Megan Florez, Compliance and Reimbursement Associate, Musculoskeletal Clinical Regulatory Advisors05.29.18
Negotiating can be a daunting task, often inducing anxiety in those without much practice. For many, it’s not a skill that develops naturally or easily. Graduate programs offer numerous courses aimed at preparing students for the necessary evil of negotiating effectively—and with good reason. The ability to negotiate is a valuable asset in all businesses and industries, not least the clinical-research setting. Executing a solid clinical trial agreement (CTA) can ensure the study is conducted within the anticipated budget, strengthen the working relationship between the parties, and bolster all parties’ reputations in the industry.
Among many other purposes, a well-drafted CTA retains proprietary rights and intellectual property rights, establishes in the sponsor unambiguous ownership over the information produced by each site, and frames the payment obligations for each party. The CTA doesn’t simply formalize the conduct of the study as covered by its protocol; it ensures the sustainability of the study, guides how research is to be conducted at each site, and defines the boundaries of the researchers’ and sponsor’s rights and obligations. Undoubtedly, negotiators on all sides of the agreement must tread carefully. According to a CenterWatch survey conducted in 2008, which asked questions regarding the top delaying factors when performing clinical trials, a number of respondents indicated that either their respective companies or another party to the agreement had incurred damages because the CTA hadn’t been properly negotiated and/or had been involved in some legal action in which the CTA was a crucial factor in its resolution. Further, 80 percent of respondents stated that a previous negative experience during contract negotiations had influenced their decision on whether to work with the site again.
Realizing the Risks
With all that’s covered by a CTA, it’s clear why the process of contracting for clinical research should be judiciously engaged. Besides the impact of a CTA’s contents, the execution of a CTA may also influence sponsor cost through protection from legal risk and unanticipated financial liability, efficient use of contractors’ time, and prevention of marketing delay (effectively, profit loss). A 2010 study published by Stanford University that surveyed medtech executives at more than 200 companies, found the average cost to a bring 510(k) product from concept to market to be about $31 million; the average cost of getting a product through PMA approval is $94 million. As such, every additional month spent working through the 510(k) or PMA process could cost upwards of $520,000 and $740,000 per month, respectively. Negotiators must be cognizant of the implications associated with an untimely process.
Understanding the Challenges
In 2005, The New England Journal of Medicine published a study of 107 medical school research administrators, analyzing the restrictive provisions in clinical trial agreements with industry sponsors. The results showed that, “[f]or multi-center trials, the provisions most often identified by administrators as ‘very difficult’ to negotiate were ownership of inventions and intellectual property (31 percent) and ownership of the data produced by the research (25 percent).” Other provisions perceived as “very difficult” or “somewhat difficult” to negotiate were indemnification issues, confidentiality of data produced by the research, rights to publish, and rights to disseminate study results. Respondents were also asked to describe the two most recent disputes they’d had with a trial sponsor after the CTA had been signed. Provisions yielding the highest dispute rates included payment, intellectual property, and data control. The study found that “[s]even percent of the disputes resulted in litigation or arbitration, 55 percent resulted in extended negotiations, and 37 percent were resolved relatively quickly.” The CenterWatch study also concluded the most difficult topics to negotiate were budget and payment, intellectual property and inventions, indemnification and limitations of liability, publication, insurance, and applicable law and jurisdiction.
So what is it about these particular provisions that parties find at least somewhat difficult to negotiate? First, some can increase liability for particular mistakes or create liability when an individual acts on the party’s behalf. Other provisions, like those dealing with publication, intellectual property, inventions, or a party’s rights in the research results, limit the anticipated benefits of trial participation. Provisions regarding applicable law and jurisdiction, meant to protect against forum shopping, restrict the conceding party from choosing a venue with laws that will benefit them most. Some institutions require specific language pertaining various accreditations, which are often non-negotiable and may be unfavorable to the opposing party.
Conducting a Proper Risk Assessment
The negotiator must conduct a proper risk assessment and be familiar with the procedures described in the protocol. He or she must also implement well-defined processes, comprehensive training, and consistent communication, and have an understanding of the issues that likely will arise during the trial.
Minor Considerations: If something is unlikely to cause a major issue, it may not be necessary to change the language because it may generate political capital and good will that could help resolve a larger, more important issue. An effective timesaver is the use of contract templates that have been reviewed and approved by counsel. This provides a starting point where the party becomes familiar with all provisions. Each party should track communications with the opposing party to ensure that no issues have been forgotten and no unnecessary delays have occurred. Furthermore, all staff participating in contract negotiations should be trained on quality communication, the desired timeline, acceptable concessions, and labor division.
