• Each NPC-administered research study should be governed by a clinical research agreement that references a CRADA designed to address solely the intellectual property issues.  NAVREF recommends use of a “universal CRADA” and “single collaborator” CRADAs.

• Statements should be incorporated in CRAs to ensure that the CRA is not perceived as binding on the VA.  An accompanying VA statement should be used to provide VA assurances as needed.
  VA should develop and disseminate clear policy on VA’s preferred outcome on IP ownership and management appropriate to the type of study proposed.  This encompasses a broad spectrum including Phase I-IV, other sponsor-initiated, investigator initiated, VA initiated, etc., studies.

• VA should staff the Technology Transfer Program appropriately in order to ensure expeditious review and approval of CRADAs.

• As quickly as possible, VA should delegate to Regional Counsel Offices approvals of routine CRADAs in accordance with VA guidelines.

• VA and NAVREF should collaborate on training for VA attorneys and NPC personnel in general CRADA principles as well as policies and procedures specific to VA.

• VA should involve NPC representatives and OGC Corporations Panel attorneys in ongoing policy deliberations.  VA should also meet with pharmaceutical company personnel and with staff of the Henry M. Jackson Foundation to learn from their extensive experience with intellectual property management, CRADAs and clinical research agreements.

6. Other Considerations – Page 12

1. Clear guidance on desired outcomes and appropriate language is needed before NAVREF can be comfortable recommending that NPCs should work with their local VAMCs to negotiate amendments and/or modifications in CTAAs to accommodate interim use of CRAs and future use of CRADAs.

2. NAVREF appreciates the commitment of the Office of General Counsel to continue to support the OGC Corporations Panel and encourages OGC to find a way for NPCs to reimburse OGC for VA attorneys’ time spent on NPC issues.

3. If improvements should be made in the NPC statute to clarify the status and authorities of NPCs, as well as to provide VA with the most effective research partners possible, NAVREF welcomes working with OGC toward that end.

4. CRAs and the language used to address issues commonly found in CRAs are similar whether the administrative entity is an NPC or other nonprofit, university or commercial research organization.  The April 1 OGC advisory conclusions should be applied consistently to all administrative entities for VA-approved research and not solely to the NPCs.

Recommendations Regarding the
April 1 OGC Advisory Determinations on
CRADAs and Clinical Research Agreements

Note:  This document and all attachments are available electronically at: http://www.navref.org/library/April_1_Advisory_Recommendations.htm

On April 1, 2005, the VA Office of General Counsel (OGC) issued an advisory (Attachment 1) that has far reaching implications for the mechanisms used to date and in the future to establish research agreements between sponsors and the VA-affiliated nonprofit research and education corporations (NPCs).

The following information is provided.  Additional and supporting materials are found in the attachments.

• Background Information about the NPCs

• Summary of the Findings and Implications of the April 1 OGC Advisory

• Rationale for VA Support of the NPCs

• Issues for Consideration by VHA and OGC

• CRADA Considerations and Recommendations

• Other Considerations

• Conclusion

The National Association of Veterans Research and Education Foundations (NAVREF) looks forward to collaborating expeditiously with VHA and OGC toward establishing and implementing appropriate policy and mechanisms for managing relationships with research sponsors for the benefit of VA and veterans.

In 1988 Congress passed legislation that enables VA facilities to establish nonprofit corporations (NPCs) “to provide a flexible funding mechanism for the conduct of approved research and education at the medical center.”  Today there are 88 active NPCs.  Collectively, prior year NPC expenditures in support of VA research and education were nearly $179 million according to NPC annual reports submitted to VA in June 2004.  Attachment 2 provides details of revenues and expenditures.

NPCs range from those that predominantly administer clinical trials to those that support a full array of research and education awards, including non-VA federal grants from NIH, CDC and DoD.  Additionally, many NPCs administer other nonprofit and voluntary health agency awards including those from the American Diabetes Association, the American Heart Association and the Robert Wood Johnson Foundation.

