1. Impact of Significant Payments of Other Sorts (SPOOS) on Clinical Research DIA ANNUAL MEETING June 2005 Michael A. Swit, Esq. Vice President, Life Sciences THE WEINBERG GROUP INC. Linda G. Strause, PhD Exec. Director, Global Site Development CancerVax Corporation

2. 2 Outline of Session Part I – The Law of SPOOS – –Michael A. Swit, Esq. Part II – SPOOS in Action –Linda G. Strause, Ph.D. Part III – Q & A

3. 3 Part I The Law of SPOOS Michael A. Swit, Esq.

4. 4 Financial Disclosure – the Basics Goal -- Reduce potential for bias in clinical studies and enhance human subject protection Way to Achieve Goal – Applicants Disclose “Financial Interests” of Investigators or Certify Their Absence How implemented by FDA –FDA Rules @ 21 CFR Part 54; Feb. 2, 1998 – published in F.R.; effective 1 year later –FDA Guidance: “Financial Disclosure by Clinical Investigators” – March 20, 2001

5. 5 Whose Interests Are Subject to Disclosure or Certification? Those held by –Investigators and subinvestigators and their family members (aggregated interests) –March 2001 Guidance specifically exempts “nurses, residents, or fellows and office staff who provide ancillary or intermittent care but who do not make direct and significant contribution to the data” Received From: –“Sponsor of the covered clinical study” – i.e., the person who gave support at the time study carried out

6. 6 The Five Types of Financial Interests Subject to Disclosure Five types of compensation and rights (collectively “Interests”) are the primary focus of the regulation –SPOOS -- Direct payments of more than $25,000. excludes the costs for the conduct of clinical studies includes honoraria, grants to fund ongoing research, compensation for or in the form of equipment or services, or retainers for ongoing consultation

7. 7 The Five Types of Financial Interests … Equity interest of more than $50,000 in a publicly traded company Ownership interest, stock, stock option or other financial interest, no matter how small, the value of which cannot be readily determined through reference to public prices, (e.g., any privately held company or unlisted equity interests)

8. 8 Proprietary interest in the investigational product –including, but not limited to, patents, copyrights, trade secrets, and licenses Financial arrangements under which the compensation (e.g., money, equity interest, royalty interest) could be higher for a favorable trial outcome than for an unfavorable trial outcome The Five Types of Financial Interests …

9. 9 Other Key Rules Governing Financial Disclosure Interests are evaluated for disclosure on a “per investigator” basis Interests of an investigator include the Interests held or received by an investigator and his/her spouse and dependent children, and are aggregated Disclosure (for all interests) must be made during the “covered” clinical trial and for one year following completion of the trial

10. 10 Other Key Rules Governing Financial Disclosure … “Covered Study” is: –a trial that FDA or the sponsor relies on to establish that the tested product is effective OR –a study in which a single investigator makes a significant contribution to the demonstration of safety –FDA is particularly concerned with Phase II and III trials (efficacy) and bioequivalence studies where results obtained by a single investigator can have a profound statistical effect on trial outcome

11. 11 Other Key Rules Governing Financial Disclosure … “Covered Study” is: … –In general, large open-label studies conducted at multiple sites, treatment protocols, Phase I tolerance studies, pharmacokinetic studies, and most clinical pharmacology studies are not “covered” studies

12. 12 How Disclosure Occurs In marketing submissions: –NDA & ANDAs (e.g., applies to bioequivalence studies) –PMAs and 510k’s (with clinical data) –BLAs –Device Reclassification petitions –OTC Monograph Petitions Mechanism – via a form –3354 – no interests to disclose –3355 – interests required to be disclosed and steps made to minimize bias

13. 13 Getting the Scoop on SPOOS … Finding the law of SPOOS … –in the Feb. 2, 1998 Federal Register -- --- see preamble to the Final Rule = binding advisory opinion read very carefully The rest is commentary … –The March 2001 Guidance document –FDA presentations at DIA, RAPS, etc.

14. 14 What’s a SPOOS? Direct “payments” > $25,000 -- aka “Significant Payments of Other Sorts” or, more precisely, per 21 CFR 54.2(f), means payments made by the sponsor of a covered study to: …the investigator or the institution to support activities of the investigator that have a monetary value of more than $25,000, exclusive of the costs of conducting the clinical study or other clinical studies (e.g., a grant to fund ongoing research, compensation in the form of equipment or retainers for ongoing consultation or honoraria) during the time the clinical investigator is carrying out the study and for 1 year following the completion of the study.”

