Added: Jun 26, 2008 11:40 am
The National Institutes of Health, is doing a market survey to determine the capability and availability of Hubzone, Service-disabled veteran-owned, 8(a), and small businesses.
The NAICS code for this requirement is 541211 with a size business standard of 7.5 million
Background
The National Institute of Allergy and Infectious Diseases (NIAID) is a component of the National Institutes of Health (NIH) . The NIAID supports basic and applied research to prevent, diagnose, and treat infectious and immune-mediated illnesses, including HIV/AIDS and other sexually transmitted diseases, illness from potential agents of bio-terrorism, tuberculosis, malaria, autoimmune disorders, asthma and allergies.
The NIAID Office of Technology Development (OTD) administers the Institute s technology transfer activities regarding Cooperative Research and Development Agreements, Material Transfer Agreements, Clinical Trial Agreements, patents, royalties and related matters.
Under Title 35 U.S.C. 207(a) each Federal agency is authorized to: (1) apply for, obtain, and maintain patents or other forms of protection in the United States and in foreign countries on inventions in which the Federal Government owns a right, title, or interest; (2) grant nonexclusive, exclusive, or partially exclusive licenses under federally owned inventions, royalty-free or for royalties or other consideration, and on such terms and conditions, including the grant to the licensee of the right of enforcement pursuant to the provisions of chapter 29 of this title as determined appropriate in the public interest; (3) undertake all other suitable and necessary steps to protect and administer rights to federally owned inventions on behalf of the Federal Government either directly or through contract, including acquiring rights for and administering royalties to the Federal Government in any invention, but only to the extent the party from whom the rights are acquired voluntarily enters into the transaction, to facilitate the licensing of a federally owned invention; and (4) transfer custody and administration, in whole or in part, to another Federal agency, of the right, title, or interest in any federally owned invention.
The NIH Office of Technology Transfer (OTT) is responsible for patent prosecution and licensing for the component institutions of the NIH. It is the policy of OTT as part of the reporting requirements of license agreements to have audits of license agreements to ensure that licensees are not under reporting sales and the resulting royalties. Please refer to Chapter No. 308 (Procedures for Auditing NIH Licenses) of the United States Public Health Service Technology Transfer Manual.
The NIAID acting through the OTD and the OTT again requires the professional services of McGladrey & Pullen, certified public accountants to conduct an audit of the sales and financial records related to licensed products of an NIH licensee, GlaxoSmithKline Biologicals (GSK). The audit will require at a minimum site visits to two GSK distribution centers in addition to their corporate headquarters or place of business in Rixensart, Belgium. The distribution centers are to include one in the United States and one in Europe.
McGladrey & Pullen conducted a previous audit of the subject licenses in 2004 and is familiar with the products, services and accounting practices of GSK. It is expected that certain efficiencies in the preparation, conduct and reporting of their findings will be realized. Further, the NIAID requires appropriate follow-up to questions concerning discrepant or possible noncompliant findings raised by McGladrey & Pullen in their audit report of 2004.
Scope of Work
Under Title 35 U.S.C. 207(a) and 37 C.F.R. 404.12, and further delimited under the provisions of the subject license agreements by and between the NIH and GSK (Licensee), the NIH shall have the right, at its expense, through a certified public accountant (hereinafter, Contractor) or like person reasonably acceptable to GSK (hereinafter, Licensee), to examine records of all sales of licensed products under the subject licenses granted to determine if OTT received the proper amount of royalty payments specified under their license agreements for use of NIH technologies.
A Contractor shall conduct an audit of:
NIH Licenses: L-380-1991 and L-075-1994
Licensee: GlaxoSmithKline (GSK) Biologicals with Corporate Headquarters or Place of Business in Rixensart, Belgium
Licensed Products : Havrix , Twinrix and Hepatyrix
Licensed Patents: Please Refer to Tables One and Two
The audit shall cover the sales reporting period from 1 January 1996 through 31 December 2007.
The Contractor shall follow-up and answer questions raised on selected discrepant or possible noncompliant findings from McGladrey & Pullen s 2004 Audit Report. The discrepant or possible noncompliant findings are listed in Table Three.
The Licensee withheld royalties after domestic and foreign patents were inadvertently allowed to lapse in 2004 for non-payment of maintenance and annuity fees. Attempts were made to restore the lapsed patents but were not fully successful. Contractor shall verify the royalty payments from July 1, 2004 through December 31, 2007 were proper and correct with respect to payments for said lapsed and restored payments.
