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must inform the grantee of the opportunity for review under this subpart. (54 FR 34770, Aug. 22, 1989, as amended at 63 FR 66062, Dec. 1, 1998)

establishes the circumstances under which the Board will accept an appeal (45 CFR 16.3) provides, among other things, that the appellant must have exhausted any preliminary appeal process required by regulation before a formal appeal to the Departmental Board will be allowed. This subpart provides such an informal preliminary procedure for resolution of disputes in order to preclude submission of cases to the Departmental Appeals Board before an agency identified in $50.402 has had an opportunity to review decisions of its officials and to settle disputes with grantees. (54 FR 34770, Aug. 22, 1989, as amended at 63 FR 66062, Dec. 1, 1998]

$50.404 What disputes are covered by

these procedures? (a) These procedures are applicable to the following adverse determinations under discretionary project grants and cooperative agreements (both referred to in this subpart as grants) issued by the agencies identified at $ 50.402;

(1) Termination, in whole or in part, of a grant for failure of the grantee to carry out its approved project in accordance with the applicable law and the terms and conditions of such assistance or for failure of the grantee otherwise to comply with any law, regulation, assurance, term, or condition applicable to the grant.

(2) A determination that an expenditure not allowable under the grant has been charged to the grant or that the grantee has otherwise failed to discharge its obligation to account for grant funds.

(3) A determination that a grant is void.

(4) A denial of a noncompeting continuation award under the project period system of funding where the denial is for failure to comply with the terms of a previous award.

(b) A determination subject to this subpart may not be reviewed by the review committee described in 850.405 unless an officer or employee of the agency has notified the grantee in writing of the adverse determination. The notification must set forth the reasons for the determination in sufficient detail to enable the grantee to respond and

$50.405 What is the structure of re

view committees? The head of the agency, or his or her designee, shall appoint review committees to review adverse determinations made by officials for programs under their jurisdiction. A minimum of three employees shall be appointed (one of whom shall be designated as chairperson) either on an ad hoc, case-bycase basis, or as regular members of review committees for such terms as may be designated. None of the members of the review committee reviewing any given appeal may be from the office of the responsible official whose adverse determination is being appealed (e.g., project officer, grants specialist, program manager, grants management officer). (54 FR 34770, Aug. 22, 1989, as amended at 3 FR 66062, Dec. 1, 1998] 850.406 What are the steps in the proc

ess? (a) A grantee with respect to whom an adverse determination described in $50.404(a) above has been made and who desires a review of that determination must submit a request for such review to the head of the appropriate agency or his or her designee no later than 30 days after the written notification of the determination is received, except that if the grantee shows good cause why an extension of time should be granted, the head of the appropriate agency or his or her designee may grant an extension of time.

(b) The request for review must include a copy of the adverse determination, must identify the issue(s) in dispute, and must contain a full statement of the grantee's position with respect to such issue(s) and the pertinent facts and reasons in support of the grantee's position. In addition to the required written statement, the grantee shall provide copies of any documents supporting its claim.

(c) When a request for review has been filed under this subpart with respect to an adverse determination, no action may be taken by the awarding

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bers. The review committee shall send the written decision with a transmittal letter to the grantee and shall send a copy of both to the official responsible for the adverse determination. If the decision is adverse to the grantee's position, the transmittal letter must state the grantee's right to appeal to the Departmental Appeals Board under 45 CFR part 16. (54 FR 34770, Aug. 22, 1989, as amended at 63 FR 66063, Dec. 1, 1998]

Subpart E–Maximum Allowable

Cost for Drugs

AUTHORITY: Sec. 215, Public Health Service Act, 58 Stat. 690 (42 U.S.C. 216).

SOURCE: 40 FR 34514, Aug. 15, 1975, unless otherwise noted.

agency pursuant to such determination until the request has been disposed of, except that the filing of the request shall not affect any authority which the agency may have to suspend assistance or otherwise to withhold or defer payments under the grant during proceedings under this subpart. This paragraph does not require the awarding agency to provide continuation funding during the appeal process to a grantee whose noncompeting continuation award has been denied.

(d) Upon receipt of a request for review, the head of the agency or his or her designee will make a decision as to whether the dispute is reviewable under this subpart and will promptly notify the grantee and the office responsible for the adverse determination of this decision. If the head of the agency or his or her designee determines that the dispute is reviewable, he or she will forward the matter to the review committee appointed

under $ 50.405.

(e) The agency involved will provide the review committee appointed under $ 50.405 with copies of all relevant background materials (including applications(s), award(s), summary statement(s), and correspondence) and any additional pertinent information available. These materials must be tabbed and organized chronologically and accompanied by an indexed list identifying each document.

(f) The grantee shall be given an opportunity to provide the review committee with additional statements and documentation not provided in the request for review described in paragraph (b) of this section. This additional submission, which must be organized and indexed as indicated under paragraph (e) of this section, should provide only material that is relevant to the review committee's deliberation of the issues in the case.

(g) The review committee may, at its discretion, invite the grantee and/or the agency staff to discuss the pertinent issues with the committee and to submit such additional information as the committee deems appropriate.

