Complying With FDA's Financial Disclosure Regulation

Medical Device & Diagnostic Industry MagazineMDDI Article IndexOriginally Published January 2000CLINICAL TRIALSAlthough it does not preclude financial arrangements between research sponsors and investigators, the intent of the regulation is to ensure that financial interests are disclosed and that collected data accurately reflect actual clinical situations.

Barry Sall

January 1, 2000

16 Min Read
Complying With FDA's Financial Disclosure Regulation

Medical Device & Diagnostic Industry Magazine
MDDI Article Index

Originally Published January 2000

Although it does not preclude financial arrangements between research sponsors and investigators, the intent of the regulation is to ensure that financial interests are disclosed and that collected data accurately reflect actual clinical situations.

Since February 2, 1999, every 510(k), premarket approval (PMA), product development protocol (PDP), and humanitarian device exemption (HDE) submission containing clinical data has been required to include financial disclosure information as required in 21 CFR 54.1,2 Applications lacking this information may not be reviewed by the agency until it is provided. This regulation is the culmination of discussions that began in the late 1980s with members of Congress and a series of public meetings that FDA initiated in 1993. The goal of this regulation is to ensure that sponsors identify and disclose clinical investigators' financial interests and arrangements that could affect the reliability of data submitted to FDA in support of a marketing application.

Both FDA and industry can agree that decisions to approve or clear medical devices should be based upon data that accurately reflect clinical performance. Sponsors of clinical research traditionally have ensured reliable data by employing a variety of techniques. Among these are double-blind randomized studies, studies with several investigative sites so that no single site could change the outcome of the trial, oversight by clinical research monitors, data-safety monitoring boards and institutional review boards, and more general third-party and corporate quality assurance efforts.3

Industry and FDA also recognize that factors which are not as easily quantifiable as financial interests, such as personal and academic prestige, can also motivate clinical researchers. Financial disclosure information is one more tool in the research quality assurance process; however, obtaining and using these data may be more complicated than some of the more traditional techniques.

FDA states in the preamble to the final rule that the regulation does not preclude any sort of financial arrangement between the research sponsor and the clinical investigator. Although the regulation does require disclosure of certain types of arrangements, FDA actions, if any, are determined on a case-by-case basis. When disclosable financial arrangements do exist, sponsors should be prepared to explain them and, where possible, demonstrate that they had no effect on the study outcome. An appropriate subset of the traditional methods of clinical trial design, mentioned previously, can be used to minimize potential bias.


What Payments and/or Financial Interests Are Covered? There are four main types of financial arrangements that are of interest to FDA under this regulation:

  • Compensation affected by the outcome of clinical studies—e.g., compensation that would increase if the clinical research demonstrates that the device performs as intended. Although it would be highly unusual for a research sponsor to tell investigators that they will be paid twice as much per patient if they can demonstrate that the device is safe and effective, more subtle forms of this type of arrangement have been found to occur. The most common, especially among smaller medical device companies, would be issuing stock or stock options as full or partial payment to the investigator. Clearly, the ultimate value of the stock would be greater if the development effort succeeds. FDA has recognized that this type of arrangement does occur in the device industry and does not intend to prohibit it. The arrangement must be disclosed, however, and measures taken to ensure data integrity should also be described. Arrangements that allow an investigator to receive royalties for product sales are also included in this category. FDA's guidance document indicates that incentive payments based upon the rate of recruitment of evaluable patients are not covered by the regulation.4

  • Significant equity interest in the sponsor of a covered study—e.g., ownership of any stock or stock options in a privately held sponsor company where the value of that stock cannot be determined by referring to public stock listings. Many development-stage medical device companies will fall into this category. Interests that exceed $50,000 in publicly traded companies are also covered by the regulation. Because ownership of mutual funds is not specifically addressed in either the regulation or guidance document, it appears that they are not covered. The monitoring period for stock ownership is the study period and for one year following completion of the study, and continues even after the 510(k) or PMA has been submitted. FDA, however, generally will not request postsubmission updates. Research sponsors need to remember that interests of investigators, subinvestigators, and their spouses and dependent children are all covered by the regulation.

