Conducting Clinical Trials With CROs: Three Common Risks

Clinical trial sponsors can obtain valuable support from contract research organizations (CROs) but nonetheless remain liable for the conduct of their trials. Sidley Austin partner Dorothee Schramm and senior associate Katie von der Weid, both specialized in international commercial disputes, share tips to protect against common problems that can arise during the course of clinical trials.

Pharmaceutical companies regularly rely on the support of contract research organizations (CROs) to conduct clinical trials, and delegate to the CRO various tasks ranging from site selection to data analysis and project management. By outsourcing these tasks, a sponsor benefits from the CRO’s know-how, resources, experience and relationships (e.g. with sites), while keeping its own headcount lower and focusing on other aspects of its business.

Importantly, even when a sponsor delegates all or some portion of a clinical trial to a CRO, the sponsor ultimately remains responsible for the conduct of that trial, particularly for product safety and the reliability of data collected during the trial. Under most laws, the sponsor cannot escape this legal liability.

This article illustrates three common problems in CRO-managed clinical trials:

1. the high turnover of CRO staff;

2. the sponsor’s level of oversight; and

3. poor performance by the CRO.

We offer tips and potential protections against these challenges.

Case Study: A Problematic Clinical Trial
Pharma SA, a global pharmaceutical company, has entered into a Master Services Agreement with CRO Ltd. via a Work Order. Pharma SA outsources to CRO Ltd. the conduct of a clinical trial, including the negotiation of Clinical Trial Agreements with the sites. Over the course of their cooperation, CRO Ltd. sends large volumes of documents for Pharma SA’s review, including Clinical Trial Agreements negotiated by CRO Ltd. and other materials.

After the first year of the clinical trial, CRO Ltd. loses a significant part of its staff. Hiring and training new staff takes time, and delays occur in the conduct of the clinical trial.

As the clinical trial progresses, CRO Ltd. performs increasingly poorly. The quality of collected data is weak, and CRO Ltd. fails to obtain an Ethics Committee approval for a change to the clinical trial protocol, due to the poor quality of the information provided to the committee. Pharma SA considers taking over management of the trial.

High Turnover Of CRO Staff

Many CROs face a high staff turnover. In the case study, the loss of a significant portion of CRO Ltd.’s staff can result in a number of pitfalls, including notably the risk of delay. Given the high cost of drug development and the time limitations for patent protection, delays cost money and may endanger the continuity and overall success of the clinical trial.

In addition to delay, there is the risk that the staff turnover results in an important loss of CRO Ltd.’s know-how related to the clinical trial, leading to repeat or unsatisfactory work. This loss is especially acute since the use of a CRO restricts Pharma SA’s own trial-related know-how. In addition, Pharma SA must invest more time on training CRO Ltd.’s new staff on its policies.

The following steps and provisions in the Master Services Agreement can help protect a sponsor against these risks:

• Past Employee Turnover: Before selecting a CRO, a sponsor should inquire about the average employment term of the CRO’s staff. A comparison of the employee turnover within a CRO should be one factor to help a sponsor choose between competing CROs.

• Review Of Training Records: In addition to defining the necessary expertise of the CRO’s personnel allocated to the clinical trial, the sponsor should contractually require the right to review the training records of all such personnel. This should be included even if in practice the sponsor limits its review to the training records of high-risk personnel, such as key personnel or personnel in sensitive countries.

• Replacement Of Personnel: The contract should provide that the CRO will not replace personnel assigned to a specific clinical trial without the sponsor’s prior agreement. The sponsor should further require prompt notification when personnel need to be replaced, and require that replacement personnel be equivalently qualified and experienced.

• Responsibility For Costs And Delays: The CRO should be contractually required to compensate the sponsor for costs the latter incurs to train the CRO’s replacement personnel, for example on a fixed fee or hourly rate basis. The parties should also agree on contract penalties that will apply in the event of delays to the clinical trial.

Sponsor's Level Of Oversight

While a CRO may have better knowledge of the regulatory framework at a given site, under most legal regimes the sponsor is responsible for the conduct of the clinical trial. Given this statutory liability and the reputational risks, a sponsor is well advised to exercise an appropriate level of oversight. Part of this oversight entails ensuring that the CRO negotiates Clinical Trial Agreements (CTAs) that are clear and properly capture the sponsor’s expectations, including in terms of compliance with relevant laws, regulations and regulatory guidelines, cooperation with regulatory inspections, deliverables, financial arrangements, timeline, milestones, confidentiality, publication, IP protections, and termination for breach of contract.

At the same time, however, increased oversight increases the risk that the CRO will attempt to shift liability for breach of its own contractual obligations to the sponsor. For example, in the case study, CRO Ltd. might claim that Pharma SA implicitly approved the large volumes of documents sent for its review.

Below are some tips to facilitate a sponsor’s oversight of the conduct of the clinical trial:

• Clinical Trial Agreements: A sponsor should provide the CRO with templates, negotiation guidelines, and the main requirements for the CTAs. As described below, these agreements should ultimately be concluded between the sponsor and the sites to facilitate a transfer of the study if needed.