At most VA facilities that conduct research, the NPCs’ support for their affiliated VA medical centers has become an essential component of the VA research infrastructure.  These corporations bear much or part of necessary research costs such as IRB activities, compliance officers, investigational pharmacists, research administration staff, IT support, facilities renovation, animal facility staffing and a host of other services that enrich the research environment.  Pages 12-14 of Attachment 2 provide specific examples of NPC support.  Typically, NPC support far exceeds its proportionate share of the research enterprise at the facility, and benefits VA more directly than when funds are administrated by other VA affiliated entities.  Because VA personnel serve on NPC boards, NPC expenditures can be directed to VA’s priority research needs as determined by VA itself.  By statute, all NPC expenditures, whether for the direct costs of a research project or for research infrastructure in general, must benefit VA research or education, or support the business operations of the NPC itself.

Additionally, studies supported by NPCs provide veterans with access to cutting edge treatments under carefully controlled circumstances.  In some cases, an experimental drug is the only treatment for a veteran’s illness and participation in a study offers veterans their only hope.

Since their inception, NPCs have used “clinical research agreements” (CRAs) to establish the terms and conditions of relationships with industry sponsors.  Over time, VA attorneys have developed sample clauses containing terms deemed acceptable to VA and many have been made available by postings on the NAVREF web site at (Attachment 3).  When negotiating with industry sponsors, NPCs and VA attorneys use these clauses to replace those offered by sponsors which may contain terms that are inconsistent with VA policies or requirements for studies conducted in federal facilities.  As recently as June 2004, then Acting Under Secretary for Health Jonathan Perlin, MD, PhD, advised NPCs to use the clauses provided on the NAVREF web site (Attachment 4).

When NPCs are unable to reach agreement on terms consistent with VA policies, they often seek advice as well as review and approval by members of the OGC Corporations Panel which was formed by OGC in 1996 to assist NPCs on legal matters, primarily in negotiating clinical research agreements.  The objectives of forming the panel were to ensure 1) compliance with VA policies; 2) consistency in the advice provided; and 3) timely responsiveness so as not to impede the conduct of the research.

As summarized by VA Deputy General Counsel Jack Thompson, the OGC email dated April 1, 2005, and entitled “Intellectual Property and Non-Profit Research Corps” concludes:

1. VA has no authority to confer IP rights in advance of disclosure except through CRADAs.

2. VA's nonprofit corporations cannot execute research agreements that legally bind the Department.

3. VA's non-profits cannot execute research agreements that contradict the CTAAs the Department has entered with its affiliates.

Consequently, OGC now takes the position that the clinical research agreements previously advised by VA attorneys for use by NPCs are improper.  To ensure that NPCs’ practices do not conflict with the above determinations, OGC has decided that Cooperative Research and Development Agreements (CRADAs) should be the vehicle for managing intellectual property resulting from sponsored research awards.  OGC also has determined that CRADAs are the only means available to VA to commit ownership and licensing of intellectual property developed by its employees (salaried and WOC), or using VA resources, prior to disclosure.  However, in order to make CRADAs feasible, accommodations must be made in the 63 Cooperative Technology Administration Agreements (CTAAs) currently in place with affiliated universities.  NAVREF’s views on the advisory are summarized in Attachment 5.

In recognition of the far reaching implications of the advisory, the very low level of risk associated with the clinical research agreements (CRAs) used to date, the need to educate both VA and NPC personnel about CRADAs and the uncertain timeline required to modify the CTAAs, OGC has agreed that NPCs will continue to use clinical research agreements, and VA attorneys may assist in their review, during the transition period.  Details were provided on April 12 in a memo to OGC attorneys with NPC involvement (Attachment 6).

It is to VA’s advantage to ensure that NPCs are fully able to realize their statutory purpose and their potential as flexible funding mechanisms first and foremost because the NPCs’ purpose is to support only VA-approved research; that is research conducted to ensure that veterans receive the best possible care now and in the future.  Additionally:

1. By statute, the NPCs are VA’s congressionally authorized means to administer non-VA federal and private sector funds in support of VA research and education.  This is supported by the March 22, 2004, IG administrative investigation on “Use of Government Funds, Travel, Personnel, Impartiality and Management Issues, Research and Development Office, Veterans Health Administration (Report No. 03-03053-115) Recommendation 1. g) and the July 8, 2004, OGC opinion regarding “Funds Provided by Pharmaceutical Companies to Friends Research Institute for Cooperative Research Studies,” under Held, Item 2.  Both recommend use of the NPCs to administer extramurally funded research.