(h) Based on its review, the review committee will prepare a written decision to be signed by the chairperson and each of the other committee mem

$50.501 Applicability.

This subpart is applicable to programs or projects for health services which are supported in whole or in part by Federal financial assistance, whether by grant or contract, administered by the Public Health Service. It applies to Federal funds and to non-Federal funds which are required to be expended as a condition to receiving Federal funds under such programs or projects.

$ 50.502 Definitions.

As used in this subpart:

(a) Public Health Service means the Office of the Assistant Secretary for Health, Health Resources and Services Administration, National Institutes of Health, Centers for Disease Control, Alcohol, Drug Abuse and Mental Health Administration, Food and Drug Administration, and all of their constituent agencies.

(b) Secretary means the Secretary of Health and Human Services and any other officer or employee of the Department of Health and Human Services to whom the authority involved has been delegated.

(c) Program funds means (1) Federal funds provided through grant or contract to support a program or project covered by $50.501, and (2) any non-Federal funds that are required as a condition of such grant or contract to be expended to carry out such program or project.

(d) Provider means one who furnishes medical or pharmaceutical services or supplies for which program funds may be expended under any of the programs or projects described in 850.501.

(e) Acquisition cost means the price generally and currently paid by providers for a drug marketed or sold by a particular formulator or labeler in the package size of drug most frequently purchased by providers, as determined by the Secretary on the basis of drug price information furnished by the Department. [40 FR 34514, Aug. 15, 1975, as amended at 49 FR 38109, Sept. 27, 1984]

That where compensation for drug dispensing is included in other costs allowable under the applicable program statute and regulations, the terms and conditions of the grant or contract, and the applicable cost principles prescribed in 45 CFR part 74, no separate dispensing fee will be recognized.

(b) In determining whether a dispensing fee is reasonable, the Secretary will take into account:

(1) Cost components such as overhead, professional services, and profits,

(2) Payment practices of third-party payment organizations, including other Federal programs such as titles XVIII and XIX of the Social Security Act; and

(3) Any surveys by States, universities or others of costs of pharmacy operations and the fees charged in the particular area.

(c) A certification by a prescriber, pursuant to paragraph (a) of this section, that a brand of drug is medically necessary for a particular patient shall be in the prescriber's own handwriting, in such form and manner as the Secretary may prescribe. An example of an acceptable certification is the notation "brand necessary”. A procedure for checking a box on a form will not constitute an acceptable certification.

850.503 Policy.

It is the policy of the Secretary that program funds which are utilized for the acquisition of drugs be expended in the most economical manner feasible. In furtherance of this policy, the Secretary has established, in 45 CFR part 19, a procedure for determining the Maximum Allowable Cost for drugs which are purchased with program funds.

Subpart F- Responsibility of Appli

cants for Promoting Objectivity in Research for which PHS Funding Is Sought

AUTHORITY: 42 U.S.C. 216, 2896-1, 299c-3.

SOURCE: 60 FR 35815, July 11, 1995; 60 FR 39076, July 31, 1995, unless otherwise noted.

850.504 Allowable cost of drugs.

(a) The maximum amount which may be expended from program funds for the acquisition of any drug shall be the lowest of

(1) The maximum allowable cost (MAC) of the drug, if any, established in accordance with 45 CFR part 19, plus a dispensing fee determined by the Secretary in accordance with paragraph (b) of this section, to be reasonable;

(2) The acquisition cost of the drug plus a dispensing fee determined by the Secretary, in accordance with paragraph (b) of this section, to be reasonable; or

(3) The provider's usual and customary charge to the public for the drug; Provided, That the MAC established for any drug shall not apply to a brand of that drug prescribed for a patient which the prescriber has certified, in accordance with paragraph (c) of this section, is medically necessary for that patient; And Provided further,

850.601 Purpose.

This subpart promotes objectivity in research by establishing standards to ensure there is no reasonable expectation that the design, conduct, or reporting of research funded under PHS grants or cooperative agreements will be biased by any conflicting financial interest of an Investigator. 850.602 Applicability.

This subpart is applicable to each Institution that applies for PHS grants or cooperative agreements for research and, through the implementation of


this subpart by each Institution, to each Investigator participating in such research (see $ 50.604(a)); provided, that this subpart does not apply to SBIR Program Phase I applications. In those few cases where an individual, rather than an institution, is an applicant for PHS grants or cooperative agreements for research, PHS Awarding Components will make case-by-case determinations on the steps to be taken to ensure that the design, conduct, and reporting of the research will not be biased by any conflicting financial interest of the individual.

$50.603 Definitions.

As used in this subpart:

HHS means the United States Department of Health and Human Services, and any components of the Department to which the authority involved may be delegated.

Institution means any domestic or foreign, public or private, entity or organization (excluding a Federal agency).

Investigator means the principal investigator and any other person who is responsible for the design, conduct, or reporting of research funded by PHS, or proposed for such funding. For purposes of the requirements of this subpart relating to financial interests, "Investigator" includes the Investigator's spouse and dependent children.

