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--In one case, no conflict-of-interest determination

had been made either by the first or by the second review official. We found a total of 26 cases where this determination had not been indicated on the statement by the first review official and 14 lacking this determination by the second review official.

We found instances where the Director, Policy Management Staff, in making a conflict-of-interest determination, indicated "no conflict noted" even though the file contained a reference to restrictions placed on the SGE's activities; in some of these cases a PRDC memorandum was on file. In these cases the statements did not, by themselves, give an accurate picture of the extent to which the potential for conflict of interest was present.

CONFLICT-OF-INTEREST DETERMINATIONS NOT
ALWAYS DOCUMENTED

We noted several cases where there was either insufficient information in the case file to support a conflict of interest determination or all relevant information on which to base this determination was not in the file.

--In two cases, supporting documents referred to on the

statement were not in the file.

--In two cases, the information needed (i.e. the value

of stocks when the number of shares is known) was not documented, although it was available from public sources.

--In some cases we had to obtain additional information

from reviewing officials within the agency to find
out the basis for the conflict-of-interest determina-
tions.

In three cases a conflict-of-interest determination was made on an interim basis with the understanding that a final determination would be made upon receipt of additional information from the SGE. The information on which the interim determination was made was not adequate for a final determination and in one of these cases the SGE never supplied the additional information requested.

In other cases we found that no conflict-of-interest determinations had been made on revised statements. case the SGE submitted a revised statement to inform the agency that he was doing clinical work involving several new drugs. In two cases SGES reported that they had

increased their financial interests in FDA-regulated industry. FDA officials informed us that these cases had occurred some time back and that all such cases were presently being reviewed.

These FDA officials stated that, as a general rule, they were not concerned about documenting the steps they had taken to clear SGES for either appointment or reappointment if this served no other purpose than to document the fact that their actions were proper. In fact, the Director, Policy Management Staff, stated that he generally discouraged the official reviewing the statement from documenting the information developed in his review on such matters as dollar value of financial holdings.

We do not agree with this practice. We believe that the information in the files should be adequate to make sure that all cases have been properly reviewed and that conflict-of-interest determinations are made in accordance with FDA policy and criteria. A clear record of the actions taken to clear an SGE for conflict of interest may also prove useful to FDA when similar reviews are made yearly prior to reappointment.

INCONSISTENT TREATMENT
OF RESTRICTIONS

FDA policy does not allow SGEs to participate in matters relating to specific firms in which they have financial interests, if these firms are involved with products regulated by the employing bureau/office and are above a prescribed dollar amount. We found some inconsistencies in the circumstances giving rise to restrictions being made a matter of record. Since it was not always clear from the SGE's case file what restrictions the reviewing officials intended should be placed on his activities, we had to rely on the accuracy of the HeW-410, "Supplemental Information--Expert or Consultant," in the personnel file in making our observations.

--Restrictions in several cases covered interests in

FDA-regulated companies outside the employee's
assigned bureau/office and in companies not regu-
lated by FDA. For example, one SGE owned stock in
26 companies, some of which produce FDA-regulated
products. According to FDA policy, no restrictions
were required because his duties and responsibilities
did not directly involve products or firms. Yet re-
strictions were placed on his activities relating to

the 26 companies, even those not involved with FDA-
regulated products, FDA officials said they were not
concerned that these practices were inconsistent with
the policy as long as they were more conservative
than required by policy.

--In cases involving members of the National Advisory

Food and Drug Committee, we found that restrictions were not placed on their activities, even though they had interests with FDA-regulated industry. FDA officials stated that because members of this committee were involved with broad policy issues in a number of areas, which do not directly relate to products or firms, restrictions were not appropriate.

--In some cases companies sponsoring investigational

new drugs and new drug applications are entered as restrictions and in other cases they are not. FDA officials stated that the policy guidance did not specifically cover these cases but, in their opinion, no restrictions were required for these companies.

--In one case a member of the Board of Tea Experts had

financial involvement with the tea industry, but restrictions were not placed on his activities.