• No Waiver: The Master Services Agreement should specify that the templates provided by the sponsor, as well as the sponsor’s oversight and document reviews do not constitute a waiver of the CRO’s contractual liability towards the sponsor, or otherwise release the CRO from that liability. In the same vein, the sponsor should be reluctant to agree to limitations of the CRO’s liability.

• Effective Control: In light of the sponsor’s overall responsibility for the conduct of the clinical trial, the Master Services Agreement should also include provisions that facilitate the sponsor’s effective control over the trial. For example, the sponsor needs the right to conduct audits at the CRO, and also at any sub-CRO, without the CRO’s approval. This right should expressly cover Good Clinical Practice, Good Programming Practice, data protection, and financial audits. The sponsor should also have the right to require the CRO, and any sub-CRO, to stop any study-related activity at any time.

• Information-Sharing: Without continuous and effective reporting and information-sharing, the sponsor risks paying for the clinical trial, but leaving all of the important documents and know-how in the CRO’s hands. To prevent this, the sponsor should require regular status meetings with relevant CRO personnel and adopt a proactive problem-solving approach to addressing any issues that arise. The sponsor should also require the CRO to provide all documents requested by the sponsor – unconditionally.

Poor Performance By The CRO During The Trial

As the case study illustrates, poor performance by the CRO can endanger the success and value of a clinical trial. It may even lead to the sponsor’s liability to patients. At the same time, however, the quality of the CRO’s performance may itself be difficult to measure, making it difficult for the sponsor to obtain effective relief.

Ultimately, if a CRO’s performance reaches critically low levels, the sponsor must be able to transfer the management of the clinical trial to itself (or to another CRO), as Pharma SA contemplated in the case study. Depending on the set-up of the clinical trial, however, transferring trial management to the sponsor may require new regulatory approvals and contracts, in particular if the CRO itself is the contract party under the CTAs. This can present significant logistical challenges for large clinical trials, where there are potentially a vast number of CTAs that would need to be redone.

Below are some important contract drafting considerations that can help protect against poor performance by a CRO and simplify the transfer of the study management to the sponsor:

• Incentives And Remedies: To facilitate proper assessment of the CRO’s performance, the parties should clearly define the CRO’s deliverables and key performance indicators (KPIs) in the Master Services Agreement or the related Work Order. The parties’ agreement should include incentives for good performance, such as achieving defined KPIs or reaching certain milestones on time or early. On the flipside, the agreement should set out the remedies for underperformance, including the transfer of management to the sponsor (or another organization), termination of the agreement, and the CRO’s liability for related costs.

• Deviation Notice: The CRO-sponsor agreement should require the CRO to provide notice if it significantly deviates from the agreed standard of services, the relevant laws, regulations and regulatory guidelines, or the sponsor’s or CRO’s procedures.

• Replacement: The sponsor should require the right to request replacement of non-performing or otherwise unsuitable CRO personnel.

• Clinical Trial Agreements And Trial Transfer: In order to enable the sponsor to assume management of the clinical trial if needed, only the sponsor (not the CRO) should be party to the CTA and other trial-related contracts. This does not mean that the logistics of the CRO-managed trial change: the sponsor can mandate the CRO to sign the contracts on behalf of the sponsor, make payments to the sites on its behalf, and serve as the principal contact with the sites and investigators. This mandate can be stipulated in the Master Services Agreement or, preferably, in the related Work Order, or issued in a separate power of attorney. It should also be expressly referenced in the CTA. While some sponsors are concerned about their potential liability under the CTA, a sponsor cannot generally escape its own statutory liability and must exercise oversight over the sites and investigators, which requires direct remedies to be effective. Also, the CRO is contractually liable for its performance to the sponsor. Finally, the lack of an effective remedy against an underperforming CRO due to the inability to take over the management of the trial can put the whole clinical trial at risk.

Final Tips For Resolving Disputes

Like any contractual relationship, the relationship between the sponsor and the CRO is not without the risk of disputes arising.

There are proactive steps you can take to efficiently manage disputes that may arise, which saves both time and money. (Also see "Contract Disputes Trends In Medtech" - In Vivo, 6 May, 2019.) Try to find an amicable solution that is a win-win for both parties: this will be faster and cheaper than litigation, and can help preserve the CRO-sponsor relationship and the continuity of the clinical trial.

In drafting new contracts, think strategically about your dispute resolution clause. (Also see "Conflict Management Strategies And Dispute Resolution Clauses – Ensuring Your International Contract Will Be Enforced" - In Vivo, 4 Feb, 2019.) You will need to have in place a robust dispute resolution mechanism in case no amicable solution can be reached. In the international context, an increasing number of pharma companies choose arbitration.

 

The authors wish to thank Robin Hanquier of Sanofi and Mareike Kilian of H. Lundbeck A/S for their invaluable contributions to the ctlegal Bi-annual Meeting event on “Contracting with CROs Protecting Your Company Against Common Risks” on 25 September 2019, which served as the inspiration for this article. ctlegal is a Sidley-hosted benchmarking and networking group for in-house counsel at life sciences companies engaged in the area of clinical trials.

This article has been prepared for informational purposes only and does not constitute legal advice. This information is not intended to create, and the receipt of it does not constitute, a lawyer-client relationship. Readers should not act upon this without seeking advice from professional advisers. The content of the article is personal to the authors and does not reflect the views of the firm or its clients.