PHS means the Public Health Service, an operating division of the U.S. Department of Health and Human Services, and any components of the PHS to which the authority involved may be delegated.

PHS Awarding Component means the organizational unit of the PHS that funds the research that is subject to this subpart.

Public Health Service Act or PHS Act means the statute codified at 42 U.S.C. 201 et seq.

Research means a systematic investigation designed to develop or contribute to generalizable knowledge relating broadly to public health, including behavioral and social-sciences research. The term encompasses basic and applied research and product development. As used in this subpart, the term includes any such activity for which research funding is available

from PHS Awarding Component through a grant or cooperative agreement, whether authorized under the PHS Act or other statutory authority.

Significant Financial Interest means anything of monetary value, including but not limited to, salary or other payments for services (e.g., consulting fees or honoraria); equity interests (e.g., stocks, stock options or other ownership interests); and intellectual property rights (e.g., patents, copyrights and royalties from such rights). The term does not include:

(1) Salary, royalties, or other remuneration from the applicant institution;

(2) Any ownership interests in the institution, if the institution is an applicant under the SBIR Program;

(3) Income from seminars, lectures, or teaching engagements sponsored by public or nonprofit entities;

(4) Income from service on advisory committees or review panels for public or nonprofit entities;

(5) An equity interest that when aggregated for the Investigator and the Investigator's spouse and dependent children, meets both of the following tests: Does not exceed $10,000 in value as determined through reference to public prices or other reasonable measures of fair market value, and does not represent more than a five percent ownership interest in any single entity;


(6) Salary, royalties or other payments that when aggregated for the Investigator and the Investigator's spouse and dependent children over the next twelve months, are not expected to exceed $10,000.

Small Business Innovation Research (SBIR) Program means the extramural research program for small business that is established by the Awarding Components of the Public Health Service and certain other Federal agencies under Pub. L. 97-219, the Small Business Innovation Development Act, as amended. For purposes of this subpart, the term SBIR Program includes the Small Business Technology Transfer (STTR) Program, which was established by Pub. L. 102–564.

850.604 Institutional responsibility re

garding conflicting interests of in

vestigators. Each Institution must:

(a) Maintain an appropriate written, enforced policy on conflict of interest that complies with this subpart and inform each Investigator of that policy, the Investigator's reporting responsibilities, and of these regulations. If the Institution carries out the PHSfunded research through subgrantees, contractors, or collaborators, the Institution must take reasonable steps to ensure that Investigators working for such entities comply with this subpart, either by requiring those Investigators to comply with the Institution's policy or by requiring the entities to provide assurances to the Institution that will enable the Institution to comply with this subpart.

(b) Designate an institutional official(s) to solicit and review financial disclosure statements from each Investigator who is planning to participate in PHS-funded research.

(c)(1) Require that by the time an application is submitted to PHS each Investigator who is planning to participate in the PHS-funded research has submitted to the designated official(s) a listing of his/her known Significant Financial Interests and those of his/ her spouse and dependent children):

(i) That would reasonably appear to be affected by the research for which PHS funding is sought; and

(ii) In entities whose financial interests would reasonably appear to be affected by the research.

(2) All financial disclosures must be updated during the period of the award, either on an annual basis or as new reportable Significant Financial Interests are obtained.

(d) Provide guidelines consistent with this subpart for the designated official(s) to identify conflicting interests and take such actions as necessary to ensure that such conflicting interests will be managed, reduced, or eliminated.

(e) Maintain records of all financial disclosures and all actions taken by the Institution with respect to each conflicting interest for at least three years from the date of submission of the final expenditures report or, where

applicable, from other dates specified in 45 CFR 74.53(b) for different situations.

(f) Establish adequate enforcement mechanisms and provide for sanctions where appropriate.

(8) Certify, in each application for the funding to which this subpart applies, that:

(1) There is an effect at that Institution a written and enforced administrative process to identify and manage, reduce or eliminate conflicting interests with respect to all research projects for which funding is sought from the PHS,

(2) Prior to the Institution's expenditure of any funds under the award, the Institution will report to the PHS Awarding Component the existence of a conflicting interest (but not the nature of the interest or other details) found by the institution and assure that the interest has been managed, reduced or eliminated in accordance with this subpart; and, for any interest that the Institution identifies as conflicting subsequent to the Institution's initial report under the award, the report will be made and the conflicting interest managed, reduced, or eliminated, at least on an interim basis, within sixty days of that identification;

(3) The Institution agrees to make information available, upon request, to the HHS regarding all conflicting interests identified by the Institution and how those interests have been managed, reduced, or eliminated to protect the research from bias; and

(4) The Institution will otherwise comply with this subpart.

850.605 Management of conflicting in

terests. (a) The designated official(s) must: Review all financial disclosures; and determine whether a conflict of interest exists and, if so, determine what actions should be taken by the institution to manage, reduce or eliminate such conflict of interest. A conflict of interest exists when the designated official(s) reasonably determines that a Significant Financial Interest could directly and significantly affect the design, conduct, or reporting of the PHS

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