Understanding Contracts in the Clinical Research Process North Texas Chapter Association of Clinical Research Profession

1. Understanding Contracts in the Clinical Research ProcessNorth Texas ChapterAssociation of Clinical Research ProfessionalsFALL SYMPOSIUMOctober 16, 2004

2. Subtitle ? Do you really Understand what you either just signed or were just asked to sign? Or … Everything you always wanted to know about study contracts in 90 minutes?

3. What we will go over … • Part I -- Various kinds of contracts encountered in the clinical research context • Part II -- Key contract clauses, with an emphasis on the actual clinical trial agreement: • What they do • Pros and cons • Different views of what’s important – e.g., site vs. sponsor

4. PART I FREQUENTLY ENCOUNTERED CONTRACT TYPES

5. The Various Contracts You May Meet in Your Journey • Clinical Trial Agreement • Others Types of Contracts: • Confidentiality Agreement • Letter of Intent • CTA • Master Agreement • Indemnification Agreement (Letter of Indemnification – Unilateral) • Consulting Agreement • Material Transfer Agreement

6. Confidentiality Agreement • Confidentiality Agreement (AKA: Non-disclosure Agreement) (“CDA” or “NDA”) • What is it? An agreement designed to protect proprietary and confidential information from misuse by those who have learned of them. • Circumstance: Prior to entering into CTA or master agreement. Review of information to determine whether to participate in a study.

7. Confidentiality Agreement • Core terms for effective management. • determine scope of CDA, definition of what is confidential and proprietary information, labeling of information, period of confidentiality, end date. • CDA should be merged into, or be superceded by, CTA if a CTA is executed. For academic centers where center is not a party to the CDA, be sure to exclude CDA from CTA – as the terms may be against center policy. Assure people working on the study are bound. • Tips: Validity of CDA if signed personally by Investigator (If investigator is party to CDA – university/entity may not recognize the CDA as binding)

8. Letter of Intent (“LOI”) • What is it? A letter from one party to another acknowledging a willingness and ability to do business. • Core Terms and effective management: confidentiality, indemnification, insurance, payment • Tips and traps. • This usually is NOT a “contract” and cannot be enforced. Be sure to follow up with a contract. • Include a term for automatic renewal to avoid amendments • Personally, I don’t like them because, if worded correctly, still may be binding and, if not binding, may waste a lot of time in negotiating • Circumstance used? Work to be done on a project during contract negotiations. LOI evidences serious intent assume certain obligations/duties until the contract is executed.

9. Master Service Agreements • What is it? A Master Agreement provides the framework of terms and conditions governing specified current and future clinical activities between two parties for a particular period of time. Each project subject to the terms/conditions of Master is set forth in an attachment outlining study specific info. • Circumstance: A sponsor conducts many clinical trials at a particular site. Master agreement with core terms is executed and each study is defined in an attachment to the Master Agreement. Advantage: cuts down on time/expense of negotiating basic contract terms.

10. Master Service Agreements … • Core terms and effective management: same as the counterpart CTA, Services Agreement. Specific end date. • Attachment: also known as “task order”, “work order”, “addendum”, “letter of agreement”, “clinical trial request form” • Includes study specific info, exceptions to master agreement terms, protocol, budget, informed consent • Tips: • Maintain local files of Master Agreements for reference. Provide copy of master with each task order executed to the investigator. • track end dates/automatic renewals for renegotiation or termination. • Be very careful with Task Order negotiation that it does not modify a key term of the MSA

11. Letter of Indemnification • What is it? A letter from one party to another outlining the liability and indemnity obligations of the parties. Liability v. Indemnity • Liability – condition of being responsible for a possible or actual loss • Indemnity- a contractual right under which loss is shifted from a party passively at fault to the party that is primarily or actively responsible • Example – Physician at a medical center is carrying out clinical study for a pharmaceutical sponsor in accordance with sponsor’s protocol. A research subject is injured. Sponsor is primarily responsible as it is sponsor’s protocol. Therefor, the sponsor agrees to take “responsibility” for any claims made against the investigator. Reimbursement for expenses. • Often is a key clause in a CTA or MSA

12. Letter of Indemnification … • Circumstance: CRO contracts directly with a site – sponsor is a third party beneficiary of the contract, but is not a party to the contract. LOI executed between the sponsor and the site. Actual research site is different from contracting party. • Core terms and effective management: scope of indemnity (limitation on claims), indemnities, subject injury, insurance provision • Tips and Traps: • certificates of insurance • additional insured status • Types of negligence (simple vs. gross) and intentional wrongdoing • Public institutions may not legally be able to provide

13. Consulting Agreements • What is it? Additional activities beyond normal scope of employment, and based in the appropriate discipline for which the individual receives additional compensation during the contract year • Circumstance: Investigator is assisting in the design of a study and/or study protocol, operational expertise or press/network value. • Core terms and effective management: scope of services, IP terms, term of agreement with specific end dates. For academia, right to termination (what if PI leaves?)

