As the public focuses attention on the influence of foreign investment in mergers and acquisitions, the national security apparatus continues to highlight the need to examine foreign influence in other areas of the economy, and throughout the federal procurement process. Recognizing that the United States has been extraordinarily open to foreign investment and involvement across the entire economy, other agencies in the United States government are examining whether foreign influence in their activities may be less benign (or commercial) than originally considered. For most agencies, foreign influence is identified as a supply chain risk. For agencies like the National Institutes of Health (NIH), foreign influence is measured in terms of financial involvement in grantee entities, pursuant to its rules for Financial Conflicts of Interest (FCOI).
FCOI is governed by Subpart F of the regulations (42 CFR part 50, subpart F), titled “Responsibility of Applicants for Promoting Objectivity in Research for Which PHS Funding Is Sought.” As stated in Section 601, the regulation is intended to promote “objectivity in research by establishing standards to ensure there is no reasonable expectation that the design, conduct, or reporting of research funded under PHS [public health service] grants or cooperative agreements will be biased by any conflicting financial interest of an Investigator.”
In March 2018, NIH posted guidance clarifying that the FCOI regulation requires recipients of NIH funds to disclose foreign financial interests as well as domestic:
One such area of the FCOI regulation requiring clarity is Investigator disclosures with respect to foreign financial interests. The regulation refers to exclusions of Institutions of higher education as defined in 20 U.S.C. 1001(a) or a federal, state or local government agency when disclosing financial interests. However, these references refer to a U.S. Institution of higher education or a federal, state, or local government agency within the U.S. Therefore, Investigators, including subrecipient Investigators, must disclose all financial interests received from a foreign Institution of higher education or the government of another country (which includes local, provincial, or equivalent governments of another country). (Emphasis added).
The decision to emphasize the agency’s concerns about foreign influence was clearly both a harbinger of things to come and a result of concerns raised by law enforcement, including the FBI, concerning potential illicit and improper activity tied to foreign investment and foreign influence at NIH grantees.
In a move that may have surprised some, especially those in the academic community, the National Institutes of Health recently advised more than 10,000 grantee institutions about concerns arising from “foreign influence” in biomedical research. Citing “threats to the integrity of U.S. biomedical research,” NIH announced that it had been coordinating with the FBI to assess those threats, and sought grantee cooperation.
In an August 20, 2018, letter to grantee institutions, NIH cited three “areas of concern” that had been identified:
- Diversion of intellectual property
- Sharing of confidential information by peer reviewers with foreign persons and entities, “or otherwise attempting to influence funding decisions”
- Failure by researchers to disclose substantial resources from outside interests, including foreign governments.
These issues were cited as potential causes of a number of negative effects, including “distort[ing] decisions about the appropriate use of NIH funds,” and intellectual property losses across biomedical research. NIH Director Francis Collins emphasized these concerns when he testified before the Senate on August 24, 2018, and noted that “undue foreign influence” in US-funded biomedical research was in fact a concern. Collins cited foreign influence as a growing concern and discussed the steps that NIH was taking to address the issue with grantees.
The requirement to report foreign government funding is not new, as NIH reminded the institutions. Applicants and awardees are required to disclose all forms of other support and financial interests in Form NOT-OD-18-160, which is the Financial Conflict of Interest: Investigator Disclosures of Foreign Financial Interests form. Further, NIH’s Grants Policy Statement requires that all applications and progress reports include all sources of research support, financial interests and relevant affiliations.
The NIH notice encouraged institutions to not only review their reporting practices, as well as prior reports, but recommended that institutions “reach out to an FBI field office” to schedule a briefing on the issue of foreign influence in their activities. Some institutions reported that they have had meetings with FBI regarding security threats from foreign countries.
The NIH Director’s Advisory Committee has been charged with developing more robust methods to improve accurate reporting, mitigate intellectual property risks and protect peer review integrity.
In a harbinger of activity to come, grantees were warned that they “may be hearing from [NIH’s] Office of External Research (OER) regarding grants administration and oversight questions.” The OER activity may delve into applications, progress reports, policies and personnel previously submitted to NIH by institutions. Though not specifically stated, these inquiries are likely to come from the NIH’s Division of Grants Compliance and Oversight (DGCO), which investigates and addresses FCOI with respect to grant performance. If FCOI is not timely reported, it can impact how grant results are treated, and lead to a mandate that the research reflect the FCOI in any presentation of the results, including prior results. But more likely is the result that identification of FCOIs in these reviews will lead to significant time and expense related to investigating and reporting FCOIs that were not previously reported.
From a national security perspective, these actions bring NIH funding into greater focus in terms of foreign influence. While NIH has published standards regarding what constitutes FCOI, as the Advisory Committee revisits and reassesses the threats and security concerns, institutions may see the ground shift, and must be prepared to adjust policies and practices in a way that addresses the new security analysis. The FBI role in this assessment means grantees will have greater insight into the threats to objectivity arising from foreign financial participation in their research, and may seek to find that funding elsewhere.
For funding entities, these actions will require greater transparency regarding the origin of funds, and will likely produce enhanced requests for information from the grantee institutions. These are just a few of the consequences as the government continues to manage its supply chain risks and vulnerabilities.