Massachusetts Biotechnology CoalitionContract Issues for Biotech Attorneys

Thursday, March 12, 2009

Agenda:Introductions:

C. Elizabeth O’Keeffe, JD, MPH, CHC

Maria D. Buckley, Of Counsel, Nutter McClennen & Fish, LLPStephen B. Harris, Life Sciences Sr. Specialist, Chubb & SonColleen Surrette Sproul,JD, Principal, Contracts, Associates, Inc.

What contracts? (E. O’Keeffe)Boilerplate (E. O’Keeffe)Transactional Contracts; Funky Clauses (M. Buckley)Insurance and Indemnification (S. Harris)In-House Perspective; Triage; Resources (C. Sproul)Q:A

What Contracts?

SPONSOR

SUBJECTFDAIRB**

DSMB

CRO*

INVESTIGATOR

INSTITUTION/ CLINICAL SITE

CTA

Informed Consent1572

CTA

CTAs

*Contracts on behalf of sponsor (donated by dotted line)

**May or may not be a written agreement - depends on whether IRB is commercial, local, centralized, etc

Services Agreements

Blue = CTA

Orange = Service Agreement

Green = Regulatory “agreement”

Third party vendors (e.g., labs)

CRO Contract Issues

Sponsor may want CRO to handle CTAs because of: Speed Cost Strength of CRO’s relationships with research

sites/investigators However, Sponsors may have problems with

CROs protecting Sponsors’ interests? CRO sometimes want to get contract in place

quickly and not expend resources in lengthy negotiations

CRO may not have adequate legal expertise

CRO Contract Issues

If CRO is allowed to contract on the Sponsor’s behalf, contractual controls can help protect Sponsor’s interests

Range of Possibilities CTA template

Sponsor provides template for CRO useCRO provides CTA template for Sponsor review

and approval CRO authority to negotiate

Only extends to certain provisionsCRO must submit all changes to Sponsor for

review and approval Notification of changes and amendments

Thesis

Traditionally, lawyers use the term “boilerplate” to refer to any standardized, “one size fits all” provision

Classic examples: The choice of law provision The notice provision The force majeure provision The assignment and delegation provision

Provisions: Supply a road map Serve housekeeping functions (matters of secondary

importance) “Boilerplate” is a misnomer as applied to these provisions

and that lying in wait within each of them are significant business and legal issues.

Agenda

Anatomy of a contract

Standard sections

Recommended language

Practical, operational and legal perspectives

Recitals

• Recitals (a/k/a “WHEREAS clauses”) supply helpful context.

• Describe the who, why and how.– A very high-level synopsis of the agreement

and provide a framework for interpretation of the agreement by the parties and/or the court.

• Recitals are non-binding, unless specifically incorporated.– “The recitals shall be incorporated by reference

in this agreement as if full set forth herein.”

MAGI Approachwww.firstclinical.com

• Parties & Recitals• __________ (“Sponsor”), a {form of entity}

organized under the laws of {State}, __________ (“Site”), a {form of entity} organized under the laws of {State}, and __________ (“Investigator”), Site’s {employee/contractor}, enter into this Agreement (“Agreement”) whereby Sponsor engages Site and Investigator to conduct clinical research on ______________ (“Study {Drug/Device/Biologic}”) according to the provisions of this Agreement and Protocol __________.[1,2,3,4,5,6,7,8,9]

Term & TerminationTerm:

Effective date As of a specified date or

Upon execution by last party to sign

Automatic termination (a.k.a. “Expiration”) Specific date

Completion of all study related activities “End of study” needs to be clarified

IRB closure at site?Sponsor close out visit?Data analysis from all sites in multi-center

study?

Term & Termination (Cont.)

Initiated termination:

Sponsor:Generally 3-5 different ways for Sponsor to terminate Includes a ‘no cause’ out for Sponsor

Site:Usually a way for site to terminate to protect the safety of subjects

Termination for breach: Material breach of agreement; provide

opportunity to cure

MAGI Approach

• 12. Effective Date, Term & Termination• 12.1. Effective Date• This Agreement becomes effective when signed below by all parties, on the date of the last

signature.[1]• 12.2. Term• Unless terminated earlier, this Agreement will expire when (a) Site has submitted all CRFs to

Sponsor, has resolved all data clarification queries, and submitted the closeout report to the IRB and Sponsor; and (b) all payments, reimbursements and refunds have been made.

