OED: From Benchtop to Bedside
Entrepreneurship
and Conflict of Interest
in Science
March 15, 2011
Barbara Barnes, MD
Ann Mathias, JD
David Smith, JD
David Wehrle, CPA, CIA, CFE
What is a Conflict of Interest?

A potential Conflict of Interest (COI)
may exist if an individual’s outside
interests (especially financial) may
affect, or perceive to affect, his/her
research, teaching, clinical or
administrative activities at the
University/UPMC.
Why does Conflict of Interest
management matter?
In order to ensure that research results are
free from bias (whether conscious or
unconscious) arising from the personal
financial interests of the investigators,
universities have an obligation to monitor
and manage conflicts of interest of their
employees.
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
Legal Requirements
Public Policy Considerations
Public Perception
Conflict of Candor – Transparency
USPTO
NIH
Investors
(& SEC)
FDA
University
Legal Considerations
 PHS/NSF
Standard
 FDA Standard
 Stark Act
 Insider Trading Laws
PHS/NSF Standard
Considerations in Tech Transfer


Federal PHS regulations (NSF has similar
guidelines) require the University to maintain
written, enforced policies and procedures to
manage faculty members’ financial conflicts of
interest.
A “Significant Financial Interest” (SFI) exists if a
faculty member


receives annual remuneration in excess of $10,000
from a company that has an interest in the faculty
member’s research, or
has an ownership interest in the company that
exceeds 5% or $10,000.
Proposed New PHS Regulations

Highlights



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Disclosure threshold lowered to $5,000 (for equity in
publicly traded entities or for remuneration)
Any equity interest in non-publicly traded entities is now
considered an SFI
Reimbursement of expenses will be counted towards the
$5,000 threshold
Regulations will apply to SBIR/STTR Phase I
applications
FCOI training required for investigators before engaging
in PHS-funded research; and every 2 years thereafter
On publicly accessible web site, institutions must post
information on SFIs/FCOIs related to PHS-funded
research before spending PHS funds
Public Disclosure of Physician
Payments

Physician Payment Sunshine Provision of
the Patient Protection and Affordable Care
Act of 2009:


requires drug and medical device
manufacturers to report gifts and payments
of $10+ made to physicians and teaching
hospitals;
beginning in September 2013, the DHHS will
post this information on a publicly available,
searchable on-line database.
Public Disclosure of Physician
Payments cont’d

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Some companies – including Johnson &
Johnson, Glaxo SmithKline, AstraZeneca,
Eli Lilly, Pfizer, Stryker, and Zimmer – are
already posting on their Web sites
consulting and speaking fees paid to
physicians.
Vermont, Massachusetts, and Minnesota
have made such disclosure a requirement;
Ohio is considering doing the same.
THE CHRONICLE
of Higher Education
Baylor College of Medicine Faces NIH
Sanctions Over Financial Conflicts
Paul Baskin  Tuesday, January 20, 2010
The NIH has ordered tougher financial disclosures on all grant
applications from Baylor College of Medicine, [citing] ”serious
concerns” about the college’s compliance with regulations
governing conflicts of interest….
The doctors who spoke favorably of Vytorin® included Christie M.
Ballantyne…who collected $34,472 during a five-month period…
The NIH informed the institution last month that the agency would
impose ‘special award conditions” on all future grants.
FDA Regulations
See 21 CFR Part 54


Clinical investigators testing a drug or device must disclose
certain financial interests in the sponsor, drug, or device under
study:
 $25,000 in outside support from the sponsor (including
grants to the investigator’s institution);
 equity/ownership interest in excess of $50,000 in a public
company; or any ownership in a non-public company;
 a proprietary interest of the investigator in the drug or device
(e.g., a patent).
The FDA will evaluate the disclosed conflict and may take
various actions, including requiring further testing with nonconflicted investigators before approving the drug or device.
ProPublica: Database of Pharma’s
Payments to Physicians

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Currently includes payments from 8 companies: Eli Lilly,
GlaxoSmithKline, AstraZeneca, Pfizer, Cephalon,
Johnson & Johnson, ViiV, and Merck
Searchable by
 name of physician
 state, city
 pharmaceutical company
Discloses type of service provided (e.g., consulting,
speaking), expenses (e.g., travel)
http://projects.propublica.org/docdollars/states/pennsylva
nia?sort=city&sort_order=0
Stark Act
The Stark Act relates to physician
referral and prescribing practices.
 The law forbids physicians or their
immediate family members from
referring patients to a “designated
health service” from which they
receive “anything of value.”

