NIH Ethics Concerns

OPENING STATEMENT OF THE HONORABLE JAMES C. GREEENWOOD CHAIRMAN, SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

NIH ETHICS CONCERNS:

CONSULTING ARRANGEMENTS AND OUTSIDE AWARDS

May 12, 2004 HEARING

For years in American political history, there was "honest graft," described by William Safire as "money made as a result of political power, without doing anything illegal - no longer considered permissible." Later, as described by Safire, the practice of "honest graft" became known as the "revolving door"-government officials, when they retire, take jobs with private industry. But 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 (NIH) 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 doesn't 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 morale, and to some extent, as an entitlement of the scientific class. But the controversial nature of this "swivel chair" policy at NIH is perceived when one considers its analogy in the context of Congress. I don't 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 the 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 reforms was good enough for the Congress, why isn't it 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 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, provided 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 a speech that is otherwise part of his taxpayer-supported official duties, it can do so without running afoul of criminal felony statutes and non-criminal 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 November 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. Even though the NIH has complied in providing substantial amounts of information and documents in response to the Committee's request, as a result of these non-disclosure policies and slow-rolling by HHS lawyers, to this day we still lack complete information on the amounts of compensation received by individual NIH scientists in many consulting arrangements over the last five years. We have been told that NIH only has the authority to request NIH employees to voluntarily produce amount 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-scientist 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, 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. The 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, morale 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 Subcommittee 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 Norman 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 improvement. The Panel states its recommended improvements are "needed to assure the continued, deserved public confidence in the work of NIH."

We welcome our very distinguished witnesses from the NIH Blue Ribbon Panel. I thank you for your public service and for 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, 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 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 am troubled by some 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 morale." 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 some rules are clear. The Committee has been investigating NIH ethics concerns for over a year, along with several other NIH oversight activities. Unlike the Blue Ribbon Panel, we have been looking at 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. If we are serious about upholding the highest ethical standards at the NIH, then NIH scientists should not even be close to the line. Yet this has been a 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 Louis Sullivan, the Director of the Office of Government Ethics, Stephen Potts wrote: "I am concerned, however, about the persistent weaknesses in the NIH outside activity approval system as it relates to scientists and doctors at NIH." In a November 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 one percent of over 4,000 requests for approval of outside activities were denied. Moreover, approximately 40% of the 553 requests we reviewed were approved after the activity had already taken place." [Emphasis added] In its 1991 audit OGE reviewers wrote:

"The permissive attitude at NIH toward outside activities and its fear that further restriction 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 appeared to violate 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 Harold 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: don't 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 Title 42 personnel? What have the turnover rates been over the years for NIH scientists? Was NIH less of a research institution 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 worth considering. What new drugs were not developed because the NIH scientist was devoting more energy about the drug company research and not the NIH research? As Josephine Johnston of the Hastings Center noted in the March 12, 2004 issue of Science: "If a scientist's desirability as a consultant stems from her NIH post, can she 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 undertaking 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 analysis on 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 employees?

We are all eager to hear from the Director of the 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 reach a conclusion of this investigation, if 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 hearing to be held 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 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.