  • Proprietary interest in the tested product—e.g., financial interests in the product, including trademarks, copyrights, or licensing agreements. Again, in the medical device industry, it is not unusual for a physician to design a device and obtain a patent, then work with a commercial organization to further develop and clinically test the device. The agency is not attempting to end this practice, but does want to be informed if it occurs.

  • Significant payments of other sorts. If, exclusive of study-related payments, payments exceed $25,000 during the period that the investigator is involved in the study and for one year following the end of that involvement, they are reportable. Payments made to an investigator's institution on behalf of the investigator are also included in this total. This provision is likely to be the most difficult for most research sponsors to implement. The payments include fees provided to investigators for reviewing promotional material, the value of travel to medical conferences, training courses, and associated honoraria. The payments may be made directly to the investigator, the investigator's professional corporation, a research foundation, or the institution where the research is conducted. Payments may be made by the device company's research department, sales and marketing departments, or directly authorized by a corporate officer. All of these variables make these data difficult to track.

Clinical investigators who are full-or part-time employees of the sponsor must be identified. It is not necessary to disclose financial information about these individuals. For in vitro diagnostic studies, if the company serves as one of the evaluation sites for the product, it is not necessary to list employees responsible for conducting the analysis so long as the marketing application clearly identifies the sponsor lab as one of the test sites.

How is the Study Sponsor Defined? The study sponsor can be any party that provides financial support or equipment during the period in which the study is conducted. If two manufacturers are jointly funding a study, they would both be considered sponsors, even if the device only bears the name of one company. If a contract research organization (CRO) provides financial support for a study, it would be considered a sponsor. If the CRO acts as a service provider and provides no financial support for the study, it would not be considered a sponsor.

Which Investigators Are Covered? Any principal investigator or subinvestigator directly involved in the treatment or evaluation of research subjects, or who otherwise could influence the outcome of the research, is considered an investigator. The agency has clearly stated that this definition includes subinvestigators. The spouses and dependent children of investigators are also covered by the regulation. This definition includes investigators in the United States and in other countries so long as data generated at those sites are submitted to FDA in a PMA application, HDE, PDP, or 510(k). The FDA guidance adds that study coordinators or study nurses would not generally be considered investigators.4 Medical device clinical trials frequently utilize physicians at core laboratories to review diagnostic data in a blinded manner. FDA has not yet determined if these physicians are considered investigators.

What Studies Are Covered? Financial disclosure information must be collected for most studies submitted in marketing applications to FDA after February 2, 1999. This includes studies conducted by other companies and studies conducted outside the United States. The regulation also mentions that large multicenter studies that provide expanded access to an investigational device and where only safety data are collected are not covered by this regulation. Any study providing data demonstrating the effectiveness of an investigational device or any study where a single investigator makes a significant contribution to the demonstration of safety would be covered by this requirement. If a research sponsor believes that a study may not be covered by this regulation, confirmation by FDA should be established early in the research process.

Study Status

Compensation that could be affected by study outcome

Proprietary interests involving investigational device

Holdings in privately held companies sponsoring research

Holdings exceeding $50,000 in publicly held companies sponsoring research

Significant payments in excess of $25,000 exclusive of study-related payments

Ongoing as of 2/2/99





Completed prior to 2/2/99a




Do not collect

Table I. Financial data reporting requirements for ongoing and completed studies.

During the next few years, some PMA applications may be submitted that contain data from studies completed prior to February 2, 1999. The December 31, 1998, Federal Register notice modified data requirements for these older studies. Table I describes these modified reporting requirements.2


The FDA guidance document states that 21 CFR 812.43 requires that financial be collected prior to the start of a study. The guidance adds that sponsors may obtain the data through questionnaires sent to covered investigators.4


Figure 1. Form FDA 3454.