14. Consulting Agreements … • Tips and traps: • Academic consultants: • if consultant is a university faculty member, look to university policy or guidelines prior to execution. • University/academic center often needs to be involved if one of the following apply: conduct of research (not merely advisory), services performed as part of university commitment, use of university resources • Conflicts of interest -- clinical research consulting agreements, especially involving academia, may create a conflict of interest. • Be sure this conflict is managed appropriately.

15. Material Transfers Agreement (“MTA”) • What is it? Agreement controlling the transfer – often without charge -- of material such as study drug, devices, biologics (cell lines, DNA/RNA, human tissue) from one party to another. • MTA defines the legal rights of the entity donating the material as well as the recipient with respect to the material and any derivatives. • Circumstance: Investigator-initiated trial where party is supplying drug/device and no funding. Also seen in collaborative settings (two academic centers)

16. Material Transfer Agreements … • Core terms: rights and restrictions to use of material, patent and licensing terms, • Effective management: MTA’s sometimes executed in conjunction with another agreement – e.g., MTA for transfer of drug and CTA for study. Assure documents are consistent. • Tips and Traps: IP counsel and Technology Transfer officers are good resources for these agreements.

17. PART II FREQUENTLY-ENCOUNTERED CONTRACT CLAUSES

18. Parties • Who are the parties to the Agreement? • Problems encountered: • PI as a party to the Agreement • Problem: Some sites will not recognize an agreement signed only by the principal investigator. • Happy medium:Sponsor: obtain site signatureSite: OK, more control over PI

19. Parties … • Problem: Some sites will not allow investigator to sign as a party to the agreement (do not want PI personally liable) • Happy medium: Have PI sign as “read and understood” or “acknowledged” (remember, PI MUST complete and sign 1572 Form which outlines his obligations in accordance with 21 CFR 312)Sponsor: not a big issue; PI still owes a fiduciary duty to allSite: insulates PI from contractual liability

20. Parties … • Agreement is between CRO and Site/PI • Problem: Sponsor is not a party (but has obligations in the trial – see 21 CFR 312) • Happy medium: Site will want to obtain: • Evidence of Sponsor/CRO relationship (may have executed a letter for sites) • Agency letter between Sponsor & CRO • Letter of Indemnification -- or better yet • Combo letter (agency, indemnification, insurance, subject injury) Sponsor: should want to ensure control over site Site: wants to make sure it has remedy vs. Sponsor

21. Scope of Work • Assure a clearly defined and comprehensive scope of work. • CTA: • Protocol • Specify investigators duties • Services Agreements: • Specifications • Problem: if you don’t, costs may jump

22. Debarment • Debarment • What is it? • Federal Regulations • Debarment – See 21 USC 335(a) and (b) • Authorizes FDA to preclude individuals/corporations form participating in the drug industry in any capacity whatsoever • Results from criminal acts such as falsifying data, bribing FDA officials for preferential treatment • When filing for drug approval, a drug company must submit a signed statement that no debarred person worked on the application (includes consultants/contractors) • $1M fine • http://www.fda.gov/ora/compliance_ref/debar/

23. Debarment … • Disqualification - See 21 CFR 312.70 • Prevents investigator from receiving investigational drugs • Results from criminal acts such as falsifying data and other egregious GCP • http://www.fda.gov/ora/compliance_ref/bimo/disqlist.htm

24. Debarment … • Problems • Qualifying language –this is a federal law • “To the best of knowledge” • Happy Medium: Assure due diligence • Check website • Contact FDA’s Office of Enforcement for up-to-date debarment list: 12720 Twinbrook Parkway Rockville, MD 20852 (301)827-0410 fax: (301)827-0482 tchin@fdaem.ssw.dhhs.gov • Site: Limit scope of debarment/disqualification to those individuals performing work on a specific study. • Institute use of a pre-clinical trial form: PI and any subinvestigator warrants no debarment of self or persons working on study • Sponsor: this is a key provision

25. Record Retention • Record Retention • Period of time various study records must be retained • 21 CFR 312.57 (Sponsor’s duties) & 21 CFR 312.62 (Investigator’s duties) – • vague – could be two years, could be 15 years! • ICH E6 5.5 (Global Studies) • Not incorporated into federal law in US (but required for global studies) • Retention until: • 2 yrs after last approval of marketing app in an ICH region and until no pending/contemplated apps -- or • 2 yrs after discontinuation of investigational product.

