerabilities
and then referring them, obviously, to the Department and then
to the Inspector General.
Mr. Stearns. Yes.
Mr. Zerhouni. That's a mechanism we need to have.
Mr. Stearns. Mr. Chairman, we've been through these
oversights on the corporate problems and we found that we need
accountability was the biggest problem. And we talked about the
CEOs of the corporation ultimately signing their accounting
reports and somehow, Dr. Zerhouni, I would expect you to also
interface and not just leave it to these folks, but you should
have some fiduciary responsibility to put your name on some
report that this has all been corroborated and submit
accounting because you ultimately have responsibility.
Mr. Zerhouni. I agree with you and that's why in the
management process changes list that I propose, we said that we
will add the ethics function to supervisors' performance plans
across the NIH, add the DEC's function to the DEC's performance
plan and by extension, it goes to my performance plan.
Mr. Stearns. Okay.
Mr. Zerhouni. Formally and officially as part of the human
resource management system that we currently have, which does
not include ethics oversight as a line responsibility of the
people in authority.
Mr. Stearns. And Mr. Chairman, if I can just have a little
bit of the indulgence. Another question is the people that are
appointed to the NIH Ethics Commission, the screening and these
individuals I guess, you know, the non-Government appointees to
this Advisory Committee, what type of individuals would be the
non-Government appointees to the Advisory Committee?
Mr. Zerhouni. In statute, every institute in the NIH has an
advisory council composed of public members, 12 scientists and
6 non-scientists. That's the general pool. Those are named by
the Secretary of Health and Human Services through nominations
received by the Secretary that we also can propose and that is
basically the source of the appointments on these committees.
There's a rotation pattern, every 4 years, there's a change
over. And these members are essentially members of the public.
Mr. Stearns. Who would make the appointments to the
independent advisory committee? Who are going to make these
appointments?
Mr. Zerhouni. These appointments are already made. This is
a board in statute, already existing, that is already in place
to oversee NIH from the public standpoint.
Mr. Stearns. Okay, thank you, Mr. Chairman.
Mr. Greenwood. The Chair thanks the gentleman and
recognizes himself for 5 minutes.
Dr. Zerhouni, if you turn to Tab 22 in the binder, you'll
find some statistics on activities reviewed by the NIH Ethics
Advisory Committee. And it states that of 317 activities and
awards received, reviewed by NEAC, NEAC recommended approval of
234.
The question is how does this rate of approval compare to
the rate of activity, approval prior to implementation of the
new procedures?
Mr. Zerhouni. well, if you look at the totality, 300, 350
this is about, on the activities, probably about two thirds
maybe.
Mr. Greenwood. A little more than that. And your question
is--what I'm trying to get at is do you know anything about the
current NEAC, your creation is approving a little more than 2
out of 3.
Mr. Zerhouni. Right.
Mr. Greenwood. Do you know how that compares to previous
rates of approval of----
Mr. Zerhouni. I think it's definitely lower because what
I'm getting as reports from the members of NEAC is that every
time they're looking at a case to say wait a minute, these are
activities that were there before under current rules, so
remember the 317 are not new ones. They're the ones that were
there. Of those 317, some have been terminated. You see what
I'm saying?
Mr. Greenwood. Right.
Mr. Zerhouni. In other words, the pool was the same pool
that was before NEAC, being reviewed by NEAC. And of those,
we've cutoff from 317 to 235.
Mr. Greenwood. And apparently I'm advised that prior to
that, if you're now turning down a quarter or a third, it used
to be that only that 1 percent were rejected. So it's an
indication to me that the NEAC is for real and is making some
tough decisions.
Mr. Zerhouni. That's my understanding, Mr. Chairman.
Mr. Greenwood. I do note though that in the NEAC, the NEAC
sent to the committee two instances where NEAC recommended
disapproval of two outside activities, but the NIH designated
ethics counselor approved them anyway.
Do you know how that happens?
Mr. Zerhouni. Not specifically on the cases that you're
referring to. I'm not sure what they are, but I will follow up
with you, sir.
Mr. Greenwood. We'll do that. According to the data
provided by NIH to the committee, the average--this is not
referring to that tab any more, Dr. Zerhouni----
Mr. Zerhouni. Right.
Mr. Greenwood. The average turnover rate among scientific
staff for the 1994 to 2003 period, about 10 years, that is in
Tab 26 if you want to look at that.
The average turnover rate among scientific staff for those
10 years was 9.24 percent, but the average turnover rate among
Title 42 employees for 2000 to 2003 was only 2.4 percent. One
could draw the inference from the turnover rate that the higher
salaries of Title 42 has lowered turnover rates. Would you
agree that's what we're seeing there?
Mr. Zerhouni. That is correct.
Mr. Greenwood. If that's correct, then why is it important
to still permit consulting when the higher salaries are
already, seem to be addressing and resolving the turnover
issue?
Mr. Zerhouni. Caps, No. 1. There have been caps since 1999,
a figure that doesn't really look at cost of living and as
years go by, you will see again a decreased competitive for NIH
to recruit these individuals.
Mr. Greenwood. Suppose we lifted that cap and gave you the
authority to exceed that cap where necessary. Would you still
feel that the paid outside consulting arrangements, agreements
were necessary?
Mr. Zerhouni. I would definitely look at that with favor,
if I could establish a market based compensation system where
really I'm not at a disadvantage. Right now, I'm in a real
disadvantage in recruiting top scientific staff at NIH. I can
tell you two anecdotes, that it is not that easy. When I was
Vice Dean of Research and Executive Dean of a private medical
school, I had more means and more flexibility in recruiting
scientists or chairs of department with much lower
responsibility levels than those that I'm recruiting right now
at NIH. So it is, actually, a structural problem and I think
there is a balance between compensation and opportunity for
compensation.
Mr. Greenwood. And it's a tradeoff for the taxpayer as well
because on the one hand the taxpayer will be adding extra
compensation which would diminish your budget, which would take
money from your budget as opposed to the private sector paying
for that activity.
Mr. Zerhouni. That is correct.
Mr. Greenwood. Paying for the ability, the enhanced ability
to retain that----
Mr. Zerhouni. That is correct. And you want to sort of
strike a balance. We don't want to end up in the situation
where we pay people high rates and their activity on Government
time is to basically advise industry for free, because then
you're creating a subsidy really.
Mr. Greenwood. Final question for me and I promise this,
sometimes when we talk about what the difference is between the
20 percent of the NIH funds that stay intramurally and the 80
percent that go out to the universities, etcetera, we talk
about the reason because theoretically, you could have a
construct where it all went out in grants. NIH could just be a
grant making entity and not do much research. And part of it is
that the NIH does intramural research that no one else is
supporting.
So it sort of raises the question in my mind, if that's the
case, what's the competition? In other words, if you're hiring
people to do research that no one else is supporting, is there
really that much competition or is it a question that if they
weren't doing that they would be doing something else that
someone is supporting?
Mr. Zerhouni. That's a good question, but it's not, the
operating definition is not what no one else will do. I mean
we're not doing just that. About a third of what we do is
really public health, relevant, things that--safety of the
blood supply, vaccine development, things that really cannot be
done really by the private sector we need to do and we need to
accumulate the science of that. Like HIV/AIDS is a good example
where a lot of the fundamental discoveries had to be made at
high speed within an institution where I can control the
program. You can't control the program of 200 universities. So
that's important.
Second, you also want as a Government, scientists who would
work in the same areas that other universities work in, because
you want to have your own experts that are not tied to having
the need for grants, telling you what the real scientific truth
is. So in truth, we maintain a cadre of scientists who are
independently funded at the intramural program to make sure
that we have an understanding of the science that people are
asking us to fund. So that's the other part of it. And that's
the part that I think you need to make sure you don't destroy.
Mr. Greenwood. The gentlelady from Colorado, do you wish to
further inquire?
Ms. DeGette. I just have, Mr. Chairman, I just have a
question and a comment.
My question is to Dr. Zerhouni, have you thought about what
you would do about post-NIH employment, transfer of knowledge
and issues like that?
Mr. Zerhouni. You mean cooling off periods?
Ms. DeGette. Yes.
Mr. Zerhouni. Yes, we have and obviously, I couldn't go
into all the details here, but we are looking certainly at
these issues of cooling off.
Ms. DeGette. Because it would seem to me that would be an
important component of any enhanced ethics program that you
would adopt, would you agree?
Mr. Zerhouni. Right, I agree. And this is definitely part
of--I thought it was a detail, but it is part of our
consideration.
Ms. DeGette. It's a detail we care about.
Mr. Zerhouni. I know.
Ms. DeGette. That actually leads beautifully into my
comment which is that I have lots more questions here about how
is the stock option issue going to work and what are we going
to do about this and that. I mean it seems to me going back to
my opening statement the details. I know you're trying to work
those out. I would hope that you and your staff would continue
working with this committee and our staff as you develop those
details and Mr. Chairman, I would hope you would leave the
option open for yet an additional hearing once those details
are worked out. Because I think we all agree you're really on
the right road here. We just need to see how it's all going to
be executed and make sure that the same kinds of excesses that
we saw in the past aren't happening now. And I thank you again
for your attendance.
Mr. Zerhouni. I really agree with you.
Mr. Greenwood. Dr. Zerhouni, I lied about no more
questions. Just one last one.
You've referenced going to supplemental rulemaking. Do you
have a timeframe on when you expect to be able to do that and
then based on how long that takes, when these new rules would
take effect?
Mr. Zerhouni. We're working on, I'll let Mr. Azar comment
on that. We're working very diligently to sort of create all of
the rules that we need. Some may not need rules. There may be
some areas where can act right away. At this time, we're really
doing it within the quickest amount of time possible.
Now beyond that, there are elements that are beyond my
control or even Mr. Azar's control. Perhaps Mr. Azar can
comment.
Mr. Azar. It's my understanding that in the past with
supplemental ethics regulations at the Department that they
have, once they have been concurred in by the Office of
Government Ethics, that they can go direct to final, rather
than notice and comment rulemaking.
That would be my goal and I would advocate for that.
Whether the Office of Management and Budget, others who
obviously play a role in the decisionmaking on regulations will
permit that in this case because of impacts on private parties,
I don't know, but that's been a past practice and the way I
would hope to go so that we could go quickly once we could
secure OGE and any other affected agencies. It would obviously
go through interdepartmental clearance, the Justice Department,
others might have views given the relations. But my office will
certainly work fully with Dr. Zerhouni's office to provide any
assistance getting the regulations drafted and working to
advocate and get them through as soon as possible and also
working with the committee as we work on the details there.
Mr. Greenwood. Thank you, both. Again, I compliment you on
your stellar work. It meets my approval across the board. There
are a couple of details to work out, but I'm very pleased and I
want you to know that and I want everyone at the NIH to know
that as well.
Thank you, again and you are excused.
Mr. Azar. Thank you.
Mr. Zerhouni. Thank you, Mr. Chairman.
Mr. Greenwood. And we will now call forward the second
panel. Mr. Peter Levine, President and Chief Executive Office
of Correlogic Systems, Inc. an Dr. Jonathan Heller, Vice
President, Information and Project Planning, Predicant
Biosciences.
Gentlemen, we welcome you. Thank you for being here. You
may have heard me say to the previous panel that it is the
custom of this committee to take testimony under oath and I
need to ask if either of you object to giving your testimony
under oath?
Okay, seeing no objection, I also need to inform you that
pursuant to the rules of this committee and of the House, you
are entitled to be represented by counsel. Do either of you
wish to be represented by counsel?
You need to put your microphone one and speak directly into
it and identify your counsel, plese.
Mr. Heller. Counsel for Biosciences is Lenny Burr.
Mr. Greenwood. And the gentleman directly behind you, thank
you.
All right, now you stand and raise your right hands,
please?
Do you swear that the testimony you're about to give is the
truth, the whole truth and nothing but the truth?
[Witnesses sworn.]
Okay, you are both under oath.
Mr. Levine, do you have an opening statement? You are
recognized for 5 minutes to offer it.
TESTIMONY OF PETER J. LEVINE, PRESIDENT AND CHIEF EXECUTIVE
OFFICER OF CORRELOGIC SYSTEMS, INC.; AND JONATHAN C. HELLER,
VICE PRESIDENT, INFORMATION AND PROJECT PLANNING, PREDICANT
BIOSCIENCES
Mr. Levine. I don't want to take up the subcommittee's time
this morning with a lengthy reading of my written testimony. I
would ask, however, that it be entered into the record.
Mr. Greenwood. It will be entered into the record. You may
summarize it as you care to.
Mr. Levine. Okay. In brief, Correlogic is a clinical
proteomics company. We're based in Bethesda, Maryland and we
specialize in the development of technologies and tools and
processes that can assist in the early detection of various
cancers.
The focus of Correlogics' energies over the last several
years has been the development of complete diagnostic system. I
think later in our testimony that will be a very important
issue, based in part, on pattern recognition technology for the
early detection of cancer. Our technologies and processes have
a wide range of applications and can be used in the creation of
disease diagnostic models and biomarker discovery and new drug
discovery processes. And we are also a clinical laboratory
regulated under the Clinical Laboratory Improvements Act of
1988 and currently working with the Nation's two premiere
clinical diagnostic laboratories, Quest Diagnostics and
Laboratory Corporation of America.
If I had my druthers, this morning, I'd be testifying only
about the accomplishments of Correlogic and the results of our
most recent research. I believe we're on the brink of some
fantastic breakthroughs that will translate the research
progress that we've made into the ability to provide more
accurate and earlier detection of cancer and other diseases.
And we would not be at this critical and exciting juncture
without the considerable talent and resources of the National
Institutes of Health and National Cancer Center, the Food and
Drug Administration and the other components of the Public
Health Service.
So I hope that my comments will not be taken as a broad
criticism of the life saving mission of these agencies or any
kind of justification for lessening or reducing the Nation's
financial commitment to the agencies.
I also ask that my testimony not be misconstrued as a
critique of the vast majority of men and women in these
agencies that have dedicated their professional lives and work
extremely hard to bring us the kind of medical science and kind
of medical improvements that we've all seen over the last many
years and because of their work thousands, hundreds of
thousands of our citizens have had their lives saved and they
give the hope to all of us for bright future.
But as this subcommittee has already heard, all is not well
at NIH. And the experience of Correlogic, these past 2 years,
has revealed what I believe are some very serious flaws in the
manner in which the agency implements its licensing, its CRADA
and it's conflict of interest policies and procedures.
By way of very brief background, Correlogic entered into a
research CRADA and a licensing agreement with the National
Cancer Institute and the Food and Drug Administration and the
Public Health Service to develop a diagnostic testing system
for ovarian, prostate, breast and other cancers. These
agreements which we paid and continue to pay significant
royalties were designed to facilitate the development and
commercialization of a diagnostic testing system for the
benefit of patients.
It's important to note that we have met all of our
obligations and entered into contractual relationships with
other well-established industry players that have been approved
by the Public Health Service to satisfy the Government's
requirements under our licensing agreements. Unfortunately,
since our work first became known to the public in 2002, what
started as a cooperative and constructive research and business
relationship has clearly deteriorated. And knowing now under
the light that has been shed by this subcommittee and with the
full perspective of hindsight, I can now really see what has
been going on for the last 2 years.
As the balance of my written testimony describes in more
detail, we've been caught in a morass of conflicting interests
and unilaterally changed agreements and a failure of the Agency
to abide by the letter, much less the spirit of critical
research and licensing agreements.
While preparing for my testimony today, I genuinely
struggle to find a starting place to address the focus on
subcommittee's interest. Reflecting back on the last 2 years
and all that's happened, it's the concept of good faith that
keeps reoccurring to me. The agencies of the Government must
act in good faith.
As the subcommittee continues its work, I would ask that
each and every issue under review be evaluated from this
perspective. And that is, were these actions, were these
decisions made in good faith or facts and legal interpretations
made to support outcomes that were inconsistent with the spirit
and the clear intention of preexisting agreements and
relationships? To me, that is really the heart of the issue
here.
And Mr. Chairman, last, let me just comment that I appear
today with great reluctance. I, of course, support
wholeheartedly the efforts of the subcommittee, but I'm
concerned about the impact of my testimony on my company's
ability to continue to do business with the Public Health
Service. We have already experienced what I believe are some
indications that our cooperation may wind up being rather
detrimental to Correlogic moving forward and we do intend to
continue doing research with the PHS. So I only hope that when
the dust has settled and the attention shifts elsewhere that
Correlogic is not penalized, in essence, a second time for its
cooperation with the committee.
I'd be very pleased to answer your questions.
[The prepared statement of Peter J. Levine follows:]
Prepared Statement of Peter J. Levine, President, Correlogic Systems,
Inc.
Mr. Chairman and Members of the Subcommittee: My name is Peter J.
Levine. I am President of Correlogic Systems, Inc., a clinical
proteomics company based in Bethesda, Maryland, that specializes in the
development of tools and processes that can assist with the early
detection of various cancers and other diseases. The focus of
Correlogic's energies has been the development of a complete diagnostic
system based in part on the use of pattern recognition for the early
detection of cancer. Our technologies have a wide range of applications
that can be used in the creation of disease diagnostic systems,
biomarker discovery, and new drug discovery processes. We are also a
clinical laboratory regulated under the Clinical Laboratory Improvement
Amendments of 1988 and are currently working with the nation's two
premier diagnostic laboratories, Laboratory Corporation of America and
Quest Diagnostics, to provide an ovarian cancer testing service.
I wish I were testifying today just about the accomplishments of
Correlogic and the results of our most recent research, because I
believe we are at the brink of translating significant research
progress into the ability to provide more accurate and earlier
detection of certain diseases, such as stage one ovarian cancer, when
the cancer is organ confined and most curable. Quite frankly, we would
not be at this critical and exciting juncture without the considerable
talent and resources of the National Institutes of Health, the National
Cancer Institute, the Food and Drug Administration, and the Public
Health Service. I hope my comments today will not be taken as a broad
criticism of the life-saving mission of these agencies or as
justification for lessening our financial commitment to them. I also
ask that my testimony not be misconstrued as a critique of the vast
majority of men and women who work there. They have dedicated their
professional lives, often at great personal sacrifice, to the
advancement of medical science and the health of our nation. Because of
their work, hundreds of thousands of lives have been saved, and these
agencies give hope to a brighter future for millions of others.
I have been asked to testify about our company's experience
collaborating with these agencies, including the benefits and dangers
for private companies that enter into contractual relationships with
federal health agencies and with federal employees who are permitted to
be both public servants and private entrepreneurs. Simply put, our
experience has reflected both the promise and pitfalls of ``being in
business'' with the National Cancer Institute and the Food and Drug
Administration. It is my hope, Mr. Chairman, that your inquiry into
weaknesses in the National Institutes of Health's ethics policies in
general, and what has happened to Correlogic in particular, will lead
to a quick resolution of these problems, and our attention can be
returned to what should be our collective objective--fighting cancer
and saving lives.
Origin of Our Relationship with FDA and NCI
Correlogic's relationship with FDA and NCI began in June of 1999
when I had brunch with Dr. Emanuel F. Petricoin, a senior research
investigator at the FDA. Our wives had been close personal friends for
many years, and Dr. Petricoin and I had met through them. During the
meal, as was our custom, we caught up on professional events in our
then very different worlds. He described to me the challenges he and
his colleagues were facing in their search for protein biomarkers for
cancer, particularly the difficulty in finding a biomarker in the
massive amounts of data that could be produced by the latest generation
of protein separation technologies. They were literally searching the
proverbial haystack not for a needle but a single protein that might be
indicative of the presence of a disease.
I had significant experience in the use of computer-generated data
analysis and suggested using pattern discovery technology to search for
patterns of proteins rather than individual proteins for use as a
diagnostic. I explained to Dr. Petricoin that I had been working with
Dr. Ben Hitt (now the Chief Scientific Officer of Correlogic) on other
applications of pattern discovery technology in non-medical fields. I
suggested that if this type of technology could be developed and
applied to cancer research, it might be able to detect patterns of
proteins that were indicative of a disease state rather than individual
protein biomarkers. Rather than looking for the needle in the haystack
of data, we would look at the configuration of the haystack. Using my
napkin as chalkboard, I sketched out the idea.
Following the brunch, I talked through the idea with Dr. Hitt. He
refined the concept and developed a powerful algorithm to test the
theory that so-called ``hidden patterns'' of proteins, also known as
proteomic patterns, could be analyzed to detect the early stages of a
disease. Through 1999 and into the spring of 2000, Dr. Petricoin, Dr.
Hitt and I tested the ``hidden patterns'' theory and in the spring of
2000, we used the basic pattern recognition algorithm that Dr. Hitt had
invented. Specifically, we applied the pattern recognition technology,
and hidden patterns concept to the blood from prostate cancer patients.
We were able to accurately perform a diagnostic assessment based on
protein patterns in the blood. At this time we were collaborating
informally with Dr. Petricoin.
Encouraged, we immediately began work on applying our approach to
ovarian cancer and outlining its application to other diseases. Dr.
Hitt and I, along with another associate, Marc Giattini, founded
Correlogic Systems in May 2000 to further develop this technology. Dr.
Petricoin filed a Public Health Service Employee Invention Report,
naming himself, Dr. Hitt, and me as co-inventors. Among other things,
he cited our June 1999 brunch as the date on which the invention was
conceived.
Formalization of Our Relationship with NCI and FDA
Things progressed rapidly after the formation of our company.
Correlogic entered into a Material Transfer Agreement with the FDA to
facilitate the continuation of research. The company filed a
provisional patent application on the core algorithm invented by Dr.
Hitt. After a period of time, Dr. Hitt, Mr. Giattini, and I were able
to supplement our personal funding of the company with additional
monies from private investors. Correlogic filed several additional
provisional patent applications on our hidden patterns testing process,
naming Dr. Hitt, myself and Dr. Petricoin as co-inventors. We began
negotiations with the Public Health Service on an exclusive license
agreement for our testing process, as claimed in these latter patent
applications.
By July 2001, we finalized our patent filings. Correlogic bore all
the expenses of these filings, as it continues to do today. By the time
the non-provisional patent was filed, Dr. Petricoin had brought in his
colleague and mentor, Dr. Lance Liotta, who was the Director of the
Laboratory of Pathology at the National Cancer Institute. Along with
the original three of us, Dr. Liotta was added as a co-inventor on the
non-provisional filing of our ``hidden patterns'' patent application.
In February 2002, the peer-reviewed medical journal, The Lancet,
published the results of the study the four of us (and others) had
authored, which demonstrated that our testing process could detect
ovarian cancer, including stage one ovarian cancer, from a single drop
of blood. The actual computational analysis for the Lancet study was
performed by Dr. Hitt alone, based upon raw laboratory data provided by
Dr. Petricoin and Dr. Liotta. Because of the significance of our
findings, the report was filed on the journal's website a week in
advance of publication. The publication generated overwhelming interest
in the media as well as the scientific community, due to the novel
nature of our process, the compelling results and, from the patient's
perspective, the simplicity of a blood test.
Congress was interested as well. A few months later the House of
Representatives passed a resolution, introduced by Rep. Steve Israel
and Rep. Rosa DeLauro, and co-sponsored by 147 members of the House,
encouraging the government to support proteomic pattern research for
ovarian cancer.
In April 2002, we entered into a Cooperative Research and
Development Agreement (CRADA) with the NCI and the FDA to ``utilize
Correlogic's proprietary software technology to continue their joint
research to identify patterns of protein expression indicative of
specific disease states.'' We also signed an exclusive, worldwide
licensing agreement with the Public Health Service to move our protein
pattern testing process, the intellectual property rights of which were
jointly held by Correlogic and the government, from the research labs
into the hands of health care providers as soon as possible. The
agreement contained explicit milestones and deadlines for the
commercialization of our testing process.
In October 2002, the Journal of the National Cancer Institute
published a study we performed with our federal partners on the use of
our technology in the early detection of prostate cancer. In accordance
with the clear purpose of and the deadlines included in the exclusive
PHS license agreement to Correlogic, we entered into agreements with
Quest Diagnostics and LabCorp, the nation's two premier clinical
diagnostic labs, to make our potentially lifesaving ovarian cancer test
available to women across North America. We also expanded our staff and
retained experts in clinical and laboratory diagnostics.
I was thrilled. We were taking an idea that I had first sketched on
a napkin and turning it into, in the words of the National Institute of
Health's Office of Technology Transfer, ``a high-throughput diagnostic
apparatus that will apparently be capable of detecting ovarian cancer
in its earliest stages.'' We had obtained funding and assembled all of
the corporate resources and expertise that we needed to advance the
science and technology. Once the ovarian cancer testing device had been
developed, we could do the same for other cancers and other diseases.
In April 2003, NCI announced in a press release, and later in a
presentation at the American Association of Cancer Researchers annual
meeting, that our testing process had enabled NCI, FDA, and Correlogic
scientists to improve upon the initial results published in The Lancet
for the detection of ovarian cancer. Later that year, Correlogic
entered into an agreement with Advion Biosciences to use one of their
technologies as a component of our ovarian cancer detection test.
This year, we began the process of finalizing the validation of
OvaCheck TM, our ovarian cancer test service. We are
continuing our work with the National Cancer Institutes' Laboratory of
Tumor Immunology and Biology and Walter Reed Army Hospital and the
Windber Institute on the application of our diagnostic testing system
to the development of a breast cancer test.
All of these developments are based significantly on our initial
work with the government, and our exclusive licensing agreement. Our
success has hinged in no small part on our ability to combine our
expertise with that of key government scientists. We seemed to be a
good example of the promise of government-private sector cooperative
programs under the Federal Technology Transfer Act of 1986. In fact, I
was invited by the National Cancer Institute to participate in a panel
discussion on how a small company could work with the government to
address a critical public health problem.
Awareness of Potential Conflicts of Interest and Related Issues
On the outside, things could not have appeared better, but
internally as we would discover, there were real problems. Only now,
under the light shed by this Subcommittee, and with the full
perspective of hindsight can we understand some of the obstacles that
we had come to view as an inherent part of the public-private
partnership.
Back in 2002, a few months after the Lancet study, I was told that
despite our exclusive licensing agreement and ongoing negotiations to
expand our CRADA to include clinical testing for ovarian cancer, the
National Cancer Institute had decided to ``sponsor'' an independent
clinical trial on the hidden patterns technology, the very technology
that was the essence of the patents we had jointly filed with Dr.
Petricoin and Dr. Liotta. I was told that the Lancet study had pushed
our testing technology to the forefront and that NCI wanted to move
forward as quickly as possible in order to get our test into the hands
of doctors and patients. We certainly agreed with the overall objective
and, for that reason, had entered into our original collaboration with
NCI consistent with the goals of the Federal Technology Transfer Act of
1986. However, rather than continuing along the path with Correlogic,
NCI had unilaterally decided to give a contract to Science Applications
International Corporation (SAIC), with which it has a long-standing
contractual relationship, to set up a new laboratory to carry out these
clinical trials, and Dr. Gordon Whiteley was hired to head this
project, beginning with the development of a business plan. I was told
not to worry, that Correlogic's existing contractual agreements ensured
that we would be an integral part of these trials and that our brand
new license agreement would protect our IP and commercialization
rights.
Obviously, I was concerned at what was presented to me as a fait
accompli. The Institute's decision impacted not only on our ability to
meet required deadlines in our exclusive government licensing
agreement, but also on the terms and conditions associated with our
negotiations with two national clinical labs, LabCorp and Quest
Diagnostics, as contemplated by the licensing agreement. When I raised
these concerns with both Dr. Liotta and Dr. Petricoin, I was told not
to be ``paranoid,'' and that NCI's unilateral decision was really in
Correlogic's best interests. Frankly, I also was concerned--and remain
concerned to this date--about the particular components that NCI had
unilaterally chosen for the detection system and also about which
entity would take the lead and responsibility for seeking regulatory
approval following successful completion of the clinical trial.
To resolve the myriad problems associated with NCI's decision, on
August 15, 2002, I met with representatives from the Offices of
Technology Transfer (and Development) for NCI, FDA and NIH. Leading the
negotiations for the government was Dr. Liotta. Also participating was
Dr. Svetlana Shtrom, who had been responsible for negotiating our
original CRADA. We reached an agreement on how to proceed with joint
clinical trials and our ongoing research CRADA, which was memorialized
in a letter dated September 12, 2003, sent to me by Karen Maurey, then
Deputy Director of the NCI's Office of Technology Transfer. In late
August, NIH affirmed in writing that our work under this new agreement
would be accepted as compliance with the government's deadlines in our
original licensing agreement. We began drafting documents to implement
the agreement.
Relying upon these agreements by the government, we pushed forward.
NIH approved our entering a contractual relationship with LabCorp and
Quest Diagnostics to commercialize our testing technology and turn it
into a diagnostic device. We continued our research and preparation for
the clinical trials, sharing our work product and future
commercialization plans with FDA, NCI, and NCI's contractor, Science
Applications International Corporation. In fact, Drs. Petricoin and
Liotta began participating in our conference calls with our commercial
clinical lab partners, LabCorp and Quest Diagnostics.
2002 came to an end and there was still no progress, even though
supposedly we were simply turning the government's September letter
into the necessary CRADA amendments and new clinical trial CRADA. I was
troubled, given NCI's persistent pattern of not communicating or
explaining its intentions with regard to my company, that despite
countless drafts and revisions, we were unable to finalize the
necessary amendments to our research CRADA and to a new, clinical trial
CRADA. What should have taken a couple of weeks at the longest was now
stretching out over months. Every time we got close, NCI's positions
would change, and the agency's requirements and expectations would be
amended. Correlogic agreed to virtually everything NCI proposed but
there was always something else. The goal posts kept shifting, but I
couldn't find out what was really going on. And every step along the
negotiation path required the approval of Drs. Liotta and Petricoin.
On April 18, 2003, my fears were realized. Kevin Brand, a
straightforward and competent employee in NCI's Office of Technology
Transfer, called me and said, ``I've got some bad news.'' He proceeded
to tell me that NCI had decided to ``go it alone'' on the clinical
trial.
Not only was NCI reversing the position it had agreed to the
previous year, it was placing Correlogic in an untenable position with
regard to our contracts with our commercial clinical lab partners and
our ability to satisfy the government's own contractual deadlines. When
I contacted Dr. Petricoin, he told me I was overreacting, that the
September letter made clear the rights Correlogic had to seek
regulatory agency approval following the clinical trials. I wrote a
detailed email to NCI's Technology Transfer Office, copying Dr. Liotta
and Dr. Petricoin, explaining my shock at this new development.
A few days later, Kevin Brand sent me an email proposing that
rather than entering into the clinical trial CRADA, which we had been
negotiating for nearly a year, NCI would agree to only a memorandum of
understanding (MOU) that would be appended to our research CRADA. The
MOU expressed some general and specific provisions and would have
provided Correlogic with limited ability to participate in designing
the clinical trial, developing the underlying analytical systems and
seeking approval for a marketable diagnostic product.
Once again, just like the summer of 2002, we had no real choice but
to acquiesce to NCI's evolving position. The NCI had reversed itself,
and we could either accept their latest offer or terminate our
relationship with the government. I kept asking myself, what was really
going on? None of this made sense. Why was this so complicated? Why
were there so many delays? After all, Correlogic had complied with
every requirement of the prior agreements.
Despite all of the negotiations, two key points were still
unresolved. Who would make the critical decision regarding the
selection of the components of the diagnostic system that would be the
core of our testing service? And, how were we supposed to reconcile, on
the one hand, NCI's apparent interests in developing their own testing
service through the work being done by their contractor, Science
Applications International Corporation, with, on the other hand, the
contemplated collaborative clinical trial reflecting benchmarks
associated with the patent rights granted to Correlogic under our
licensing agreement?
In late June and early July of 2003, I first learned of one
possible explanation for the confusion and delay. Unbeknownst to me or
anyone at Correlogic, Dr. Liotta and Dr. Petricoin had been working as
consultants for Biospect, a direct competitor of my company. And, as I
learned only much later, through the Subcommittee's May 18 hearing,
they had already been doing so for seven months. Also affiliated with
Biospect was Dr. Rick Klausner, whom Dr. Liotta and Dr. Petricoin had
briefed about the Correlogic-NCI-FDA relationship when he was the
director of the National Cancer Institute. Joining these three at
Biospect was Dr. Svetlana Shtrom, the NCI technology transfer
specialist who had worked on our original CRADA.
I had also learned that prior to being hired to set up NCI's
clinical lab to conduct the hidden pattern tests, Dr. Gordon Whiteley
had been an employee of a business run by Dr. Lance Liotta, a company
called Immunomatrix.
So, while our negotiations over finalizing our clinical trial CRADA
were slowly going nowhere, Dr. Liotta and Dr. Petricoin had become
consultants to our competitor, Biospect, and Dr. Shtrom had become an
employee. During our endless discussions with Dr. Liotta and Dr.
Petricoin about Correlogic's research and plans for clinical trials, I
now realized, I would have had no way of knowing, for example, whether
I had been talking to Dr. Liotta, the NCI employee, or Dr. Liotta, the
Biospect consultant, or Dr. Liotta, an owner of Immunomatrix, or Dr.
Liotta, the employer or former employer of Dr. Whiteley. And, these are
just the relationships that I know about.
I first learned about Biospect in May of 2003 in a conversation,
followed by an email, with a biotech industry executive, who described
the company as ``your new competition,'' rather than from my government
research partners. Since Dr. Petricoin, Dr. Liotta and I routinely
discussed our collective ``competition,'' I forwarded that email about
Biospect to both Dr. Liotta and Dr. Petricoin, but they never
responded. And they certainly didn't bother telling me they had been
working for the company since December 2002. Included in the email I
forwarded to Drs. Liotta and Petricoin were excerpts from Biospect's
website. The website language was so close to our own, that even to a
casual reader, it would suggest that this was a company engaged in very
much the same activities as Correlogic.
A few weeks later, I began hearing more from industry contacts
about Biospect being a competitor, but now I was hearing that Drs.
Petricoin and Liotta were affiliated with Biospect. In early July of
2003, I reached Dr. Petricoin by phone and raised the issue directly. I
told Dr. Petricoin that I was appalled, and that people in the industry
were talking about a conflict of interest. Dr. Petricoin promised to
share my concerns with his ethics officer.
By this time--having watched NCI drag out our negotiations for
nearly a year for no apparent reason, unilaterally tossing aside
existing contractual agreements, and tolerating what appeared on its
face to be a serious conflict of interest--I felt I had no choice but
to ask one of our advisors to raise the conflicts issue with Dr.
Barker. We were already in the process of attempting to meet with her
to discuss all of the other NIH-Correlogic issues.
I raised my concerns about what was happening to my company with
Dr. Barker and other Public Health Service officials in a meeting in
September 2003. While I recognized that Dr. Liotta and Dr. Petricoin
would probably not appreciate what I was doing, I believed strongly
that my company was entitled to an objective assessment and oversight
by NCI officials who were in a better position to act in an impartial
manner. The meeting was relatively short, but was courteous and offered
a promise of appropriate guidance from senior NCI management. I
expressed concerns about actions that appeared to be undermining our
exclusive license agreement and Dr. Barker indicated she would take all
my concerns under advisement. The issue of potential conflicts of
interest per se was not discussed as it appeared that NCI had taken the
matter under review.
In October 2003, I received a packet from the National Cancer
Institute, proposing, effectively, that we simply abandon all critical
rights in our research CRADA that had been negotiated over the
preceding year, eliminate all of the terms contained in the September
2002 letter of agreement, and enter into a very narrowly defined
clinical trial CRADA. We were expected to agree to language that
directly contravened specific provisions in prior written agreements
with the government, including, specifically, our exclusive license
agreement. Notably, it also once again left Correlogic out of the loop
with regard to determining the components of the diagnostic testing
system.
The Recent Subcommittee Hearings
All of us at Correlogic were disappointed, and surprised, at the
testimony given to this subcommittee by Dr. Liotta and Dr. Petricoin.
Their arguments for why no conflict of interest ever existed depend on
minimizing Correlogic through three themes. First, they claim that
Correlogic was ``just'' a ``software'' company, attempting to draw a
distinction between the scope of Correlogic's business activities and
those of Biospect. In fact, the National Cancer Institute's own
documents rebut this assertion. For example, the National Institutes of
Health's Office of Technology Transfer described what we were seeking
to create as a ``diagnostic apparatus.'' In various correspondence
between NCI, Correlogic, Dr. Petricoin, and Dr. Liotta, the term most
commonly used to describe the system we were building was ``a device.''
There were many, many meetings devoted to detailed discussions of
Correlogic's focus on the development of a diagnostic testing system.
In fact, the issue of the selection and assembly of all of the
components of a diagnostic testing system was, and is, at the very
heart of the two year-long clinical trial CRADA negotiations. This is
also the kind of information that companies consider to be among their
most closely-held proprietary matters.
Second, they seem to imply that the hidden patterns technology we
helped pioneer for the early detection of cancer was something related
to what they had been working on for years. While it is true that Dr.
Petricoin and Dr. Liotta had been working on trying to diagnose cancer
for years, our approach to cancer diagnostics was something new. In
fact, their own actions undermine their argument. If their assertion
were true, why did Dr. Petricoin file a Public Health Service Employee
Invention Report which clearly states that something novel had been
invented? Why did Drs. Petricoin and Liotta work with us on filing
patents in our collective names? Why did they continue to publish with
us results trumpeting our novel approach?
Third, they diminish Correlogic's role in the development of the
technology on the basis that we lack all the resources and laboratories
available to the government or large companies. No one at my company is
suffering under any delusions in this regard. However, we had an idea
that may radically change the way physicians test for cancers and
dramatically improve a patient's chance for early detection and
treatment. Using our unique abilities, our staff and advisors, as well
as the specific talents of government specialists and the capabilities
of well-established industry players, such as Quest Diagnostics,
LabCorp, Charles River Proteomics and Advion Biosciences, we are on the
brink of bringing a new testing device to market. We are hoping to
follow in the footsteps of the many innovative small companies that
have made a substantial contribution to the public health. Facilitating
this journey is the very purpose behind the Federal Technology Transfer
Act--allowing different entities in the public and private sector to
pool their abilities in order to advance medical science.
Mr. Chairman, I hope my testimony today will shed some light on the
need for reform of the consulting and outside activities approval
process at the Public Health Service. As the experience of Correlogic
demonstrates, the government's current ethics, licensing and CRADA
processes allow for an inappropriate muddle of intellectual property,
licensing, and commercialization rights of government agencies, private
individuals, corporations, and public employees acting as private
sector entrepreneurs.
It is impossible in such a Kafkaesque morass to have any hope of
impartiality or basic protection of contractual rights such as patent
license agreements and CRADA. It is simply wrong for a single federal
employee, whose salary is paid by taxpayers, to sit in judgment, or
influence the outcome of contracts affecting legal rights and
obligations when he or she may have private, pecuniary interests. It is
also wrong for one component of an agency to undermine contractual
rights granted by the parent agency. It isn't tolerated anywhere else
in government. It should not be permitted at the National Cancer
Institute.
Mr. Chairman, I believe the experience of Correlogic is the
exception not the rule. I remain convinced that the vast majority of
employees at FDA, NCI and NIH are upstanding and dedicated public
servants who would never put themselves into the kind of ethical
quagmire we have experienced. Moreover, I believe, more than ever, that
every American has a vested interest in the success of the kind of
cooperative relationships that led to our original contract with the
Public Health Service, and I hope that whatever changes the agencies
and the Subcommittee feel are warranted do not undermine this critical
activity.
I hope the larger ethical issues can be addressed quickly, just as
I hope the specific problems facing Correlogic can be resolved
expeditiously. I hope, despite my appearance today, that Correlogic
will be allowed to finish the work called for in the various agreements
we have signed with the NIH and National Cancer Institute and the Food
and Drug Administration. I hope that the NIH will honor its license
agreements. And, I hope that Correlogic will not be victimized a second
time by being shunned by the NIH when we seek future research
collaborations.
All we ask for is a level playing field, where a contract signed on
one day cannot be discarded the next, at the whim of public employees
who may have their own private, business agendas. The small private
investors who have funded Correlogic, and hundreds of other small
biotech companies deserve better. The men and women in our public
health service deserve better. And, most importantly, the millions of
Americans whose lives could be saved by the earlier and more accurate
detection of cancer deserve better.
I would be happy to answer any questions you may have.
Mr. Greenwood. Thank you, Mr. Levine, and let me assure
you, sir, that even a hint of any kind of retribution or
negative response for your cooperation with this committee will
absolutely not be tolerated by this committee.
Mr. Levine. I appreciate that very much.
Mr. Greenwood. And we would expect for you to inform us of
any such untoward actions occur, because we will be all over
it.
Mr. Levine. Thank you, sir.
Mr. Greenwood. Dr. Heller.
TESTIMONY OF JONATHAN C. HELLER
Mr. Heller. Good afternoon, Chairman Greenwood and members
of the committee. My name is Jonathan Heller and I am Vice
President for Information and Project Planning at Predicant
Biosciences, formerly known as Biospect.
Thank you for the opportunity to appear before you today to
discuss past consulting arrangements between my company and Dr.
Lance Liotta and Chip Petricoin. With your permission, before I
address these consulting relationships, I would like to take a
few moments to tell you about myself and the company where I am
extremely proud to work.
In 1989, I received my Bachelor's Degree with Honors in
applied mathematics from Harvard University. After college, I
joined the Peace Corps as a volunteer and spent 2 years in
Papua New Guinea, teaching science and math. My passion for
science and math ultimately led me to graduate school at the
University of California, Berkeley, where I earned a PhD in
Biophysics in 1997. The focus of my graduate work was on
biophysical investigations of Prion proteins, which are
responsible for Mad Cow disease.
In 2002, I was offered a wonderful opportunity with a
small, South San Francisco startup company called Biospect. We
recently changed our name to Predicant Biosciences.
I was one of the first scientists to join Predicant, which
has now grown to thirty-five employees. Our goal is and has
been to revolutionize patient care by developing a platform
that will reliably detect and diagnose the severity of a
disease by analyzing protein patterns in blood.
We are still approximately 18 to 24 months away from having
a diagnostic service ready for sale on the market. As I testify
today, my colleagues in California are hard at work on the
company's integrated system. In very simple terms, our system
works in the following way: A drop of blood from a patient is
fed into our instrument; the instrument prepares the blood
sample for analysis; proteins in the blood are separated into
smaller groups; the grouped proteins are then sprayed into a
mass spectrometer, a detection instrument; and finally, the
data is analyzed to find patterns that suggest the presence of
a disease. Many of our competitors focus on one, perhaps two of
these steps. We believe that our comprehensive approach sets us
apart, which is why we often refer to our system as a complete,
``blood to answer'' solution.
I manage the informatics department at Predicant. I work
with a team of eight scientists and mathematicians on the last
step of our integrated system, the data analysis step. We
develop statistical tools for signal processing and for finding
patterns in the data. These software tools help us cull
meaningful information out of very large and often ``noisy''
data sets.
We are hopeful that our ``blood to answer'' solution will
become an important milestone in the field of predictive
medicine. We at Predicant are very hard at work to make that
happen. Earlier detection, more accurate diagnoses, and better
information on the acuteness of a disease will optimize
treatment selection and have a dramatic impact on patient care,
on outcomes, and on health care costs.
We understand that the committee recently has held several
hearings on the important topic of ethics at the National
Institutes of Health. Our company applauds the committee for
its attention to this issue.
At the hearing on May 18, the committee considered a ``case
study'' involving the consulting relationships between our
company and Drs. Liotta and Petricoin. While Predicant was
unaware that the company would be a topic for discussion at
that hearing, we are grateful for this opportunity to
participate in this very important dialog and to provide our
perspective on the issues raised by the committee.
Drs. Liotta and Petricoin began consulting on a part-time
basis for our company in December 2002. As this committee has
previously heard, they are among the most prominent scientists
in the field of clinical proteomics. Predicant engaged Drs.
Liotta and Petricoin because they are thought-leaders in the
field, and we believed that they could assist us in conceiving
of and evaluating potential applications for our system and
technology. In other words, we hoped that they could help us
identify which diseases to target first.
At the time that we engaged Drs. Liotta and Petricoin, our
company was aware that there are important ethical restrictions
that limit the type of outside activities that can be engaged
in by government scientists. As a result, we sought to ensure
that we followed all the applicable NIH and FDA guidelines and
processes and were open and transparent in our dealings with
those agencies. The consulting agreements were reviewed and
formally approved by ethics officials at both the NIH and the
FDA.
Because Drs. Liotta and Petricoin are government
scientists, our consulting agreements with them deliberately
carved out large areas as off-limits for consultations or
discussions of any kind. For instance, Drs. Liotta and
Petricoin could not tell us about their official government
research if their findings had not been made public. This
includes any research performed under a CRADA.
One of the concerns raised by the committee was that Drs.
Liotta and Petricoin were consulting for Predicant at the same
time they were engaged in Government work with a software
development company called Correlogic. At the time that we
entered into consulting agreements, we asked them to identify
all of their outside activities, and we became aware of their
CRADA. In addition, the fact of the collaboration between
Correlogic and the Government was well known. As a result of
the Correlogic agreement, the sharing of any public/non-public
CRADA-related information was specifically excluded from the
scope of our consulting agreements. Consistent with the
agreements, Predicant never sought from Drs. Liotta and
Petricoin, and they never shared with Predicant, any non-public
information regarding their CRADA with Correlogic. In fact,
they never shared any non-public information of any kind with
Predicant.
Another important point to be made here is that, while our
company and Correlogic both employ clinical proteomics to
detect disease, I think it is fair to say that our two
companies are pursuing different methods--both in terms of the
software and technology to achieve this goal. It is our
understanding, based on public information, that Correlogic's
software technology uses self-organizing maps in combination
with genetic algorithms to identify and analyze proteins in the
blood. Predicant, on the other hand, has focused on other
methods, which we hope will prove more effective. In addition,
as noted, Predicant's goal is to develop a comprehensive
``blood to answer'' approach to disease detection, which we
believe is not directly comparable to Correlogic's technology.
In closing, I would like to emphasize on behalf of all of
my colleagues at Predicant that we will continue to follow our
internal ethical standards and all applicable government
requirements as we strive to create new tools to aid in the
detection of cancer and other diseases. We believe that we
followed the rules and acted appropriately in our relationship
with Drs. Liotta and Petricoin.
Thank you for the opportunity to appear before you today
and to participate in the important work of the committee. I
would be pleased to answer any of your questions.
[The prepared statement of Jonathan C. Heller follows:]
Prepared Statement of Jonathan C. Heller, Vice President, Information
and Project Planning, Predicant Biosciences, Inc.
Good afternoon, Chairman Greenwood, Representative Deutsch, and
Members of the Committee. My name is Jonathan Heller, and I am Vice
President for Information and Project Planning at Predicant
Biosciences, formerly known as Biospect, Inc. Thank you for the
opportunity to appear before you today to discuss past consulting
arrangements between my company and Dr. Lance Liotta of the National
Cancer Institute (``NCI'') and Dr. Emanuel ``Chip'' Petricoin of the
Food and Drug Administration (``FDA''). With your permission, before I
address those consulting relationships, I would like to take a few
moments to tell you about myself and the company where I am extremely
proud to work.
In 1989, I received my Bachelor's Degree with Honors in applied
mathematics from Harvard. After college, I joined the Peace Corps as a
volunteer and spent two years in Papua New Guinea, teaching science and
math. My passion for science and math ultimately led me to graduate
school at the University of California, Berkeley, where I earned a PhD
in Biophysics in 1997. The focus of my graduate work was on biophysical
investigations of Prion proteins, which are related to Mad Cow disease.
In 2002, I was offered a wonderful opportunity with a small, South
San Francisco startup company called Biospect. After a lengthy
deliberative process, our company recently changed its name to
Predicant Biosciences because of trademark issues associated with the
name ``Biospect,'' and because we believe the name ``Predicant'' more
closely reflects our mission of identifying and predicting disease.
I was one of the first scientists to join Predicant, which has now
grown to thirty-five employees. Our goal is and has been to
revolutionize patient care by developing a platform that will reliably
detect or diagnose the severity of a disease by analyzing protein
patterns in blood. Predicant is just two-years old and still in the
development phase. To date, we have been concentrating on developing
our technology; refining our business strategy and operational plans;
developing scientific and clinical collaborations; and, most
importantly, building a team of dedicated and talented scientists.
We are still approximately 18 to 24 months away from having a
diagnostic service ready for sale on the market. As I testify today, my
colleagues in California are hard at work on the company's integrated
system. In very simple terms, our system works in the following way: A
drop of blood from a patient is fed into our instrument; the instrument
prepares the blood sample for analysis; proteins in the blood are
separated into smaller groups; the grouped proteins are sprayed into a
mass spectrometer, a detection instrument; and finally, the protein
patterns are analyzed to differentiate between patterns that suggest
the presence of a disease and patterns that do not. Many of our
competitors focus on one, perhaps two of these steps. We believe that
our comprehensive approach sets us apart, which is why we often refer
to our system as a complete, ``blood to answer'' solution.
I manage the informatics department at Predicant. I work with a
team of eight scientists and mathematicians on the last step of our
integrated system--the analysis step. We develop statistical tools for
signal processing and for finding patterns in the data. These software
tools help us cull meaningful information out of large and often
``noisy'' data sets.
We are hopeful that our ``blood to answer'' solution will become an
important milestone in the field of predictive medicine. Many dedicated
scientists at Predicant are working very hard to make that happen.
Earlier detection, more accurate diagnoses, and better information on
the acuteness of a disease will optimize treatment selection and have a
dramatic impact on patient care, outcome, and healthcare cost.
We understand that the Committee recently has held several hearings
on the important topic of ethics at the National Institutes of Health
(``NIH''). Our company applauds the Committee for its attention to this
issue.
At the hearing on May 18, the Committee considered a ``case study''
involving the consulting relationships between our company and Drs.
Liotta and Petricoin. While Predicant was unaware that the company
would be a topic for discussion at the May 18 hearing, we are grateful
for this opportunity to participate in this very important dialogue and
to provide our perspective on the issues raised by the Committee.
Drs. Liotta and Petricoin began consulting on a part-time basis for
our company in December 2002. As this Committee has heard previously,
Drs. Liotta and Petricoin are among the most prominent scientists in
the field of clinical proteomics, our company's area of focus.
Predicant engaged Drs. Liotta and Petricoin because they are thought-
leaders in the field, and we believed that they could assist us in
conceiving of and evaluating potential applications for our system and
technology. In other words, we hoped Drs. Liotta and Petricoin would
use their knowledge and experience in the field to assist us in a
variety of ways, including by helping us identify which diseases to
target first.
At the time that we engaged Drs. Liotta and Petricoin, our company
was aware that there are important ethical restrictions that limit the
type of outside activities that can be engaged in by government
scientists. As a result, we sought to ensure that we followed all the
applicable NIH and FDA guidelines and processes and were open and
transparent in our dealings with those agencies. The consulting
agreements between Predicant and Drs. Liotta and Petricoin were
reviewed and formally approved by ethics officials at both the NCI and
the FDA. In addition, it is our understanding that NCI officials in
fact helped draft the agreement between Dr. Liotta and Predicant.
Because Drs. Liotta and Petricoin are government scientists, our
consulting agreements with them deliberately carved out large areas as
off-limits for consultations or discussions of any kind. For instance,
Drs. Liotta and Petricoin could not tell us about their official
government research if their findings had not been made public. This
included any research performed under a Cooperative Research and
Development Agreement, or ``CRADA.''
One of the concerns raised by Committee Members at the May 18
hearing was that Drs. Liotta and Petricoin were consulting for
Predicant at the same time they were engaged in government work with a
software development company called Correlogic. At the time that we
entered into consulting agreements with Drs. Liotta and Petricoin, we
asked them to identify all of their outside activities, and we became
aware of their CRADA with Correlogic as a result. In addition, the fact
of the collaboration between Correlogic and the government and its
general subject matter were well known in our field. As a result of the
Correlogic agreement, the sharing of any non-public CRADA-related
information was specifically excluded from the scope of the consulting
agreements between our company and Drs. Liotta and Petricoin.
Consistent with the agreements, Predicant never sought from Drs. Liotta
and Petricoin, and Drs. Liotta and Petricoin never shared with
Predicant, any non-public information regarding their CRADA with
Correlogic. In fact, Drs. Liotta and Petricoin never shared any non-
public information of any kind with Predicant. We were always of the
view that they took care to ensure that their work for us did not
breach any ethical or other requirements.
Another important point to be made here is that, while our company
and Correlogic both employ clinical proteomics to detect disease, I
think it is fair to say that our two companies are pursuing different
methods--both in terms of software and technology--to achieve this
goal. It is our understanding--based on public information--that
Correlogic's software technology uses self-organizing maps in
combination with genetic algorithms to identify and analyze proteins in
the blood. Predicant, on the other hand, has focused on other methods,
which we hope will prove more effective. In addition, as noted,
Predicant's goal is to develop a comprehensive ``blood to answer''
approach to disease detection, which we believe is not directly
comparable to Correlogic's technology. As a result, even if it had not
been prohibited by our consulting agreement, Predicant would not have
sought confidential information pertaining to Correlogic's CRADA
because such information would have been of no value to our company.
In closing, I would like to emphasize on behalf of all of my
colleagues at Predicant that we will continue to follow our internal
ethical standards and all applicable government requirements as we
strive to create new tools to aid in the detection of cancer and other
diseases. We believe that we followed the rules and acted appropriately
in our relationship with Drs. Liotta and Petricoin.
Thank you for the opportunity to appear before you today to
participate in the important work of the Committee. I would be pleased
to answer any of your questions.
Mr. Greenwood. Thank you, Dr. Heller. I'm going to ask--the
Chair recognizes himself and Ms. DeGette and I have agreed that
I'll question for both of us, so we're going to go through a
fairly tight script here.
So if the staff could please play clips two and three, we
will hear Dr. Petricoin's testimony from last week about
discussions he had regarding this with you, Mr. Levine.
[Tape is played.]
Mr. Greenwood. Mr. Levine, in your discussions with Dr.
Petricoin was your frustration, as he recalls, simply over the
fact that Biospect employed so many former NCI employees?
Mr. Levine. Not at all, Mr. Chairman. My conversation with
Dr. Petricoin which, in fact, did not occur at the time that
Dr. Petricoin suggested that it did, was a----
Mr. Greenwood. When did it occur?
Mr. Levine. The actual oral conversation occurred or
telephone conversation, I should say, occurred on or about July
8 or July 9, 2003. And it was explicit at that time that we
viewed Biospect as a competitor. And what's interesting though
is when I look back because of these hearings, it's very clear
that in May 2003, I had sent an e-mail to Drs. Petricoin and
Liotta which included the website of Biospect. It had been sent
to me by an outside industry executive who said this is your
new competition, Peter. And I forwarded that e-mail to Drs.
Petricoin and Liotta as sort of an FYI because we were always
talking about the competition out there, in essence.
So I made it very clear----
Mr. Greenwood. Mr. Levine, would you turn to Tab 28 in the
binder there. I think that is the e-mail to which you are
referring. I'm going to ask you to read it. Go to Tab 28 and
then go to the second page and I think you'll find the e-mail
to which you just referred.
Would you read that?
Mr. Levine. The incoming e-mail is directed to me from an
outside industry executive. It says, ``Peter, nice talking with
you today. Here's some information on your new competition.
I'll be in touch. Vince.'' And attached to the bottom of the e-
mail is the website, I assume the website at that time of
Biospect which describes the company. Actually, I think Dr.
Heller's description just now was extremely accurate. And
that's exactly as we perceived Biospect to be which was again
exactly what Correlogic is doing.
I then forwarded this same e-mail with all the background
material on Biospect to Drs. Liotta and Petricoin on Thursday,
May 22. And the subject line was ``FYI, Info on Biospect, FYI
Rick Klausner, Lance and Chip, Peter.''
So I brought this to their attention. I had no idea that
they were consulting for Biospect. Frankly, I had never heard
of Biospect before, but again this was brought to my attention
by an outside industry executive.
In the 4 or 5 weeks that followed this e-mail, I was
informed by a number of other biotech industry officials that
they heard that Petricoin and Liotta were consulting for
Biospect or had some affiliation actually. And I became worried
about that. And it was brought to my attention very
specifically in late June, actually, I think it was over the
July 4 weekend and I went to the website for the first time
myself and all the pieces came together. I realized that
Biospect was located on the same floor in our building in
Bethesda and that I had indeed seen Drs. Petricoin and Liotta
there which always struck me as being rather odd from time to
time. And all the pieces began to come together.
So at that point I called Dr. Petricoin who I considered to
be a friend and I confronted him about it, very directly, and
my concern getting back to your question, Mr. Chairman, my
concern was not that there were all these former NCI folks, the
concern was very specifically that Biospect was a competitor
and that they were consulting with a competitor.
Mr. Greenwood. Did your discovery of the consulting
arrangement between Biospect and Drs. Liotta and Petricoin have
an impact on your working relationship within the CRADA?
Mr. Levine. Oh, it most certainly did. I immediately
instructed all the scientists at Correlogic to be very careful
about the information that we shared with them. And for
example, this is at a time where we were beginning our work on
electrospray technology and again, I don't know much about the
details at Biospect, but it certainly seems to be very much
related and this was an area that we were pursuing
aggressively, again, all part of the process of putting
together a turnkey system that goes basically from the
patient's vein to a diagnostic determination. So we cautioned,
I cautioned everybody at Correlogic to be very careful about
what was said until the issue was resolved.
Mr. Greenwood. I'm going to ask the staff to play Clip 5
now.
[Tape played.]
Mr. Greenwood. First, let me ask you, Dr. Heller, do you
consider yourself just a medical device company?
Mr. Heller. I don't know exactly what a medical device
company is, Mr. Chairman. I would say that we're trying to
provide a complete solution. It contains an instrument. It
contains software. It contains an application and we plan on
delivering that entire system to the market for diagnosis.
Mr. Greenwood. Sounds like what Mr. Levine is trying to do.
Mr. Heller. It does sound like what he has said he is
trying to do. That is not our understanding of what he was
trying to do.
Mr. Greenwood. Let me go to you, Mr. Levine. Do you agree
with Dr. Liotta's assertion that you just heard, that what
Correlogic is doing ``seems completely different'' from what
Biospect is doing?
Mr. Levine. No, I was actually amazed at that comment
because at that time, and going back actually as early as April
2002, it's very clear from the license agreement that we have
with the Public Health Service and from what has now been a 2-
year negotiation, that the very central issue was the creation
of a turnkey system. That was the content of probably a good
two-thirds of our CRADA meetings. It was the content, in fact,
it was the sticking point of our negotiations with the Public
Health Service and particularly with NCI was the selection of
components for a turnkey system.
Mr. Greenwood. And is there any question in your mind that
Dr. Liotta understood that?
Mr. Levine. Dr. Liotta was intimately involved in all those
negotiations. And indeed, one of the other issues that went on
in this same time period was that, of course, the Public Health
Service approved our contract with Lab Corp. of America and
Quest Diagnostics and again, these are companies that with
Correlogic, were attempting to deliver a turnkey ovarian cancer
testing service. So again, the idea that we were only a
software company is--it's very clear as early as April 2002,
that was not the case.
Mr. Greenwood. Do you believe that other parties at NIH
understood that you were not just a software company as Dr.
Liotta suggested?
Mr. Levine. Well, I don't know where in the hierarchy of
NIH the information was going. I know certainly that Drs.
Liotta and Petricoin were our principal contacts at NIH, at FDA
and NCI. So I don't know what they were telling their
superiors, but clearly, a large number of people that ranged
frankly from Dr. Shtrom of Biospect to people in the Office of
Technology Transfer of NIH to the people or to the officials in
the Office of Technology Transfer at NCI, all of whom were
intimately aware of this. It's in documents.