Federal False Claims Act (Anti-Kickback)


Violation for knowingly and willfully offering or
paying/soliciting, or receiving remuneration in
return for purchasing, leasing, ordering, arranging
for, or recommending an item or service paid in
whole or in part by Medicare/Medicaid
 Even if the expenditure has a legitimate
purpose, there is liability if one purpose is to
induce purchases
 Applies to both the giver and receiver
 Felony: fine and/or imprisonment
“Whistleblowers” can bring about investigations
and share in penalty proceeds.
Study* of Settlements by
Pharmaceutical Companies

U.S. spending on prescription drugs has
increased from $40 billion in 1990 to $234
billion in 2008. In this era of rapidly rising drug
costs, the illegal pharmaceutical company
activities that have contributed to such inflated
spending have garnered a significant amount of
media attention. Recent billion-dollar
settlements with two of the largest
pharmaceutical companies in the world, Eli Lilly
and Pfizer, provide evidence of the enormous
scale of this wrongdoing.
*Sammy Almashat, M.D., M.P.H, Charles Preston, M.D., M.P.H, Timothy Waterman,
B.S., Sidney Wolfe, M.D., Public Citizen’s Health Research Group
Published December 16, 2010
Summary of Settlements {Ss*}
Rapidly Increasing Criminal and Civil Monetary
Penalties Against the Pharmaceutical Industry:
1991 to 2010

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1991-2010: 165 Ss of $1+ million
2006-2010: 121 Ss; total $14.8 billion
1991: 1 S totaling $10 million
2009: 38 Ss totaling $4.41 billion
Average $ amount of Ss:
• 1991-2000: $37 million/per S
• 2001-2010: $128 million/per S
* Ss = Settlement(s)
PHARMACEUTICAL COMPANY
OIG CASES
Allergan
Criminal Plea, Corporate Integrity Agreement (2010) ($600 million)
AstraZeneca
Civil Settlement, Corporate Integrity Agreement (2010) ($520 million)
Bionet
Civil Settlement Agreement, Corporate Integrity Agreement, Deferred
Prosecution Agreement (2007) ($26.9 million)
Boston Scientific
(Guidant)
Civil Settlement, Corporate Integrity Agreement (2009) ($22 million)
Bristol-Myers
Squibb
Civil Settlement, Corporate Integrity Agreement (2007) ($515 million)
Cephalon
Plea Agreement, Corporate Integrity Agreement (2007) ($425 million)
DePuy
Orthopaedics
Civil Settlement, Deferred Prosecution Agreement, Corporate Integrity
Agreement (2007) ($84.7 million)
Eli Lilly Co.
Criminal Plea, Corporate Integrity Agreement (2009) ($1.415 billion)
Forest
Laboratories
Criminal Plea, Corporate Integrity Agreement (2010) ($313 million)
PHARMACEUTICAL COMPANY
OIG CASES cont.
Medtronic Sofamor
Danek
Civil Settlement, Corporate Integrity Agreement (2007) ($40 million)
Medtronic Spin
Civil Settlement, Corporate Integrity Agreement (2008) ($75 million)
Merck
Civil Settlement, Corporate Integrity Agreement (2008) ($650 million)
Ortho-McNeil
Pharmaceutical
Criminal Plea, Corporate Integrity Agreement (2010) ($6.14 million)
Pfizer, Inc.
Criminal Plea, Corporate Integrity Agreement (2009) ($2.3 billion)
Smith & Nephew
Civil Settlement Agreement, Deferred Prosecution Agreement,
Corporate Integrity Agreement (2007) ($28.9 million)
Stryker Orthopedics
Non-Prosecution Agreement (2007)
Zimmer, Inc.
Civil Settlement, Deferred Prosecution Agreement, Corporate Integrity
Agreement (2007) ($169.5 million)
RateMDs.com
Top Spine Surgeons Reap Royalties,
Medicare Bounty
By JOHN CARREYROU And TOM MCGINTY 12/20/2010
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From 2004 to 2008, Norton Hospital in Louisville, KY performed the
third-most spinal fusions on Medicare patients in the country.
5 surgeons are among the largest recipients nationwide of
payments from medical-device giant Medtronic, Inc. In the first nine
months of this year alone, they received more than $7 million from
the company (mostly royalties they earned for helping the company
design one of its best-selling spine products.)
Corporate whistleblowers and congressional critics contend such
arrangements—which are common in orthopedic surgery—amount
to kickbacks to stoke sales of medical devices. They argue that the
overuse of surgical hardware is a big factor behind the soaring
costs of Medicare.
Industry Relationships

