Financial Disclosure: Are Non-profits the Answer?

By Berra Yazar-Klosinski, PhD

June 23, 2010

Clinical investigators are crucially involved in the planning, conduct and execution of clinical trials, and must demonstrate the highest caliber of research integrity. To assess the reliability of clinical data, the FDA requires sponsors of clinical trials to disclose certain financial interests of their investigators in marketing approval applications under the Food, Drug and Cosmetic Act (21 CFR part 54).^1,2 Financial conflicts of interest can affect the rights and welfare of human subjects, and yet they are frequently underreported.³ The drug development and patenting process leaves a narrow window in time for financial payoff, causing large pharmaceutical companies to tightly guard their formulas for drugs and other intellectual property.⁴ Clinical investigators who are instrumental in generating this intellectual property are not immune to the temptation of industry payouts. Nonprofit drug development may be the wave of the future for minimizing these financial interests while maximizing progress on neglected diseases.⁵

Financial interests are not prohibited, and not all financial interests cause conflicts of interest or affect the rights and welfare of human subjects. However, Institutional Review Boards (IRBs), research sponsors, institutions and investigators must consider the impact of financial interests on trial conduct and seek ways to minimize this impact.² Investigators should be compensated for their services regardless of study outcome, without providing an incentive for demonstrating efficacy of the drug, device or biologic agent. Responsibilities involving design of the study and analysis of the results should be shared between a sponsor and investigators in order to prevent potential influence of financial relationships on the outcome of a clinical trial.² While documenting how much investigators are paid for their services may be easy, determining the extent of additional payments made to the researcher's practice, a foundation controlled by the researcher, or another unit of the investigator's institution may not be.⁶ In a guidance document issued as clarification on federal regulations by the FDA, payments made to the institution are to be disclosed if they are in "direct support of the investigator." ⁷ Payments made to the institution "on behalf of the investigator" are reportable, but the nature of these payments is not very clear. The FDA recommends that publicly traded sponsor companies "act with due diligence" to obtain information describing proprietary interests, significant payments above $25,000 or how much stock or equity an investigator owns in the company.^{6, 2}

According to a 2007 report on financial disclosure from the department of Health and Human Services (HHS), only 1% of clinical investigators disclosed a financial interest that year, in contrast to 23-28% of academic researchers disclosing financial interests to a leading medical journal.³ Furthermore, an eye-opening 42% of FDA-approved marketing applications were missing financial information, with 28% of applications justified using the "due diligence" exemption to indicate they were unable to provide complete financial information.³ Since the FDA did not have a comprehensive list of investigators for the trials and did not use on-site inspections to confirm that financial information submitted with marketing applications were complete, a thorough assessment of reliability of clinical data was not possible. Yet the FDA approved 118 marketing applications that year.³ It is clear from these observations that the financial disclosure system is not working as it was intended.

So what can be done to improve this process? Using independent research monitoring services, such as those of a Contract Research Organization (CRO), would help to provide a third party review of financial arrangements between sponsors and investigators. ² However, independent monitoring services must also be paid for, making it less likely that they would blow the whistle. The HHS suggests informing subjects and their families using the informed consent document about the source of funding and how it is managed, and involving an objective individual in the consent interview if a conflict of interest exists.² Conversely, subjects are more likely to choose not to participate in a seemingly flawed study than they are to report it to the FDA. In addition, sponsors only have to disclose financial arrangements at the endpoint of a clinical trial, and few INDs make it to that point in the process. To further complicate the issue, some clinical sites and investigators are preferable over others, and sponsors would like to keep working with them to generate quality data to support their clinical development plans. In order to recruit and retain these investigators, financial arrangements are usually necessary. Even sponsors following clinical best practices may have a hard time balancing these responsibilities with the demands of their shareholders, and given that the FDA has been unable to follow through on financial disclosure regulations, it is conceivable that the potential for bias may not be identified and mitigated under some circumstances.

