Risk management starts with contract

Think of contracts as fluid documents

Research institution administrators could more easily protect their clinical trials against legal risks and other problems if they began the risk management process at the bargaining table when the research organization staff and for-profit pharmaceutical company staff hammer out the clinical trial agreement.

For example, it takes vigilant clinical trial and institutional monitoring to make certain that common procedures, such as blood draws, that subjects undergo as part of a clinical trial are not mistakenly billed to Medicare, which would consider it double billing and could result in a hospital system paying thousands of dollars or more in fines.

However, if the research administrators first had negotiated a contract with the research sponsor that specifically omits language that suggests the sponsor will reimburse for blood draws and other procedures, then there’s no danger that Medicare will consider the incident a double billing and fraud, explains Michael Slocum, JD, president of Slocum & Boddie located in Springfield, VA. Slocum spoke about negotiating clinical trial agreements at the Society of Research Administrators (SRA) International Annual Meeting, held Oct. 23-27, 2004, in Salt Lake City. The Slocum & Boddie firm conducts business law, including representing research institutions in clinical trial negotiations.

What can happen if the contract contains the pharmaceutical company’s detailed cost budget list is that Medicare will find one case in which a nurse charged Medicare for a blood draw that was used, at least partially, for a clinical trial, Slocum says.

Because of the clinical trial contract, Medicare officials say that this constitutes double billing, which is fraud, he adds.

"The way they work is [fraud inspectors] don’t have to go out and prove you did this every time — they only have to prove you did it once," Slocum tells Clinical Trials Administrator. "Then they use statistical sampling to show how many other times you must have done it, and that’s why hospitals end up paying these incredible settlements, like $90 million, because of picky charges picked up by auditors and extended out on a statistical basis."

The simple solution is to keep the detailed cost analysis out of the contract and use language that only refers to a fixed fee for the clinical trial, he adds.

The problem is that pharmaceutical companies often use boilerplate contract language drawn from different industries, and the lawyers sent to discuss the contracts typically are young and have no courtroom experience, Slocum says.

That’s why it’s important that research administrators recognize that these agreements are negotiable, he notes.

"The other purpose of a contract is to give you a road map on how to work together," Slocum says. "If you approach it from that direction, most of the issues do fall out in a way that’s acceptable to a vast majority of research institutions and a vast majority of drug companies."

Slocum says there are six areas in a clinical trial agreement that cause the most problems. The six areas include the following:

  • HIPAA and confidentiality;
  • publication restrictions;
  • payment details;
  • indemnification;
  • choice of law clause;
  • patent rights.

Don’t just sign on the dotted line

The reason standard clinical trial contracts continue to include phrasing that is problematic is because research institutions do not engage the help of knowledgeable people who can fight the pharmaceutical company lawyers on these details, Slocum notes.

"It’s my impression that most of the drug company lawyers you deal with are reasonably junior in the organization, and most clinical trial negotiators have to fight to get through to a lawyer," he says.

It’s like the philosophy of Tom Wolfe’s term the "flak catchers," Slocum says, referring to Wolfe’s 1971 book, Radical Chic & Mau-Mauing the Flak Catchers, which details the frustrations of people trying to get through government bureaucracy where gatekeepers are there simply to say, "No."

"Corporations put front people out to be flak catchers, to tell you No’ at the first level you deal with," Slocum says. "It’s their job to say, We can’t do that; it’s not our policy.’"

The key is to force them to bump you past that level, and hiring someone who is knowledgeable about clinical trial contracts is the best way to get that boost up, he notes.

Always negotiate, Slocum advises.

"You can negotiate over e-mail; and 90% of the time if you just ask for these changes, you will get them," he says.

Strategies for research contract negotiations can be found on Slocum’s web site at www.slocumboddie.com.

An example of some of the questions that need to be considered prior to contract negotiation, include these listed by Slocum in his speech at the SRA 2004 Annual Meeting:

  • Can the sponsor approve the principal investigator (PI)?
  • What is the PI’s commitment to conduct the study?
  • If the PI becomes unable to complete the study, must the sponsor consent to a new PI?
  • Can the sponsor follow the PI?
  • Are there multiple PIs?
  • How long will records be held?
  • What’s the time frame for completion of the study, the marketing application approval, discontinuation of the IND?
  • How will study records be maintained?
  • How will the transfer of study records be handled?
  • Who owns the documents and how are things kept in accordance with HIPAA and state laws?
  • What information will be disclosed by the sponsor to the institution?
  • What information will be disclosed by the institution to the sponsor?
  • How will confidentiality be maintained with regard to third-party information?
  • How will confidentiality be maintained with regard to patients/subjects?
  • What are the obligations regarding confidentiality on the part of the investigator, staff, and students?

Research institutions also could learn more about how their own contracts can be changed by checking out some examples offered on the web sites of major research institutions, including the University of Texas’ at: http://www3.utsystem.edu/ogc/IntellectualProperty/clinical%20trials.htm.