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February 26, 2008 Bradley Merrill Thompson Sponsor-CRO Relationships: Managing Risk

Topics ABCs of CROs Planning RFP and Due Diligence Contracting Execution of Work Evaluation Take Aways

What is a Contract Research Organization? FDA Definition : A CRO is a person that assumes, as an independent contractor of the sponsor, one or more obligations of the sponsor, such as design of the protocol, selection of the research site(s), monitoring of investigators, evaluation of the study data, and/or preparation of materials to be filed with the FDA. See 21 CFR § 312.3(b) ICH Definition : – A CRO is a person or an organization (commercial, academic, or other) contracted by the sponsor to perform one or more of a sponsor’s trial-related duties and functions. See GCP §1.20

SMOs Defined What is a Site Management Organization (SMO)? A person that is retained as an independent contractor of the principal investigator or research site to provide administrative support of the conduct of the study, such as recruitment of the subjects, collection and preparation of the study data and reports for submission to the sponsor. A CRO may perform SMO functions Definition based on agency relationships

CROs v SMOs Sponsor Sponsor’s Agent (CRO) Researcher’sAgent (SMO) Research Site/ Investigator

CRO Industry CRO industry is booming, taking a larger piece of worldwide R&D expenditures -- $14 billion by CROs in 2005 The industry is fragmented with over 1000 CROs, including: A small group of large, full service multinational entities representing 50% of worldwide CRO revenue The remaining CROs being small to mid-sized entities providing a more limited menu of services, including: Niche CROs providing services in a limited geographic region or on a specific disease state or therapeutic model

CRO Clinical Trial Services Protocol development Site/Investigator recruitment and selection Personnel training Clinical trial management Quality assurance and site monitoring Data analysis Medical writing Processing and preparing regulatory filings and liaison with regulatory bodies

Potential Advantages of CROs Reduce: Time needed to develop and commercialize a new drug Sponsor’s fixed costs associated with personnel, equipment and facilities needed for its R&D function Provide: Ready access to needed expertise and/or technology Greater access to potential investigators Knowledge of regulatory climate in foreign markets

Potential Risks of Outsourcing to CROs Risks generally associated with reduced control of the clinical trial process by the Sponsor Risks include: Delays in completion of studies Lost or poor data Regulatory infractions produce indirect consequences FDA regulations/GCPs HIPAA Fraud and Abuse Private litigation exposure

Delegation of Authority to CRO Sponsors may transfer regulatory obligations to a CRO Must describe in writing – usually this is done in a written Transfer of Obligations form If not all are transferred, specify which ones are and which ones are not Any regulatory obligation not expressly delegated remains the responsibility of the Sponsor CROs that assume regulatory risk for delegated areas

Delegation of Authority to CRO Portion of Transfer of Obligations form: X Ensuring the FDA and all participating Investigators are promptly informed of significant new adverse effects or risks with respect to the Study Materials X Maintaining an effective IND with respect to the Study X Ensuring that the Study is conducted in accordance with the Protocol X Ensuring proper monitoring of the Study X Providing Investigators with the information they need to conduct the Study properly X Selecting qualified Investigators 212 CRF 312.50 General responsibilities of sponsors Transferred to CRO Maintained by Sponsor Sponsor Responsibility

Delegation of Authority to CRO CRO may have key roles and responsibilities pertaining to regulatory responsibilities, even when obligation is not “transferred” to CRO Example: Adverse Event Reporting Sponsor retains responsibility to report to investigators and FDA CRO may still be responsible for: Reporting AEs to Sponsor Drafting AE descriptions Providing summary reports of AEs Following up with sites to ensure complete AE information is obtained Safety database maintenance and/or reconciliation - These responsibilities should be described in the Work Order

Traditional Pattern of Outsourcing Integration Shares common goal/objectives Engages in joint strategic planning Forms relationship-based structure Makes open-ended agreements New business forms Strategic Alliance Preferred Supplier Establish core team Builds collaborative mechanisms Develops understanding of client’s customers Incorporates client into strategic planning Assigns dedica70 ted relationship management Makes directed investments Builds collaborative mechanisms Partnership Source: August 2004, Goldman Sachs Research Responsiveness to requests Transactional

Checks and Balances Monitoring Systems auditing Trial auditing Contract negotiations Clinical research operations Protocol Development Site/Investigator Recruitment and Selection Personnel Training Clinical Trial Management Data Analysis Medical Writing Processing and Preparing of Regulatory Filings and liaison with Regulatory bodies QA and QC Secondary Vendors Primary Vendor

Topics ABCs of CROs Planning RFP and Due Diligence Contracting Execution of Work Evaluation Take Aways.