Major Risks: There will be issues and disagreements that should not be easily dismissed, as they could have serious, direct impacts on the sponsor’s rights and costs. Since negotiating a contract is naturally contentious, with each side having different, often opposing goals, choosing when to stand firm and how firmly to stand can be a tricky path to maneuver. There is no universal decision that suits all sponsors, and a sponsor’s desire to work with specific institutions or investigators may influence the concessions. Ultimately, a seasoned professional with expertise in clinical research of orthopedic devices and surgeries will be best suited to tailor the negotiating strategy to fit the circumstances.
Common Concerns for Orthopedic CTAs
Fair Market Value—According the Centers for Medicare and Medicaid Services, Fair Market Value (FMV) refers to the value in arm’s-length transactions, consistent with the general market value. However, there are no standard valuations for physician or institution compensation, and even determining an appropriately considered FMV can be tricky. There are various approaches to establish FMV (cost, market, and income), which take into consideration geographical location, institution size, local markets, physician expertise for particular services, and average rate, among other pertinent information. Much importance has been placed on increasing transparency in payments to physicians, academic medical centers, and other healthcare professionals. A failure to document FMV and commercial reasonableness can beget hefty fines and penalties, including shareholder lawsuits and imprisonment. Because of oversight and regulations like the Federal Anti-Kickback Statute and the Sunshine Act, working with someone who has compliance experience is vital. Besides avoiding the harsh legal burden associated with FMV, the timeframe for negotiations may be reduced by beginning with a fair and accurate rate. Therefore, the sponsor should be represented by a negotiator with expertise in reimbursement who can ensure that all necessary factors are being weighed in presenting a fair initial proposal that’s likely to be approved.
Indemnification—As noted previously, parties to a CTA often find indemnification one of the most difficult provisions to negotiate. Indemnification clauses are complicated, since they prompt the indemnifying party to compensate the other party for any current or future losses for specific incidents. Sponsors will want sites to indemnify and exempt them from any responsibility for any willful misconduct, negligence, and/or intentional acts of the institution’s agents, since these acts cannot always be prevented. In turn, the sponsor will indemnify the institution for injuries to patients that are a direct result of the protocol or device. Given the nature of the products, orthopedic manufacturers must be especially concerned about indemnification and liability clauses. Breakage, wear and tear, failure to heal, and potential biologic complications are always a risk, but may be especially consequential during investigational trials. In fact, many institutions, particularly academic, will be hesitant to indemnify the sponsor or refuse to agree to such language. In these cases, the sponsor’s representative should be familiar with the technicalities of responsibility language to appropriately exclude from its indemnity obligations any losses caused by the institution’s indemnitees’ failure to follow outlined processes and study documents.
Subject Injury—A subject injury is an injury, illness, adverse event, or death caused by a subject’s involvement in a clinical trial. While it is common for sponsors to pay for subject injuries, issues may arise when tailoring the parameters under which payment will be made. Sponsors are unlikely to want to pay for costs associated with the institution’s mistake, negligence, or failure to follow protocol. Issues may also arise when establishing whether an injury has occurred and its relation to the subject’s trial participation. Many institutions prefer the decision be at the investigator’s sole discretion; however, the sponsor will want input to avoid abuse. A more complex issue involves setting a benchmark for payment of injuries. Without this limit, the sponsor may find itself responsible for amounts far exceeding its estimates. Navigating this requires careful drafting by an expert in orthopedic trials. The party representing the sponsor should be well-versed in reimbursement and coding, so it can set a fair and commercially reasonable rate.
Allocating Resources
Many parties on either side of a negotiation don’t have sufficient staff trained or available because work can fluctuate dramatically. Despite this, the CenterWatch survey indicated that few respondents engaged with outside contractors like clinical research organizations due to cost concerns. However, dedicated contractors with specific expertise and resources can negotiate on the party’s behalf in a goal-oriented, time-sensitive manner, ultimately resulting in a budget-conscious outcome. A person familiar with negotiating CTAs will understand the importance of both speed and thoroughness, and will have established efficient processes, quality documents, and well-trained, experienced staff.
CTA negotiation can be complicated, with significant costs at risk in both the contract’s contents and its execution. As such, any party hoping to engage in clinical research should be prepared to invest in experienced and qualified staff, whether through internal hiring and training or external contracting.
Megan Florez, J.D. is a compliance and reimbursement associate at Musculoskeletal Clinical Regulatory Advisors, and works as part of a collaborative team to provide consulting services to medical technology clients with respect to coverage, payment, and commercial market access. As an associate, her work focuses primarily on analyzing federal Medicare regulations and commercial health plan coverage policies, developing strategic recommendations for new technologies, analyzing clinical literature, and drafting landscape assessments, clinical trial contracts, clinical trial budgets, negotiations, and sponsor submissions to CMS. Florez earned her Juris Doctor from Western New England University School of Law. She is a barred attorney in Connecticut and awaiting admission to the New York State bar.
