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GAO was asked by the requestor not to obtain
formal comments. However, GAO discussed the
report with the Associate Commissioner for
Administration and other agency staff in the
Food and Drug Administration responsible for
the financial disclosure system. GAO also
discussed the report with officials in the
Office of the General Counsel, Department
of Health, Education, and Welfare. Their
comments, where appropriate, were considered
in drafting the report.

This is GAO's first report on financial disclosure for special Government employees and one in a series of reports on financial disclosure systems in the Government. (See app. 1.)

INTRODUCTION

This is our second report on the Food and Drug Administration's (FDA's) financial disclosure system. In the earlier report entitled "Financial Disclosure System for Employees of the Food and Drug Administration Needs Tightening" (FPCD-76-21, Jan. 19, 1976), we discussed FDA's financial disclosure system for regular employees. This report discusses the system for protecting against conflict of interest for special Government employees (SGES) and the actions which are needed to strengthen this system.

As of May 31, 1976, FDA had 810 SGES. Approximately 480 of these were voting members of public advisory Committees and another 37 were nonvoting consumer and industry representatives to these committees. The majority of the remaining SGEs were consultants and experts to committees.

Most SGES in FDA are principally employed by universities and hospitals. Other employers are foundations and Government agencies. Industry representatives come almost exclusively from FDA-regulated industries.

The term "special Government employee" has been broadly defined in 18 U.S.C., section 202 (a), as an officer or employee of the Government who is retained, designated, appointed, or employed to perform, with or without compensation, temporary duties either on a full-time or intermittent basis for a period of not more than 130 days during any period of 365 consecutive days. This does not mean, however, that every person who performs temporary duties with a Government agency must be an SGE. The term SGE is limited to those persons who have an employee-employer relationship with the agency concerned (See 5 U.S.c. 2105(a)).

There is no specific statutory requirement that members of public advisory committees be appointed as SGES. 1/ Where a member's temporary duties on a public advisory Committee result in an employee-employer relationship, however, appointment as an SGE would be required. If a member serves strictly in a representative capacity, as in the case of FDA's consumer and industry representatives, there is no requirement to appoint that member as an SGE. 2/ However, an agency, at its discretion, may

1/Federal Advisory Committee Act, 5 U.S.C., appendix I.
2/Federal Personnel Manual, chapter 735, appendix C, pages
735-C-4 and 5.

require that members serving in a representative capacity be SGES, thus making them subject to the conflict-ofinterest laws.

FDA'S MISSION

FDA, a constituent agency of the Department of Health, Education, and Welfare (HEW), is a principal consumer protection agency of the Federal Government enforcing the Federal Food, Drug, and Cosmetic Act and other related laws.

FDA's major task is to prevent adulteration or misbranding of foods, drugs, medical devices, and cosmetics. It is likewise concerned with the safety of a host of chemical products, biological products, and electronic equipment which emits radiation. In pursuing these activities, FDA must be responsive to many groups and individuals who are concerned with the health needs of the Nation.

SGE'S ROLE

FDA believes that it is not possible to maintain in-house all the many kinds of scientific talent required for intermittent, but high priority work. Thus, the regular full-time FDA staff is augmented by SGES who are individuals with knowledge and judgment in a specific field and qualified by training and experience to evaluate information and interpret its significance under various circumstances. Each is expected to be a leader in his profession and fully conversant with the most advanced expression of its scientific basis, clinical or technical applications, and societal implications. These individuals represent the diversity of judgment, outlook, and background which FDA believes essential to balanced and effective programs. FDA has taken the position that without the use of SGES it could not discharge

s scientific and regulatory responsibilities at the level which the safety and health of the public warrants.

Most SGES are members of public advisory Committees or serve as consultants and experts to these committees. All voting members and many nonvoting members on these committees are SGES.

Public advisory committees assist FDA by holding public hearings, reviewing and making recommendations on matters pending before FDA. These committees supplement the knowledge and judgment which is generated internally in FDA and can be brought to bear on the broad range of areas in which FDA is responsible. According to FDA, these committees are

strictly advisory and have no direct operating or administrative authority.

FDA had 60 public advisory Committees at the time of our review. The number of committees changes from time to time; one new committee was established in each of the last 2 years.

Most committees have a limited life, functioning from 2 to 6 years or until their mission is completed. These committees meet formally from 1 to 12 times a year.

Voting committee members generally do not represent any particular interest group or organization. Nonvoting consumer and industry members, however, serve in a liaison function with those whom they represent. Voting committee members have a greater capacity to influence agency decisions than nonvoting members. Their position on issues is a matter of record and is expected to be arrived at objectively and independently, totally free from bias motivated by an affiliation with a particular interest.

Consumer liaison members are nominated and selected by consumer organizations and other interested consumers. Industry members are selected by industry associations. It is the responsibility of these members to represent the consumer and industry interests fairly in all deliberations; they must exercise restraint and not engage in unseemly advocacy or attempt to exert undue influence over the other members of the advisory Committee. The need for consumer and industry representation is determined on a committee by committee basis and, in most cases where one interest is present, so is the other.

Most industry representatives are not SGES and, therefore, are not subject to SGE conflict-of-interest regulations and do not file financial disclosure statements. FDA does not require either consumer or industry representatives to become SGES. To attend closed committee meetings, consumer representatives must be SGES whereas industry representatives may not attend meetings closed for the purpose of discussing trade secrets even if they are SGES.

CONFLICT-OF-INTEREST PROBLEMS

Many of the characteristics which make SGES desirable (wide experience, an active role in the development and advancement of new products and techniques, a close relationship with other Federal agencies as well as with the nonFederal community) create problems in terms of conflict of interest which are far greater than for regular employees.

--Regular employees customarily derive most if not

all of their income from FDA employment. SGES
normally have other employers as well as outside
financial interests, and the income derived from
FDA is often minor in relation to that derived
from other sources. Some SGES serve without com-
pensation. Compensated SGEs received an average
of $1,558 in 1975 ranging from a low of $64 to
slightly under the maximum allowable of $16,744.

--While it is possible to eliminate conflicts for

regular employees by such actions as job reassign-
ment and divestiture of controversial interests,
such solutions are often not appropriate for SGES.
FDA is generally not the primary employer; the
maximum tenure in any one assignment is 130 days
a year for a period of up to 4 years.

FDA has recognized that often a highly qualified person cannot be found who is totally free from non-Federal employment or private financial interests that present potential for conflict of interest. Its Staff Manual Guide (FDA 2111.1) issued in July 1975, states:

"It will not always be possible for FDA to obtain
the services of a competent consultant, expert,
or committee member who does not have some sort
of relationship with regulated industry. In ad-
dition, a group of consultants to FDA may of neces-
sity be composed largely or wholly of persons
representing a common class, group, or interest
whose regular employers might benefit or appear
to benefit from the actions of the group. How-
ever, in many cases, only in such groups can
the necessary expertise needed by FDA be obtained."

FDA is concerned about this problem and its implications in terms of the continued use of SGES. FDA firmly believes that the conflict-of-interest statutes were not intended to deny the Federal Government access to the highest quality scientific and medical advice. The Congress has demonstrated its concern over this possible inaccessibility by making the conflict-of-interest prohibitions less stringent for SGES than for regular employees.

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