September 30, 2008

1. September 30, 2008 Sponsor-CRO Relationships: Managing Risk Bradley Merrill Thompson

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

3. 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

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

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

6. 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

7. Delegation of Authority to CRO • Sponsors may delegate responsibility for regulatory obligations to a CRO • However, device sponsor remains liable • This is different from the drug world, where the drug regulations contemplate that sponsors may transfer regulatory obligations to CROs such that they assume regulatory liability • FDA may be coming out with guidance in this area

8. Delegation of Authority to CRO • CRO may have important role in meeting regulatory responsibilities, even though obligation is not “transferred” to CRO • Example: Adverse Event Reporting • Sponsor retains responsibility to report to investigators and FDA, and the regulatory liability for failure to do so • 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

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

10. Checks and Balances

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

12. 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?

13. 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

14. 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

15. Topics • ABC 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

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

17. 60% 52% 50% 45% 37% 40% 35% 28% 30% 20% 10% 0% Contract and Patient Protocol IRB review & Review budget recruitment & amendment approval &approval of negotiation & enrollment and refinement consent forms approval Factor Most Often Causing Study Delays United States Source: Thomson CenterWatch 2005 Survey of 612 Investigative Sites in the U.S.

18. Topics • ABC 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

19. 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

20. 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

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

22. 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

23. Example Metric Definition Table Cuddigan & King *All days specified are elapsed time

24. Example Metric Definition Table, contd. *All days specified are elapsed time Cuddigan & King

25. Example Metric Definition Table, contd. Cuddigan & King

26. Example Metric Definition Table, contd. Cuddigan & King

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

28. 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

29. 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)

30. 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

31. DSMB, MRC, etc SPONSOR Services Agreements CTA CTA CTAs CRO* INSTITUTION/ CLINICAL SITE *Contracts on behalf of sponsor (donated by dotted line) INVESTIGATOR Blue = CTA Orange = Service Agreement Green = Regulatory “agreement” Informed Consent 1572 **May or may not be a written agreement - depends on whether IRB is commercial, local, centralized, etc FDA SUBJECT IRB** Third party vendors (e.g., labs)

32. 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

33. 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

34. 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

35. 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

36. 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

37. 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

38. 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 may generally be allocated to the CRO • Institutionalize communication and systems to reduce dependence on merely outstanding people

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

40. 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

41. 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

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

43. 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)

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

45. 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

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

47. Proactively Avoiding Disputes • Obviously write a clear contract, statement of work, budget, payment schedule, etc • 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

48. 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.

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

50. 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