Mr. Greenwood. Speaking of documents, in Tab 28 again,
would you point out some of the NIH e-mails that show what they
understood?
Mr. Levine. There are a series of e-mails here and for
example, this is one on July 3, 2003 between Kevin Brandt and
myself, cc'd to Dr. Liotta and Dr. Petricoin.
Mr. Greenwood. Explain who Kevin Brandt is.
Mr. Levine. I'm sorry. He's with NCI's Office of Technology
Transfer. And again, this e-mail is describing the development
of what at this point was a Memorandum of Understanding and the
focus of this e-mail and I believe several others in this same
group is the--for example, choosing of components. And again,
the issue of choosing of components is far beyond software. It
was one of the things that we were focusing on which mass spec.
you use, this protein separation or ionization system do you
use? Frankly, all the components Dr. Heller just described.
That's exactly what Correlogic was doing.
Our business model, however, was a little bit different,
apparently, than Biospect's. We were doing this through
collaborations with Lab Corp. and Quest, with Avion
Biosciences, with Charles River Proteomics. We were doing this
by way of license agreement and contract. But clearly, every
one of these e-mails and all of these negotiations were all
centered on that point of developing a turnkey system.
Mr. Greenwood. Do you believe that it would be clear to
someone comparing Correlogic to Biospect that the two companies
are competitors?
Mr. Levine. Clearly, and in fact, again the way in which I
was alerted to, was that other industry executives, including
some senior executives at a very large in vitro diagnostic
company that if I mentioned the name everybody would know, they
were the ones who were bringing it to my attention.
Mr. Greenwood. Were you aware, prior to these hearings,
that in August 2002, Drs. Petricoin and Liotta were in
discussions with a company called Signet Labs about becoming
members of their new scientific advisory board?
Mr. Levine. Prior to these hearings, no.
Mr. Greenwood. Would you go to Tab 33 and read the June 28,
2002 e-mail from Jeff Livingstone to Dr. Petricoin and Dr.
Petricoin's response.
Mr. Levine. It says ``thank you very much for your kind
reply. We are aware of Dr. Liotta's excellent work in
proteomics and LCN and has worked with Ben Hitt at Correlogic.
I agree he'd be an excellent person to contact in this regard.
At present, Signet is a privately owned small business. The
core business if profitable. However, the capital necessary for
commercialization or new technology will require outside
financing. Our plans are to use outside investment to double
our size and research activities. And we will be starting our
road show next month to raise approximately $15 million for
successful commercialization of our technology. We expect this
to be done through a combination of corporate and venture
investments and some of our corporate partners, Zymarc,
Corning, Life Science, etcetera, have expressed interest in
contributing. In order to preserve capital, we are intending to
offer equity compensations to those who serve as members of the
SAB. Obviously, once we close on our first round of financing,
this will convert to cash or cash plus equity basis, depending
upon the interest of that particular SAB member.'' Dr.
Petricoin's response dated Friday, June 28 says ``Hi Jeff, I'd
be interested in learning more about this. I'd like to
recommend my colleague, Dr. Lance Liotta at the NCI for
consideration for the SAB. I can provide you with his contact
info if you wish. I highly recommend him. We would have to
receive outside activity okay from ethics. Can you tell me what
kind of compensation the SAB members receive for their time.
Best. Emanuel.''
Mr. Greenwood. Now read the second paragraph in the e-mail
from Jeff Livingstone to Drs. Petricoin and Liotta and then the
reply e-mail from Emanuel Petricoin dated August 1, 2002. Tab
32.
Mr. Levine. The e-mail from Dr. Petricoin to Mr.
Livingstone says ``Hi Jeff, both Lance and I are interested in
talking with you about this. Perhaps a conference call this
afternoon would be helpful to us so that we can understand
better what you envision our roles to be, a bit more about your
Magellan technology and how to get ethics clearance. Note that
both Lance and I work with Correlogic as a CRADA partner within
our Government jobs. Best, Emanuel.''
And then there's another e-mail here also from Jeff
Livingstone to Dr. Liotta. ``Dr. Liotta, you may be aware of
any correspondence with Dr. Petricoin. I've invited him to be a
member of a new Scientific Advisory Board we're putting
together. He, in turn, suggested we send an invitation to you.
As we're very aware of your excellent work in pathology and
proteomics and of course, your background is an ideal fit for a
new technology we'll be launching at the DDT meeting this
coming Sunday. My only concern here is there may be a conflict
of interest between the companies you're working with at
present, e.g., Correlogic and any companies you may intend to
start. As a professional courtesy, I do not wish to put you in
such a situation. We meant no slight. I trust you understand.
However, if this is not the case and you are interested, then
please let me know. We'd be honored to have expertise and
perspective available for the development of our Magellan
platform. Plese note, I've sent a binder to Dr. Petricoin
containing an overview of our company and technology, along
with his invitation to the SAB. Please feel free to review it
if you wish. I note you be participation''--that's the way it's
written--``in the DDT meetings. See below. I intend to be at
this meeting on Sunday and all day Monday. I'd be happy to meet
with you in person if you have the time. If you're interested
in visiting Signet while you're here, please let me know. I'd
like to extend this invitation to Dr. Petricoin as well, if
he'll be here for the meeting. Thank you for consideration.''
Mr. Greenwood. Let me ask you this question. What role did
Svetlana Shtrom play in the CRADA?
Mr. Levine. Dr. Shtrom was the NCI technology transfer
specialist that I dealt with continuously really from the
summer of 2000 through the fall of 2002, both through the
development of the original CRADA and then the attempted
amendments that began in the summer of 2002 and she was also
involved indirectly, I will add though, with the negotiations
with NIH's Office of Technology Transfer about the license that
we had, the exclusive license for the hidden patterns
technology. The reason being is that there was an overlap, if
you will, between the CRADA and the license agreement. Indeed,
that's one of the issues really here that makes this so
complicated. It's again that we are both co-inventors, along
with Petricoin and Liotta and we are the exclusive licensee of
the Government's interest in that invention and at the same
time operating under a CRADA.
So there was a lot of exchange of e-mails, conversations,
between the Technology Transfer Office of NIH that we
negotiated with for the exclusive license and NCI's Tech.
Transfer Office that was responsible for the CRADA.
Mr. Greenwood. And when did you learn that Svetlana Shtrom
was involved with Biospect?
Mr. Levine. At the same time, essentially, that I learned
that Dr. Petricoin and Dr. Liotta were involved. I was aware
that she was on the floor of our building, but never made the
association.
Mr. Greenwood. In your testimony, you mention that you're
on the brink of bringing a new testing device that can improve
chances for early detection and treatment of cancer to market.
Has the process of negotiating with NIH in any way slowed the
process of getting your product to the American people who need
it?
Mr. Levine. That's difficult to answer, Mr. Chairman, but
certainly the amount of time, energy and effort that a little
company like Correlogic has spent--a 2-year negotiation and of
course, the--as we began to describe the CRADA relationship
after July as the un-CRADA, certainly we could have made much
more progress had there been a genuine collaboration and
cooperation with our Government partners.
Mr. Greenwood. Okay, Dr. Richard Klausner is listed on
Biospect Predicant's website as a founder and director of the
company. Do you know whether or not Dr. Klausner was aware of
the work being done on Correlogic's CRADA with NCI?
Mr. Levine. Long before any of these issues became aware,
became apparent to me, in casual conversations with both Drs.
Liotta and Petricoin, they mentioned to me the great interest
that Dr. Klausner had in this and indeed, I think when you look
back at all that went on, there was a tremendous amount of
publicity in February 2002 concerning the Lancet publication on
our ovarian cancer work with Dr. Liotta and Dr. Petricoin. So I
think the Agency as--I think everyone at the highest levels of
the Agency was very much aware of this work, but again, I was
told specifically that both Petricoin and Liotta had been
brought in to talk with Dr. Klausner.
Mr. Greenwood. And do you know if those discussions
occurred before or after his departure from NCI?
Mr. Levine. No, I believe they occurred before.
Mr. Greenwood. When you learned that Dr, Klausner was
involved with Biospect, were you alarmed that the person with
whom the two principal investigators on your CRADA had
discussed your work, was involved with a competitor?
Mr. Levine. Well, all that raised troubling questions and
again, the e-mail that I sent to Drs. Liotta and Petricoin on
May 22 was part of that issue. And again, because we routinely
over the preceding 2 years had sent e-mails and constantly
talked between ourselves about what other institutions were
doing, other academics, other private sector companies, knowing
that there were other folks out there who were sort of racing
to fill the same space.
So yes, it was very troubling and in general, the idea that
the former director of NCI and actually there were at least
three people that I know from NCI, two rather high positions,
plus Dr. Shtrom who had worked with us directly, were all now
members or were working with Biospect. Certainly, it seemed to
be stacking the deck.
Mr. Greenwood. Okay. I will turn to you, Dr. Heller.
When did Biospect hire Dr. Liotta and Dr. Petricoin?
Mr. Heller. I believe their consulting agreement started in
December of 2002.
Mr. Greenwood. And how long did the consulting relationship
last?
Mr. Heller. Up until last month as far as I know.
Mr. Greenwood. Last month?
Mr. Heller. Last couple of months, yes.
Mr. Greenwood. And do you know when Dr. Liotta stopped
receiving payments?
Mr. Heller. I don't have an exact date, but it was some
time in 2004.
Mr. Greenwood. And did these two doctors work pretty
consistently through that time period?
Mr. Heller. They spent initially about 2 days a month and
then subsequently about 1 day a month working with us.
Mr. Greenwood. So Biospect was still compensation Dr.
Liotta for work into May, is that correct?
Mr. Heller. I believe his last paycheck was May 1.
Mr. Greenwood. Look at Tab 41, I think it might help you.
Mr. Heller. So yes, according to this, Dr. Liotta got paid
on May 1, 2004.
Mr. Greenwood. Okay, the staff would put up a slide and if
you would turn your attention to the screen, Dr. Heller.
Is this the canceled check indicative of the last time
Biospect compensated Dr. Liotta?
Mr. Heller. That looks like it is.
Mr. Greenwood. Okay. So he was still doing work for the
company during March, April and May. Is that correct?
Mr. Heller. I do not recall whether we actually had
conversations during that time period, but I would say most
likely we did, yes.
Mr. Greenwood. Is it likely you would have compensated him
for doing nothing?
Mr. Heller. As the agreement stood, we compensated them on
the first of every month regardless. They did not have to turn
in time sheets or anything like that. We did a direct deposit
essentially.
Mr. Greenwood. You don't know whether he was still doing
work during those 3 months?
Mr. Heller. In the last couple of months, I was no longer
on the phone calls with Drs. Petricoin and Liotta. I would have
to guess that they were still doing work in February.
Mr. Greenwood. You said that you were not on the phone
calls. That presumes that you know that there were phone calls?
Mr. Heller. I assume there were phone calls.
Mr. Greenwood. You assume, based on what do you make that
assumption?
Mr. Heller. One of my colleagues was responsible for
working with them and setting up such phone calls and he was
fairly diligent about that.
Mr. Greenwood. Okay. The Chair will yield 10 minutes to the
gentleman from Florida, Mr. Stearns.
Mr. Stearns. Thank you, Mr. Chairman. If the staff would
please play clip one. Plese listen to a statement of Dr.
Petricoin made at our last hearing.
[Audio file played.]
Mr. Stearns. I guess the question would be for Dr. Heller.
Based on Biospect's relationship with Dr. Petricoin, do you
believe it is likely that this encounter with Dr. Goodman was
the first time Dr. Petricoin understood that Biospect did data
analysis?
Mr. Heller. With all due respect, I cannot really say what
Dr. Petricoin and Dr. Liotta remember about what we told them.
I have the utmost respect for Drs. Liotta and Petricoin and
therefore it's actually hard for me to understand the clip that
we just heard.
I believe that we had past discussions with them, starting
at the beginning of their consulting relationship with us which
made them aware that the company was doing pattern recognition,
pattern analysis and subsequent to that we signed a
confidentiality agreement with the NCI to acquire new data that
was publicly available, but not yet published from Drs. Liotta
and Petricoin and I believe they were aware that we had signed
that consulting agreement and downloaded their data.
Mr. Stearns. Can I summarize by saying you don't think that
is believable what you just heard?
Mr. Heller. I can't state under oath again that what they
were thinking when they answered that, but it's not my
knowledge.
Mr. Stearns. Let me ask you yes or no, what you heard, do
you think that is believable?
Mr. Heller. Not to my knowledge.
Mr. Stearns. Okay, so basically you're saying you don't
think it's believable.
Did Dr. Liotta or Dr. Petricoin offer any advice to
Biospect on how to set up the labs?
Mr. Heller. I assume by that you mean our reference labs?
Mr. Stearns. Yes, the reference labs?
Mr. Heller. I think we, in general, discussed different
routes of bringing a product to market and that included,
covered the area of setting up a clinical reference lab, yes.
Mr. Stearns. Did they advise you on certification
standards? CLIA certification standards?
Mr. Heller. One of the main things that the two of them did
is they pointed us to public information because we were a
small company. We didn't have a lot of resources. We didn't
know exactly where to look. I believe that one of the things
they pointed us to was a list of CLIA reference lab standards,
yes.
Mr. Stearns. Which Federal agency regulates CLIA standards?
Mr. Heller. I believe it's CMS.
Mr. Stearns. So Dr. Liotta gave Biospect advice on how to
implement a CMS standard?
Mr. Heller. I wouldn't say that he gave us advice. I would
say that he pointed us in the direction of a document that told
us essentially what we would have to do to meet that standard.
Mr. Stearns. So he advised on how to make the reference lab
CLIA compliant?
Mr. Heller. Again, he pointed us to documents that
described how we would do that. I wouldn't say that he actually
advised us how to do that.
Mr. Stearns. Mr. Levine, has Correlogic attended any
clinical proteomics conferences?
Mr. Levine. Yes, we do, sir.
Mr. Stearns. And were they with Drs. Liotta and Petricoin,
did they make presentations at these?
Mr. Levine. Over the last 3 years, there have been a large
number of conferences. We have not attended most of those. I
believe there have been at least two or three where either I
have been a speaker along with Dr. Petricoin or Correlogic's
Chief Scientific Officer, Dr. Hitt may have been a speaker
along with Dr. Petricoin.
Mr. Stearns. And when they discussed the work they had done
for Correlogic, did they acknowledge the company's contribution
to the work?
Mr. Levine. In a minimal way. And in fact, over the last
2\1/2\ years, there was a series of e-mails that I've not
provided yet to the committee, but I'd be happy to do so where
we actually complain about that, that basically our
contribution is being minimized.
Mr. Stearns. So the principal investigators, you were
collaborating with on this CRADA, weren't giving the company
any credit for their work?
Mr. Levine. I wouldn't say no credit. I'd say really de
minimis credit and particularly relative to the Lancet
publication in which the actual analysis, I mean the actual--
the meat of the Lancet, the real discovery is what Dr. Hitt did
in the computational analysis.
Mr. Stearns. But as you mentioned, you are named with Dr.
Petricoin and Dr. Liotta in filing patents in a publication. Is
that correct?
Mr. Levine. That's correct.
Mr. Stearns. Thank you, Mr. Chairman.
Mr. Greenwood. The chairman recognizes Mr. Bilirakis for
questions for 10 minutes.
Mr. Bilirakis. Well, Mr. Chairman, I listened to some of
their testimony while I was out in the anteroom. I'm not going
to be specific here as Mr. Stearns and others maybe were, but--
and I know in your written statements you basically refer to
your experience at NIH and what not. Mr. Levine, you quite--
you're pretty strong, I would say quite frankly, would not be
at this critical and exciting juncture in talking about the
accomplishments of your company without the considerable talent
and resources of the NIH and NCI, etcetera.
You're both health care people. You're in it, obviously, to
make a profit, but you're in it also because I think you care
and you want to help people.
And I know you're involved in the research area and you
work with NIH and some of these other groups. I'm just going to
ask you to maybe complement, if you would, supplement,
complement your written testimony, anything more--you sat
through the--how much time did we take with the prior panel.
You sat through all that.
Let's start with Mr. Levine, is it Levine?
Mr. Levine. Levine.
Mr. Bilirakis. With what I get with my last name, you
shouldn't be----
Mr. Levine. I respond either way, I got used to it too.
Mr. Bilirakis. Mr. Levine, why don't you just go ahead and
supplement your statement. You heard--your written statement
was written prior to coming in and sitting in during the last
panel. And just tell us how do you feel, I mean, how do you
feel about what has happened? How do you feel about what we are
doing here in terms of research? Are we helping research or are
we hurting research, etcetera? Go ahead.
And then Dr. Heller, I would ask you the same thing.
Mr. Levine. I think, in general, that the subcommittee's
work is critical and I think it will create a very significant
improvement. We constantly hear about the job generation, for
example, from the small business sector, well, actually both
Biospect and Correlogic are small companies and if the
Government wants to really realize the great potential of these
public/private partnerships, you've got be able to assure that
when small companies enter into relationships with the
Government that they don't get crushed. And so I think the
theme that I take away from all of this is that everyone in
America has to abide by their agreements. Everyone has got to
play fair, but particularly the Government, particularly the
Government. My God, if a Government agency can just sort of
arbitrarily decide to ignore an agreement that's signed on 1
day because other people in the agency think it's not correct
or because something looks more attractive elsewhere, the whole
system falls apart. So I'm actually very encouraged by what Dr.
Zerhouni said.
Mr. Bilirakis. Excuse me, a minute, sir. I wanted to ask
the questions. Dr. Zerhouni has left. Are there any NIH people
in the audience? Are there any NIH folks here? Are you all
taking notes? Okay.
I would hope that some of the things that you're hearing
from these two witnesses will go to Dr. Zerhouni and Mr. Azar.
Okay, go ahead, sir.
Mr. Levine. So I'm very encouraged by what I heard this
morning. The other suggestion I would make though, I realize
that the focus of these subcommittee hearings are principally
on conflict of interest and the consulting arrangements, but I
think that all this ties into the broader issue that when you
have an agency as large as NIH, and you have this very
complicated interaction of licensing agreements, intellectual
property, contracts, CRADAs, essentially you have the potential
and I think Correlogic is caught up in the middle of this, the
potential for an incredibly complicated situation where rights
are being granted and then whittled away or it's confusing as
to which rights were granted. So I'm not sure that I can offer
a solution this morning, but I think certainly someone has got
to be able to be in a position to step back and say and what
are all the conflicting or potentially conflicting and
overlapping relationships between this agency, this employee of
this agency, this private sector company, and this is
particularly true, particularly true in the area of biotech.
I have no problem whatsoever with Biospect, what Dr. Heller
has said. We are both working toward the same end point and
it's a great end point for the public, in general. But if it
leaves too small biotech companies kind of wondering who
they're talking to and what information they should be sharing
and not be sharing, that can't be good for the public. So
that's the lesson that I would take away from all of this.
Mr. Bilirakis. Based on your experience with NIH, would you
look forward to working with them or any other part of the
Federal Government again regarding the good work that you're
doing?
Mr. Levine. That is a difficult question, Congressman. We
do intend to continue working with the Public Health Service.
And, again, in my opening comment, that is one of the concerns
I have is that there are no whistleblower statutes for
companies, especially small companies. But, no, we would.
I mean, overwhelmingly, all of the scientists and the
executives that I have dealt with in the Public Health Service
are outstanding, so I don't think that this is a systemic
problem. I think there was a profound lack of common sense
applied to all of this. I mean, when you step back from all of
the lawyers and figuring out where the semi-colons are placed,
I mean, basically, you know, none of this would pass the smell
test. It just didn't make sense. So, you know, but I don't
think that is the rule.
Mr. Bilirakis. I know the chairman basically laid out his
admonishment regarding any negative suffering that you might
have as a result of testifying here before you--right at the
beginning of your testimony. So hopefully--I know he was pretty
strong and stern when he made those comments, and I know he
means it.
