INDEMNIFICATION AND SUBJECT INJURY IN CLINICAL TRIAL AGREEMENTS What is Reasonable SRA International Annual Meeting T6

1. INDEMNIFICATION AND SUBJECT INJURYIN CLINICAL TRIAL AGREEMENTSWhat is Reasonable?SRA International Annual MeetingT65October 18, 2005 Aylin A. Regulski J.D., M.S. Office of Clinical Trials The University of North Carolina at Chapel Hill aylin@unc.edu

2. 2 Those �Magic� Words:Indemnify, Hold Harmless and Defend Indemnify Contractual way of providing for the payment of attorney�s fees and other losses and expenses arising from a legal action Pays for the liability/judgment plus attorney�s fees and other costs of defense Hold Harmless Agreement not to sue another party if a given event occurs Defend One party agrees to defend the other party by retaining counsel and paying for the other costs of the defense (e.g. expert witnesses, court costs)

3. 3 Indemnification Sponsor developed the drug or device. Sponsor wrote the Protocol. CTA requires that Institution/PI follow the Protocol and Sponsor�s written instructions�� Sponsor should indemnify for any injuries, illness or damages arising from trial activities.

4. 4 If a CRO is Involved: Typically when a CRO is involved, the CRO does not provide indemnification (or subject injury), it is provided by the Sponsor Separate Letter of Indemnification (�LOI�) signed by Sponsor Provisions incorporated in the agreement with CRO Caveat: What authority does the CRO have to bind or commit the sponsor to the indemnification?

5. 5 Assumption of trial risk is part of the cost of business. If indemnification is not provided, academic Institution is shouldering the risk of running Sponsor�s trial, without the potential financial benefits that offset such expenses.

6. 6 Elements of Indemnification Indemnify, defend and hold harmless Identify the proper parties/entities to be indemnified (e.g. Regents/Trustees/ Directors, officers, employees, agents, affiliates, students) Cover broadest liability losses (e.g. claims, demands, costs, liabilities, judgments) Cover broadest potential damages (e.g. any injury, death, illness, property damage) Cover all activities that may lead to claim (e.g. administration of study drug or comparator, implantation/use of device and accessories, procedures required by the protocol, following written instructions from Sponsor/agent) Cover Sponsor�s use of the Study results Watch for the carve-outs Address control of defense and settlements

7. 7 Indemnity Elements at Issue: Examples Sponsor will indemnify� Institution and any agents, employees, (etc.) under the supervision of investigator Sponsor will indemnify� for any judgment due/ damages awarded Sponsor will indemnify� for any bodily injury Sponsor will indemnify� for any injury not related to a claim of indemnitee�s negligence Sponsor will indemnify� for any claim�directly caused by administration of the drug. [What�s missing?] Sponsor will indemnify� for any injury�directly caused by defect/malfunction of the device

8. 8 Exceptions to Indemnification Any claim demand, cause of action, expense, loss to the extent caused by Indemnitee�s negligence, willful malfeasance, or failure to follow the Protocol or written instructions, unless deviation to protect safety of subject. Any claim, etc. to the extent caused by Institution�s failure to obtain proper informed consent.

9. 9 Conditions of Indemnification Provide Sponsor with notice of claim within reasonable time after Institution receives such notice. Allow Sponsor to conduct defense unless request to do own defense at own expense. Assist Sponsor in providing defense, at Sponsor�s expense.

10. 10 Indemnity Conditions/Exceptions at Issue: Examples Sponsor will indemnify�provided that: Study conducted in accordance with the Protocol, all written instructions delivered by Sponsor, all laws and regulations, accepted standards of medical and clinical practice and GCP Guidelines� Sponsor shall have the sole right to select defense counsel, direct the defense, settlement, or other disposition of any Claims, and indemnitees shall cooperate in the defense of any Claim, including but not limited to providing documents and witnesses for purposes of pre-trial preparation, discovery, and/or trial. [What�s missing?]