What Are the Reporting Requirements? Reporting under the regulation is linked to submission of a marketing application (510(k), PMA, HDE, or PDP). No reports are sent to FDA prior to submission of the marketing application. Reporting is done using a new form, FDA 3454 (Figure 1). When using the form, sponsors that have conducted all their own clinical research and have no reportable financial arrangements with their investigators check box 1, and list all the clinical investigators. If studies sponsored by other organizations are included in the submission and there are no reportable arrangements, then box 2 is checked. Box 3 is checked if complete data for box 2 were not obtainable for any reason, such as a clinical investigator not responding to an information request. In addition, sponsors must explain why the information could not be obtained.


Figure 2. Form FDA 3455.

When a reportable financial arrangement exists, the sponsor must complete form FDA 3455 (Figure 2). The completed form must identify both the investigator and the type of financial arrangement, and include a description of steps taken to minimize the potential for bias. Some applications could contain multiple FDA 3455 forms. For example, a sponsor could have sent two investigators to several professional conferences, and two other investigators and a subinvestigator could own stock in the private sponsor company. In this situation, five FDA 3455 forms would need to be completed. If the marketing application does not contain financial disclosure information, FDA can refuse to review or file the document until the information is provided. If financial disclosure information is deficient for just one of several studies, FDA can choose to review the other studies while setting aside the study with the disclosure problems until they are resolved.


The regulation presents many complicated situations to the research sponsor. Because it is a new regulation, few precedents have been established. Research sponsors need to recognize the issues involved, and consult with internal managers and knowledgeable external sources to create appropriate solutions.

Especially during the early stages of the regulation's implementation, the greatest challenge for publicly traded research sponsors will be gaining the cooperation of clinical investigators who must report ownership of more that $50,000 of company stocks. Many clinical investigators are unfamiliar with this regulation and, even when informed of it, may be unwilling to disclose this type of information for themselves, their spouses, or dependent children.

Internal accounting systems at most device companies are not configured to track the "significant payments of other sorts." It may be relatively straightforward to determine how much the research department has paid a particular clinical investigator over a specified period of time; however, additional payments also could have been made to the researcher's practice, a foundation controlled by the researcher, or to some operating unit of the investigator's institution. The FDA guidance document has narrowed this class of payment so that now only payments to the institution "for direct support of the investigator" must be considered.4 According to the guidance document, payments to an institution that are not made on behalf of a covered clinical investigator are not reportable. The guidance document, however, does not define the phrase "on behalf of the investigator." Conservative device manufacturers may wish to consider any payments made to an institution where they are conducting clinical research to be made on behalf of the investigator. This would be especially true for smaller institutions.

Complicating the situation further, other departments besides research are likely to compensate clinical investigators and their institutions. The sales department may provide expenses for an investigator to attend a professional conference or conduct a training course in the use of the device, or it may donate books or equipment to the investigator's department. Large companies with multiple divisions face further challenges to promote adequate communication of these financial data. If a clinical investigator reports a disclosable financial arrangement to the sponsor that the clinical department was not previously aware of, records of that arrangement must be obtained and maintained in accordance with the regulation. The medical device industry has also experienced a significant amount of merger activity. Merged companies must establish their own procedures for identifying reportable financial arrangements during the regulation's monitoring period.


Refusal to Accept a 510(k), HDE, or PMA. The device regulations have been amended to permit FDA to refuse to file an application if 21 CFR 54 data are not present. The agency has publicly stated that, if a good faith effort to comply with the financial disclosure regulation has been made, the application will be filed, although additional information may be requested during the review process.5 For PMA applications that may contain data from more than one clinical study, FDA can refuse to consider data from one or more studies for which the financial disclosure data are not in order.

Review of Reported Arrangements. As stated earlier, reporting a financial arrangement with a clinical investigator initiates a more detailed review of the study protocol to determine if further investigation is warranted. In most cases, the study design greatly minimizes the introduction of bias. If this is the case, a clear explanation should be attached to the form FDA 3455. FDA has the ability to audit the clinical data, reanalyze the data themselves, request reanalysis from the sponsor, or even request additional clinical data.


Although the FDA guidance document has clarified many of the questions that device manufacturers had after reviewing the regulation, some outstanding issues remain. For example, FDA recommends that publicly traded companies sponsoring research "act with due diligence" to obtain information describing investigator ownership of their stock that exceeds $50,000. The phrase is not defined further. As mentioned earlier, clarification of the phrase "made on behalf of the investigator" would also be beneficial. These are key issues and, at the present time, companies must prepare their own definitions.