Additionally, VA’s own Handbook 1200.2 Research Operations mandates:

4. Financial Operations. b. Distribution and Expenditure of Funds. a) Administration of Funds.

NOTE: If approached by a potential donor or grantor interested in supporting VA research, a VA official may not direct the donor to deposit the funds with any entity other than VA or a VA nonprofit corporation.

3. Affiliated schools and universities and nonprofit organizations (other than a VA nonprofit research corporation, discussed above) may administer funds for VA research if authorized by a VA medical center Director. A VA medical center Director may authorize these entities to administer funds for VA research only if administration is a condition of payment of the funds to VA.

2. NPC administration of VA approved research and education affords VA greater awareness, control and oversight of research conducted in its facilities.

3. The NPCs were authorized in part because General Post Funds were found to be an ill-suited mechanism for research administration.

4.   4. Unlike other administrative entities, all NPC expenditures ultimately benefit VA.  By augmenting hospital and R&D support for VA research, NPCs make VA a more attractive career choice for clinicians interested in pursuing clinical, research and academic careers.

It is a matter of some concern to NAVREF that the NPCs are often placed at a disadvantage to affiliated universities and other potential administrative entities when it comes to research administration.  This is in violation of its own policies and is counterintuitive because VA clearly benefits from NPC administration of both private sector funding and non-VA federal grants.  The table provided as Attachment 7 allows one to calculate the approximate cost to VA of non-NPC administration of extramural research support.  At a modest indirect cost rate of 15%, this amounts to a loss of as much as $40 million per year in indirect reimbursement on non-VA federal awards alone.  At a 25% rate, this would be as much as $66 million per year.  The typical NPC administrative overhead rate on non-federal awards is 15-25% so the lost benefit to VA on the $91 million in private sector funding managed by other entities is also substantial.

Ironically, at a time when various determinations are having a negative impact on NPC revenues, the secretary of the Department of Veterans Affairs has on numerous occasions informed Congress that VA research depends on funds other than those appropriated to VA and anticipates large increases in such amounts in the coming year.  VA’s own FY 2006 budget proposal assumes that VA investigators will successfully compete for an additional $37 million over the previous year’s level of funding from other agencies and $9 million more from private sector sources.  VA support for its own research program, which it contends will amount to $1.65 billion under the FY 2006 budget proposal, would shrink to 48% of the total, with the R&D appropriation representing less than 24%. 

However, according to reports submitted in June 2004, NPC private sector revenues actually declined by 15% or $17.7 million during the previous year.  In part -- though we acknowledge not entirely -- due to continuing difficulties negotiating IP clauses under CTAAs and within VA policies, a significant further reduction is anticipated in the reports due on June 1, 2005.

CRADAs present an opportunity for addressing what has become in recent years the most contentious issue in clinical research agreements; that is, intellectual property ownership and licensing.  It is our understanding that in using CRADAs, VA is agreeable to relinquishing to sponsors the first right to option new intellectual property arising from the Phase III and IV clinical studies that comprise the majority of studies administered by NPCs.  If our understanding is accurate, this is a step in the right direction and CRADAs are a means to significantly reduce the time and effort required to negotiate agreements with industry sponsors and to foster an environment conducive to veteran participation in worthwhile studies.

However, CRADAs have not been widely used for the types of studies administered most frequently by NPCs so this is an untested area for VA, the NPCs and industry sponsors.  Additionally, the prospects for university cooperation in modifying the CTAAs to accommodate CRADAs are uncertain.  Finally, it is our understanding that the Office of General Counsel proposes that going forward, intellectual property for virtually every sponsored project will be managed under a CRADA with VA and the sponsor as the only signatories.