26. Record Retention … • Problems • Long retention periods for site (as compared to site policies or fed law?) • Where to store records? • Who pays? • Destruction of records • Record retention policies may prohibit destruction • Happy medium: • Require sponsor consent to destroy records; or • Return records to sponsor (to extent allowable); or • Provide for indefinite retention at a third party facility

27. FDA Inspections • Inspections • Right to notice • FDA may inspect sponsor at “reasonable times” • FDA may inspect Investigator at “reasonable times” • Sponsor’s right to be present during FDA inspection of PI • Replying to deficiencies • Contrast this with “audit” right of sponsor to inspect PI at “reasonable times”

28. Termination • What is it: ability to cancel or “escape” performance of the contract without “breach” • Problems: • Ability to terminate without cause (for any reason) • Assure this type of termination is in writing. Duty to provide “reasonable notice” is required under modern case law; otherwise, contract may fail for lack of consideration.

29. Termination … • Sponsor: typically wants the right to terminate w/out cause – • Site incurs expenses upfront that are “amortized” across the study (i.e. salary, supplies, advertising, patient recruitment) • Happy Medium: • allow for appropriate remedies (see below) • specify particular circumstances for termination, such as: ♦ FDA places a clinical hold ♦ Safety issues ♦ Investigator/site breaches the agreement and breach not cured w/in time period. ♦ Safe harbor: termination for “business” decisions

30. Termination … • Site right to termination w/out cause • May be a duty to subjects to continue • Termination of site can cause serious delays in getting a particular drug to market (available to general public) • Happy medium -- specify circumstances • Site may terminate: • PI unable to perform (leaves site) and acceptable replacement cannot be identified • FDA places a clinical hold or local IRB withdraws study approval • Sole discretion of PI, safety of subjects is compromised SPONSOR – would want IRB concurrence to preclude arbitrary action • Sponsor materially breaches agreement and breach not cured w/in notice period

31. Termination … • Remedies • Problem: costs of termination (who bears the costs?) • Site perspective: Sponsor has the deep pockets and should bear all costs incurred by site for termination • Sponsor perspective: direct and consequential costs of a termination are extremely high (considering each day of delay in bringing a drug to market). Sponsor should not be responsible to Site for termination costs • Is there a happy medium?

32. Termination … • How about: Fixed-price (per patient) to cost-reimbursement upon termination • Per patient costs • Non-cancelable obligations through date of termination • Unless: termination due to breach by Site, then • Fixed-price, per patient (pro-rated) • But, what if CRO involved? Gets a little dicier for the sponsor.

33. Choice Of/Governing Law • Choice of/Governing law • What is it? • Law: the state law that will be used in the event of dispute • Jurisdiction: The right and power of a particular court to adjudicate on a matter • Venue: where a dispute may be resolved

34. Choice Of/Governing Law … • Problems: • Customary that the “payer” dictates governing law: • PI obligations to patients make jurisdictional issues difficult • Site attorneys are familiar with own state law and jurisdiction (argument, if a dispute, parities typically hire outside counsel) • Happy medium ♦ Remain silent (issue dealt with IF a dispute – unlikely) ♦ Chose law of state with a great deal of case law (e.g., New York) or model corporate statutes (e.g., Delaware)

35. Choice Of/Governing Law … • Problems … • Many public sites cannot negotiate law/jurisdiction as they are governed by state statute • Happy medium: • Remain silent

36. Assignment • What is it? • Transfer by a party to a non-party rights under a contract; or • Transfer of the rights and duties – assignment of the contract.

37. Assignment … • Problems • Sponsor right • Due to industry climate, sponsor must have the ability to assign its contracts (take-over, merger, etc.) without consent • Site must provide updates/possible administrative changes to the IRB, other administration considerations • Happy medium? • Sponsor agrees to provide notice of assignment: what is reasonable?