In response to concerns over the impact of
industry interactions on the prescribing
practices of healthcare professionals, the
University’s Schools of the Health Sciences and
UPMC adopted a policy addressing such
relationships in February of 2008
http://www.coi.pitt.edu/IndustryRelationships/index.htm

Most questions surrounding the Industry
Relationship Policy involve consulting and
speaking engagements
University COI Policies
Pitt and CMU have policies to address
the following concerns:

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Consulting Work—Conflict of Commitment
Management, directorship, or ownership of
Licensed Start-up Company
Research performed by Pitt and CMU for
company in which faculty member has an
interest
• Differences in policies are due to the different
types of research conducted at our respective
institutions.
Current* Pitt Policy provisions
include

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49% equity cap in Licensed Start-up
Companies
Assuming his/her department chair does not
object, a researcher conflicted with a Licensed
Start-up Company can be PI on the University’s
portion of an SBIR or STTR grant not involving
human subject or animal research.
*revised March 2010
Perspective of Venture
Capitalists

Licensed Start-up Company evaluates
the technology as a business matter, not
as a purely scientific inquiry;

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A Director/Officer of a Licensed Startup Company has a fiduciary obligation to
the Company;
Scientific Advisory Board members of
Companies do not have legal, fiduciary
obligations.
Conflict of Interest Case Study 1
Tech Transfer Activities, Scenario 1:
Ophthalmic lubricants used to treat glaucoma can cause
troublesome side effects, such as blurred vision, retinal
detachment, and a slow or irregular heartbeat. Richard Gumbert, a
Pitt faculty member, has developed a lubricant that may not cause
such adverse reactions. The University obtained a patent on this
invention. A Licensed Start-up Company, SightSavers, LLC,
executed a license agreement with the University providing
SightSavers with the exclusive right to this invention. Dr. Gumbert
is entitled to receive royalty payments through the University in
connection with the license agreement. He also plans on acquiring
25% of the company’s equity and serving as its CEO.
Conflict of Interest Case Study 2
Tech Transfer Activities, Scenario 2:
Continuing with the previous scenario,
SightSavers, LLC would like to sponsor research at
the University to continue evaluating the licensed
technology. Dr. Gumbert would like to serve as PI
on the study. In their proposed agreement, Sight
Savers wants the results of such research to remain
confidential. Additionally, the company assumes it
would be the owner of any new inventions
developed by Dr. Gumbert.
Questions?

Further information on the University
of Pittsburgh’s Conflict of Interest
Policies can be found at:
http://www.coi.pitt.edu

Carnegie-Mellon University COI web
site:
http://www.cmu.edu/osp/regulatorycompliance/conflict-of-interest.html
Contacts

Jerome L. Rosenberg, PhD Chair/COI Committee/University of Pittsburgh
412-624-3007 jrosenb@pitt.edu

David T. Wehrle Director/COI Office/University of Pittsburgh
412-383-1774 wehrledt@upmc.edu

Barbara Barnes Associate Vice Chancellor for Continuing Education and Industry
Relationships (University of Pittsburgh) and Vice President of Sponsored Programs,
Research Support, and Continuing Medical Education (UPMC)
412-647-8212 barnesbe@upmc.edu

David Smith of Counsel/Pepper Hamilton, LLP
412-454-5862 smithds@pepperlaw.com

Ann Mathias Assistant Vice President for Research Compliance/CMU
412-268-4817 amathias@andrew.cmu.edu