NAVREF is concerned that a policy that excludes NPCs from participating in CRADAs as “collaborating parties” or from otherwise being recognized as partners in supporting the research may be problematic for the NPCs and their continued ability to support VA research and education.  For purposes of 1) their ability to be grantee institutions for NIH awards; 2) preserving their state tax exemptions; and 3) maintaining their IRS tax-exempt status, it is extremely important that all relevant documents fully support the standing of NPCs as active participants in the programs they administer.  Briefly:

To qualify as a medical research organization, the principal function of the organization must be the direct, continuous and active conduct of medical research in conjunction with a hospital that is described in section 501(c)(3), a Federal hospital, or an instrumentality of a governmental unit referred to in section 170(c)(1).” [IRS Form 1023 Application for Tax Exempt Status]

• If OGC determines an appropriate “collaborating party” role for NPCs in CRADAs, NPCs could sign such universal CRADAs, but it may not be necessary.

• The CRADA and CRA would specify that funds should be paid directly to the NPC which will be accountable for their administration.

• A CRA for each study, signed by the NPC and the sponsor, would reference the CRADA as the governing document for intellectual property resulting from that study, subject to any post-discovery CTAA considerations.

• The CRA would address other issues commonly detailed in CRAs, such as payments and notices, termination rights, as well as providing the protocol and budget as attachments.  Standard terms and/or principles for each issue could be developed and promulgated, perhaps using the clauses on the NAVREF web site as the starting point.

• The CRA could also contain an explicit statement that the CRA is not binding on VA.  If needed by the sponsor, a separate letter from VA could provide assurances of VA support and involvement in the study.  A sample letter currently used for this purpose is provided as Attachment 13.

Providing actual language for the terms of the universal and single collaborator CRADAs is beyond the scope of this document.  However, NAVREF would be pleased to participate in their development.

2.  For studies other than industry-sponsored Phase III and IV trials, VA should also develop and disseminate clear policy on VA’s preferred outcome on IP ownership and management appropriate to the type of studies including Phase I and II, investigator initiated, VA initiated, medical device, etc. studies.  Such policy should allow negotiators to conduct a cost/benefit analysis in accordance with criteria established with VA, to determine whether VA will assert a pre-discovery ownership right and/or will readily give another interested party – presumably the sponsor – the first right to license new IP and under what terms.  The potential royalty gain to VA should be weighed against the cost of losing worthwhile studies.  There may be instances when – using a CRADA – in spite of its legal right to ownership, VA should relinquish rights to IP in the interests of participating in worthwhile research programs.

This recommendation for clear policy is based on NAVREF’s view that there is no realistic prospect for “one size fits all” CRADA.  That is, a single sponsor may simultaneously be involved in different Phase III, investigator-initiated and VA-initiated Cooperative Studies, each of which may require a different approach to IP.

Pros:

• CRADA negotiations and terms would be customized to fit the circumstances of the study.

• NPC personnel and VA attorneys in the field would have the tools necessary to pursue appropriate CRADA terms; that is, terms consistent with pre-established VA policy and criteria.

• The burden on VA attorneys and the TTP would be reduced, reserving their involvement only for studies that don’t fit the pre-establish criteria.

Cons:

• Considerable effort would be required to develop clear guidance understandable to NPC personnel and VA attorneys who may not have significant CRADA or scientific experience.

• OGC would have to relinquish some authority to negotiators subject to review and approval of VA attorneys in OGC or Regional Counsel offices.

A matrix such as the one provided as Attachment 12 could be designed to provide guidance to NPCs and VA attorneys as they negotiate CRADA terms.  By incorporating appropriate terms in draft CRADAs, final approvals would be greatly expedited.

VA should staff the Technology Transfer Program appropriately in order to expedite CRADA approvals.  Although using universal CRADAs would significantly reduce the number of Phase III and IV CRADAs requiring TTP involvement, it is likely that there will be a significant increase in CRADA requests for other studies.  Additionally, during the transition to CRADAs, there are likely to be a number of complex issues in need of resolution.  Although VA policies provide that it will respond to CRADAs within 30 days, it typically takes far longer to receive a response.

Pros: