CRO Clinical Services Agreements: Navigating Legal Risks

When contract research organizations (CROs) and sponsors negotiate agreements for services related to the planning and conduct of clinical trials, the issue is often the appropriate allocation of certain legal risks typically associated with such agreements. Negotiations typically begin on the basis of a standard contract submitted by one of the contracting parties. This initial draft often contains provisions favoring that party, which already incorporate a certain amount of leeway for concessions to the other party. The range of solutions generally acceptable to both parties results from certain contract-specific market standards that the parties can use as a guide in negotiations regarding an appropriate allocation of risk. From a legal perspective, the parties should, in particular, consider the following risks.

Scope of the CRO's services. The precise description of the services to be provided by the CRO and covered by the service fees is sometimes less in the parties` focus during negotiations and upon signing the agreement. This includes the scope of the CRO's obligations with regard to the activities of other persons and institutions involved in the clinical trial (in particular, the investigators and trial sites), as well as their guidance, training, and monitoring. Parties often underestimate the importance of agreeing on a clear description of the services to be provided by the CRO and sufficiently coordinating the details in the annexes or individual orders that address these issues with the main agreement. This is one of the main reasons for legal disputes that can later arise from such agreements. Therefore, the annexes or individual orders that address the details of the services to be provided by the CRO should be drafted and discussed with the same attention and care as the provisions of the main agreement. Another important consideration in this context is whether initial services provided by the CRO prior to the signing of the clinical services agreement based on a letter of intent or similar agreement should also be covered by the clinical services agreement once negotiations on that agreement are concluded.

Legal and other requirements for the CRO's services. The parties should clearly define which laws, regulations, guidelines, and other standards the CRO must comply with when providing the clinical services. Depending on the locations of the parties and of the clinical trial sites, applicable legal requirements regarding clinical trials, data protection, compliance, and other relevant issues must be identified, and the parties must agree on the extent to which the CRO assumes responsibility for compliance with these legal requirements in connection with the provision of its services and the conduct of the clinical trial. Further requirements for the provision of the CRO's services, compliance with which should be agreed, include the applicable standards of good clinical practice, the relevant study protocol, standard operating procedures, scientific and due care standards, instructions from the sponsor, and orders from the competent authorities and ethics committees.

Clinical trial agreements and informed consent forms. CRO clinical services agreements should clearly state the extent to which the CRO is responsible for preparing the clinical trial agreements with trial sites and investigators, and the consent forms to be used for study participants. Sample documents outlining their content can be attached to the agreement between the sponsor and the CRO as an annex, as well as specific guidelines regarding the cases and conditions under which deviations from these templates are possible or necessary. With regard to clinical trial agreement, the clinical services agreement should also specify whether and in what cases the CRO should sign these agreements in its own name or on behalf of the sponsor, the extent to which their conclusion and any amendments require the sponsor's prior written approval, and how any rights of the sponsor under these agreements can be enforced if the sponsor itself is not a party to the agreement. Likewise, a clinical services agreement should stipulate the extent to which the CRO is obligated to the sponsor to ensure that all necessary information is provided to study participants and that investigators and trial sites obtain valid informed consent from all participating patients prior to their participation in the clinical trial, based on the contractual requirements.

Subcontractors and other third parties. Another often controversial issue is under what conditions the CRO may use subcontractors and other third parties to fulfill its contractual obligations and the consequences of their involvement. Clinical services agreements typically stipulate that the involvement of third parties by the CRO requires the prior written consent of the sponsor, unless they have been pre-approved individually or by category in the agreement. The sponsor will often insist that the involvement of third parties does not release the CRO from its obligations under the clinical services agreement. The clinical services agreement may contain various provisions to ensure that the sponsor's risks arising from the CRO's involvement of third parties are mitigated, for example, specific requirements regarding the third parties' obligations under their contracts with the CRO.

Project delays. The consequences of the CRO's failure to meet agreed deadlines should also be addressed in the clinical services agreement. If the agreement contains a binding obligation of the CRO to meet the agreed deadlines (and not merely a best-effort obligation), certain rights for the sponsor will typically be provided in the event that a delay is caused by circumstances for which the CRO is responsible. Such rights may include, for example, reimbursement of certain costs incurred as a result of the delay. In any event, the CRO should be required to (i) promptly inform the sponsor of any foreseeable failure to meet agreed deadlines, the reasons for, and the expected duration of, such delays, and (ii) propose new deadlines that can be agreed between the parties in accordance with the contractual provisions regarding changes.