Among many other purposes, a well-drafted CTA retains proprietary rights and intellectual property rights, establishes in the sponsor unambiguous ownership over the information produced by each site, and frames the payment obligations for each party. The CTA doesn’t simply formalize the conduct of the study as covered by its protocol; it ensures the sustainability of the study, guides how research is to be conducted at each site, and defines the boundaries of the researchers’ and sponsor’s rights and obligations. Undoubtedly, negotiators on all sides of the agreement must tread carefully. According to a CenterWatch survey conducted in 2008, which asked questions regarding the top delaying factors when performing clinical trials, a number of respondents indicated that either their respective companies or another party to the agreement had incurred damages because the CTA hadn’t been properly negotiated and/or had been involved in some legal action in which the CTA was a crucial factor in its resolution. Further, 80 percent of respondents stated that a previous negative experience during contract negotiations had influenced their decision on whether to work with the site again.
Realizing the Risks
With all that’s covered by a CTA, it’s clear why the process of contracting for clinical research should be judiciously engaged. Besides the impact of a CTA’s contents, the execution of a CTA may also influence sponsor cost through protection from legal risk and unanticipated financial liability, efficient use of contractors’ time, and prevention of marketing delay (effectively, profit loss). A 2010 study published by Stanford University that surveyed medtech executives at more than 200 companies, found the average cost to a bring 510(k) product from concept to market to be about $31 million; the average cost of getting a product through PMA approval is $94 million. As such, every additional month spent working through the 510(k) or PMA process could cost upwards of $520,000 and $740,000 per month, respectively. Negotiators must be cognizant of the implications associated with an untimely process.
Understanding the Challenges
In 2005, The New England Journal of Medicine published a study of 107 medical school research administrators, analyzing the restrictive provisions in clinical trial agreements with industry sponsors. The results showed that, “[f]or multi-center trials, the provisions most often identified by administrators as ‘very difficult’ to negotiate were ownership of inventions and intellectual property (31 percent) and ownership of the data produced by the research (25 percent).” Other provisions perceived as “very difficult” or “somewhat difficult” to negotiate were indemnification issues, confidentiality of data produced by the research, rights to publish, and rights to disseminate study results. Respondents were also asked to describe the two most recent disputes they’d had with a trial sponsor after the CTA had been signed. Provisions yielding the highest dispute rates included payment, intellectual property, and data control. The study found that “[s]even percent of the disputes resulted in litigation or arbitration, 55 percent resulted in extended negotiations, and 37 percent were resolved relatively quickly.” The CenterWatch study also concluded the most difficult topics to negotiate were budget and payment, intellectual property and inventions, indemnification and limitations of liability, publication, insurance, and applicable law and jurisdiction.
So what is it about these particular provisions that parties find at least somewhat difficult to negotiate? First, some can increase liability for particular mistakes or create liability when an individual acts on the party’s behalf. Other provisions, like those dealing with publication, intellectual property, inventions, or a party’s rights in the research results, limit the anticipated benefits of trial participation. Provisions regarding applicable law and jurisdiction, meant to protect against forum shopping, restrict the conceding party from choosing a venue with laws that will benefit them most. Some institutions require specific language pertaining various accreditations, which are often non-negotiable and may be unfavorable to the opposing party.
Conducting a Proper Risk Assessment
The negotiator must conduct a proper risk assessment and be familiar with the procedures described in the protocol. He or she must also implement well-defined processes, comprehensive training, and consistent communication, and have an understanding of the issues that likely will arise during the trial.
Minor Considerations: If something is unlikely to cause a major issue, it may not be necessary to change the language because it may generate political capital and good will that could help resolve a larger, more important issue. An effective timesaver is the use of contract templates that have been reviewed and approved by counsel. This provides a starting point where the party becomes familiar with all provisions. Each party should track communications with the opposing party to ensure that no issues have been forgotten and no unnecessary delays have occurred. Furthermore, all staff participating in contract negotiations should be trained on quality communication, the desired timeline, acceptable concessions, and labor division.
Major Risks: There will be issues and disagreements that should not be easily dismissed, as they could have serious, direct impacts on the sponsor’s rights and costs. Since negotiating a contract is naturally contentious, with each side having different, often opposing goals, choosing when to stand firm and how firmly to stand can be a tricky path to maneuver. There is no universal decision that suits all sponsors, and a sponsor’s desire to work with specific institutions or investigators may influence the concessions. Ultimately, a seasoned professional with expertise in clinical research of orthopedic devices and surgeries will be best suited to tailor the negotiating strategy to fit the circumstances.