Okay. Dr. Heller?
Mr. Heller. I do. I also encourage the committee's work. I
think you are doing very good work, and I was encouraged by Dr.
Zerhouni's plans. I think we come from a different perspective.
We feel like we followed all of the ethical rules and
procedures, and really up until this morning we were under the
impression that Drs. Liotta and Petricoin had as well. We do
not feel like we had any surreptitious or secret dealings with
them in any way.
I think it is up to the committee and to Dr. Zerhouni to
find the right balance between what government scientists
should be allowed to do in terms of consulting and cooperative
research agreements, and what not. I don't feel like I am in
the proper place. I am not an ethicist in any way.
I will say that I believe that allowing government
scientists to consult encourages new developments in the field,
and, in fact, I believe that Drs. Liotta and Petricoin's work
has really led to the blossoming of a new industry. And I think
that was--that is to be encouraged in many ways.
Mr. Bilirakis. Are you optimistic hearing Dr. Zerhouni's 10
steps as he explained them to us? Are you optimistic that those
would work?
Mr. Heller. I am. I think the transparency is the main
issue within NIH.
Mr. Bilirakis. Yes. Do you agree, Mr. Levine?
Mr. Levine. I would like to make one more comment on Dr.
Heller's comment, which I agree with generally. But the last
part of your comment, Dr. Heller, that consulting is a way to
somehow spread the--you know, get the technology out, I really
reject that idea completely. The Congress has set up very, very
clear mechanisms for the technologies that are developed by
government to be transferred to the private sector, through a
CRADA, through licensing agreements, and, of course, both of
those are mechanisms that Correlogic has availed itself of.
And, third, through the peer review and the publications
and the public speaking that government scientists do. So the
idea somehow that private consulting by a government scientist,
where those funds go into the pocket of the scientist, and the
information goes directly to the private sector company, I
think that is just not--that is not a methodology for
technologic transfer. There are three very, very good methods
for technology transfer, and that is not one of them.
Mr. Bilirakis. Well, Dr. Heller, a response to that? I
mean, that is a little bit of a hornet's nest there. Go ahead.
Mr. Heller. I mean, I guess, again, I am not an expert in
this, but I guess I would disagree. I believe that consulting
is a valid way to get information that government scientists
have out to industry. And I guess I feel also that there are a
huge number of applications for these kinds of technologies.
Although in some senses Correlogic and Predicant may be
competitors, in other senses there are hundreds of applications
that we might want to go after. You know, specifically, from
the literature I know ovarian cancer is at the top of
Correlogic's list of diseases that it is trying to address.
That is not on our list. And so I see no fundamental conflict.
I feel like government employees can look at the----
Mr. Bilirakis. So do you think that consulting is a pretty
significant part of adequate research?
Mr. Heller. I believe it is a way for government scientists
to make their expertise available to biotech.
Mr. Bilirakis. Well, it is kind of a fundamental point I
guess.
All right. Thank you very much, Mr. Chairman.
Mr. Greenwood. The Chair thanks the gentleman.
The Chair recognizes the chairman of the full committee,
Mr. Barton.
Chairman Barton. Thank you, and I appreciate this panel
still being here. I had to go do something else, and I am glad
they are still here.
Dr. Heller, let me ask you a hypothetical. Let us assume
that I move to Colorado, and I move to Congresswoman DeGette's
district. And I know she is a crackerjack campaigner, and I
find out who her consultant is that is helping her on her
campaign, and I decide to run for Congress against her.
And I go to her consultant, and I say, ``Now, I am going to
pay you a lot more, and I want you to continue to work with
Congresswoman DeGette, but don't tell her that you are working
for me. Just every now and then I am going to have a board
meeting, and I want you to come give me information about the
campaign.'' Would you consider that ethical or not?
Mr. Heller. I would not consider that ethical, but I do not
believe that that is the case in front of us today.
Chairman Barton. All right. Now, you said you don't
consider that to be ethical. Now, my understanding is that the
former head of NCI, Dr. Klausner, at one time was a member of
the board of your predecessor company, and maybe still is a
member of the board of your--the company as it is currently
configured. Is that correct?
Mr. Heller. He is.
Chairman Barton. Okay. Now, Mr. Levine, sitting right next
to you, several years ago according to his testimony had this
idea, and he sketched it out on a napkin at a restaurant, about
the way to find a predictive test for ovarian cancer. And he
got some folks at NIH to collaborate with him and checking it
out, and, lo and behold, it appeared to have viability.
And so they created what was called a CRADA, and he had
several of the NIH researchers working with him on it, I think
a Dr. Liotta and a Dr. Petricoin. And things were moving along
swimmingly, and then, lo and behold, unbeknownst to him, they
got retained to work for your company. And my guess is that Dr.
Klausner recommended them.
I don't know that, but since he was the head of NCI and he
had access to this information, it would--it is speculation on
my part, but it would seem to be logical that if he knew what
was going on that he could have pointed these individuals out
to your company. Is that how it happened, or did you all just
pull names out of a hat and it happened to be these two
scientists that were working on the CRADA with Mr. Levine's
company?
Mr. Heller. Let me explain a number of things. First of
all, I want to address the point that the agreements between
Biospect, now Predicant, and Drs. Liotta and Petricoin, were at
no time secret. We never kept that from public information. We
divulged that to people we were working with. It is not my----
Chairman Barton. So Mr. Levine next to you is just an idiot
and didn't know?
Mr. Heller. We never talked to Correlogic or any employees
there.
Chairman Barton. You honestly think that it is fair game to
hire people that are working for a company that, if not doing
exact research, something in a similar vein. In fact,
apparently they are the ones--this gentleman to your right is
the gentleman who had the idea, and it is okay to go in and
retain them and just assume that it is Mr. Levine's job to know
that they were retained and hire a private investigator to go
out and search them out?
Mr. Heller. So let me address, again, a couple of issues
here. One, although Mr. Levine and his--the people he works
with did talk to Drs. Petricoin and Liotta, I would call it
farfetched to--with all due respect, to say that they invented
pattern recognition as it comes--you know, with respect to
biological data. This is something that was going on in very
closely related fields.
The second thing I would like to say----
Chairman Barton. I assume that you read his testimony about
the dinner conversation that he had and sketching the idea on
the napkin. You dispute that? That didn't----
Mr. Heller. No, I completely believe that it occurred. But
there were very closely related fields where people were doing
very similar pattern recognition.
Chairman Barton. Okay.
Mr. Heller. Not in proteomics but in gene expression
analysis, a very closely related field.
Second of all, I don't think that it is fair to say that we
were doing exactly the same thing, or we are doing exactly the
same thing as Correlogic. Mr. Levine pointed out that we are
approaching the same problem from different ways, and I think
there is a fundamental difference.
Chairman Barton. Nothing wrong with that. We are not
disputing that there is----
Mr. Heller. No, but let me explain. I think we are trying
to develop a complete technology solution. We are not just
trying to buy parts off the shelf and fit them together, and I
think that because of that we are--we think of ourselves as a
very integrated company.
Chairman Barton. Well, but----
Mr. Heller. We do not think of ourselves as only producing
software. And to our knowledge, that was Correlogic's only----
Chairman Barton. Well, let me--Mr. Levine, do you consider
yourself the software company only?
Mr. Levine. No, I don't, sir. And the analogy there really
I think falls flat. I mean, there is virtually no company, at
least in the technology world, that manufactures or produces or
designs every single component of a complicated piece of
equipment. I mean, if you look at a Dell computer, you will
find the hard drives are made by one company in Taiwan, and the
motherboards are made by somebody else in Texas.
Chairman Barton. Well, we will give Dr. Heller the benefit
of the doubt that his company is looking at this area in a
little bit different way, and maybe a little more comprehensive
way.
Mr. Levine. Right.
Chairman Barton. I won't dispute that. But I want to go
back to how these two scientists at NIH that were under the
CRADA agreement with Mr. Levine got picked to work for your
company. Did Dr. Klausner have anything to do with identifying
them as prospective candidates to work for your company?
Mr. Heller. They were invited to be consultants for our
company by our Acting CEO, Jim Tannenbaum.
Chairman Barton. And how did he find out about it?
Mr. Heller. He did work with Dr. Klausner. Dr. Klausner----
Chairman Barton. So Dr. Klausner indicated to your Acting
CEO that these were two individuals that were doing research on
a similar idea and they might be worth talking to.
Mr. Heller. I believe that would be the case, but let me
also point out that there are a very limited number of people
in the world who are doing this kind of research. You know, we
are talking 20.
Chairman Barton. When these two scientists were contacted
by your company, was it a legal requirement that they notify
Mr. Levine's company? Or was it just their own code of honor
that they should indicate that they have been contacted?
Mr. Heller. We had very carefully worded agreements. NIH
participated in editing those agreements. All of the agreements
that we have in place were NIH and FDA cleared. I do not know
what NIH and FDA rules are with regard to disclosure. We
specifically asked the consultants what other agreements they
had, and we were informed----
Chairman Barton. While they were in the CRADA with Mr.
Levine's company, they were retained by your company. Were they
compensated by both companies at the same time?
Mr. Heller. I do not know whether----
Chairman Barton. Were they compensated by your company?
Mr. Heller. They were compensated by my company.
Chairman Barton. All right. Mr. Levine, were they
compensated by your company?
Mr. Levine. No, that is absolutely prohibited. The CRADA--
we made a contribution in terms of our----
Chairman Barton. So we have a situation with the
government-sponsored research, the CRADA. The taxpayer is
paying for their time. But with Dr. Heller's company, the
investors are paying for their time, and so they have a
potential conflict there that they are actually serving two
masters, one of which is the public and one of which is
private.
Now, I don't know what the compensation package was with
Dr. Heller's company. I will assume it was on the up and up.
But if it had incentives in it, the incentives would certainly
be for them to give their best shot to Dr. Heller's company,
because they get more money that way.
Mr. Levine. There were no incentives in it. It was strictly
a fee per month.
Chairman Barton. Okay. Now, I want to read you a statement,
Dr. Heller, and you tell me what you think about this. This is
from Mr. Levine's testimony. This is on page 10, and I quote,
``So while our negotiations over finalizing our clinical trial
CRADA were slowly going nowhere, Dr. Liotta and Dr. Petricoin
had become consultants to our competitor, Biospect, and Dr.
Shtrom had become an employee. During our endless discussions
with Dr. Liotta and Dr. Petricoin about Correlogic's research
and plans for clinical trials, I now realize I would have had
no way of knowing, for example, whether I had been talking to
Dr. Liotta, the NCI employee, or Dr. Liotta, the Biospect
consultant, or Dr. Liotta, an owner of Immunomatrix, or Dr.
Liotta, the employer or former employer of Dr. Whitley. And
these are just the relationships that I know about.''
Do you have any sympathy for Mr. Levine's plight there
that, you know, he didn't know which hat his CRADA coordinator
was wearing at the time?
Mr. Heller. Let me address the fact that Svetlana Shtrom
did and continues to work for Predicant. The first time I was
aware that she actually was involved in establishing this CRADA
was about 2 weeks ago. So we have internally had very high
ethical standards. We have not discussed Correlogic or the
CRADA internally at all, and I think that that is an important
issue.
Chairman Barton. Well, my time is about out, so I want to
conclude with just an observation. In the political arena, if I
am campaigning against Mr. Greenwood or Ms. DeGette, you know,
I kind of know what the rules are. You know, everything is
going to be in the public, and any funds that are raised have
to be reported, and groups that support us have to report the
contributions, and, you know, we fire salvos back and forth.
But we kind of know what the rules are.
But what you are having us believe, that in this research
situation funded by NIH, that it was okay for you to go in and
retain or somehow develop some sort of a contractual
relationship with the people that were helping your competitor,
and you didn't have to tell anybody about it. And it was okay
as long as you got some scientific agreement that got approved
and got filed where nobody could read about it, and I think
that is just flat wrong.
I think if the taxpayers are going to enter into a
cooperative agreement, a CRADA, with any company, that anybody
who represents the government, if they want to have a
relationship with somebody else in the same line, that has to
be transparently reported upfront, proactively, not, you know,
if you smoke them out and he hires a private investigator, or
just happens to find out through the grapevine, and, you know,
I respect your academic background, and I respect the research
that your company is doing, but I absolutely have no respect
for the way you have gone in and retained the services of some
of the individuals that at least ostensibly on paper were
supposed to be working with Mr. Levine's company.
I just think that is irresponsible. And if we need to pass
legislation to prevent it, or if we can reinforce what Dr.
Zerhouni has said in doing it administratively, I am going to
encourage this committee to do that.
Mr. Heller. May I comment on that?
Chairman Barton. Certainly.
Mr. Heller. I agree with your conclusion that better
transparency is a good thing, and I believe that Dr. Zerhouni's
recommendations will address that. I completely agree with you.
I just want to point out, we did follow all of the NIH and
all of the FDA guidelines. The FDA knew, the NIH knew, exactly
what we were doing. We at no time tried to keep their
relationship secret in any way, and, in fact, that is probably
how Peter Levine found out about this. We weren't trying to
hide this in any way. I feel like that is a false accusation.
And so I agree that better transparency would be a very
good thing. We feel like we followed the law, and if the laws
need to change, which I believe that you are suggesting they
do--and Dr. Zerhouni is suggesting they do--I believe that is a
good thing as well.
Chairman Barton. Mr. Chairman, I would ask unanimous
consent for 2 minutes, just to----
Mr. Greenwood. Without objection.
Chairman Barton. Mr. Levine, I don't want to comment on
what Dr. Heller just said, I want to give you a chance to
comment on what he just said. Do you think that there was full
disclosure of the relationship between Drs. Petricoin and
Liotta and Biospect/Predicant and your company that you could
have known without----
Mr. Levine. There certainly was not, although I will say I
am sympathetic, actually, to Dr. Heller's comment. The
responsibility is not on Biospect to be, you know, contacting
Correlogic. The responsibility was on the part of Drs. Liotta
and Petricoin and NCI and FDA to make sure the situation
couldn't arise. So we were not informed at all.
In fact, there were numerous occasions where the
opportunity to inform us was very apparent--for example, when I
sent them an e-mail with the Biospect information in May 2003.
So, again, I think the issue here really is it is the role of
the Public Health Service scientists, it is the role of the
ethics officers within those agencies--and, again, just to
stress a point, it is not just the CRADA relationship. It is
the interrelationship between research that we did with NCI and
FDA under the CRADA and the overarching license agreement that
we have with the Public Health Service.
And just one other comment. Dr. Heller mentioned in answer
to your description of my brunch discussion with Dr. Petricoin
many years ago, whether or not the issue of pattern recognition
has been used in other fields, of course it has been.
But the central issue here, though, is that the FDA and the
NCI and the Public Health Service and Correlogic have all filed
patents on these various inventions. And, of course, the
central part of the licensing agreement with Correlogic was to
develop a turnkey system, and that is exactly the same business
goal that Biospect has.
And, again, I have no problem with what Biospect is doing.
I mean, they--you know, if you can get some expertise, go ahead
and do it. The problem lies with the agencies.
Chairman Barton. So you think that if it is not Biospect's
obligation, then the scientists in question should either
recuse themselves, ask to be released from their obligation to
your company, or, at a minimum, report it in an open and
transparent fashion.
Mr. Levine. That is absolutely correct. In fact, I think
the issue of transparency, which several individuals today have
already commented on, I think that is really, really key. And,
again, because I think it is not--it doesn't take a group of
lawyers to figure this out.
It is really just--it is sort of a--you know, it is sort of
a common sense look at the website of both Biospect at the
time, and at the time from my perspective that is May 2003,
perhaps earlier. And what Correlogic was doing, it didn't take
an ethics officer or a scientist or a lawyer to figure out that
these two companies had exactly the same goals and were working
on very, very similar technologies.
Chairman Barton. Thank you, Mr. Chairman.
Mr. Greenwood. The Chair asks unanimous consent to--the
Chair yields himself 5 minutes, and then will just be brief and
then yield to Mr. Bilirakis.
Let me just understand something about your testimony, Dr.
Heller. There are a couple ways to look at this issue. One is
that not to worry because what you are doing is so different
than from what Mr. Levine's company is doing that even if
Liotta and Petricoin told you everything there was to know
about what they were doing, it wouldn't have helped you anyway,
because you are doing different things.
The other way to do it is to say, actually, that they
didn't you anything anyway, and so there was--confidentiality
was kept. I mean, which is it here? I mean, do you want us to
believe that if you knew everything that Dr. Levine was doing
it wouldn't help you to develop your product?
Mr. Heller. I actually think that it is sort of both of
what you are saying. We knew nothing from--other than what was
in the public literature about what Correlogic was doing. It
was never shared by Drs. Liotta or Petricoin or anyone else
with us.
At the same time, we know specifically from the literature
that they are working on these very specific software
algorithms that are not the focus of what we are working on. We
are working on completely different pattern recognitions and--
--
Mr. Greenwood. So if Dr. Levine wrote everything that he
was doing with his product in a notebook, and you happened to
stumble upon it, you wouldn't even be interested in looking
through it? You wouldn't learn anything from reading what Dr.
Levine is up to?
Mr. Heller. I think we would gain some information about
what he was doing. I don't know that it would be incredibly
helpful to our company in any way.
Mr. Greenwood. Okay. Do you concur with that, Dr. Levine?
Mr. Levine. No, I don't. And thank you for the doctor, but
it is only----
Mr. Greenwood. Right, Mr. Levine.
Mr. Levine. Unless a J.D., you know, confers doctor status
on me.
The problem I have, Dr. Heller, with what you just said is
that--and, you know, in general with this issue--is that when
someone learns something, whether it is a scientist or just,
you know, a citizen, when you learn something, you know, a
month or 2 after you learn it, are you going to remember where
you learned it? So whether or not--I mean, you are not in a
position, and Biospect wasn't in the position, to know whether
or not----
Mr. Greenwood. You need to address your questions to the
committee.
Mr. Levine. I am sorry----
Mr. Greenwood. That is okay.
Mr. Levine. --Mr. Chairman. The problem is that when we
would say something to a scientist at NIH, if a month later
they are digesting that and then it comes back out in a
conversation with somebody else, are they going to remember
that they learned that or that particular piece of information,
maybe not an earth-shattering, you know, not a patent pending
kind of information, but the direction that the company was
going in or some particular manipulation of data.
So the issue really is: how do you filter out, and how do
you know that what is in your own mind, and you then provide
that advice to somebody else, is really coming from your own
understanding, or is it coming from something that you learned
a week earlier? So that is one concern.
The second issue is that Dr. Heller mentioned, well, they
are using different algorithms. But, again, what we have
published, you know, publicly is one thing. But, of course, the
fact that the work is ongoing with other bioinformatics--and,
again, the central issue, as I mentioned earlier, is that we
were developing and working on processes that began with the
collection of blood and how it was handled, stored, prepared,
through what kind of robotic machines would handle it, to mass
spectrometry, all the way through to the end result. So it
wasn't just the software issue.
Mr. Greenwood. Which is why the standard in ethics is not
conflict of interest. It is the appearance of conflict of
interest. And by casting that kind of a net, we avoid all of
this--all of these nuances.
The Chair yields to the gentleman from Florida, Mr.
Bilirakis.
Mr. Bilirakis. All of this hitchhiking on all of these
conversations, Mr. Chairman--well, Dr. Heller, I raised the
question about the significance of consulting to the field of
research. And you and Mr. Levine completely disagreed in terms
of the significance of it and the need for it. I guess maybe
that is the best way to put it is the need for it.
Now, you said there is a need for it. Can you take a couple
of minutes and tell me how? I mean, do you want to pick an
illustration and tell us how that illustration supports your
point of view? I think it is really, as the chairman just said,
a fundamental policy question. And as long as--you know, maybe
bad things have not taken place. But God knows it certainly
contributes to the perception of an awful lot of bad things
having taken place.
So can you do that for us in a couple of minutes?
Mr. Heller. Sure. Again----
Mr. Bilirakis. And I thank the chairman for the time.
Go ahead, sir.