An ancillary benefit of non-profit pharmaceutical companies is that financial disclosure requirements are easily satisfied. Provided that investigators are compensated without providing incentives for certain outcomes of a trial, and objective endpoints are used to assess efficacy, non-profit companies are capable of conducting objective clinical trials for indications that would not be selected for drug development by a for-profit pharmaceutical company. In these trials, investigators would not hold proprietary interests in the product, as patents, trademarks, copyrights or licensing agreements would not be necessary to establish a profit margin. Similarly, investigators would not have equity interest in the non-profit sponsor company. Given the need to limit expenses in the non-profit setting, investigators would not receive significant payments that exceed $25,000 excluding the cost of conducting the trial, and payments to investigators would be kept in a reasonable range. Non-profits can also harness resources that would not be available otherwise, including patent donations, tax exemptions, and the ability to use a sliding scale for pricing in the marketing phase.⁵

Financial disclosure regulations are fine tuned to the business model of large pharmaceutical companies, which entails huge investments in research and development (R&D) to identify a candidate, then filing for a patent, followed by a race to complete the drug development, clinical trials and the FDA review process before the patent expires. In the last decade, R&D spending has been steadily increasing while generating diminishing returns.8 Non-profit pharmaceutical companies may be the answer to this quandary. Non-profit companies are in a unique position to harness the power of investigator-driven clinical research while balancing global health needs with limited funds.⁵ Non-profit companies can limit expenditure on marketing and administrative costs as well as R&D by pursuing compounds that have already accumulated substantial safety and efficacy data. This enables development of treatments for neglected diseases of the developing world, such as malaria, that have a tremendous need but lack the profit margin to attract for-profit investments.5, 8 To this end, non-profit companies like OneWorld Health and Collaborative Drug Discovery have been collaborating with academic researchers and industry giants like GlaxoSmithKline to meet this need.^{9, 10}

The financial landscape of drug development has been changing over the last decade.5 The loss of venture capital and highly profitable patent exclusivity has been plaguing the pharmaceutical industry since 2001. Non-profit drug development can provide a way to continue innovative healthcare endeavors while limiting financial conflicts of interest. This new path can thus safeguard the rights and welfare of all human subjects, and not just those who can afford the cure.

References

1. Disclosable financial interests include: proprietary interests in the product, including patents, trademarks, copyrights, or licensing agreements; equity interest in the research sponsor; grants, compensation in the form of equipment, retainers for ongoing consultation, or honoraria; payments per participant or incentive payments that may be affected by outcome of the trial.

2. Department of Health and Human Services, "Financial Relationships and Interests in Research Involving Human Subjects: Guidance for Human Subject Protection." May 12, 2004, Federal Register, Notices, 69 (92): p. 26393

3. Osterwell, N. "FDA Not Effectively Monitoring Investigator Conflicts of Interest, HHS Watchdog Says," Medscape Medical News, January 16, 2009

4. Guth, R.A. "Glaxo Tries a Linux Approach: Drug Maker Shares Its Research Data Online in Test of Open-Source Principles," Tech Journal, May 26, 2010

5. Hale, V.G., Woo, K. and Lipton, H.L. (2005) "Oxymoron No More: The Potential of Nonprofit Drug Companies to Deliver on the Promise of Medicines for the Developing World," Health Affairs, 24 (4): 1057-1063

6. Sall, B. "Complying with FDA's Financial Disclosure Regulation," Medical Device and Diagnostic Industry Magazine, January 2000

7. Guidance for Industry: Financial Disclosure by Clinical Investigators (Rockville, MD: FDA, 1999)

8. Goozner, M. "PHARMA: The Future of Non-Profit Drug Development," February 13, 2007, accessed June 22, 2010

9. Guth, Robert A. "Glaxo Tries a Linux Approach: Drug Maker Shares Its Research Data Online in Test of Open-Source Principles," Tech Journal, May 26, 2010

10. OneWorld Health, http://www.oneworldhealth.org/new_opportunities accessed June 22, 2010