The Contractor shall review the Licensee s sales records to test the gross sales figures for all areas where Licensed Products were sold and to verify that the Licensee has accounted for all the Licensed Product sales when reporting net sales and earned royalties due for the period covered by the audit. Contractor shall perform a detailed calculation of royalties owed on net sales of Licensed Product in accordance with the subject license agreements. Specifically, using appropriate accounting and auditing procedures, the Contractor shall perform a limited audit that includes at least the following elements:
1. Compliance Review Preparation:
Prior to visiting the Licensee s place of business to audit sales and financial records, the Contractor, under a confidential nondisclosure agreement, will be provided background information by an OTT Monitoring and Enforcement Specialist (the Project Officer ). The NIH Project Officer will prepare and send an audit confirmation letter to the Licensee and assist in coordinating the scheduling of the on-site visits by the Contractor at the Licensee s place of business and distribution centers. The Contractor shall determine from the Licensee the type of accounting system and data availability for the period to be audited. A briefing of the Contractor will be conducted by the Project Officer. A NIAID observer(s) will be present during the briefing. A Compliance Review Plan will be formulated by the Contractor as an outcome of this briefing. Background information provided by the Project Officer to the Contractor will include a copy of the license agreement and any amendments, copies of sales and earned royalty reports submitted by the Licensee for the period to be audited, licensee s payment history and copies of any other pertinent information about Licensed Products and their sales obtained from other sources.
2. Site Visit to the Licensee s Place of Business:
Based on the information obtained during the compliance review preparation and briefing, the Contractor shall conduct site visits at selected Licensee location(s) where Licensed Product sales records are kept to conduct the on-site audit and compliance review. The Compliance Review Plan shall be executed during the site visits. It is expected that the Contractor will visit two distribution centers in addition to the Licensee s corporate headquarters or place of business as sales invoices or receipts are not stored at this site.
A visit to each distribution center and audit of records is expected to take no more than two (2) to three (3) business days. A visit to the Licensee s corporate headquarters or place of business and audit of records is expected to take no more than four (4) to five (5) business days.
3. Exit Interview with Licensee:
Upon completion of the actual audit which is estimated to require approximately 11 business days, an exit interview and briefing shall be conducted by the Contractor with the Licensee to present findings and to provide the Licensee an opportunity to explain and/or correct any deficiencies found during the interview.
4. Audit Report and Debriefing with the Project Officer:
A Preliminary Written Report shall be prepared by the Contractor and delivered to the Project Officer within thirty (30) business days of completing the exit interview with GSK. On receipt, the Project Officer will immediately forward a copy of the Preliminary Written Report to NIAID s Director, Office of Technology Development. A debriefing or phone conference with the Contractor will be scheduled by the Project Officer within 15 business days of receiving the Preliminary Written Report. The debriefing or phone conference shall include a NIAID observer(s).
The Preliminary Written Report shall contain all relevant raw data, auditing procedures, findings, analyses of reported findings, and conclusions. At a minimum, the report shall address the following highlights:
a. Comparison of data submitted to NIH with the Licensee s internal records;
b. Comparison of Licensee inventory with reported production of Licensed Product;
c. Comparison of Licensee shipping and receiving records;
d. Comparison of Licensee shipping records to shipping invoices;
e. Determination of methods used and analysis of Licensee s calculations of royalties for each Licensed Product;
f. Determination of the methods used and analysis of Licensee s input of sales data for each Licensed Product;
g. Comparison of location of Licensee s actual sales force with location of reporting offices;
h. Analysis of periodic sales fluctuation over period relative to season or period of Licensee s fiscal year;
i. Analysis of currency valuation versus Licensee s sales reporting for sales in foreign currencies; and
j. Comparison of sales volume of products which are complimentary to the Licensed Product for the same reporting period.
Travel:
The Contractor shall travel to Rixensart, Belgium or where the Licensee s sales records for License Product are kept in order to conduct this audit. The NIAID requires that the Contractor travel to at least one distribution center in the United States and one in Europe. It is estimated that one domestic and one foreign trip to two European countries shall be required. If the Government shall modify the contract due to unforeseen circumstances, additional travel issues shall be considered before modification. In addition, the Contractor shall only be reimbursed for reasonable travel costs that are allowable under Government travel regulations. In addition, the travel time of employees will not be reimbursed at their hourly pay rates under this contract.
Deliverables:
The Contractor shall provide:
1. a Compliance Review Plan to the Project Officer within five (5) business days of completing a compliance review briefing (On receipt, the Project Officer will immediately forward an electronic copy of the Compliance Review Plan to NIAID s Director, Office of Technology Development);
2. a Preliminary Audit Report as defined above to the Project Officer within 30 business days of completing the exit interview with GSK (On receipt, the Project Officer will immediately forward an electronic copy of the Preliminary Audit Report to NIAID s Director, Office of Technology Development); and
3. a Final Audit Report to the Project Officer within 120 days of the award notification.