The effect of this regulation on bioresearch monitoring (BIMO) enforcement activities has yet to be determined. The regulation will enable investigators to review a wide variety of sponsor financial documentation during BIMO audits that they have not previously been able to access. Sponsors need to review their files and ensure that these documents are accessible and clearly distinguished from those documents that are not required by this regulation.


Medical device manufacturers that sponsor clinical research face numerous challenges when planning a compliance strategy for this regulation. The key compliance tool is a carefully drafted financial disclosure standard operating procedure (SOP). It should be drafted to address the common issues faced by the manufacturer. Sponsors need to utilize all available information sources, including the regulation and preamble, assistance from trade groups, external consultants, and contacts with FDA, when drafting the SOP.

Equally challenging, manufacturers need to develop systems to internally capture relevant financial data, maintain these records, and process information requests made to clinical investigators. As all parties become more familiar with the regulation, some simplifying assumptions may be possible. For instance, as mentioned in the guidance document, sponsors can prepare an agreement for clinical investigators to sign at the start of the study that asks them to describe any potentially disclosable arrangements and agree to inform the sponsor if any disclosable arrangements are entered into in the future. Alternately, a sponsor could ask inves-tigators to sign an agreement stating that they will not become involved in a disclosable financial arrangement during the regulation's monitoring period. Such agreements shift most of the tracking burden from the sponsor to the investigator. No matter what compliance strategy is chosen, SOP compliance should promote a consistent approach to the regulation across both internal departmental and external study lines. Regulatory and clinical personnel at device companies that conduct clinical research need to be aware of new interpretations as the implementation process for this regulation proceeds.


Everyone involved in the medical device clinical research process, from the patients to clinical investigators and research sponsors, wants the process to produce credible scientific results. Data that do not accurately reflect the actual clinical situation do not benefit anyone.

The 21 CFR 54 requirements provide FDA with additional information that can be used to determine if more detailed review of clinical data is appropriate. This regulation, however, relies on the honesty of all the participants in the clinical research process in order to function properly. Recent incidents of clinical research fraud have involved situations where clinical investigators created nonexistent patients, enrolled ineligible patients, or improperly billed sponsors for research expenses.6–9 Unfortunately, few of these activities, if any, would have been identified by compliance with 21 CFR 54.

Sponsors of medical device clinical research must meet the challenge of complying with the financial disclosure regulation while continuing their efforts to select suitable clinical investigators, carefully monitor their investigations, and conduct research on time and on budget.


1. Code of Federal Regulations, 21 CFR 54, "Financial Disclosure by Clinical Investigators, Final Rule." Federal Register, 63 FR: 5233, 1998.

2. Code of Federal Regulations, 21 CFR 54, "Financial Disclosure by Clinical Investigators, Final Rule: Action on Petition for Reconsideration." Federal Register, 63 FR: 72171, 1998.

3. Barry S Sall, "Auditing to Ensure Reliable Clinical Trials," Medical Device & Diagnostic Industry 19, no 5 (1997):197–209.

4. Guidance for Industry: Financial Disclosure by Clinical Investigators (Rockville, MD: FDA, 1999).

5. FDA Financial Disclosure Rule: Issues and Challenges (Washington, DC: Drug Information Association Conference, June 1999).

6. Thomas M Burton, "One Extreme Case Highlights Medicine's Conflicts of Interests," Wall Street Journal, March 19, 1998.

7. Sandy Hodson and Tom Corwin, "Borison Gets Prison After Guilty Pleas," The Augusta Chronicle, October 9, 1998.

8. Kurt Eichenwald and Gina Kolata, "Drug Trials Hide Conflicts for Doctors," New York Times, May 16, 1999.

9. Kurt Eichenwald and Gina Kolata, "A Doctor's Drug Studies Turn into Fraud," New York Times, May 17, 1999.

Barry Sall is a senior regulatory consultant in worldwide regulatory affairs services at Parexel International Corp. (Waltham, MA).

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