Mr. Heller. Again, this is not an area of my experience,
but let me follow on a theme that Dr. Zerhouni mentioned in his
testimony. He said, ``Well, what happens if there is an NIH
scientist who is studying West Nile Virus with technology that
is obviously applicable to some other disease?'' And I think
that is a great example of what can happen.
You know, in this case, the technology is not just limited
to diagnosis of ovarian cancer and the diseases that Drs.
Petricoin and Liotta and Correlogic are working on. There are a
huge number of diseases out there, and to gain the expertise
from people who have developed it for one particular
application in other applications would be of great value to
the scientific industry.
Mr. Bilirakis. But isn't there, Mr.--am I pronouncing your
name correctly when I say Levine?
Mr. Levine. No, Laveen is the name.
Mr. Bilirakis. Laveen. Dr. Heller has been using Laveen all
along.
But anyhow, Mr. Levine, aren't there other ways that this
important significant information, these breakthroughs and what
not, are available out there for the general public and for
these other industries and what not?
Mr. Levine. Yes.
Mr. Bilirakis. Other than through the consulting method?
Mr. Levine. Yes, absolutely. There are three methods. There
is the CRADA method, which Correlogic is involved in, which,
again, that is very public and it goes through a review process
within the government. There is a licensing procedure where if
Public Health Service scientists invent a technology which has
the potential to be commercialized, it is posted in the Federal
Register, and private sector companies can compete for that
technology.
And third, of course, is that most government scientists
are obsessed with putting out peer reviewed publications, which
are then available to anyone who buys the magazine or attends a
conference. So I think there are very clear methodologies which
are transparent, which are fair to the public at large. And if
there is any, you know, income that comes back from those
activities, and particularly the licensing--whether it is
direct licensing or licensing under the CRADA--those funds come
back into the Federal treasury, back to the taxpayer, not into
the pockets of the individual scientist.
Mr. Heller. May I comment on that?
Mr. Bilirakis. Yes, Dr. Heller.
Mr. Heller. I agree. I think that the three methods that
Mr. Levine----
Mr. Bilirakis. But you don't think they are adequate?
Mr. Heller. I think it doesn't account for one thing. The
scientists at the NIH and the FDA are very busy people. I
couldn't guess how many e-mails that they get per day. How does
a company like us, like Predicant, attract the attention? How
do we get their time, and how do we get their information?
The public meetings are one forum for doing that, but, you
know, in general people come to these meetings for a very short
period of time. They fly out. It is hard to attract people's
attention. I think by being able to get focused--the focused
attention through a consulting agreement, I think that is the
best way. But I agree that it should be transparent.
Mr. Bilirakis. Yes. So you feel the only way you can get
the attention is by paying them, giving them stock options.
Mr. Heller. I mean, I think there are multiple ways but
different people respond in different ways. And we--I don't
think that stock options are necessarily the right thing, and
we specifically did not give any stock in this case.
Mr. Bilirakis. Well, sir, I don't know what took place
here. I don't think this committee is saying that you all did
anything wrong or anything of that nature, because we don't
know. I mean, that is not our job here. But I do think that the
perception--and I am sure you don't blame Mr. Levin--Laveen,
Levine, Levin----
I am sure you don't blame Mr. Levine for thinking that,
because, boy, what a perception there is there.
Mr. Heller. No, I do not. Absolutely not.
Mr. Bilirakis. So that is why we----
Mr. Heller. But I believe the transparency would solve the
issue. I think if he was made aware initially that the
consulting agreement was being put in place, I think that would
take care of this issue.
Mr. Bilirakis. Well, thanks, Mr. Chairman.
Mr. Greenwood. The gentlelady Ms. DeGette wants to comment.
Ms. DeGette. Thank you, Mr. Chairman.
I just wanted to comment. I joined in the chairman's
questioning, so I didn't ask this round. But listening to the
two of you gentlemen speak today, first of all I really want to
thank you for coming, both of you. I know it was an imposition,
and it was incredibly illuminating, some of the most
illuminating testimony we have had during these series of three
hearings.
What it showed to me is, first of all, the concerns that
private industry has in trying to get folks' attention over at
HHS, and also to try to get some of the research, which is what
leads, in our view, to some of these conflicts of interest that
we are seeing and which really need to be ended.
And the second thing--and really related--is the completely
different motives in needing this information and research that
private industry has from HHS and from the government agencies
themselves. So, therefore, it is really clear to me we cannot
and should not expect private industry to conduct the kind of
policing operations that ethics counsel and others should be
conducting.
And the final lesson that your testimony taught me is it
is--and I have been saying this all along like--I have just
been harping on it, which is it is very difficult, and it is a
huge challenge for the HHS ethics team and for Dr. Zerhouni to
put together some ethics guidelines that will actually prevent
these kinds of conflicts from happening. So all I would say is
I think this has been very illuminating. I thank you for your
help and hope you will continue to work with us as we do this.
And to the HHS folks, good luck. I think it is really going
to be hard to put ethics guidelines in place that are going to
prevent these kinds of conflicts.
Thank you, Mr. Chairman.
Mr. Greenwood. The Chair thanks the gentlelady and thanks
our witnesses.
Dr. Heller, you are excused. Mr. Levine, we are going to
ask you to take a seat but remain with the speakers. We may
want to come back to you as we question the third and final
panel.
And I now call them forward. Dr. Anna D. Barker, Ph.D.,
Deputy Director, Advanced Technologies and Strategic
Partnerships at the National Cancer Institute; Dr. Maureen O.
Wilson, Ph.D., Assistant Director of the National Cancer
Institute; and Dr. J. Carl Barrett, Ph.D., Director, Center for
Cancer Research at the National Cancer Institute.
Good afternoon. We welcome all of you here. As you probably
know, it is the custom of this committee to take questions
under oath. The first question I have for you is: do any of you
object to giving your testimony under oath? Seeing no such
objections, I would then advise you that you are entitled to be
represented by counsel. Do any of you wish to be represented by
counsel?
Ms. Barker. No.
Mr. Greenwood. Okay. In that case, I would ask you to stand
and raise your right hands, please.
[Witnesses sworn.]
Okay. You are all under oath.
TESTIMONY OF ANNA D. BARKER, DEPUTY DIRECTOR, ADVANCED
TECHNOLOGIES AND STRATEGIC PARTNERSHIPS; MAUREEN O. WILSON,
ASSISTANT DIRECTOR; AND J. CARL BARRETT, DIRECTOR, CENTER FOR
CANCER RESEARCH, NATIONAL CANCER INSTITUTE
Mr. Greenwood. And, Dr. Barker, do you have any opening
statement or any comments you wish to make preliminary to
questioning?
Ms. Barker. We do not have an opening statement. We are
here to answer your questions.
Mr. Greenwood. That is true of you, Dr. Wilson, and you,
Dr. Barrett?
Mr. Barrett. That's correct.
Okay. In that case, we will--okay. Let me address you
first, Dr. Wilson, and ask you this. And I am going to ask the
staff to pull up the slide for Dr. Wilson's questioning.
While they are doing that, I will describe it. It is an e-
mail dialog between you--there it is. You may have to turn
around in order to see that. It is an e-mail dialog between
you, Dr. Wilson, and Dr. Liotta and Holli Beckerman Jaffe. Ms.
Beckerman Jaffe writes, ``Please also confirm with him that
while he has not received any payment since February''--in
other words, he was last paid in February--``he has not
consulted with Biospect since February. The arrangement has
been put on hold until he receives approval on from Dr.
Kington. I know I am beating a dead horse, but I want to be
very clear on the facts.''
Dr. Liotta then responds, ``I confirm this on hold.''
Do you understand his response to mean that Ms. Beckerman
Jaffe asked that he had not received any payment since February
and had not consulted with Biospect since February? Was that
your understanding?
Ms. Wilson. That was my understanding.
Mr. Greenwood. Okay. And why would it have been a problem
if he had been consulting for the company beyond February?
Ms. Wilson. At the time of the new NEAC rules, all
activities with Biotech, as well as others that were covered by
the NEAC responsibilities were to be resubmitted for approval,
and all new activities that were covered under their
jurisdiction also were supposed to be submitted for approval.
And our regs say you cannot proceed with an activity without
obtaining prior approval.
Mr. Greenwood. And let me ask you this. Do you believe it
was consistent with that policy to be able to receive
compensation, either if there was no further activity?
Ms. Wilson. It would probably depend on the subject of the
agreement. Payment for prior services would be, in my mind,
acceptable. But, again, that would be subject to the agreement.
Mr. Greenwood. But if there was a monthly payment to be
made, would you--is it your understanding of the policy that
the employees should not receive payments for ongoing services?
Ms. Wilson. The intent was to cease accepting payment until
rereview had gone forward.
Mr. Greenwood. Okay. I am going to ask the staff to play
clip 6, in which we will hear Dr.--go ahead.
[Tape played.]
Those voices were Dr. Petricoin first and then Dr. Liotta.
Was that clear to you----
Ms. Wilson. Yes.
Mr. Greenwood. [continuing] which was speaking when? Okay.
Based on his testimony, do you understand Dr. Liotta to be
confirming what he stated in this e-mail, that he stopped
working for Biospect in February?
Ms. Wilson. He indicated that it was on hold . He said he
had one e-mail conversation with them. I do not know what the
subject of the e-mail is, so I wouldn't know whether to call it
employment or not.
Mr. Greenwood. What do you interpret ``on hold'' to mean?
Ms. Wilson. ``On hold'' would be----
Mr. Greenwood. I am going to ask you to speak a little bit
more directly into your microphone. Thank you.
Ms. Wilson. ``On hold'' would be performance of no
services.
Mr. Greenwood. Performance of no services. And, again,
receipt of no payments for----
Ms. Wilson. Yes.
Mr. Greenwood. [continuing] services. Okay.
I am going to ask the staff to show the slides. This is a
series of canceled checks indicating that Dr. Liotta was
continuing to be compensated for his work through May. Dr.
Wilson, doesn't that conflict with what he told you and Ms.
Beckerman Jaffe in the e-mail?
Ms. Wilson. Yes, it does.
Mr. Greenwood. Okay. Doesn't this suggest that he did not
terminate his agreement with the company as he was required to
do by new NIH policies at the time?
Ms. Wilson. The requirement was that the activities be put
on hold until they could be rereviewed, not necessarily that
they be terminated. The NEAC was to determine whether they
would be terminated or not.
Mr. Greenwood. Okay. Didn't terminate his agreement.
Certainly did not--it certainly indicates that he did not
terminate his agreement. But what you're saying was the
termination of an agreement per se was not the policy, it was
to suspend services and payment----
Ms. Wilson. Yes.
Mr. Greenwood. [continuing] during that time. And why did
you ask him in that e-mail--or why did the Ethics Directors,
excuse me, ask that--he inquired as to whether he had received
any payments and wanted to confirm that he had not received any
payments since February?
Ms. Wilson. To assure that, in fact, he was abiding by what
NIH had put in place.
Mr. Greenwood. Okay. The former director of NCI, Richard
Klausner, is a member of Biospect's Board of Directors. Dr.
Carol Dahl, former Chief of the Office of Technology and
Industrial Relations at NCI, was Vice President of Strategic
Partnerships. Svetlana Shtrom, who was the Technology Transfer
Officer from NCI with whom Correlogic had to negotiate its
CRADA was hired by Biospect. And the two co-principal
investigators on the CRADA--Drs. Liotta and Petricoin--were
hired by Biospect.
And if you will look at Tabs 27 and 37 in the binder before
you there, you will see information from the websites of
Correlogic and Biospect. Do you see them? Tab 27, and then 37.
I want you to compare them.
To me, they look remarkably similar. For example,
Correlogic's site states, ``Correlogic's mission is to advance
the early identification of various cancers and other diseases
and to accelerate the new drug discovery process by applying
its proprietary software to the development of proteomic and
other biomarkers.''
Turning, then, to Biospect's website, it states, ``Biospect
is an emerging life science company founded in 2002 that is
developing technology for identifying and assaying protein
biomarker patterns.''
Given the fact that all of these parties have a
relationship with a company that bears a near-same statement of
aims to its own, and is clearly a competitor, isn't it
reasonable for Correlogic to be concerned that something is
amiss?
Ms. Wilson. It is reasonable, yes.
Mr. Greenwood. Okay. Let me turn to Dr. Barrett. As you
know, Dr. Richard Klausner, the former Director of the NCI, is
on the Board of Directors of Biospect. Do you know Dr.
Klausner? You need to turn your microphone on and make sure it
is up close.
Mr. Barrett. I do know him, yes.
Mr. Greenwood. Okay. And did you advocate having Dr.
Klausner designated as special volunteer in your lab at NCI?
Mr. Barrett. Yes.
Mr. Greenwood. Okay. If you would turn to Tab 16, you will
see documentation that you submitted in September 2001 to get
Dr. Klausner the special volunteer designation. Do you see
that?
Mr. Barrett. Excuse me. That was 16?
Mr. Greenwood. Tab 16, yes.
Mr. Barrett. Yes, I see that.
Mr. Greenwood. Okay. Can I assume that you have had a
professional relationship with Dr. Klausner that prompted you
to do this?
Mr. Barrett. Yes. Dr. Klausner had resigned as the Director
of the National Cancer Institute to take a position, and as
other outside people was allowed to be a special volunteer at
the NIH. And so he was doing--continuing to do research at the
NIH. He had one post-doctoral fellow who was continuing to do
this research, and this agreement allowed him to continue to be
a special volunteer, not paid, but actually continue that
research.
Mr. Greenwood. And did he get that designation?
Mr. Barrett. Yes, he did.
Mr. Greenwood. And does he still have the designation?
Mr. Barrett. No, he does not.
Mr. Greenwood. Okay. When did it end?
Mr. Barrett. I do not know. It was not renewed, so it
certainly expired after 1 year. But I don't know if----
Mr. Greenwood. Are you still in communication with Dr.
Klausner?
Mr. Barrett. I have not been in communication with him
since probably June 2002 would be my recollection.
Mr. Greenwood. Were you doing Dr. Klausner a favor when you
supported him in his request to be a volunteer?
Mr. Barrett. I think Dr. Klausner is a noted scientist, a
member of the National Academy of Sciences, and was doing
research that had begun when he was at the NIH. And this
appointment allowed him to complete that research, which I
think was in the benefit of the NCI and the NIH.
Mr. Greenwood. Okay. My time has expired. It appears that
there is a series of votes. I am going to recognize the
gentlelady from Colorado for 10 minutes, and at the end of her
questioning we will recess for probably----
Ms. DeGette. Ten minutes or 5 minutes?
Mr. Greenwood. Five minutes. I am sorry.
Ms. DeGette. Okay.
Mr. Greenwood. And then we will recess for----
Ms. DeGette. Thank you very much, Mr. Chairman.
Mr. Greenwood. [continuing] 45 minutes.
Ms. DeGette. Dr. Barrett, I wanted to talk a little bit
about some confusion from the May 18 hearing. Our written
transcripts reflect that what you said is, when you were
reviewing Dr. Liotta's request to consult for Biospect, you
were unaware of the plethora of former NCI employees working at
Biospect. Is that correct?
Mr. Barrett. That is correct.
Ms. DeGette. But during the hearing, Dr. Liotta said,
``When I reviewed this with my ethics officer and discussed the
outside activity, it was clearly known and factored into the
review that particularly the review, that former Cancer
Institute employees were members of that company.''
Were you, as you testified, unaware of all of the former
NCI employees or officials working at Biospect?
Mr. Barrett. I was told that there was some relationship
with Dr. Klausner. It is still not clear to me exactly what
that relationship was, if he was a member----
Ms. DeGette. When were you told that?
Mr. Barrett. I was told that--I guess I was told that when
it was--back in August when we were rereviewing this. But that
was----
Ms. DeGette. Okay. So when you say on May 18 that you were
unaware of former NCI employees, that was incorrect?
Mr. Barrett. No, I said I didn't--there was a long list of
individuals, and the only ones I knew about were Dr. Klausner
and Dr. Dahl.
Ms. DeGette. Okay. But your testimony on the 18th--I am
sorry I am not tracking. Your testimony on the 18th was, ``I
was unaware of the NCI former employees being members.'' So
where is the--what is the discrepancy there?
Mr. Barrett. Maybe I didn't appreciate the question. My
understanding was there was some relationship with Dr.
Klausner, but that was not clear to me. And I also knew that
Dr. Dahl was a member of that company, but I was unaware of the
other individual.
Ms. DeGette. Okay. But that is not what our record reflects
that you said on the 18th. You didn't specify that you knew
about several, Dr. Klausner in particular, but not of others.
So is what you are saying now correct?
Mr. Barrett. What I am saying now is correct, yes.
Ms. DeGette. All right. Now, Dr. Barker, and also you, Dr.
Barrett, after hearing Peter Levine testify earlier today about
how Correlogic and Biospect are, in fact, competing companies,
do you now question your decision to allow Dr. Liotta to be
involved in a consulting relationship with Biospect at the same
time he was involved in the CRADA with Correlogic?
Ms. Barker. I said yes to that last time, and I would
actually reaffirm that. I think if the information that one has
today was available when this rereview was done, that it would
not have been approved.
Ms. DeGette. Let me ask you what additional tools--and, Dr.
Barrett, do you agree with that?
Mr. Barrett. Yes, I do.
Ms. DeGette. What additional tools would you need to have
to be able to make an informed decision? Because it is pretty
clear to me you didn't have all of the evidence at the time you
were approving both of these relationships. Dr. Barker?
Ms. Barker. Yes. When I was asked--actually, a colleague of
Peter Levine's asked that this be reviewed, raising just this
issue in August 2003. And so when I did ask that question, I
obviously asked the question of Dr. Wilson, the Ethics Officer,
and she in turn asked Dr. Barrett to rereview those. And the
system that was in place basically up until I believe the
announcements today is very, very much dependent on
investigators actually giving you information about their
consulting arrangements.
And I was new to NCI. I came in actually to look at some of
these issues for Dr. von Eschenbach in the technology area,
especially the development area. And having been in the
biotechnology industry myself, I did understand some of the
questions that were being asked, and so I think that--I think
Dr. Wilson and Dr. Barrett reviewed it with all of the
information that was available to them then.
Ms. DeGette. Well, I am not--yes, I am not disagreeing with
that. What I am asking you is--and what you are saying is the
previous system was dependent on the researchers themselves
giving you information.
Ms. Barker. Right.
Ms. DeGette. And probably if Mr. Levine had not contacted
you all, you may have never known about this terrible conflict,
right?
Ms. Barker. Correct.
Ms. DeGette. So what is it about the reforms being
announced today that you think will stop these kinds of
conflicts in the future?
Ms. Barker. Well, one of the things that we are doing at
the NCI is to create a data base much like the one for--that
Dr. Zerhouni announced today. We have been working on that.
And I think the issue here with CRADAs is complex, and we
can--you know, you may have more questions about that. But I
think we need to understand clearly the consulting arrangements
of individuals that are going to enter into CRADAs, and they
have to be--I think it has to--the understanding has to be
pretty complete, and we really have not had the tools to do
that in my opinion.
Ms. DeGette. Now, how would that--let me ask this question
and then I will yield to the chairman. How would that system
prevent this kind of conflict from happening?
Ms. Barker. I should probably let Dr. Wilson answer that
question, since she would review that request and act on it.
But I am assuming that she would have a great deal more
specific information that----
Ms. DeGette. Yes. Let us let Dr. Wilson answer.
Ms. Wilson. The one piece that is probably lacking in our
system right now has been a complete recognition of all of the
CRADA technology-type transfer arrangements.
Ms. DeGette. If you can speak more closely to the mike.
Ms. Wilson. Sorry. What is missing in our system has been a
direct connection with the technology--all of the technology
transfer agreements and with a full knowledge of these pieces.
We do, in our office, look actually at CRADAs, one form of
technology transfer. So in approving the outside activity, we
would have looked at the Correlogic CRADA. We would have known
about that. But we would not have known of any additional----
Ms. DeGette. And would you know about that now?
Ms. Wilson. We are putting in place a system that will
actually let us in real time get that information.
Ms. DeGette. I will yield to the chairman.