15. 15 “… payments” Remember – this is a noun – thus, we are describing types of remuneration Rule – silent directly, but indirectly (“e.g.”) makes clear can include: –honoraria –equipment –retainers for consultation

16. 16 “… payments …” Preamble – fairly silent on what’s a payment other than those examples actually in the Rule. –exception – FDA: no duty to disclose competing interests that also could bias the investigator (see Comment #17) Guidance – travel expenses added to mix –excessive; or –for other family members (FAQ #26) Common sense – has an immediate or measurable value – arguably is a payment; if your friendly CPA would regard as income if you were a sole proprietor

17. 17 “… payment…” Gray areas: –What if deferred until after one year from study completion? –What if contingent on an event unrelated to study’s success – e.g., the stock reaches $XX in value, we will pay you $25,001? –What if duty to pay back or return? Arguably, look at: FRV/FMV at end of use during study interest – opportunity cost of money

18. 18 “… made…” Intertwined with “payment” –What if only parts of the payment have been made (see, also, “What is $25,000” slide, to follow)? may depend on whether contingent –What if a present pledge to give the money at a time after the study completed? Rule: silent Preamble: silent Guidance: silent

19. 19 “… by the sponsor…” “By” –what if made by someone else, but the money came from the sponsor originally? might look to CME rules for guidance conspiracy to avoid 21 CFR 54? “Sponsor” -- per 21 CFR 54.2(h) = “…the party supporting a particular study at the time it was carried out” – –thus, the “applicant” – a term itself defined in 21 CFR 54.2(g) – may not be “sponsor”

20. 20 “…sponsor…” Preamble: silent Guidance: –whoever provides “material” support (either money or test product) –“sponsor” here is not same as some other FDA regulatory definitions of sponsor (e.g., 21 CFR 312.53 and 812.43, where a “sponsor” is someone who submits a marketing application) Common sense: usually whoever pays the bills Trap for the unwary – a CRO can be a sponsor under Guidance if it provides things of value to CI’s (FAQ #9)

21. 21 “…of a covered study…” See definition of “covered clinical study” at 21 CFR 54.2(e) But, the SPOOS definition itself in Rule does not include the word “clinical” – any significance? –doubtful –probably inadvertent

22. 22 “…to the investigator…” 21 CFR 54.2(d) defines “clinical investigator”: “…means only a listed or identified investigator or subinvestigator who is directly involved in the treatment or evaluation of research subjects. The term also includes the spouse and each dependent child of the investigator.” PhRMA – companies err on side of inclusion out of fear of omission leading to regulatory challenge by FDA

23. 23 “…investigator…” What about payments to a corporation controlled by the investigator? “…or [to] the institution…” What if to a related entity, but not legally same as the institution (e.g., WARF vs. U. of Wis.)? Rule – defines investigator Preamble – also clarifies no duty on business partners (Comment #18) Guidance – only if parent company itself is a “Part 54 sponsor” (FAQ #22)

24. 24 “…to support activities of the investigator…” “Support” –FDA – little written on its precise meaning –presumably, it’s inverse of a study cost “Activities of the investigator” –what if give money for “indirect” reasons – agreement not to study anyone else’s NSAID? scholarship/fellowship funds [allows institutional funds to be used for other purposes; indirectly leaving more money for CI’s activities] general grant to CI’s Dept.? –Guidance – “direct support” (FAQ #25)

25. 25 “…that have a monetary value…” When is value measured? –at initial donation? $75,001 piece of lab equipment; 3-year depreciation; study takes 2 years; do you need to disclose? –at end of study? How long does it have to stay >$25G? [contrast here to stock; which is not SPOOS] What if value fluctuates – rarer; could happen – e.g., donated raw materials for experiments; Rule and Preamble are silent; Guidance – only addresses stock fluctuations

26. 26 “…of more than $25,000…” Thus, must be at least $25,000.01. –Picayune lawyer’s observation # 1 – Guidance incorrectly says “$25,000 or more” Aggregate payments relative to the >$25G threshold? –Rule – silent –Preamble – silent –Guidance – “cumulative monetary value”

27. 27 “ … exclusive of the costs of conducting the study or other clinical studies … ” Exclusion – necessary or you would be disclosing the study costs themselves; presumably those are “for services rendered” and/or direct expenses Costs – what is a cost: –overhead – what if excessively allocated to the study? –profit allowed?