FDA officials stated that based on the requirements of the legislation establishing this committee, they believed its members must come from the tea industry. They further pointed out that all tea testing is done blind and members of the broad do not have an opportunity to give preferential treatment to any of the teas tested.

We believe that FDA's practices concerning restrictions should be consistent and reflect agency policy. Placing more restrictions on SGEs than is necessary creates additional work for FDA officials responsible for making sure that they do not participate in prohibited activities.

CONCLUSIONS

Based on the errors and inconsistencies we found in reviewing SGE files, we believe that there is a need for more definitive policy guidance as well as written procedures to make sure that FDA policy is being completely and accurately carried out. These problems point up the need for better management control so that SGEs working for FDA are not involved in potential conflict-of-interest situations.

CHAPTER 6

CONCLUSIONS AND RECOMMENDATIONS

CONCLUSIONS

FDA is responsible for protecting the Nation's consumers against impure and unsafe foods, drugs, cosmetics, and other potential hazards. FDA believes SGEs are essential to the effective accomplishment of its mission. To maintain public confidence in its decisions, it is essential that its SGES adhere to the highest ethical standards.

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But conflict-of-interest determinations relating to SGES are, in many cases, difficult. FDA is most often a secondary employer. Many SGEs have employment or other financial relationships with FDA-regulated industry. Options available to eliminate potential conflicts of interest for regular employees, such as job reassignment or divestiture, in most cases, are not appropriate for SGEs. Also, FDA believes that the conflict-of-interest statutes are not always clear as they relate to SGES. FDA has had problems interpreting certain key phrases and, in general, this has made the development of conflict-of-interest regulations and guidelines exceedingly difficult.

Before January 1976, FDA made case-by-case judgments concerning conflict of interests based on the Federal statutes and the Department's regulation. In January 1976, FDA issued draft policy guidance for SGEs to be used on a pilot basis until FDA gained experience with the policy in operation as well as resolve various legal issues. In October 1976, FDA revised its policy guidance based on 9 months of operating experience and concerns we expressed during our review. Most of the errors and inconsistencies found in reviewing SGEs' case files can be traced to the lack of formalized policy guidance prior to January 1976.

We believe that FDA's recent actions have increased the effectiveness of the system to protect against conflict-ofinterest situations for SGES. However, much remains to be done to complete system development and to integrate its components. Of primary importance is the need for FDA to submit its policy guidance to the Department and CSC for approval and develop implementing procedures. Until this is done, we believe that FDA cannot satisfactorily assure itself that all potential conflict-of-interest situations are being surfaced.

We recommend that, to improve the effectiveness of the FDA financial disclosure system for SGES, the Secretary of HEW:

--Actively assist FDA in developing a policy to protect

the Government against conflict-of-interest situations
and resolving difficult policy issues with regard to
the employment of SGES. One avenue for doing this would
be through the issuance of a supplemental regulation
covering SGES.

--Require the Commissioner of FDA to:

(a)

Complete system development which involves (1)
developing policy to provide guidance for special
Government employees not covered by present policy
guidance, (2) submitting its policy guidance to
HEW and csc for approval, (3) developing specific
procedures to make sure policy is implemented, and
(4) improving the form used to collect financial
disclosure information.

(b) Issue specific guidelines clearly defining the

responsibilities of the officials making the initial conflict-of-interest recommendation and the

position this individual should be in the agency.
(c) Develop procedures to provide responsible officials

with adequate information to make sure that SGES
do not participate in FDA matters in which they
have financial interests and are disqualified.

(d) Develop written procedures setting forth what in

formation should be included in public disclosure memoranda and the format to be used in order that the information be presented in a consistent and understandable manner.

(e) Improve procedures to make certain that all public

disclosure memoranda are, in fact, received by the Public Records and Documentation Center and made available for public review. In cases where the information contained in these memoranda does not change in subsequent reappointment cycles, notations should be made periodically on these memoranda that the information is still current.

(f) Establish a policy designating the maximum period

in which financial information can be submitted

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