Chairman Barton. Well, I am going to have my own time when
we come back. But it just--I want to ask Dr. Barker what
information you have today that you didn't have back on August
20 when you ruled that Dr. Liotta's duties were appropriate?
What do you know today you didn't know then?
Ms. Barker. Well, I think the--as this process has unwound,
actually, we have learned a great deal more about the
Correlogic's competitor, Biospect, that was actually capsuled
here today. And I think just the simplicity of looking at the
change in the website, which has changed over time--when Dr.
Wilson reviewed this request, even back in August of last year,
or the fall of last year, the website was still quite different
from the website that we are viewing now. And so----
Chairman Barton. Well, how was it different?
Ms. Barker. It basically did speak to the fact that the
focus of the company at that time was really around
instrumentation, and some of the issues that Dr. Liotta has
reflected in his request. I think only in the--in very recent
months has the website reflected this issue of pattern
recognition being a major focus of the company. It was news
to--I think it was news to Dr. Wilson and the----
Chairman Barton. Is Congresswoman DeGette coming back?
Because I don't want to take all of her time if she is--I mean,
I want to----
Mr. Greenwood. Help yourself, Mr. Chairman.
Chairman Barton. Okay. Well, Mr. Levine is out there in the
audience vigorously shaking his head that his website has
changed. I don't know what the protocol is to----
Mr. Greenwood. Mr. Levine is still under oath and is----
Ms. Barker. Not his website, the Biospect website.
Mr. Greenwood. Mr. Levine, would you like to come to the
table, pull up a chair, and----
Chairman Barton. And as soon as Congresswoman DeGette gets
back, I will----
Mr. Greenwood. No, she has gone for the votes. She is not
coming back----
Chairman Barton. Okay.
Mr. Greenwood. [continuing] until after the votes.
Chairman Barton. Have you heard----
Mr. Greenwood. And I would advise the chairman that we have
5 minutes and 39 seconds left on this vote.
Chairman Barton. Mr. Levine, Dr. Barker had said that she
didn't know now--she knows more now than she knew then when she
approved this, and that one thing that has changed is
Biospect's website. What is your response to that?
Mr. Levine. Well, I can't comment on what any of the NIH
officials knew when. But certainly on May 22, 2003, the website
was very clear, and we have all looked at that earlier. So
nothing changed. In May 2003, the comparison and the similarity
between what we were doing and what Biospect was doing was very
clear at that time. So I am not sure what change the witnesses
are referring to.
Chairman Barton. Well, my--and, again, when I get back I
will have my own time. But my comment to Dr. Barker and to Dr.
Wilson and to Dr. Barrett, reading the August 20, 2003,
memorandum from Dr. Wilson to Dr. Barker that Dr. Liotta's
activities were appropriate or acceptable or approved is based
on the fact, it appears to me, that he didn't have a
proprietary interest in the CRADA. And while he was being paid
by Biospect, he didn't have an ownership interest, so as long
as he was being paid in a consulting fashion it was okay.
Now, am I misreading that? But it doesn't really relate to
the subject. I mean, it is just--it was kind of a technical
ruling that, you know, Biospect was hiring him as a consultant,
and so he could pretty well consult on whatever he wanted, and
it was okay.
Ms. Wilson. It would not be true even before that he could
consult on whatever he wanted. There were restrictions on what
a Federal employee----
Chairman Barton. That is not what the memo says.
Ms. Wilson. It is a technical analysis. Is the activity
legal? Did it meet with regulations? And technically it did.
Chairman Barton. Well, I am--we have to go vote, but we
are--I assume we are going to retain these--this panel, so we
can come back and get into this in more detail.
Mr. Greenwood. That is correct.
The committee will now recess until 3.
[Brief recess.]
Mr. Greenwood. The committee will come to order, and the
Chair recognizes the chairman of the full committee for 10
minutes for inquiry.
Chairman Barton. Thank you, Mr. Chairman, and I appreciate
the panel staying.
I am trying to get a handle on what constitutes a conflict
of interest at the time the individuals who were working on the
CRADA were also asked to go to work on the Biospect company
payroll as consultants. And I am looking at this August 20,
2003, memorandum, which is from Dr. Wilson to Dr. Barker, and
the subject is Conflict of Interest Review, Lance Liotta, M.D.
It is Tab 7, if you all have that information.
On page 1 of the memo, it starts--it says--it has the
sentence that, ``Ethical conduct for employees of the executive
branch requires that approval be granted,'' so it is a positive
directive that approval be granted in response to a request for
outside employment under the following conditions: that the
request is submitted prior to the beginning, and unless it is
determined that the outside employment involves conduct that is
prohibited by statute or Federal regulation.
So if an individual wants to go to work outside the
government, they have to submit it, require it to the beginning
of the activity, and then if you--unless it is determined that
the employment would involve conduct that is prohibited by
statute, then you have to say yes.
On the next page it says that, ``The nature of the
consultive services requested''--this is Dr. Liotta's request
to be a consultant for Biospect--``are limited in requests
deemed to be advisory and unrelated to any HHS matters. These
consultive services do not violate the regulation.''
Now, my first question is: how was it determined that what
Dr. Liotta was doing for Correlogic was unrelated to any HHS
matter? Because he was doing the same thing, or at least
similar work. So who determined that it was unrelated? Did you
just take Dr. Liotta's word at that?
Ms. Barker. We did actually go through the established
process. Maybe Dr. Wilson should let you sort of hear that
review quickly, and then we can talk about the specifics of
this case.
Ms. Wilson. In conducting the review, we look at the scope
of Dr. Liotta's duties. We look at his personal financial
interest, we look at his CRADAs, we look at the grant and
contract activity insofar as we are able to determine it, all
of the technology transfer activities insofar as we are able to
identify them. And we also look at the science.
We look for the purposes of the science--as you know,
science is changing on a daily basis. It is very complex now,
and so our office does rely on experts who know the field much
better than anyone in my office does to give us a review of
whether what is proposed by the scientist is within the scope
of the employee's duties or outside.
Chairman Barton. But you know when he is asking this--I
mean, he says, ``I am part of a CRADA with Correlogic, and this
is what Correlogic is trying to do. They are trying to find a
predictive test for ovarian cancer based on some sort of an
analysis of blood.'' I mean, you know that, right?
Ms. Wilson. Yes.
Chairman Barton. Now he wants to go to work for Biospect,
and according to their web page they are doing the same thing.
And yet in this memo it says it is--what he is requesting to do
for Biospect is unrelated to any HHS matter. That just begs
credulity that that would be a statement.
Ms. Wilson. This memo relates to the rereview. The original
approval we did not have access to the website. Biospect's
website in 2002 was not available to us. So we relied on the
description of the company, on the description that was
provided and the documents provided from the company as to what
he was going to do.
We asked Dr. Barrett to assist us with the science of the
matter. And given that it was limited by the provisions that
were put into the contract, it was determined that those things
were matters of general applicability.
Chairman Barton. Well, now, so what you are telling me, if
I interpret this colloquially, Babe Ruth was a great pitcher
for the Boston Red Sox. He turned out to be a great hitter for
the New York Yankees. And according to this ruling, he could
continue to do both. He could play right field for the Yankees
and hit home runs. And when he wasn't playing for the Yankees,
he could go up to Boston and pitch for the Red Sox.
Ms. Wilson. By the same instance, would we have stopped him
from coaching his children's little league----
Chairman Barton. Well, I think if you would have told the
owner of the Yankees that he still wanted to go pitch for the
Red Sox, you know, both ownerships would have had a problem
with that.
Ms. Wilson. I do not disagree with that.
Chairman Barton. All right. Mr. Barrett, what is your take
on this? Dr. Barrett?
Mr. Barrett. Thank you. We reviewed this carefully, but I
must--as we admitted last time I think, knowing what we know
today, we would not have made the same decisions.
Chairman Barton. But what do you know today that you didn't
know then?
Mr. Barrett. Let me explain that to you, Congressman. So at
the time, what we knew was that the Biospect company was a new
company that had a very general description of their
activities. It was not clear that they were involved in the
pattern recognition business. What was also known was that the
CRADA with Correlogic, the Correlogic's contribution, was in
terms of doing the computational analysis, the algorithm, to
actually do the analysis of the patterns and the proteins.
So what we did to make sure, so it did not appear that
there was any overlap, but we put very clear exclusionary
language within the consulting agreement to try to make it very
clear that if there was any overlap that that would be
excluded, and that Biospect in fact knew that.
Clearly, it should have been the case that Correlogic--Mr.
Levine--should have also been aware of this. We admitted that
last time, and I think that certainly is one of the changes
that needs to be----
Chairman Barton. Well, Dr. Heller, when he was before us in
the previous panel, basically said that you can't blame his
company because they complied with all of the rules. And you
are the people that are applying the rules, and you are saying
you didn't know.
I mean, the Biospect website shows this capability will be
targeted to improve the diagnosis and clinical patient health
and enable new approaches to drug development. The Biospect
system will be the foundation for the discovery and detection
of patterns of proteins, protein fragments, that reflect and
differentiate various states of health and disease.
And the Correlogic mission statement--and I am not going to
read the whole thing--they want to create turnkey diagnostic
systems that will revolutionize the disease, testing, and
screening market. They will also provide pattern discovery
solutions to biotech and pharmaceutical companies for the use
in genomics, if I am saying that correctly, molecular biology,
protein sequencing, and in new drug identification and toxicity
evaluation.
Now, that is not word for word. But I am not a biological
scientist, but it sure looks to me like they are doing the same
thing.
Mr. Barrett. Yes, sir. Based upon those two descriptors, I
would agree fully with you. The----
Chairman Barton. Well, they didn't look at that. I mean----
Mr. Barrett. I don't know when that was available. If it
was available and we did not look at it, that was certainly----
Chairman Barton. I mean, isn't the truth is that--and this
is speculation on my part--but it appears to me that prior to
this subcommittee getting involved in this, after 1995 the
environment at NIH was to either encourage these sort of
arrangements or to give it only the most perfunctory and
technical analysis. And this particular arrangement just took
it a little bit too far.
But, I mean, I don't see that any effort was really made to
check what was going on. You all basically took Dr. Liotta at
his word, or whatever he put into writing, and gave a very
technical analysis of it, and based on that said it is okay.
Now, how far off the mark am I on that?
Mr. Barrett. I think you have a lot of merit in what you
say. I think what we did do was to look, obviously, at the
scope of the CRADA. And the scope of the CRADA is much more
narrow than the scope of the overall mission of the company.
And so within the scope of the CRADA there was very clear
language in the consulting agreement that that was excluded.
Chairman Barton. Now, as a layman, do you feel that it
would be appropriate at any time for somebody in your--the
three of your positions, the government positions that are
reviewing this, to let the first company know that Dr. Liotta
had acquired this ability to be a consultant for what appears
to be a competitor? Should the law require or internal
regulations require that before that approval is granted, even
if it looks okay on paper, the original company ought to be
notified?
Mr. Barrett. We fully agree with Dr. Zerhouni's conclusion
that these things should be transparent and should be----
Chairman Barton. Well, you agree with it today, but you
didn't at the time. Did anybody bring that up? Did anybody sit
around the table or by e-mail say, ``You know, we ought to let
those saps at Correlogic know that the two principal people
they are working with at NIH are about to have a consulting
arrangement with what appears to be a competitive company''?
Did anybody even think about that?
Ms. Barker. In the concept of the Privacy Act, which we
believe this outside activity to be covered by, we would not
have made that personal income relationship known to the
public. And from this perspective----
Chairman Barton. Well, I am not saying make it known to the
public, but, for gosh sake, why can't you make it known to the
company that started the process first? I am not saying put an
ad in The Wall Street Journal. But why couldn't you have
notified confidentially Mr. Levine's company? That is not
protected by the Privacy Act.
Ms. Barker. We would have--we would have checked with legal
counsel to determine whether they were in the chain of command,
and whether they were covered by the Privacy Act or not,
whether we had the ability to. Absent that, we would not have
made it known.
Chairman Barton. Well, my time has expired, and I apologize
for that. But at some point in the process, if you folks are
the people responsible for ruling on ethics applications, you
need to step back and look at the broader picture. I don't see
any attempt in the documentation to really look at what we
would consider to be right and wrong.
And, you know, Dr. Zerhouni, to his credit has come around
to the view that we need to change the system. And apparently
you folks also agree that the system needs to be changed, which
is to your credit. But in the interim, Correlogic has had two
of the people that it thought were assigned by the government
to work with their company have behind the scenes been working
with another company, at least along a similar track.
And my analogy to Babe Ruth is kind of corny, but it is
very real. You know, there is no way the New York Yankees would
have let Babe Ruth go back and pitch for the Red Sox. There is
absolutely no way, but yet by the approval of this application
that is essentially in the research sphere what was allowed to
happen.
With that, Mr. Chairman, I would yield back.
Mr. Greenwood. The Chair thanks the chairman and recognizes
the gentleman from Florida, Mr. Stearns, for 10 minutes.
Mr. Stearns. Thank you, Mr. Chairman.
Let me just continue along what the distinguished chairman
of the Energy and Commerce Committee started to talk a little
bit about this--what appears to be two scientists involved with
a company, and sort of--Biospect and sort of working for NIH at
the same time, not--Mr. Levine not aware of that, and then he
finally became aware of it.
Mr. Levine, I went through your testimony here, and I
thought I would go through and ask for some further
clarification of your statements. On page 7 of it you say when
you raised concerns to Dr. Petricoin and Dr. Liotta, you said
they told you--``I was told not to be paranoid.'' And that
NCI's unilateral decision was really in Correlogic's best
interest.
And, frankly, I was also concerned, and remain concerned to
this day, about the particular components that NCI had
unilaterally chosen for the detection system, and also about
which entity would take the lead in responsibility for seeking
regulatory approval following successful completion of the
clinical trial.
When they said to you not to be paranoid, what did that
mean to you?
Mr. Levine. Well, Congressman, two issues here. The first
is that the reference I was making there was not to the
conflict of interest, which I didn't know about at the time.
The reference there was really to NCI's decision to proceed
with the clinical trial and to essentially take over this area
that had otherwise just been granted to Correlogic in April
2002.
So the reference really was to the activities of NCI going
forward toward the clinical trial and all of those issues,
although throughout my conversations over the last 3 years with
Drs. Petricoin and Liotta they would continuously tell me that
I was paranoid. Every time I questioned an activity or a
decision coming out of NCI, they thought I was rather paranoid.
And I think in hindsight I wasn't paranoid enough.
Mr. Stearns. Well, and then you go on--``a few weeks later
I began hearing more from industry contacts about Biospect
being a competitor.''
Mr. Levine. Yes.
Mr. Stearns. ``By now I was hearing that Drs. Petricoin and
Liotta were affiliated with Biospect. In early July 2003, I
reached Dr. Petricoin by phone and raised the issue directly to
him.'' Tell us what you said to him.
Mr. Levine. In that call--and I was friends with Dr.
Petricoin, so I was able to be pretty blunt with him, I said
that it had come to my attention through industry contacts that
he and Dr. Liotta were consulting with Biospect, and I was
shocked. I was appalled.
Mr. Stearns. What was his response when you said to him,
``I have heard through the industry grapevine that I am now--
you are advising me--you are telling me not to be paranoid, yet
I am finding you are part of my main competition.'' What was
their response? And were you talking to both of them or to----
Mr. Levine. The conversation was only with Dr. Petricoin.
Mr. Stearns. Okay. And what was his response?
Mr. Levine. His response was first and foremost that this
was to approve the outside activity. And I, again, expressed
genuine shock at that. I asked him how that could be so because
the two companies were so clearly competitors, and I reiterated
to him at the time the way in which I found out, which was
through other people in the biotech industry, so that others
perceived it as a conflict of interest, others outside of
government, others outside of Correlogic.
And I then made the point to him--and this is very, very
clear, since I actually wrote an e-mail shortly after my
conversation with him--I made the point that, as I said earlier
in the testimony, that the information that he was picking up
and Dr. Liotta picking up from their collaboration with
Correlogic, where that information began and where their own
understanding ended, it would be very hard to tell.
So that if they were then consulting with a competitor, the
fact that they might think that they are not revealing
confidential information I thought became a very difficult line
to determine.
Mr. Stearns. Well, then you say later on, ``I raised my
concerns about what was happening to my company with Dr.
Barker.'' And let me ask Dr. Barker: were you aware of this,
too?
Ms. Barker. Let me explain a little bit about how I became
involved.
Mr. Stearns. Okay.
Ms. Barker. I joined the NCI in January or December
actually--or January 2003, and I actually came to the NCI to
join Dr. von Eschenbach to sort of work on these kinds of
issues. So----
Mr. Stearns. I need you to be brief, just because----
Ms. Barker. Okay. Not long after I arrived, I received a
call that said--from a colleague of Dr. Levine's saying that he
was engaged in a CRADA with us, and he felt as though there was
a potential conflict of interest for the investigators. So that
is when I asked that Dr. Wilson and Dr. Barrett rereview the
case and readvise us on whether or not there was a conflict of
interest, so we could proceed to negotiate this.
Mr. Stearns. Was there a conflict of interest detected?
Ms. Barker. You know, we have just heard from Dr. Wilson
and Dr. Barrett that using the guidelines they had at that
time----
Mr. Stearns. Right, okay.
Ms. Barker. [continuing] they concluded that there was not
a conflict of interest.
Mr. Stearns. Okay.
Ms. Barker. I think we have all agreed in retrospect that
there was.
Mr. Stearns. Okay. That is all I wanted to hear.
NCI and Correlogic have been in negotiations on the
clinical trials for CRADA for a long time. Is it customary to
take that long, Dr. Barker?
Ms. Barker. In a word, no.
Mr. Stearns. Okay.
Ms. Barker. We have 100-plus CRADAs. This is the only one
actually that has taken this amount of time to negotiate. But I
will honestly say in sorting this out, it is a very complex
CRADA. And by that, it involves some laboratory discoveries
that are quite profound, a clinical trial, a licensed----
Mr. Stearns. Let me put it this way. How close are we to
fruition on these negotiations? Are they 1 week away, a year
away, a month? Where are we right now?
Ms. Barker. They depend actually on--a confounding factor
in this has been that we started out with a technology that was
developed in collaboration on the CRADA. Dr. Levine's company
has actually pursued another line of investigation. He would
like to add that to the CRADA, and I think the only thing that
is missing here is to see the data from that technology so we
can proceed to make a decision about this CRADA in terms of
doing----
Mr. Stearns. Let me see if Dr. Levine understands this
negotiation the same way you do. Dr. Levine?
Mr. Levine. I have to respectfully disagree. The
negotiations----
Mr. Stearns. I mean, have you started something else here
and it is making----
Mr. Levine. Well, it is not something else. It was work
that we were developing----
Mr. Stearns. It was part of the initial negotiations.
Mr. Levine. Exactly, part of the initial CRADA. Also, let
me just add, Congressman, that there has been constant
reference to how narrow the original CRADA was. Well, that was
one of the issues beginning as early as August 2002 that we are
attempting to change, because I can show you we have a year's
worth of CRADA notes here taken by the NCI's contractor that
have--perhaps 25 or 30 percent of these meetings were about
software. The bulk of it was about sample preparation, mass
spectrometers, turnkey systems.
So what was happening was that the research--the joint
research under the CRADA was in fact going exactly down the
road that I described earlier, which is the development of a
turnkey system. So the goal of the negotiations was to both
convert the research CRADA and eventually the clinical trial
CRADA to match what was actually going on.
So in terms of where we are today, no, we----
Mr. Stearns. Okay. So we have a little disagreement, Dr.
Barker, in your--you have heard him, I have heard you. Dr.
Barrett or Dr. Wilson, is there anything you would like to
contribute here? We have this negotiation we all agree is going
on much too long. You indicate that it is going to perhaps go
on, Dr. Barker, longer because of some changes that have taken
place, and Dr. Levine says no. Just, Dr. Wilson or Dr. Barrett,
anything you folks want to add here?