28. 28 “ … (e.g., a grant to fund ongoing research, compensation in the form of equipment or retainers for ongoing consultation or honoraria)…” By including some examples, does NOT exclude others meeting definition Specifics listed: –a grant to fund ongoing research –compensation in the form of: equipment, or retainers for ongoing consultation, or honoraria

29. 29 “ …during the time the clinical investigator is carrying out the study…” When does a study begin? –Guidance – by implication, cites to 21 CFR 312.53 and 812.43 as keying when an investigator’s involvement in a study starts (FAQ #6) Why important? –what if there was a payment just before site initiation cleared, but the protocol has been signed? –IND on file naming that investigator?

30. 30 “ … and for 1 year following completion of the study …” Varies – no hard and fast rules But, what if the investigator’s role in the study ends on 12/31/02, but the study continues at other sites for more than a year thereafter? –Guidance – flexible; can make site specific (FAQ #14) Be sure to establish up front and stick by it and make sure the investigators understand the measure

31. 31 Minimizing Bias In Event of Financial Disclosure Key – take the action early; you will have to describe it later in your marketing application and you also may not be able to address effectively later Possible angles: –multiple study sites/investigators –blinding –objective endpoints –randomized assignment of patients to treatment v. control groups –have someone other than investigator measure subjective endpoints

32. 32 Internal Controls Need an interdisciplinary team on this FDA’s view of the time and expense involved is not shared by PhRMA Have a written procedure –train on it –audit its implementation If you use CROs and other contractors, you will have to ride herd on them

33. 33 Part II SPOOS In Action Dr. Linda G. Strause

34. 34 SPOOS IN ACTION Site Selection Site Qualification Study Conduct Study Closure Submission of application Site Selection Site Qualification Study Conduct Study Closure Submission of application From study start to study finish:

35. 35 SPOOS IN ACTION Site Selection Site Qualification Study Conduct Study Closure Submission of application Site Selection Site Qualification Study Conduct Study Closure Submission of application From study start to study finish:

36. 36 Site Selection: Investigator and institution/site experience Ability to conduct the study –additional requirements? Completion of the 1572 –- who is to be listed? SOP: guidance not always clear –define in SOP Can’t start study without obtaining financial info – 21 CFR 314.53(c)(4)

37. 37 Site Selection: Standard Operating Procedure -- Key points –Make sure that includes provision to possibly follow up with FDA – prior to initiating the study -- to determine, if there are disclosed financial interests, whether: Study size impacts bias Other efforts are needed to minimize bias

38. 38 SPOOS IN ACTION Site Selection Site Qualification Study Conduct Study Closure Submission of application Site Selection Site Qualification Study Conduct Study Closure Submission of application From study start to study finish:

39. 39 Site Qualification: Who is to be on the 1572 and why? Anyone on 1572 must complete Financial Disclosure form/questionnaire Do you review completed form at the IND stage (remember – no need to submit to FDA at this point)? –Yes, to assess potential a conflict will bias study Other studies of same sponsor? KOL on another study? (Marketing) SPOOS: contracts department?

40. 40 Site Qualification: 1572: Review carefully 21 CFR 54.2(d) defines ‘clinical investigator’: “...means only a listed or identified investigator or sub investigator who is directly involved in the treatment or evaluation of research subjects. The term also includes the spouse and each dependent child of the investigator.”

41. 41 Site Qualification: Sponsor vs. Study: – Equipment provided by sponsor for another study? – Identified as KOL by marketing team for another therapeutic indication by same sponsor? – How do you manage internally?

42. 42 SPOOS IN ACTION Site Selection Site Qualification Study Conduct Study Closure Submission of application Site Selection Site Qualification Study Conduct Study Closure Submission of application From study start to study finish:

43. 43 Study Conduct: Tracking investigator financial activity Remember -- SPOOS: –“…payments made by the sponsor….to investigator or the institution….a monetary value of more than $25,000, exclusive of the costs of conducting the clinical study or other clinical studies…)

44. 44 Examples: (>$25,000) Study Conduct: Equipment – DEXA – Biosafety hood – Electron microscope – Cumulative: fax machine, water bath, transporter Honoraria – Speakers bureau – KOL activities

45. 45 Study Conduct: Cumulative monetary value: – over duration of study? – multiple studies? – all monies received? – maintenance costs? What if returned – or Not? Depreciation: over time, across studies What if 100% utilization is for your study?