CRO Selection Business and legal risks will be minimized when the Sponsor-CRO relationship is based on open communication and trust Imperative that Sponsor adopt a CRO selection process that assesses: Expertise : Does the CRO have the expertise to undertake duties Sponsor desires? Compatibility : Can the CRO fulfill its duties in manner that is compatible with the Sponsor (i.e., is there a good fit)? Capacity : Does the CRO have the ability to commit the manpower and resources needed in the Sponsor’s timeframe? Price : Does the CRO provide services at same price as competitors? If not, what added value is being offered?

CRO Selection Sponsor usually conducts an RFP process tailored to the specific trial at hand Sponsor’s due diligence should include: Web research Public directories Careful analysis of Responses to RFP Interviews with operational leaders Site visits Information gleaned by Sponsor during the CRO selection process should be communicated to counsel to ensure that CRO’s verbal claims are reflected in the CRO contract

QA Questions to Ask How does the CRO measure quality? What CRO processes are in place to continually monitor quality? What is the size of the CRO quality assurance (QA) department? What internal QA procedures are in place? For example, does QA audit studies independent of sponsor-CRO contract, as part of internal CRO quality control? Winther

Topics ABC of CROs Planning RFP and Due Diligence Contracting Risks to manage Metrics 3 rd Party Agreement Change Orders Staffing Issues Execution of Work Evaluation Take Aways

Common Project Risks Inefficiency and quality issues from staff changeover Delays in obtaining regulatory approvals Delays in site initiation Delays with patient recruitment Difficulties with the management of clinical trial supplies Issues with vendors Delays with the processing of CRFs Utilization of resources at a level that exceeds the budget

Source: Thomson CenterWatch 2005 Survey of 612 Investigative Sites in the U.S. Factor Most Often Causing Study Delays United States

Metrics--Why Measure? Performance management requires metrics to: Create alignment and focus Assess and manage risk Inspire/motivate people Create accountability for those responsible Learn lessons regarding what works Reduce subjectivity and political bias in decision-making Maximize data quality Ensure timelines What gets measured, gets done What does not get measured, may not get done

CRO and Sponsor Relationships Transparency of performance builds trust Assures alignment on study quality Provides the tools for proactive and focused management of issues early so they don’t become bigger problems Allows for shared consensus on steps for resolution Celebrating successes provides positive reinforcement and motivation

Metrics in a CRO Relationship CRO Engagement RFP and Due Diligence Contracting Execution of work Evaluation Metric Creation Key Performance Indicators Critical Success Factors Specific Performance Indicators Discussion Senior Committee Junior Committee Discussion Analysis Measurement Feedback & Adjustment Feedback Planning Metric Use

Key Metrics for Early Identification of Project Risk Clinical Operations Start-up metrics Enrollment metrics CRF backlog Data Management Data entry Data review Data quality Varawalla

Example Metric Definition Table *All days specified are elapsed time Cuddigan & King Clinical data management system (CDMS) Clinical trial management system (CTMS) Data Source 5 days Average number of days from patient visit to lab data available in CDMS Visit data to lab data available in database 60 days (mean); 90 days (oncology) Number of days from final protocol approval by sponsor to first patient enrolled at first site Final protocol to first patient recruited Achievement of key project timelines Target * Definition Related Metrics KPI

Example Metric Definition Table, contd. *All days specified are elapsed time Cuddigan & King CTMS CDMS Data Source 21 days Number of days between database lock and final approval study report Database lock to final study report 5 days Number of days from LPLV at site to database locked Last patient last visit (LPLV) to database lock Target * Definition Related Metrics KPI

Example Metric Definition Table, contd. Cuddigan & King CTMS Percent of sites enrolled that recruits 1 subject within one month of initiation visit Percent of non-performing centers Data manager Number of database errors found on database audit/total number of data fields audited Database error rate Achievement of target quality standards Data Source Definition Related Metrics KPI

Example Metric Definition Table, contd. Cuddigan & King Finance Number of change orders approved after initial contract sign-off Number of change orders Finance Total project fees after final invoice paid, compared with initial contract value (includes pass-through costs) Final actual contract cost as percent of initial contract value Compliance with agreed contract value Data Source Definition Related Metrics KPI

How Do We Use Metrics? Just as you would internally, for performance management: Create alignment and focus Assess and manage risk Inspire/motivate people Create accountability for those responsible Learn lessons regarding what works Reduce subjectivity and political bias in decision-making Maximize data quality Ensure timelines Dispute Resolution (later) Contractually in a few cases Contractual management process and dispute resolution Contractual rewards Contractual penalties

Utility in Managing Sites Compare sites on the basis of: Subjects (overall enrollment, enrollment per month, screen fail rate, dropout rate) Start up (contract completion time, document completion time) Data (query rate, query completion time) Money (overall cost per patient, advertising cost per patient)