Both an electronic copy and at least one signed hard copy of the Final Audit Report shall be sent to the Project Officer at the following address:
NIH Office of Technology Transfer
6011 Executive Blvd, Suite 325
Rockville, MD 20852
(On receipt, the Project Officer will immediately forward an electronic copy of the Final Audit Report to NIAID s Director, Office of Technology Development).
Period of Performance:
Contractor shall contact the Project Officer within ten (10) days of award notification. The date of contact shall be deemed the start date for the period of performance and the final day of the period of performance shall be 120 days after the start date.
Table One: Schedule of Licensed Patents Non-Exclusive Agreement
Country
Application #
Filing Date
Patent #
Issue Date
Comments
United States 06/366,165 04/07/82 4,532,215 07/30/85 Abandoned
United States 06/686,524 12/26/84 4,636,469 01/13/87
Continuation of 4,532,215
United States 06/652/067 09/19/84 4,620,978 11/04/86
Continuation in Part of 4,532,215
United States 06/905,146 09/09/86 Abandoned
United States 07/217,824 07/12/88
4,894,228 01/16/90 Continuation in Part
United States 08/673,408 09/06/95 RE37,381 09/18/01 FWC Expired
United States 07/822,639 01/16/92
United States 07/088,220 08/24/82 Abandoned
United States 07/462,916 01/12/90 Abandoned
United States 07/789,640 11/12/91 Abandoned
United States 08/120,646 09/13/93 5,478,746 12/26/95
United States 08/473,304 06/07/95
PCT PCT/US85/01769 09/18/85
EPO 85904746.6 09/18/85 EP 0 196 316
Australia 48620/85 09/18/85 583306 08/18/89
Bahamas 817 09/16/85 817 09/16/85 Check Expired
Canada 491,066 09/18/85 CA 1260392 09/26/89
China 85107525 10/11/85 CN 11801 09/25/91 Check Expired
Denmark 227786 09/18/85 2277-86
Finland 861966 09/18/85 86376
Greece 85/2293/A 09/20/85 850102293 01/21/86
Ireland 2304/85 09/18/85 IE 82310
Israel IL 76417 09/18/85 IL 76417
Japan JP1985 504247 09/18/85 JP625500659T
New Zealand 213,513 09/18/85 NZ213513
Norway 861619 09/18/85 NO 169601B
Portugal 81,150 09/18/85 PT 81150 03/17/87 Check Expired
South Africa 85/7134 09/17/85 ZA8507134 05/27/87
South Korea 1986-700275 09/18/85 Abandoned
Spain 547,115 09/19/85 547.115 10/26/86
Thailand 003801 09/18/85 TH 10337
Taiwan 74104148 TW NI-47520 Abandoned
Table Two: Schedule of Licensed Patents Exclusive Agreement
Country
Application #
Filing Date
Patent #
Issue Date
Comments
United States
07/947,338 9/18/92
Abandoned
United States
08/397,232 4/17/95 6,180,110 1/30/01
CIP of PCT/US93/08610
United States 08/475,886 6/7/95 6,113,912 9/5/00 CIP of
08/397,232
United States 09/653,499 8/31/00 6,423,318 7/13/02 DIV of
08/475,886
United States 10/135,988 4/29/02 US 2002/0176869 (Pat. Appl. Pub.) 11/28/02 (Pub. Date) CON of
09/653,499
PCT PCT/US93/08610 09/17/93 WO 94/06446 (Pub. #)
EPO 93921524.0 9/17/93 EP 0 666 751 9/12/01
Austria AT19930921524T 9/17/93 AT205536T 9/15/01
France 9/17/93 FR0666751 Check
Italy 9/17/93 IT0666751 Check
Luxembourg 9/17/93 LU0666751 Check
Belgium 9/17/93 BE0666751 Check
Sweden 9/17/93 SE0666751 Check
Switzerland 9/17/93 CH0666751 Check
Liechtenstein 9/17/93 LI0666751 Check
Denmark DK19930921524T 9/17/93 DK666751T 11/12/01
Spain ES19930921524T 9/17/93 ES2164074T 2/16/02
Greece 9/17/93 GR0666751 Check
Monaco No Record
Netherlands 9/17/93 NL0666751 Check
Germany DE19936030758T 9/17/93 DE69330758T 7/4/02
Germany DE19936030758 9/17/93 DE69330758D 10/18/01
United Kingdom 9/17/93 GB0666751 Check
Portugal PT19930921524T 9/17/93 PT666751T 1/30/02
Ireland 9/17/93 IE 0666751 Check
Australia AU19930048585 9/17/93 AU687012 2/19/98
Australia AU19930048585D 9/17/93 AU4858593 4/12/94
Canada CA19932144317 9/17/93 CA2144317 3/31/94
Japan JP19940508225T 9/17/93 JP8504094T 5/7/96
New Zealand NZ19930256278 9/17/93 NZ256278 11/26/96
Hong Kong HK19980115009 12/23/98 HK1013667 5/17/02 Annuity Payment Overdue
Singapore 9611170-3 9/17/93 SG73999 3/31/94 Annuity Payment Overdue
Table Three: Selected Discrepant or Possible Noncompliant Findings from the GSK 2004
Audit Report
Point from the
2004 Audit Report
Discrepant or Possible Noncompliant Finding
Resolution
(6)
Trend analyses of sales by licensed products were prepared but not included in the 2004 Audit Report.
