"Nothing is more important for NIH than preserving the public's trust," NIH Director Dr. Elias A. Zerhouni said Tuesday.
The new rules also will prohibit scientists from holding stock in such companies and will restrict the amount of stock that other NIH employees can own in pharmaceutical and biotechnology companies.
The ban on outside work by NIH scientists covers research institutions, including those that receive grants from the NIH, health care providers, insurers and related trade associations.
The scientists will be allowed, however, to teach courses and give lectures related to their work, as well as write articles and textbooks.
"Clearly we do not want to impair scientific interchange," Zerhouni said at a briefing.
Zerhouni also said that the institute last month established rules requiring researchers who receive royalties from experimental treatments they helped develop to disclose those royalties to patients.
Such disclosure "is a clear necessity," said Zerhouni.
The rules will take effect when they are published, probably within a day or two. They will also include a $200 limit on awards that institute researchers can accept, with a few exceptions, such as the Nobel Prize.
Zerhouni said the institutes also will begin evaluating any potential conflicts of interest with members of its outside advisory panels.
He described early reaction to the new rules from NIH staff as "mixed."
However, the action drew praise from Rep. Diana DeGette, D-Colo., who has been critical of Institute policies allowing its scientists to take consulting jobs.
"NIH's previous ethics requirements were unworkable not at all what the public deserves from our nation's premier research institution," said DeGette.
In September, the Institute proposed to ban outside consulting work by its roughly 5,000 or so scientists in the wake of media reports that some researchers received thousands of dollars from industry. That proposal was intended to give the agency time to develop new ethics regulations.
It doesn't affect scientists' official duties in turning basic research into health treatments, duties that often involve some work with industry.
Rather, the restrictions focused on a fraction of agency scientists about 120 by one count who have arranged private consulting deals with industry. In one case uncovered by Congress, Pfizer Inc. allegedly paid an NIH researcher half a million dollars over five years, in part to help the company's research of brain disease.
Such arrangements have raised widespread concern in Congress and among the public as to whether they represent a conflict of interest for researchers.
In May, Zerhouni told Congress that the agency needed to tighten its rules but said some collaboration with industry and academia is vital to advance science and to translate discoveries into medical practice.
"It would be a mistake to ban all compensated activities with outside organizations. Such an action would be bad for science, unfair to the employees and ultimately hinder our efforts to improve the nation's health," he said.
And former NIH Director Harold Varmus said that allowing NIH scientists to do outside consulting has helped in recruiting better researchers.
Varmus, now president of the Sloan-Kettering Cancer Center, relaxed some rules, allowing NIH scientists to do outside consulting and accept speaking fees, when he headed the agency in the 1990s.