Clinical Trial Agreements: Do You Understand All the Important Terms in the Contract?

April 30, 2018

Do you understand everything you need to about the clinical trial agreement contracts you sign?

Likely not, as most contain hidden landmines and not everything in them is as simple as you might think, according to Eric Babineaux, legal counsel for Clintrax Global, who spoke during a WCG webinar last week on the meaning of certain words and concepts often seen in clinical trial agreements.

Even establishing the date of a contract is not as straightforward as one might assume, said Babineaux. Most contracts start on the date that both parties sign, but often one of the parties will want to back date the contract, and the other party agrees to go along. For instance, signing parties will make the effective date a date from a few months ago to reflect a protocol amendment in the study, usually for budget reasons. But Babineaux warns against it.

“I would argue that this is inappropriate. Avoid back dating agreements,” he said. “Instead what we should be doing is truthfully reflecting that the agreement is being made with the signing of the agreement, then moving forward with drafting language within the body of that amendment to show that the parties are agreeing that any changes to the budget are going to need to be retroactive back to whatever date that protocol amendment might have occurred.”

When in doubt, Babineaux said, it’s better to truthfully represent the date, with both parties agreeing to respect the fact that there may be some rights that go back beyond whenever the contract was actually signed.

Another complicated area, said Babineaux, is indemnification — the clause in which one party agrees to protect the other against potential harms or losses that the other party may incur. This is a big one because if triggered, “it could have a pretty high degree of liability,” Babineaux said.

He advised that those penning contracts be very clear on who exactly is indemnified. He used the example of a Sponsor signing a clinical trial agreement with an institution that has affiliated hospitals. To avoid extending wide indemnification to a whole healthcare system, for example, Sponsors should be specific in the contract about exactly which facilities they will indemnify, naming only those that will touch your study, he said.

And Sponsors and CROs, watch out for the word “gross” when writing the clause stating which types of actions — specifically negligence — will be indemnified and which will be excluded from that protection. Explained Babineaux, gross negligence in the context of a clinical trial is conduct that smacks of intentional wrong doing or implied malice or evil intention or represents an extreme departure from standards of ordinary care. Sometimes one party will negotiate to have the standard for indemnification in a contract raised to gross negligence only, meaning: the Sponsor protects the site from a claim from a third party except when the site has been grossly negligent.

But when that is done, Babineaux explained, the Sponsor or CRO is no longer excluding non-gross negligent acts from the behaviors they will protect, and thus will need to protect an investigator who engages in negligence should a third party file a claim, when that might not be appropriate.

“Gross negligence standard is not applied as consistently across jurisdictions as the negligence standard,” he said. “It’s a much higher standard than plain negligence which results in conduct that only amounts to negligence but not reaching gross negligence being indemnified.”

That one word changes everything.

As a Sponsor, “you want to be careful if you ever see that language being added,” said Babineaux. “You want to make sure exactly how that will affect your duty to indemnify because you want to avoid increasing your risk liability just through overlooking the addition of a single word.”

Babineaux also pointed out that clinical trial agreements are often signed between CROs and sites, not Sponsors and sites, and this pushes into a new legal area called third-party beneficiary law. Explained Babineaux, the CRO signs an agreement on behalf of the Sponsor, under power of attorney or a letter of authority, and the Sponsor is now a third-party beneficiary to the contract. Under this type of agreement, the Sponsor is able to sue to enforce obligations under the contract even though they are not party to the agreement — but because they are not a party to the agreement, the site can’t sue them.

“The site can’t enforce any obligations against the Sponsor” under this type of agreement, said Babineaux. This can leave a site dangerously vulnerable when it comes to indemnity.

To remedy that, he suggests sites draw up a letter of indemnification to have the Sponsor sign so they can enter into a direct relationship over the matter. “That way, you do have the mechanism to enforce your rights that the Sponsor may owe,” he said.

Clinical trial agreements may seem complex, but if you understand key terms and the ramifications they can have, you’ll be well on your way to protecting yourself during the course of a trial, and clearing the space to focus on the trial without worrying about legal exposure.

-By Suz Redfearn