It is not clear from the text whether the Contractor prepared trend analyses based on gross or net sales and there is no mention of any periodic sales fluctuations over the period as requested in the SOW.
Contractor to provide schedules summarizing gross sales from net sales by both product and license and by geographic region (domestic vs. foreign). Further, there must be a test of the gross and net sales figures based on sales invoices and shipping tickets.
(7)
The Contractor noted that the Merck & Co. royalty stacking provision is for sales in the United States, Canada and Spain. Further, the Contractor was unable to determine whether the intent of the royalty stacking provision was to limit the credit taken by Licensee on sales of NIH Licensed Product, where both NIH and Merck & Co. earn a royalty on the sale of similar products in the same country.
As the license agreements are silent with respect to our ability to review third-party agreements, and given the inability of the Contractor to discern the intent of the above stacking provision, the Contractor shall review the entire Merck & Co. Agreement with the Licensee and ascertain whether Licensee applied the proper credit against royalty payments due the NIH.
Contractor to verify amounts of royalties were actually paid by Licensee to Merck for a Hepatitis A (Giesa) patent license and whether these amounts correspond to what Licensee reported to NIH.
(8)
Unable to review Licensee s sales amounts and correlate this information with actual invoices and shipping tickets. Licensee did not provide detailed sales reports in conjunction with the appropriate sales invoices. Instead, Licensee provided selected invoices for review.
Without the detailed sales reports and associated invoices or random samples thereof, the Contractor was unable to verify the accuracy and evaluate the integrity of the financial information presented in the royalty reports submitted to NIH by the Licensee. In brief, the main purpose of the 2004 audit was not met and the audit report deemed inconclusive by NIAID s Office of Financial Management. Inspect actual invoices and shipping tickets at a minimum of two distribution centers, one U.S. and one European and correlate this data with licensee s sales figures.
(11)
Sales journals from the United Kingdom, Germany and the United States were reviewed and it was found that the total sales amounts and quantities sold were in agreement with the royalty computations without exception. However, the Contractor was not able to verify the accuracy of the journal entries as they were not given actual invoices and/or shipping tickets.
Journal entries must be verified by actual invoices and/or shipping tickets.
Address matter in the Follow-Up/Closeout Audit at the selected distribution centers.
(12)
Based on an inventory usage reasonableness test, it is noted that shipments from Belgium to the United Kingdom, Germany and the United States exceeded the reported sales figures by approximately 10% for 2002 and 2003.
It is unclear whether this test was applied to any other years. However, the Contractor noted that it did not have access to ending inventory quantities or scrap rates, which may explain the discrepancy.
Address matter in the Follow-Up/Closeout audit.
(15)
Licensee requested a $1.57 million dollar credit for royalties paid on U.S. government sales during the period 1995 through 2001 under the non-exclusive license. Licensee did not provide actual invoices but instead relied on sales figures from management or channel reports. Based on these reports, approximately 75% of the sales were directed to the Centers for Disease Control ( CDC ) which may be deemed a valid U.S. government sale. Whereas, 25% of the sales were directed at non-government entities such as the American Red Cross and would not qualify under the specified U.S. government sales credit.
This credit should be denied until Licensee provides the proper supporting documentation. Further, if this credit is allowed at some future date, it would probably be in our best interest to apply the credit before the Merck & Co. stacking credit.
Address matter in the Follow-Up/Closeout Audit.
(16)
Inconsistencies were noted in the application of discounts and credits (e.g., customer discounts, U.S. sales credit and corporate credits) in worksheets reflecting U.S. sales data. At one Licensee facility in the United States, the difference between the gross sales and net sales was almost 50% of sales.
The Contractor was unable to verify these discrepancies. However, this difference is significantly out of line with historical sales data on licensed products..
Address matter in the Follow-Up/Closeout Audit.
Experience in providing similar services must be demonstrated. This market survey is being conducted through the FedBizOpps to reach the widest possible audience and to gather current market information. Responding firms shall provide 2 copies of their tailored capability statement to the attention of Marcia Goldman, Office of Acquisitions, OLAO, 6011 Executive Blvd., Room 539A, Bethesda, Maryland 20892-7663, by July 3, 2008. Respondents shall address their small business representatives when sending in capability statements.
