Transcript SPOOS” The Do’s and Don’t of “Significant Payments of

“SPOOS”
The Do’s and Don’t’s of
“Significant Payments of Other
Sorts”
Michael A. Swit, Esq.
Law Offices of Michael A. Swit
FDACounsel.com
[email protected]
Originally Presented to:



Barnett International Conference on
Financial Disclosure
November 12 – 13, 2002
Philadelphia, Pennsylvania
FDACounsel.com
2
Financial Disclosure – the
Basics


Goal -- Reduce potential for bias in clinical
studies and enhance human subject
protection
How implemented


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
FDACounsel.com
3
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.”
FDACounsel.com
4
Where to Go for Perspective –
How to Get the Scoop on SPOOS
Law School in 60 seconds

What is “law”?



U.S. Constitution
Statutes – Federal Food, Drug, and
Cosmetic Act (“the Act”)
Regulations – force and effect of law – 21
CFR Part 54
FDACounsel.com
5
Where to Go for Perspective –
Getting the Scoop on SPOOS …

FDA advisory opinions – formal
position of FDA; binding until refuted;
FDA can’t take regulatory action vs.
someone who relies on an FDA advisory
opinion – 21 CFR 10.85(e)

Preambles to proposed or final rules =
an advisory opinion – 21 CFR 10.85(d)(1)

“Common” law = case law
FDACounsel.com
6
Getting the Scoop on SPOOS
…

What’s not “law”?


Anything else FDA writes – guidances,
speeches, warning letters, complaints in Federal
court –
“Guidance” –


FDACounsel.com
“…describes the agency’s interpretation of or policy on a
regulatory issue” – 21 CFR 10.115(b)(1)
“…do not legally bind the public or FDA…” – 21 CFR
10.115(d)(1)
7
Getting the Scoop on SPOOS
…

So, where do we find the law of SPOOS?

NOT:


in Constitution, the Act (or any other law administered
by FDA), or the Common Law
YES:

FDACounsel.com
Regulation – 21 CFR Part 54

Problem – doesn’t say much more than the definition on

What do you do -- read every word with care
Slide #3
8
Getting the Scoop on SPOOS
…

Finding the law of SPOOS …

YES




The rest is commentary …



in the Feb. 2, 1998 Federal Register -- --- see preamble
to the Final Rule
= binding advisory opinion
read very carefully
The March 2001 Guidance document
FDA presentations at DIA, RAPS, etc.
Caution – FDA does not cite GAAP
FDACounsel.com
9
So How Do We Know If It’s A
SPOOS?
“…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.”
FDACounsel.com
10
“… 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
FDACounsel.com
11
“… 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
FDACounsel.com
12
“… 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:


FDACounsel.com
FRV/FMV at end of use during study
interest – opportunity cost of money
13
“… 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
FDACounsel.com
14
“… 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”
FDACounsel.com
15
“… by the sponsor…”



must they be named in the IND?
what re joint venture partner (e.g., Lilly/Icos on Cialis®)
not in the IND?
“the” – DOES THAT MEAN THERE CAN
ONLY BE ONE PERSON WHO’S THE
SPONSOR?


risky argument to make and inconsistent with
other FDA positions
Waxman-Hatch Act – “conducted or sponsored”
for 3-year exclusivity


FDACounsel.com
files the IND; or
provides significant support to the study
16
“…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)
FDACounsel.com
17
“…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
FDACounsel.com
18
“…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
FDACounsel.com
19
“…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)
BUT – what re Publicly-held parent vs. privately
held operating subsidiary?
FDACounsel.com
20
“…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

general grant to CI’s Dept.?


[allows institutional funds to be used for other purposes;
indirectly leaving more money for CI’s activities]
Guidance – “direct support” (FAQ #25)
FDACounsel.com
21
“…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
FDACounsel.com
22
“…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”
FDACounsel.com
23
“ … 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?
FDACounsel.com
24
“ … (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:



FDACounsel.com
equipment, or
retainers for ongoing consultation, or
honoraria
25
“ …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?
FDACounsel.com
26
“ … 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
FDACounsel.com
27
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
FDACounsel.com
28
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
FDACounsel.com
29
Why comply?


It’s the law
If FDA doesn’t get you, Alan Milstein
and Bill Lerach will!!
FDACounsel.com
30
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”
rule was created on Groundhog’s Day
a SPOO is a life form on the TV show Babylon 5
[the foregoing brought to you courtesy of Google®]
FDACounsel.com
31
Questions?
Michael A. Swit
Attorney at Law
Law Offices of Michael A. Swit
539 Samuel Ct. , Suite 229 ♦ Encinitas, CA 92024
Office & Cell: 760-815-4762 ♦ O-Fax: 760-454-2979
[email protected]
Also Admitted In Virginia and D.C.
FDACounsel.com
32
About the speaker …
Michael A. Swit has over 19 years of experience addressing critical FDA legal and regulatory
issues. His vast and varied experience, which he is now providing as a solo practitioner,
includes serving for three and a half years as vice president and general counsel of
Pharmaceutical Resources, Inc. (PRI) a prominent generic drug company and, thus, brings an
industry and commercial perspective to his representation of FDA-regulated companies.
While at PRI from 1990 to late 1993, Mr. Swit spearheaded the company’s defense of multiple
grand jury investigations, other federal and state proceedings, and securities litigation
stemming from the acts of prior management. Mr. Swit then served from 1994 to 1998 as CEO
of Washington Business Information, Inc. (WBII) a premier publisher of FDA regulatory
newsletters and other specialty information products for the FDA-regulated community.
Before founding FDACounsel.com, Mr. Swit was special counsel in the FDA Law Practice
Group in the San Diego office of Heller Ehrman White & McAuliffe. Before that, he was
twice in private practice with McKenna & Cuneo, from 1988 to 1990 and, most recently, from
1999 to 2001, first in that firm’s D.C. office and most recently, in its San Diego office. He first
practiced FDA regulatory law with the D.C. office of Burditt & Radzius from 1984 to 1988.
Mr. Swit has taught and written on a wide variety of subjects relating to FDA law including,
since 1989, co-directing a three-day intensive course on the generic drug approval process and
editing a guide to the generic drug approval process, Getting Your Generic Drug Approved.
He is a member of the California, Virginia and District of Columbia bars, an avid hockey,
basketball and baseball fan (and ex-player), and the father of triplet sons, born Feb. 29, 1996,
and is married to Vera Caccioppoli, an accomplished creative writer, artist, and business and
personal coach.
FDACounsel.com
33