• 12.3. Termination• The parties may terminate this Agreement under the following circumstances: Breach. Upon

material breach by a party, the other party may terminate this Agreement provided that the other party fails to cure the breach within 20 days after notice.[1,2] Subject Safety. Either party may terminate immediately based on Subject safety or welfare concerns, e.g., if the informed consent form required by the IRB/IEC or other party is unacceptable, or if the IRB terminates the Study at the Site. Alternatively, Parties may agree that Site will discontinue enrolling Subjects and attempt to agree if and how the Study will proceed at the Site. Insolvency. Either party may terminate immediately upon notice by the other party that it has filed for protection under any bankruptcy laws, has been declared insolvent, ceases or threatens to cease to carry on its business, or an administrator or receiver has been appointed over all or part of its assets. Investigator Successor. Either party may terminate if Investigator is unable for any reason to continue in that role and the parties are unable to agree upon a successor. Government Exclusion. Site may terminate immediately if Sponsor is excluded from any FDA, OHRP or Medicare/Medicaid, or other state or federal government program.

• [3]Without Cause. Either party may terminate without cause, upon 20 days’ prior notice.• [4]Upon termination, Site will immediately stop enrolling Subjects and, subject to protecting

Subject safety and welfare, cease Study activities and complete its normal Study completion responsibilities.

Governing Law/Venue

Choice of law determines which state or country’s law should govern the contract

Choice of venue determines where disputes are resolved

State institution limited to their state laws

Use: “without regard to its conflict of laws provisions”

Silence – remove the clause Where is the work being done? Many states will apply

this

MAGI Approach

• 14.1. Governing Law & Jurisdiction

• The laws of _________ govern this Agreement. The Courts of ____________ have legal jurisdiction, without regard to conflict-of-laws provisions.[1,2,3,4,5,6,7]

AssignmentWhat is it?

Ability to assign contract to another partyMay be prohibited or limited to written consent

Issues: By institution/investigator

Qualifications of new investigator/staffIndemnification, confidentiality and IP provisions enforceable

against all parties

By Sponsor/CROContinuity of obligations

Overall, ensure full assignment of responsibilities:PaymentStudy completion and reporting

Negotiating and Drafting the Assignment and Delegation Provision:

The Anti-Assignment Clause

A Typical, but Flawed, Anti-Assignment Clause:

“This Agreement shall not be assigned by either party without the consent of the other party”.

A clause that prohibits solely the assignment of the contract, without any reference to rights under the contract, presumptively prohibits only the delegation of duties

Contract Rights

• Today, contract rights are freely assignable, with certain limited exceptions

• This general rule completely reverses

earlier common law doctrines and reflects, in large part, the role that contract rights play in a modern credit-based economy

MAGI Approach

• 14.7. Assignment• Any party may assign this Agreement to an Affiliate or in

connection with the merger, consolidation or sale of all or substantially all of its assets, upon 30 days’ prior written notice to the other party, provided that the Affiliate or acquirer agrees to assume all responsibilities and obligations under this Agreement. Any other assignment of this Agreement, and the associated rights and obligations, requires the prior written consent of the other party. If Site or Investigator terminates this Agreement, it will assign to Sponsor its contracts with subcontractors, if any, so Sponsor can continue study without that party.

• 14.8. Delegation• Site may delegate Investigator duties under this Agreement

according to Section 3.6. Investigator may delegate his/her duties under this Agreement according to Section 3.8. The parties may delegate other duties under this Agreement to third-parties, provided, however, that (a) such third parties perform such duties in a manner consistent with this Agreement, and (b) the delegating party remains fully responsible for such third parties’ performance under this Agreement.[1]

Entire Agreement/Modification

What is it?Ensures that the contract represents the

entire understanding of the parties with respect to the subject matter.

Must incorporate protocol, exhibits, schedules, addendum, etc.

Assures that assurances outside the contract are not enforceable.

Issues with modifications: Must be in writing. Must be signed by proper parties. Must properly integrate with core agreement.

Putting It All Together

Contract Goals:

• Record parties’ agreement

• Merger provisions increases certainty in terms set forth

MAGI Approach

• 14.3. Entire Agreement; Modifications • This Agreement, together with any attachments or

exhibits, sets forth the entire understanding among the parties about the Study. Any prior agreements, promises or representations, whether oral or written, such as agreements of confidentiality, have no force or effect. Any modification or waiver to this Agreement must be in writing and signed by all parties to this Agreement. However, IRB-approved changes to the Protocol are incorporated by reference into this Agreement, subject to agreement on appropriate budget modifications.[1]

Contract Logistics

Proof before you send/signCopy/paste errorsTemplates getting switchedEmails vs. Hard copyWho keeps signed originals?

Post-termination Obligations

Return/destruction of confidential information

Safeguarding PHI

Return of case report forms, unused drug/device and related equipment and supplies

Surviving obligations (e.g., IP, use of name, confidentiality, indemnification)