Liability Risks Hamper Clinical Trials

In last month's issue, we noted a systemic problem with the distribution of risk during drug clinical trials. Although clinical trial sponsors invariably carry insurance, their insurance coverage may not pay for all of the damages suffered by trial participants. This can leave doctors and hospitals that participate in the trials at risk.

Contracting Amid Confusion

The discussion around payment for treatment of clinical trial injury has led to a patchwork of contract provisions and contracting styles and, almost inevitably, confusion and inefficiency for all parties participating in clinical trials.

For instance, if a sponsor desires to conduct a Phase 2 clinical trial with 20 clinical sites, the sites will likely be composed of some blend of large institutions and smaller hospitals or hospital systems and, depending on the indication, private medical practices.

A prudent sponsor would plan for lots of comments and significant negotiations on the clinical trial agreement with large institutions, while the smaller hospitals or hospital systems would likely offer fewer comments and require less negotiation depending, of course, on how active their inside counsel were in these types of transactions. Finally, the sponsor would expect almost no comments from medical practice sites.

In the 20 clinical trial agreements that the sponsor will need to execute with clinical sites and principal investigators, it is likely that, even despite efforts to “standardize” its approach to the treatment of and payment for patient injury, only a few of the agreements would read the same on the indemnification, patient injury and insurance provisions. The majority will have provisions that take different approaches on these topics.

This is a system that requires time and effort. Sponsors, clinical sites and principal investigators often spar on the contents of the clinical trial agreement. In the end, the patient may be the loser if the parties spend their time and money trying to push risk to the other party, while neglecting to agree specifically on how trial injuries will be treated and the treatment paid for.

The Unfortunate Results

Enrollment in U.S. studies is notoriously low when considered as a percentage-of-potential-patients basis. A recent GAO report analyzing clinical trials stated that in 2008, 40% to 65% of clinical trials of U.S. FDA-regulated products were conducted outside the United States. Patients would be more apt to enroll in a study if they had assurance that their injuries would be treated without cost to them, even if the injury requires long-term care, and even if the company providing the experimental treatment goes belly-up.

The uncertainty and inefficiency of the U.S. system can also work as a deterrent for non-U.S. sponsors. While many foreign sponsors recognize that the United States is a key market for the sale of pharmaceuticals and devices, and that an FDA approval is something that will be useful and respected in many other jurisdictions, some are not willing to navigate the unknown risks posed to sponsors of U.S. clinical trials. This can be especially concerning for sponsors who would like to test treatments during which patients might die, such as treatments for certain late-stage cancers.

Often, foreign sponsors view U.S. clinical trials as a “bet-the-farm” move, believing they could be exposing their entire company to U.S.-style judgments, as they are aware the insurance may or may not cover their actual losses. The end game for all sponsors, academic institutions, hospitals and investigators is to improve public health and to increase their ability to offer to their patients treatments that address their symptoms, help them manage their ailments and treat/cure their diseases. A sensible, coherent approach to the treatment of patient injury and payment for treatment of patient injury could go a long way in furtherance of that goal.

Reform Is Needed

Our system of treatment and payment for treatment could greatly benefit from a few simple improvements.

• First, the obligations of each party participating in the trial need to be spelled out clearly. Sponsors need to provide insurance, hospitals need to be required to treat or obtain treatment for injured patients, investigators need to oversee the process, and insurers and CMS need to decide (or be told) what their role will be.
• Second, sponsors need to be offered insurance that covers all the primary risks of clinical trials.
• Third, the clinical trial agreement contracting process and documentation should be standardized. It would be best if key obligations were not subject to regular re-negotiation in each new clinical trial agreement.

Of course, all of the foregoing suggestions are useless without standardization of the cost for treating a study subject. Predictability of cost is key to covering the costs of treatment and ensuring enough money has been set aside to protect the patient.

Conclusion

If the United States would like to earn world respect for our own standards for the treatment of clinical trial injuries, we should consider requiring all sponsors conducting trials in this country to employ the same protections in every country in which the trial is being conducted. With reforms like these in place, it would be easier to bring more participants into clinical trials and more sponsors to our country to develop new and innovative treatments.

Blaine Templeman, a partner in the corporate and intellectual property practice groups in the New York office of Sheppard Mullin Richter & Hampton, serves as co-leader of the firm's life sciences group. This article first appeared in the New York Law Journal, an ALM sister publication of this newsletter.