Payments. Although the content of the payment provision primarily concerns business issues, the details of its wording should also be carefully considered from a legal perspective, as they can be relatively complex due to the various types of payments involved. For example, service fees may be based on or include milestone payments, fixed prices, caps, a unit-based budget, or a combination of several of these elements. There are various ways to address pass-through costs, which may include payments to trial sites and investigators. From the sponsor's perspective, it is important to clearly define the agreed amount of service fees and pass-through costs, the documentation to be submitted to the sponsor to demonstrate that these payments are due, the applicable approval and other requirements for additional payments, and appropriate mechanisms for final reconciliation of service fees and pass-through costs and for handling overpayments and underpayments.

Termination of the agreement. Termination rights typically include the right of each party to terminate the agreement with immediate effect in the event of an uncured material breach or the insolvency of the other party, as well as the right of the sponsor to terminate the agreement without cause. In addition, the parties may agree on further termination rights, for example, termination rights of the sponsor with immediate effect if circumstances arise that require termination of the study, such as serious adverse events or the withdrawal of a required regulatory approval to conduct the study, or if there is a change of control of the CRO. Depending on the applicable law, there may also be other statutory termination rights (e.g., under German law, the non-waivable right to terminate certain agreements for good cause) or there may be a risk that a termination right may not be effective or enforceable under certain circumstances (e.g., under German law, the right to terminate in the event of the insolvency of the other party, the effectiveness of which, according to a 2022 decision of the Federal Court of Justice, may depend in particular on whether the termination pursues an objective justified under insolvency law). Of course, the consequences of termination should also be specified, for example, details of the measures required to properly wind down the study and the scope of closeout services.

Intellectual property. Often, the parties to a clinical services agreement agree that all inventions, study results, and related rights arising in connection with the performance of the services or the conduct of the study shall be the sole property of the sponsor, with certain clearly defined exceptions. Typical exceptions include certain pre-existing or independently developed technologies of the CRO and their improvements that arise during the performance of the agreement and shall be solely owned by the CRO. The agreement should contain the necessary provisions to ensure that all rights to inventions and study results to which the sponsor is entitled are transferred to the sponsor or, if such a transfer is not legally possible, licensed to the sponsor. Depending on the applicable employee invention law, special contractual provisions may be required (e.g., under German law, the CRO's obligation to claim all rights to employee inventions) to ensure that the sponsor can become the owner of the rights to inventions to which it is entitled.

Indemnification obligations. As a general rule, each party indemnifies the other party against damages and liability based on third-party claims resulting from specific actions or circumstances for which the indemnifying party is responsible. Typical cases include a breach of the clinical services agreement and negligent or intentional conduct by the indemnifying party. Such indemnities may also extend to other circumstances. Whether and to what extent certain further indemnities are acceptable to both parties (e.g., regarding the use of the investigational medicinal product during the study) can be negotiated on a case-by-case basis. In any case, indemnities should be limited by excluding damages and liability caused by the other party's negligent or intentional conduct or breach of contract.

Limitation of liability. The liability of the parties under the clinical services agreement may be limited, subject to certain exceptions. For example, the amount of liability may be limited to a fixed amount or a variable amount, such as a certain percentage of the total amount payable by the sponsor for the services. The extent to which such limitations of liability are permissible and enforceable under the applicable law should be carefully examined. For example, under German law, liability cannot be excluded or limited (i) with respect to intentional conduct in individual contracts and general terms and conditions, and (ii) with respect to various other cases (e.g., gross negligence, personal injury, and breaches of certain material contractual obligations) in general terms and conditions. According to German court case law, the requirements for proving that certain clauses of a contract are not general terms and conditions but individually negotiated clauses are very strict. The significant risk of invalidity of limitation of liability clauses under German law can be mitigated in several ways, for example, by clearly documenting the individual negotiation of such clauses.

Of course, there are also many other legal issues that must be considered when negotiating CRO clinical services agreements. However, contractually addressing the issues described above in accordance with generally accepted industry standards can help significantly reduce the legal risks associated with such agreements.