w-sacksWithin a few short months, stringent new rules regarding financial conflicts of interest (FCOI) will affect every research institution applying for or using Public Health Service (PHS) funds from the National Institutes of Health (NIH). More accountability and transparency will be required, which means that organizations must be prepared with better processes to identify, manage and report FCOI among their physicians and others.


FCOI transparency is a relatively new area of concern for most healthcare organizations. Until about 20 years ago, most organizations downplayed or rejected the idea that clinical research could be influenced heavily by industry funding. As applying for public research funding became more competitive, however, it became apparent that interdependency among academic researchers and the industry at large not only existed – it was deepening.


As a result, the U.S. Department of Health and Human Services (HHS) released an initial set of conflict of interest regulations in 1995. These regulations required institutions to have a written and enforced administrative process to identify and manage FCOI. For the most part, organizations were on the honor system; they simply had to certify that a process existed. That meant compliance could be as basic as asking researchers to answer “yes” or “no” to the question of whether any conflicts of interest existed.


This will not be the case going forward. Since 1995, an increase in the amount of available research funding has dovetailed with a new public awareness about the relationship between clinical research and potential financial conflicts of interest. On Aug. 23, 2011 the government published a much more detailed final rule on FCOI that takes effect Aug. 24, 2012.


The consequences of noncompliance will include ineligibility for PHS funding – a potentially catastrophic situation for some research-driven organizations. Compliance with these tougher new standards will require most healthcare organizations to create new disclosure procedures, especially if investigators have significant financial interests (SFI) in pharmaceutical, medical device or other companies. Having updated, accurate and easily accessible data will be key to developing necessary FCOI management plans and complying with public information requests in a timely manner.


New Rules Require New Processes


According to a 2005 study published in the Journal of the American Medical Association (JAMA), financial support for biomedical research rose from $37.1 billion in 1994 to $94.3 billion in 2003. Industry sources provided 57 percent of the latter amount, the study also indicates. With such large sums of money involved, it’s important for healthcare organizations to understand the new definition of SFI.


Until now, the threshold for disclosing significant financial interests was set at $10,000. That bar has been lowered dramatically under the new regulations, which define SFI as any remuneration or equity interest in a publicly traded company that exceeds $5,000 when aggregated over 12 months prior to the date of disclosure – regardless of whether the sum is related to specific PHS funding.


Also now included in SFI is any equity interest in a non-public company, as well as some intellectual property rights. SFI can be that of an investigator, his or her spouse, or dependent children. Travel, sponsored or paid for by a group other than a government agency, a center of higher education, or its affiliates, also must be included in financial disclosures.


It is up to individual organizations to create clear processes for establishing a) when a significant financial interest is determined to be a financial conflict of interest, and b) what should be done when FCOI exists. Before spending PHS money, an organization must report any investigator FCOI and certify that a management plan already has been implemented.


The regulation notes that management plans used to mitigate potential conflicts should include, at minimum:


  • Disclosure of FCOI to participants;
  • Appointment of an independent monitor capable of taking measures to protect the design, conduct and reporting of the research into bias resulting from the FCOI;
  • Modification of the research plan if FCOI is revealed;
  • Change of personnel or personnel responsibilities, or disqualification of personnel from participation in all or a portion of the research;
  • Reduction or elimination of the financial interest (for example, sale of an equity interest); and
  • Severance of relationships that create financial conflicts.


Another new rule to note involves training. Every investigator now must undergo training before they can participate in PHS-funded research. Training must occur every four years at minimum, as well as when:


  • An organization’s FCOI policies change;
  • An investigator first joins an organization; or
  • It’s discovered that an investigator is not in compliance with the organization’s FCOI policy or management plan.



Overall, it is quite apparent that the final rule seeks to foster greater accountability and transparency. To that end, the rule also requires healthcare organizations to respond to any written request for FCOI disclosure within five days. PHS officials can ask at any time – before, during or after a funding award – about any investigator FCOI disclosure and the organization’s response.


Given all of these factors, it is clear that organizations must move their FCOI processes into the digital age; they either must develop or acquire automated systems for collecting financial disclosure information. Traditional, manual processes are unlikely to be able to identify and manage FCOI adequately, or generate required reports in the mandated timeframes.


A New Era of FCOI Compliance


The costs of implementing changes to comply with the final rule may be eligible for reimbursement as a facilities and administrative cost as it pertains to PHS-supported funding. This could offset some of the financial burden, especially considering that healthcare organizations will need an accessible, relational database containing financial disclosures.


Data flexibility and accessibility are two essential ingredients necessary for ensuring compliance. Organizations should have processes in place to collect data not only through an annual financial disclosure form, but also on a transactional basis so that researchers can update disclosures and conflict status as they relate to specific grant applications or renewals.


An electronic database also can help organizations maintain up-to-date financial disclosure information for investigators and other key staff. A format that lets users provide financial disclosure information on demand also can go a long way toward helping organizations comply with PHS and public requests for FCOI information quickly and easily.


Still, compliance with the new FCOI regulations must start with senior leadership. Especially in these times of competing high-level initiatives and lean resources, leaders must help their organizations secure the financial resources needed for FCOI technology updates. Non-compliance simply isn’t an option; valuable research dollars are at stake.


About the Author


William Sacks has more than 30 years of experience in healthcare management as a consultant, medical practice manager and faculty practice plan director. He is the co-founder and vice president of Health Care Compliance Strategies.


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