46. 46 SPOOS IN ACTION Site Selection Site Qualification Study Conduct Study Closure Submission of application Site Selection Site Qualification Study Conduct Study Closure Submission of application From study start to study finish:

47. 47 Study Closure: End of study – Guidance doesn’t define – Your protocol should! What if investigator leaves before study ends? Tracking of documents – –Site – know how they’re organized in case PI leaves One year follow-up –Make sure in SOP in case sponsor study team changes

48. 48 Study Closure: Hire a PI to find the PI?

49. 49 SPOOS IN ACTION Site Selection Site Qualification Study Conduct Study Closure Submission of application Site Selection Site Qualification Study Conduct Study Closure Submission of application From study start to study finish:

50. 50 Submission of Application: Required disclosure/certification must be included in marketing application [NDA, BLA, PMA, 510(k)] If not included, FDA may refuse to file application. If FDA determines that the information disclosed raises a serious question about the integrity of the data from a clinical trial, the agency claims the authority to take actions; –auditing or reanalyzing data –refusing to accept the trial as providing data that can support marketing approval –making you do a new study

51. 51 http://www.fda.gov/oc/guidance/financialdis.html Submission of Application: For drugs and biological product applications, applicants should include the financial certification/disclosure forms as part of item 19 (“Other”) of the application. –#19 -- form 356h: Financial certification information For device applications, applicants should submit the financial certification/disclosure forms according to the format outlined in the appropriate submission checklist.

52. 52 Submission of Application: Responsibility of sponsors – Recommendations: –Compliance with regulations should be a part of selection process and documented –Clinical Trial Agreements (CTA) should contain provisions requiring compliance with disclosure regulations (CROs, licensing agreements) –Establish and maintain tracking system for investigator disclosure Collateral issue – SEC compliance on PI insider trading –Establish and implement tracking system for types of interests paid and how managed

53. 53 Submission of Application: Small company – Characteristics influencing financial disclosure issues –# of sites/patients Small – if balanced as to patients, bias risk less But, if many sites (e.g., for rare disease), single site may have bias if large # of patients at one site creates greater risk for bias –sponsor usually aware of financial involvement

54. 54 Submission of Application: Large company – large study -- Characteristics influencing financial disclosure issues –Large # of patients distributed evenly across large # of sites lower risk for bias –Tracking of multiple studies at one investigative site –SPOOS: percent dedicated to specific clinical study? 100% dedicated to study -- is not a SPOOS

55. 55 Hire an Accountant to Calculate and Track! Irony -- ~ 1% of investigators are impacted! Hire an Accountant to Calculate and Track! Irony -- ~ 1% of investigators are impacted! Submission of application:

56. 56 SPOOS IN ACTION THANK YOU !!

57. 57 Other SPOOS Considerations The Jesse Gelsinger scenario -- If an investigator has a significant financial interest, has that been adequately disclosed in the study’s informed consent documents?? –California – Moore v. Regents – financial interest is an element of informed consent Other entities may also impact financial disclosure duties, such as: –the investigator’s institution (e.g., university or hospital) may have separate rules with different, lower thresholds –HHS rules may apply as well (e.g., if federally funded); and are not identical

58. 58 Tired of SPOOS? A few truly obscure things to know about SPOOS: –According to CDRH, applies to payments made for “consolation” – means you have to disclose if they pay you for failing results? –on Wall Street, “SPOOS” is the nickname for the Standard & Poors 500 Futures Contract –a SPOO is a life form on the TV show Babylon 5 –rule was created on Groundhog’s Day [some of foregoing brought to you courtesy of Google®]

59. 59 Part III Q & A

60. The End

61. 61 MORE QUESTIONS? Linda Strause, Ph.D. CancerVax Corporation lstrause@cancervax.com 1-760-494-4224 San Diego Hospice & Palliative Care strause@pacbell.net 1-858-509-9054

62. 62 More Questions? Call, e-mail, fax or write: Michael A. Swit, Esq. Vice President, Life Sciences THE WEINBERG GROUP INC. 336 North Coast Hwy. 101 Suite C Encinitas, CA 92024 Phone 760.633.3343 Fax 760.633.3501 Cell 760.815.4762 D.C. Office 202.730.4123 michael.swit@weinberggroup.com www.weinberggroup.com