Mr. Barrett. Let me----
Mr. Stearns. If you can be brief, because I have got a
summary----
Mr. Barrett. Right. I know it is--actually, there are
several issues that do need to be put on the table----
Mr. Stearns. Okay.
Mr. Barrett. [continuing] which won't be brief. But let me
make one point. That is, the ability to execute a CRADA is not
something that Dr. Barker or I or the NCI has.
Mr. Stearns. No, I understand that.
Mr. Barrett. It goes through the NIH.
Mr. Stearns. Just your interpretation.
Mr. Barrett. Part of the discussion has been, what would be
appropriate to put into a CRADA that would be satisfactory to
all parties, most importantly the NIH? And that is part of the
complexity of this.
The comment that Dr. Levine made--Mr. Levine made about us
taking over an area given to Correlogic I take great exception
to, because I think this is, in fact--we are continuing to do
the research that the NCI is supposed to do and which we are
paid to do by the public, and that is to try to understand how
to improve clinical trials for ovarian and other cancer
patients.
We have started a clinical trial. There is no delay in that
trial. That is going along. That will collect the samples that
will be used by a variety of sources for doing this analysis.
We have welcomed Dr. Levine to participate in that activity and
offered him unlimited access to these samples, but not
necessarily through the CRADA.
The CRADA requires, again, a contribution of both parties,
so there are other mechanisms. He mentioned earlier that he was
also collaborating with another laboratory at NCI through a
material transfer agreement, which is a very legitimate way of
doing this transfer.
So there is lots of ways to move this forward, but the
important thing is it is moving forward, even while these
negotiations are underway.
Mr. Stearns. I guess, Dr. Barker, can you assure us that
NCI will treat Correlogic fairly in the future as they seek to
work with the agency on research?
Ms. Barker. Absolutely. I have made--I have gone to great
lengths to ensure that that is the case. And just to clarify
the point on--I have seen all the pieces of this now, and it
took some time to sort this out, actually. But I think the
point I was raising before is we do have--we have reached the
point of having an agreement on I think--and I think NCI and
Correlogic agree on the basics of the agreement.
I think the one question NCI has raised is: could we see
some data for the other proposed technology? And we are
awaiting that.
Mr. Stearns. Thank you, Mr. Chairman.
Mr. Greenwood. Mr. Levine, you looked like you were about
to say something.
Mr. Levine. Yes. The problem with the observations made
just now are that we reached agreement with NCI in August 2002,
and that agreement was reduced to writing on September 12 by
NCI's technology transfer office. And we have now spent the
last 2 years watching every part of that agreement be
unravelled.
So now to say, ``Well, if we show them data, we can come
and be part of this trial'' is--I mean, frankly, it is
sophistry. I mean, we had an agreement 2 years ago to move
forward together, and NCI basically has negotiated us to death.
It is very difficult when you are a small company to be
negotiating with all of NIH at one time.
Mr. Greenwood. Thank you.
The gentlelady from Colorado is recognized for 10 minutes.
Ms. DeGette. Thank you, Mr. Chairman.
Dr. Barker, when Mr. Levine was just giving his response, I
saw on your face you disagreed with that. You know, what can be
done here to move this along?
Ms. Barker. First of all, I think Dr. Levine's comment is a
point well taken. When I say this was difficult to sort out,
there were a lot of things on the table that had been worked
out over time. And I think because of the speed of the
technology, the movement of the technology, issues that arose
due to the tests that Correlogic was proceeding with, the
desire of NCI to proceed along a different line of technology,
when I started looking at this we really had to start over. I
mean, it was--no one sort of within the NCI I think was where
they were a year earlier, and so--and the technology had moved
along.
So I think that the agreement we have on the table now is I
think appropriate, and I think it would allow Correlogic to
be--to really get a 510K, and be probably first to get a 510K,
and they hold a license for this technology. So I think if we
can agree on this one single point in terms of using two
technologies versus one, I think we could close this fairly
quickly.
Ms. DeGette. Okay. And, Mr. Levine, does that--do you think
it could be closed fairly quickly, too, given Dr. Barker's
statements?
Mr. Levine. I will certainly give it my all, and hopefully
it will be less than 2 years.
Ms. DeGette. And, Dr. Barker, I think I know the answer to
this, but I just want to get it on the record. There are some--
is there any indication that Correlogic will suffer because of
its complaint to this committee or the proceedings that we have
going on with respect to these issues or the clinical follow-on
to the agreement we have?
Ms. Barker. I speak on behalf of myself, Dr. von
Eschenbach, all the folks at this table, and the National
Cancer Institute in saying that we are most interested in this
relationship, and we are very interested in CRADAs. We are
desperate in Cancer to get these technologies into patients,
so, trust me, we are absolutely--if this is a relationship that
can and should be closed and pursued, it will be done.
Ms. DeGette. And there will be no retaliation against----
Ms. Barker. Absolutely not. There will be--no. I think,
actually--I think this is an interesting and I think very
revealing case study, and I think that Dr. Zerhouni has taken
it to heart and changed some things that needed to be changed
from this case study.
It is--you know, there are some unfortunate things here,
but I think we have learned some things in the system that has
been in place. And I think it is actually directing us to a new
system, and the NCI has--had already begun to initiate some of
these changes.
Ms. DeGette. So you are happy for the information they have
brought forward.
Ms. Barker. I think it has been very informative, and I
think it is also going to help us in the future as we negotiate
our CRADAs and put them in place to be very clear on conflict
of interest. And I--that has not been a simple issue before.
Ms. DeGette. Dr. Wilson, I just wanted to follow up on the
discussion we were having in my previous line of questioning
when I yielded to the chairman. I think you had testified, and
several of the others had testified, that these new systems
that are being put into place--in particular, the computer
systems--should function to raise a red flag to help us avoid
conflicts of interest like this in the future.
And I guess I would like it if you would describe for me
with a little more precision how it is these types of conflicts
of interest will come up, and how your office is going to
identify them in the future.
Ms. Wilson. With regard to the data that we can collect on
our own employees, it will allow us to link together everything
that we know that they are doing. Certainly, we have much
better descriptions of what their official duties are, their
current projects, contracts, grants, anything that the might be
involved in. With regard to CRADAs, we have the same
information, or will very shortly, accessible in real time,
including more documents than we have had before, including
such things as confidential disclosure agreements, which were
not accessible to us before.
Ms. DeGette. Who were they accessible to before?
Ms. Wilson. They were on record in technology transfer
offices. And we received copies of CRADA listings, but not of
those other documents. And so it indicates a dealing that we
have with the company as part of our official duty activities.
Being able to link those together will, in fact, alert us to a
number of relationships that we wouldn't have been aware of
before. It will give us better description.
With regard to what Dr. Zerhouni said this morning about
Googling various companies, clearly, what we can obtain from
the web is subject to what is available on the web, and that--
--
Ms. DeGette. Right.
Ms. Wilson. [continuing] will continue to be a limitation.
For small startup companies----
Ms. DeGette. So let me stop you. Is it your intention,
then, anytime someone comes forward with a proposal for outside
contracts that you are going to Google all of the proposed--I
mean, how is that going to work mechanically? I am still
grappling with how this new proposed ethical system is going to
work.
Ms. Wilson. With regard to outside activities, what we
actually do now when an activity is proposed, as I said, we
review all of the data bases about the employee and their
activities, and the Institute's involvement with whatever the
proposed outside partner is. Again, they are limited by the
systems that we have in place, which are being improved. We do
also search the web for anything that we can find related to
the companies.
Ms. DeGette. And then, is there some--but, I mean, if you
had done that in this case, the information would have--I mean,
would you have known from the web that there was a conflict
between these two companies?
Ms. Wilson. There is one piece of information that was
available to us in August 2003 that we had not known about
before. There was a confidentiality disclosure agreement
executed between Biospect and the NCI for access to the data,
which is now public, that has been generated as part of the
CRADA.
That certainly would have immediately signaled an interest
of the company in pursuing the same direction, perhaps exactly,
that the Correlogic CRADA was going down.
Ms. DeGette. Okay. So that--you would have caught that
based on the provision of getting the confidentiality
agreements. You wouldn't have caught that by surfing the web.
Ms. Wilson. No. We would have caught that within our own
system.
Ms. DeGette. Okay. All right. I don't think I have any
further questions, and I yield back.
Mr. Greenwood. The Chair thanks the gentlelady and
recognizes himself for 10 minutes for questioning.
I am going to ask you, Dr. Wilson, to go to Tab 28. And if
you go to the second page, you'll see an e-mail from Peter
Levine. Do you see that?
Ms. Wilson. Yes.
Mr. Greenwood. Now, actually, the e-mail in question here
is the address below that where it says Vince Simmon, sent
Wednesday, May 21, to Peter Levine, subject Info on Biospect.
Do you see that?
Ms. Wilson. Yes.
Mr. Greenwood. Okay. And the date is May 21, 2003. I think
earlier in your response to questions you said that the
information that you would have needed to demonstrate that
Biospect was really involved and engaged in the same kind of
activities as Correlogic wasn't available in 2003, didn't you?
Ms. Wilson. As a group, we indicated that the website was
not available. The website was available, and in our 2003
analysis my office did look at that website.
Mr. Greenwood. Oh, did not look at it.
Ms. Wilson. We did look at it.
Mr. Greenwood. Right.
Ms. Wilson. It was attached to our documents.
Mr. Greenwood. Okay.
Ms. Wilson. Which I believe were submitted to your
committee. It appears to have been an oversight, and may very
well have been my office's fault that it was not provided to
Dr. Barrett. So he may very well have been unaware of the----
Mr. Greenwood. Because clearly the--what he says, ``Peter,
it was nice talking with you today. Here is some info on your
new competition. I will be back in touch. Vince.'' And then it
goes on from the website there--a description of the--a
complete description of Biospect, which talks--describes
exactly what it does, which, of course, is very much what
Correlogic was doing. You don't disagree with that in
retrospect?
Ms. Wilson. I don't disagree with it in retrospect. I would
have asked for--being that I would have done a technical
analysis, I would have asked for further information about the
nature of biological fluids analysis, and so forth, and are
they truly related? Are they that close?
Mr. Greenwood. And wouldn't you have referred that to--that
question to Dr. Barrett, since it is a scientific question?
Ms. Wilson. Yes.
Mr. Greenwood. Okay. I think here is what is troubling us.
Mr. Levine comes in and says, ``Holy God, I am upset. I am
working with these guys on my CRADA, and I find out that they
have never told me they are working for Biospect. I view
Biospect as a competitor, and this I find appalling.'' Okay?
So you have the information, but the guy at Correlogic, he
thinks--he thinks that his company's secrets are at risk. Okay?
And one would assume that if there was no risk, no potential
risk because they were in very different fields of endeavor,
Mr. Levine wouldn't come in so upset and asking for a rereview,
right? So you have got some--I mean, you have got a pretty good
red flag going in the person of Mr. Levine. Okay? So then you
rereview.
And the thing that worries us, that causes us to spend so
much time on this issue, is out there at Biospect you have got
on the Board the old boss of the NCI, the big man, the big
dude, Klausner. Right? Knows all you guys, you worked with him
and for him and all of that, and you have got Dahl out there,
and you have got Shtrom out there.
And the concern is we think--we worry that in the face of
the obvious concern of Mr. Levine you scanned over the horizon
to look at Biospect to see if this is a problem, and there is
the old gang out there making money at Biospect. And that we
worry that that would have clouded your judgment.
Did you have any discussions with any of those three
people--Dr. Klausner, Dr. Shtrom, Dr. Dahl? Did you have
conversations with any of them during the time that you were
rereviewing this agreement?
Ms. Wilson. To my knowledge, no. I know I didn't--I have
not talked to Dr. Dahl I believe since she left. I could be
wrong. I would have to check notes to see if we had anything. I
have not talked to Dr. Shtrom. I have had a few conversations
with Dr. Klausner on various situations, but not on this.
Mr. Greenwood. Not with regard to this, okay.
Ms. Wilson. No.
Mr. Greenwood. And does that apply to you as well, Dr.
Barrett?
Mr. Barrett. Absolutely, yes. I mean, absolutely not.
Mr. Greenwood. Okay. You haven't had any conversations
with----
Mr. Barrett. No conversations.
Mr. Greenwood. I mean, in retrospect, do you think that
your judgment may have been clouded by the fact that former
friends and associates----
Mr. Barrett. It did not enter into my decision at all. I
was told that Dr. Klausner had, you know--what I was told, as I
understood, was he was part of the venture capital group that
had funded this, and he was not directly involved in the
management of this company. I actually overlooked the fact that
Carol Dahl was the signature on one of the letters that we had,
so I actually did not even make the connection until much later
when it was brought to the attention of this committee.
I reviewed the statement of work and the consulting
agreement. I used my knowledge of the CRADA that we had with
Correlogic, and those did not seem to overlap, and that was the
sole basis for the decision.
Mr. Greenwood. If you would turn to page--to Tab 34, you
will see e-mails sent from Carol Dahl to Petricoin, and then
below that is--actually, I always forget these things go in
reverse order--an 8:06 a.m. message from Dr. Petricoin to Carol
Dahl. Do you see that, Dr. Wilson and Dr. Barrett?
Mr. Barrett. Yes.
Ms. Wilson. Yes.
Mr. Greenwood. If you look at the address that Dr.
Petricoin's e-mail emanated from, it is FDA--it is
seiber.fda.gov, which clearly indicates he is using his
government computer to be sending e-mails with regard to his
outside paid consultancy. Would you come to that conclusion?
Ms. Wilson. Yes, he is using it to confirm what appears to
be a scheduling arrangement.
Mr. Greenwood. All right. And he is also sending it--if you
look, it went to Dr. Liotta at mail.nih.gov.
Ms. Wilson. Yes.
Mr. Greenwood. That is not necessarily grand larceny, but,
I mean, it does violate the rules, does it not? My
understanding from previous conversations with others at NIH
and at the FDA indicates that these private consultancies are
not supposed to involve the use of government computers,
telephones, equipment, etcetera. Is that correct?
Ms. Wilson. The conduct of personal business should not be
done using government equipment.
Mr. Greenwood. Right. And certainly not on government time
either.
Ms. Wilson. Yes.
Mr. Greenwood. Okay. Turn to Tab 11 now, please. If you
would look at--would you identify that document, Dr. Wilson?
Ms. Wilson. That is a cover sheet that is generated by our
computer recording the Biospect activity with the comments that
my office added in submission to the NEAC committee.
Mr. Greenwood. Okay. And money earned to date, it says
$49,375 consulting fees, proposed annual rate of $39,000, or
$3,250 per month. Where would that information have--how would
that have been inputted into the system so that that would
appear on this computer-generated form?
Ms. Wilson. There is--what you cannot see is a blank field
next to--you can see a field that says ``fee.'' Next to it
would have, in fact, been the dollar amount. And our system is
limited right now. It was intended to reflect an annual rate,
and if we begin to put in cumulative rates we are going to have
to make some changes in the system. So it is done manually at
the moment.
Mr. Greenwood. Okay. So that $49,375, was that--did
somebody enter that, or was that--did the computer do math--do
multiplication----
Ms. Wilson. We received that information from Dr. Liotta
himself, because we weren't collecting the data on that at the
time.
Mr. Greenwood. I understand. So Dr. Liotta provided that
information.
Ms. Wilson. Yes.
Mr. Greenwood. Okay. Now, go to Tab 41, please. Okay. If
you look at--can you identify that document? Well, I will
identify it. This document I don't think you have seen. But
this is a document provided to the committee by Predicant
Biosciences, formerly Biospect, and it is a vendor quick
report, January 1, 2002, through June 5, 2004.
And the numbers on that--this is for Dr.--it is what they
paid--what they report that they paid to Dr. Lance Liotta. And
you will notice that the rate started out at $5,000 per month
and then was reduced to $3,125, and that adds up to, the staff
tells me, $70,000. And so does that--would that indicate a
discrepancy between the $49,000-plus figure that we just were
discussing and this $70,000 figure that the company indicated
that it paid Dr. Liotta?
Ms. Wilson. There is clearly a discrepancy. I believe
what--the dollar amount Dr. Liotta furnished us may have been
what he had on his W-2 equivalent form. I would have to check
what he----
Mr. Greenwood. Do they submit the W-2 form?
Ms. Wilson. No, they are not required to.
Mr. Greenwood. They are not required to. Okay. But you
can't explain how this discrepancy would have occurred?
Ms. Wilson. The number we used is what he provided to us.
Mr. Greenwood. Okay. We understand that Dr. Liotta and Dr.
Petricoin were involved in helping Predicant Biosciences set up
a CLIA lab, which is regulated by the Department of Health and
Human Services. Is there an ethical conflict there where they
are being paid to provide guidance in an endeavor that would be
regulated by the Department?
Ms. Wilson. The issue I would have looked at, and I may not
be looking at all of the issues, would have been whether they
were engaged in a matter that would become the subject of a
submission of documentation or discussions with HHS. The mere
establishment of a lab according to known processes or
standards would not, in my mind, fall under that, but I would
have verified----
Mr. Greenwood. So it would be the preparation of documents
themselves that would then be reviewed that would cross an
ethical line.
Ms. Wilson. Communications become the subject of dealings.
Mr. Greenwood. Okay. How about if they--where is the line
between actually doing the paperwork where you are sitting and
inputting the data onto the--into the computer to print out the
report or actually writing a document versus advising a client
to pay--a client who is paying you how to do that or advising a
client how to--a strategy for getting a new device approved
through the FDA? Is there a--is that a gray area, or is there a
fine line there?
Ms. Wilson. I would have to say it is a gray area in my
mind. I would defer it to better legal counsel. I am not a
lawyer.
Mr. Greenwood. Okay. Finally, Dr. Barker, you heard Dr.
Levine in the very beginning of his testimony express concern
and worry that the NIH and/or the FDA would act in a
prejudicial form because of his role in making the committee
aware of his concerns about this. How can you assure Dr. Levine
and this committee that that will certainly not be the case, at
least as it concerns the NIH?
Ms. Barker. Well, I think we will proceed in good faith.
And I think there have been some missteps here, but I think
most of the things that have been done on this negotiation have
been done in good faith. Doing it over, we probably would do it
differently I think, at least the first--up to the point I
think Dr. Levine described to you.
I think since then we have been--you know, we have been
moving along at a reasonable rate, not rapidly enough I think,
but I think in the future some of these new processes that we
have already started to put in place will assure anyone
actually entering into these relationships that not only will
you be able to proceed I think more quickly and more
efficaciously, I think you are also going to proceed without
the kinds of issues that Mr. Levine has raised.
I mean, I think this new system of actually looking at
everything an individual is doing, especially those folks who
are entering into CRADAs, is going to be critical. And as I
said before, I think one thing this case has pointed up is that
we do have to very carefully consider that.
In terms of, you know, fair treatment from the NIH, FDA,
and I can certainly only speak for the NCI, we will certainly
make very effort to ensure that Mr. Levine and anyone else who
comes to deal with us, in terms of these very important
relationships, will get fair and equitable treatment.
Mr. Greenwood. You are not critical of Dr. Levine for his
testimony today, are you?
Ms. Barker. Not at all, actually. As I say, as I sat there,
I think both Dr. Barrett and Dr. Wilson and all of us, we
learned a lot today. And I think it is learning that will help
us in the future. And the biotechnology industry is actually
very, very important to the National Cancer Institute. So many
of our products are smaller markets; that is very attractive to
this industry. And so we have--and, actually, cancer is the
major focus of most of the biotechnology companies that are
being formed today.
So we are going to endeavor to do everything we can to
build the very best relationship with this industry we can.
There are about 1,500 biotech companies in the country today,
and we see that as being an absolutely exploding area for the
future. So it behooves the NCI and the NIH to actually work, as
Dr. Zerhouni said this morning, to really make these
relationships effective areas of translation of technology for
the American public.
Mr. Greenwood. I think on that very positive note the
committee will thank you very much for spending the day with us
and for your testimony. It has been a big help.
Mr. Levine, we thank you particularly.
And the committee is adjourned.
[Whereupon, at 3:57 p.m., the subcommittee was adjourned.]
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