In last month's issue, we noted a systemic problem with the distribution of risk during drug clinical trials. Although clinical trial sponsors invariably carry insurance, their insurance coverage may not pay for all of the damages suffered by trial participants. This can leave doctors and hospitals that participate in the trials at risk.

Contracting Amid Confusion

The discussion around payment for treatment of clinical trial injury has led to a patchwork of contract provisions and contracting styles and, almost inevitably, confusion and inefficiency for all parties participating in clinical trials.

For instance, if a sponsor desires to conduct a Phase 2 clinical trial with 20 clinical sites, the sites will likely be composed of some blend of large institutions and smaller hospitals or hospital systems and, depending on the indication, private medical practices.

A prudent sponsor would plan for lots of comments and significant negotiations on the clinical trial agreement with large institutions, while the smaller hospitals or hospital systems would likely offer fewer comments and require less negotiation depending, of course, on how active their inside counsel were in these types of transactions. Finally, the sponsor would expect almost no comments from medical practice sites.

In the 20 clinical trial agreements that the sponsor will need to execute with clinical sites and principal investigators, it is likely that, even despite efforts to “standardize” its approach to the treatment of and payment for patient injury, only a few of the agreements would read the same on the indemnification, patient injury and insurance provisions. The majority will have provisions that take different approaches on these topics.

This is a system that requires time and effort. Sponsors, clinical sites and principal investigators often spar on the contents of the clinical trial agreement. In the end, the patient may be the loser if the parties spend their time and money trying to push risk to the other party, while neglecting to agree specifically on how trial injuries will be treated and the treatment paid for.

The Unfortunate Results

Enrollment in U.S. studies is notoriously low when considered as a percentage-of-potential-patients basis. A recent GAO report analyzing clinical trials stated that in 2008, 40% to 65% of clinical trials of U.S. FDA-regulated products were conducted outside the United States. Patients would be more apt to enroll in a study if they had assurance that their injuries would be treated without cost to them, even if the injury requires long-term care, and even if the company providing the experimental treatment goes belly-up.

The uncertainty and inefficiency of the U.S. system can also work as a deterrent for non-U.S. sponsors. While many foreign sponsors recognize that the United States is a key market for the sale of pharmaceuticals and devices, and that an FDA approval is something that will be useful and respected in many other jurisdictions, some are not willing to navigate the unknown risks posed to sponsors of U.S. clinical trials. This can be especially concerning for sponsors who would like to test treatments during which patients might die, such as treatments for certain late-stage cancers.

Often, foreign sponsors view U.S. clinical trials as a “bet-the-farm” move, believing they could be exposing their entire company to U.S.-style judgments, as they are aware the insurance may or may not cover their actual losses. The end game for all sponsors, academic institutions, hospitals and investigators is to improve public health and to increase their ability to offer to their patients treatments that address their symptoms, help them manage their ailments and treat/cure their diseases. A sensible, coherent approach to the treatment of patient injury and payment for treatment of patient injury could go a long way in furtherance of that goal.

Reform Is Needed

Our system of treatment and payment for treatment could greatly benefit from a few simple improvements.

• First, the obligations of each party participating in the trial need to be spelled out clearly. Sponsors need to provide insurance, hospitals need to be required to treat or obtain treatment for injured patients, investigators need to oversee the process, and insurers and CMS need to decide (or be told) what their role will be.
• Second, sponsors need to be offered insurance that covers all the primary risks of clinical trials.
• Third, the clinical trial agreement contracting process and documentation should be standardized. It would be best if key obligations were not subject to regular re-negotiation in each new clinical trial agreement.

Of course, all of the foregoing suggestions are useless without standardization of the cost for treating a study subject. Predictability of cost is key to covering the costs of treatment and ensuring enough money has been set aside to protect the patient.

Conclusion

If the United States would like to earn world respect for our own standards for the treatment of clinical trial injuries, we should consider requiring all sponsors conducting trials in this country to employ the same protections in every country in which the trial is being conducted. With reforms like these in place, it would be easier to bring more participants into clinical trials and more sponsors to our country to develop new and innovative treatments.

Blaine Templeman, a partner in the corporate and intellectual property practice groups in the New York office of Sheppard Mullin Richter & Hampton, serves as co-leader of the firm's life sciences group. This article first appeared in the New York Law Journal, an ALM sister publication of this newsletter.