Topics ABCs of CROs. Planning RFP and Due Diligence Contracting Risks to manage Metrics 3 rd Party Agreement Change Orders Staffing Issues Execution of Work Evaluation Take Aways

Third party vendors (e.g., labs) SPONSOR SUBJECT FDA IRB** DSMB, MRC, etc CRO* INVESTIGATOR INSTITUTION/ CLINICAL SITE CTA Informed Consent 1572 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”

Ability to Bind Sponsor to CTAs 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

Ability to Bind Sponsor to CTAs 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 use CRO provides CTA template for Sponsor review and approval CRO authority to negotiate Only extends to certain provisions CRO must submit all changes to Sponsor for review and approval Notification of changes and amendments

Topics ABCs of CROs. Planning RFP and Due Diligence Contracting Risks to manage Metrics 3rd Party Agreement Change Orders Staffing Issues Execution of Work Evaluation Take Aways

Change Orders Typically, the SoW sets forth the particular services to be provided by the CRO to the sponsor Additional services beyond those in the SoW are generally subject to a “change in scope” or “change order” that modifies the agreement and increases the total cost of the project Some sponsors have negotiated a shift of the risk of cost overruns to the CRO absent an executed addendum setting forth the change of scope and any additional charges for these services

Personnel Experience & qualification of CRO personnel varies widely Educational background Therapeutic area experience Duration of monitoring experience Training Accreditation (e.g. ACRP, SoCRA) Study personnel change frequently Turnover Moving people around

Managing Personnel Sponsor should retain the right to approve at least key study personnel, including additional or replacement personnel added during the course of a study Sponsor access to study team training records Consider specifying training requirements for the study team, including any replacement personnel The cost of study-specific training of study personnel is typically included in the budget Training of replacement personnel should generally be allocated to the CRO Institutionalize communication and systems to reduce dependence on merely outstanding people

Topics ABCs of CROs Planning RFP and Due Diligence Contracting Execution of Work Red Flags Communications Dispute resolution Evaluation

Watch for Red Flags Selection of inexperienced investigators by the CRO Questions from study site directed to sponsor Inadequate monitoring reports Enrollment of patients who don’t fit criteria Higher screening-to-enrollment ratio at one site than others Failure of CRO to submit monitoring reports promptly after visit Frequent rescheduling of meetings and reports by CRO Delays in cleaning up CRFs Changes in CRO personnel Unscheduled request for payment by the CRO Vogel

Strategy for Avoiding Delays Efficient change order process Also need good communication more generally And a good process for conflict resolution, that escalates it up three steps before the conflict goes to the lawyers CRO needs to agree contractually to not unreasonably refuse a change order

Managing Communications Poor communication is often cited as a prime reason for frosty relations between CRO and Sponsors CRO contract should contain an express liaison provision establishing a point of contact for each party Provide for basic joint committee structure Consider including list of all key operations, billing and legal personnel as part of MSA or SoW (link to change of personnel provision)

Preferred Provider Agreement Relationship Management Model—Joint Committees Thomis & Desai Project Team 1 Project Team 2 Project Team 3 Project Team 4 Governance/Steering Committee (VPs) Operational Committee (Directors)

Speaking The Same Language Define systems and expectations up front Joint committees of designated people by title Weekly, monthly and quarterly meetings with the clinical and operations project teams Discuss at team level Operational issues Quality/compliance issues Metrics review Cost vs budget Escalate as appropriate to operational and steering committees Periodic comprehensive reviews by operational and steering committees Other Communications Establish systems that identify and track key issues and their resolution Keep other key stakeholders informed

Proactively Avoiding Disputes Obviously write a clear contract Payment Terms The CRO must remain cash neutral: not a bank Clearly define “delivery” and “completion” Sponsors should negotiate payment for performance, including milestones and deliverables

Resolving Payment Disputes Make delivery of data independent of payment Why? This is the reciprocal of a common request by a CRO to include limitations on liability, such as limiting damages to contract price, not actual damages due to delay, etc. If the CRO does withhold data to secure payment, the CRO opens itself up to actual damages—the limitation is lost. This dovetails with the termination provision, which might for example require 10 days notice during which the contract is still valid.

Post Study Learning How did the CRO perform? Look at final metrics. How did other third parties perform? How did the sponsor perform? What unexpected risks were there, and how can they be better managed in the future? How can operations be improved, including communication? Channel that learning back to the contracting and operations units

Take Aways Establish realistic objectives and expectations Understand your internal capabilities and advise the other party accordingly Budget early Establish clear lines of communications between parties and identify contract liaisons One size does not fit all; make CRO selections based on specific needs of each trial Use contract templates with caution Do templates contain party’s wish list or minimum requirements? Review/update templates periodically, particularly MSAs

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