38. Assignment … • Sites/PI right • Site/PI picked because of reputation – becomes personal contract (which is not assignable) • Sponsor must have control over who is performing the trial (1572 form is required by the PI; what to do with subjects currently on protocol?; debarment or disqualification issues; quality issues) • May want to require sponsor consent to assign • assure that Site/PI must provide reasonable notice so that the protocol can be submitted and approved by the appropriate IRB; 1572 forms are completed and signed, a new CTA can be negotiated and signed

39. Publicity • Publicity • Sponsor and Site need control over the use of their respective names • Problems • may have federal (e.g., SEC) reporting requirements • Requirement to obtain written consent for each use may be overly burdensome

40. Publicity … • Happy Medium: • Limit use to “promotional” purposes • Sponsor – be careful here, though, that there is not off-label, pre-approval promotion by site going on that could be attributed to you • Specify situations in which disclosure is okay • Mandatory conflict of interest disclosures • Federal/state/local reporting (sponsor and amount of funding) • Internal reporting requirements

41. Order of Precedence • In the event of a conflict between the terms of the CTA and any attachments (protocol, budget, etc), what document controls? • 1st view: terms of Protocol govern • 2nd view: terms of Agreement govern • Problems: • sometimes “contractual” terms are placed in Protocol: confidentiality, publication. • Other duplicate terms are in more than one document: record retention, inspections, reporting requirements • Happy medium: Protocol governs scientific conduct of trial conduct of trial; Agreement governs all else • Caveat: be careful to define “scientific conduct” carefully and ensure that no key scientific duty is omitted from either document

42. Authorized Representative • Similar issue to “Parties” • Problem: • Ensure person signing has corporate authority • Include a representation that all necessary approvals to enter contract have been secured

43. General Tips and Traps • Know the parties • Commercial sponsor vs government • Academia v independent lab or individual site • Important to recognize that the type of agreement you are looking at may not be titled correctly. Example: research v. services • Going Global? • Take the Plunge. Hire outside counsel to perform contract review: country/province specific laws governing clinical research and privacy. • Watch terminology – define with care – e.g., when is a clinical trial completed? • Write in plain English!!

44. Questions? Write, call, fax or e-mail:

45. About your instructor Michael A. Swit has over 20 years of experience addressing critical FDA legal and regulatory issues. His vast and varied experience, which he is now providing as a solo practitioner, includes serving for three and a half years as vice president and general counsel of Pharmaceutical Resources, Inc. (PRI) a prominent generic drug manufacturer through its Par Pharmaceutical subsidiary. He thus also brings an industry and commercial perspective to his representation of FDA-regulated companies and, to that, effect also counsels on an array of transactional issues relating to FDA-regulated biomedical industry, including clinical research agreements, mergers & acquisitions, contract manufacturing, and due diligence inquiries. While at PRI from 1990 to late 1993, Mr. Swit spearheaded the company’s defense of multiple grand jury investigations, other federal and state proceedings, and securities litigation stemming from the acts of prior management. Mr. Swit then served from 1994 to 1998 as CEO of Washington Business Information, Inc. (WBII) a premier publisher of FDA regulatory newsletters and other specialty information products for the FDA-regulated community. From May 2001 to May 2003, Mr. Swit was special counsel in the FDA Law Practice Group in the San Diego office of Heller Ehrman White & McAuliffe. Before that, he was twice in private practice with McKenna & Cuneo, from 1988 to 1990 and, most recently, from 1999 to 2001, first in that firm’s D.C. office and most recently, in its San Diego office. He first practiced FDA regulatory law with the D.C. office of Burditt & Radzius from 1984 to 1988. Mr. Swit has taught and written on a wide variety of subjects relating to FDA law including, since 1989, co-directing a three-day intensive course on the generic drug approval process and editing a guide to the generic drug approval process, Getting Your Generic Drug Approved. He is a member of the California, Virginia and District of Columbia bars.

46. Acknowledgements The speaker gratefully acknowledges the help of Stacie Switzer, Esq., Corporate Counsel at Takeda Pharmaceuticals, and Nina Cannon, J.D. Manager, Contracts Management , at the Duke Clinical Research Institute/Duke University, whose recent presentation at the SRI Institute 14th Annual Clinical Trials Contracting Conference formed the basis for much of Part I of this presentation. Part II, in turn, is based on a joint presentation that I prepared with Ms. Switzer for the same conference.