By Tony Carita
Engaging with a contract research organization (CRO) brings both opportunity and risk. Itâs important to build in accountability before the contract is awarded â as a condition of the selection process.
Here are six considerations for structuring agreements that can safeguard your investment and maximize the results of your work with CROs.
Avoid T&C pushback in the master service agreement
Instead of âsavingâ your key terms for the actual contract, include them in your request for proposals (RFPs) and require the CRO to commit as part of the proposal response â not after the fact. This is a great way to weed out CROs who will not stand behind their proposal-stage promises or agree to the terms presented in the master service agreement (MSA). Worse yet, they may be unable to meet your expectations without significant budget increases.
Securing a commitment to your terms as part of the RFP puts you in a stronger position when negotiating your MSA, which can help short circuit efforts by CROs to decline your preferred terms after selection. Similarly, be mindful of MSA trigger words, such as âassumptions.â Assumptions should always be clarified to protect both the sponsor and the provider.
Document selection criteria from the beginning
When your company comes under the scrutiny of a regulatory audit, you will need to show detailed information as to how and why you selected your CRO.
Be sure to document key criteria for business and clinical operations into the RFP question and answer period with the CRO. This will allow you to show auditors the questions you posed and the answers the CRO provided, demonstrating that you performed a detailed vetting process.
Include consequences of poor KPI performance
Key performance indicators (KPIs) have little meaning without consequences for CROs failing to meet them. Your agreements should include specific KPIs you will track, how you will measure them and the consequences for failing to meet them in the form of a Service Level Agreement (SLA).
Sponsors should not be expected to pay the full price for subpar performance, just as CROs arenât expected to perform additional work for the same price. For example, if a CROâs standard operating procedure (SOP) states that monitoring visits will be performed within ten days, the sponsor can include a clause stating that failure to meet this KPI will entitle the sponsor to a refund of a portion of the monitoring visit expenses.
This raises a very important point: if a CRO will not commit to what is stated in their own SOP, run away! Donât risk aligning with a provider who cannot live up to their own standards.
Leverage milestone payments and earn backs to improve compliance
During the proposal stage, use milestone-based payments and earn-back pools as another way to hold CROs to their timeline promises. Payments should be tied to specific results, not the passage of time. For example, the sponsor can put 5-10% of the agreementâs value at risk for meeting certain milestones. As an inducement to overperform and balance any risk of poor performance, the CRO gets to keep the full contract value if they finish the study early or under budget. This way they are incentivized to use contract units they truly need and not to cover backlog by burning units.
Weâve seen many cases where a CRO will tell the sponsor that theyâre already providing a 20% discount, broken out into a 15% actual discount and 5% at risk. Be wary of this approach. Presenting that level of risk as a discount sends a message that the CRO assumes they wonât perform to expectations. The better approach is to reward for good performance and discount for bad.
Be critical of termination terms
We believe the right to terminate a CRO agreement for convenience should be exclusive to the study sponsor. Life science companies put their futures at stake when contracting with a CRO, and early termination by a CRO for convenience can jeopardize a product launch.
Termination for non-payment is a separate matter and may be requested by CROs. However, there should be some flexibility in the terms and conditions of termination. There could be many reasons why a particular payment is late, and termination upon a single occurrence should not be permitted.
Specify change order authorization
It is common practice for CROs to use change request forms or notifications during a study. The study sponsor should include in the agreement terms for transitioning these forms into official change orders within a certain period of time. No invoices should be generated from change request forms â only from official change orders approved by the sponsor.
Perhaps most importantly, there must be clear language dictating who is authorized to approve a change request form or notification. Itâs not uncommon for individuals within the sponsor company to sign off on these requests without the proper authority to commit to the expense. If the change request form is not signed by an authorized individual as specified in the contract, it should be considered invalid and the sponsor should not be obligated to pay for the work.
Designing and negotiating CRO contracts is highly specialized and nuanced. For additional insights, click here to view the replay of our webinar â Accountability in CRO Relationships.