Common Concerns for Orthopedic CTAs
Fair Market Value—According the Centers for Medicare and Medicaid Services, Fair Market Value (FMV) refers to the value in arm’s-length transactions, consistent with the general market value. However, there are no standard valuations for physician or institution compensation, and even determining an appropriately considered FMV can be tricky. There are various approaches to establish FMV (cost, market, and income), which take into consideration geographical location, institution size, local markets, physician expertise for particular services, and average rate, among other pertinent information. Much importance has been placed on increasing transparency in payments to physicians, academic medical centers, and other healthcare professionals. A failure to document FMV and commercial reasonableness can beget hefty fines and penalties, including shareholder lawsuits and imprisonment. Because of oversight and regulations like the Federal Anti-Kickback Statute and the Sunshine Act, working with someone who has compliance experience is vital. Besides avoiding the harsh legal burden associated with FMV, the timeframe for negotiations may be reduced by beginning with a fair and accurate rate. Therefore, the sponsor should be represented by a negotiator with expertise in reimbursement who can ensure that all necessary factors are being weighed in presenting a fair initial proposal that’s likely to be approved.
Indemnification—As noted previously, parties to a CTA often find indemnification one of the most difficult provisions to negotiate. Indemnification clauses are complicated, since they prompt the indemnifying party to compensate the other party for any current or future losses for specific incidents. Sponsors will want sites to indemnify and exempt them from any responsibility for any willful misconduct, negligence, and/or intentional acts of the institution’s agents, since these acts cannot always be prevented. In turn, the sponsor will indemnify the institution for injuries to patients that are a direct result of the protocol or device. Given the nature of the products, orthopedic manufacturers must be especially concerned about indemnification and liability clauses. Breakage, wear and tear, failure to heal, and potential biologic complications are always a risk, but may be especially consequential during investigational trials. In fact, many institutions, particularly academic, will be hesitant to indemnify the sponsor or refuse to agree to such language. In these cases, the sponsor’s representative should be familiar with the technicalities of responsibility language to appropriately exclude from its indemnity obligations any losses caused by the institution’s indemnitees’ failure to follow outlined processes and study documents.
Subject Injury—A subject injury is an injury, illness, adverse event, or death caused by a subject’s involvement in a clinical trial. While it is common for sponsors to pay for subject injuries, issues may arise when tailoring the parameters under which payment will be made. Sponsors are unlikely to want to pay for costs associated with the institution’s mistake, negligence, or failure to follow protocol. Issues may also arise when establishing whether an injury has occurred and its relation to the subject’s trial participation. Many institutions prefer the decision be at the investigator’s sole discretion; however, the sponsor will want input to avoid abuse. A more complex issue involves setting a benchmark for payment of injuries. Without this limit, the sponsor may find itself responsible for amounts far exceeding its estimates. Navigating this requires careful drafting by an expert in orthopedic trials. The party representing the sponsor should be well-versed in reimbursement and coding, so it can set a fair and commercially reasonable rate.
Allocating Resources
Many parties on either side of a negotiation don’t have sufficient staff trained or available because work can fluctuate dramatically. Despite this, the CenterWatch survey indicated that few respondents engaged with outside contractors like clinical research organizations due to cost concerns. However, dedicated contractors with specific expertise and resources can negotiate on the party’s behalf in a goal-oriented, time-sensitive manner, ultimately resulting in a budget-conscious outcome. A person familiar with negotiating CTAs will understand the importance of both speed and thoroughness, and will have established efficient processes, quality documents, and well-trained, experienced staff.
CTA negotiation can be complicated, with significant costs at risk in both the contract’s contents and its execution. As such, any party hoping to engage in clinical research should be prepared to invest in experienced and qualified staff, whether through internal hiring and training or external contracting.
Megan Florez, J.D. is a compliance and reimbursement associate at Musculoskeletal Clinical Regulatory Advisors, and works as part of a collaborative team to provide consulting services to medical technology clients with respect to coverage, payment, and commercial market access. As an associate, her work focuses primarily on analyzing federal Medicare regulations and commercial health plan coverage policies, developing strategic recommendations for new technologies, analyzing clinical literature, and drafting landscape assessments, clinical trial contracts, clinical trial budgets, negotiations, and sponsor submissions to CMS. Florez earned her Juris Doctor from Western New England University School of Law. She is a barred attorney in Connecticut and awaiting admission to the New York State bar.