11. 11 Indemnity Conditions/Exceptions at Issue: Examples cont. In consideration for submission to Sponsor of a complete report of the results of the Study, Sponsor will indemnify� Sponsor will indemnify� provided that Sponsor is notified within 5 days after the claim is made... Sponsor will indemnify provided that Institution immediately provides Sponsor with complete written documentation of all the facts and details related to the claim Sponsor will indemnify provided that Institution strictly follows the Protocol

12. 12 Indemnification Complication: Multiple parties involved with the research at your site What if your site uses a facility that is a separate legal entity? Facility wants indemnification satisfactory to them Facility may not want its indemnification dependent upon your site�s actions/inactions What if your investigator is the physician and he/she practices medicine as a part of a private practice plan that is a separate legal entity? Medical risk and professional liability insurance for �medical� malpractice may be responsibilities of the private practice group � not your site May require a subcontract to perform services What�s their status vis a via the list of �indemnitees�?

13. 13 IndemnificationMAGI Version 1.02 Provisions from any and all third-party liabilities, including reasonable attorneys� and experts� fees and costs, arising from claims, actions and lawsuits for property damage, personal injury, or death resulting in whole or in part from . . . participation in the Study, {due to/including} administration or use of any Study {Drug Materials/Devices}, performance of any Study test or procedure, use of any equipment or supplies {provided by Sponsor/manufactured by Sponsor {or customized for Sponsor}}, or complying with the Protocol or any non-conflicting written instructions provided by Sponsor

14. 14 Do Indemnification Provisions Really Work? The �first line� of defense May determine who covers the initial costs until party or parties �responsible for the claim� is determined from the facts Helps define role of sponsor�s insurance provider Handling conflict of interest issues from joint representation Contractual relationships with outside counsel Settlement leverage

15. 15 Cross Indemnification For Institution�s negligence or willful malfeasance For claim caused by failure to follow the Protocol/ breach of this Agreement Can/should Institution provide this?

16. 16 Cross Indemnification Public institutions often cannot cross indemnify State constitution or statutes prohibit or provide limited liability �Sovereign� determines how and where it can be sued Statutes may provide for mechanism for filing negligence claims but this may not cover legal or defense costs Contract claims/breaches frequently addressed differently than tort claims

17. 17 Subject Injury

18. 18 Elements of Subject Injury Cover broad potential injuries to subject (injury, illness) Cover broad potential expenses of subject (diagnosis, medical care, hospitalization) Cover all research components of the study (i.e. administration of drug or comparator, implantation/ use of device, explanation of device, procedures required by the protocol Be careful about language specifying who determines causation Exceptions: no payment to extent injury caused by Institution�s negligence, willful malfeasance, failure to follow Protocol

19. 19 Subject Injury at Issue: Examples Sponsor will pay subject for the costs�. Sponsor will reimburse Institution for Institution�s reasonable expenses for treating subject� Sponsor will pay for unexpected and unforseeable injuries caused by the Study Sponsor will pay for costs of emergency medical treatment necessary to stabilize subject� In the event that a patient in the Study suffers an illness or injury that Institution and Sponsor determines is caused by Study Drug�

20. 20 Subject Injury at Issue: Examples cont. Sponsor will pay for the costs of such injury or illness if claims for such costs are denied by the patient�s medical or hospital insurance coverage Sponsor will pay provided such expenses are not covered by the Study subject's medical or hospital insurance coverage or other third party payer Sponsor will pay up to the aggregate amount of Five Thousand Dollars ($5,000) per subject, provided the illness or injury was caused by unanticipated serious problems associated with the Device

21. 21 Subject InjuryMAGI Version 1.02 Provisions will pay Site and Investigator all reasonable and customary fees for diagnosis and standard-of-care treatment of the injury or illness provided, however, that: The injury or illness was not caused by Site�s deviation from the Protocol, other current written instructions provided by Sponsor to Site, applicable laws and regulations, or this Agreement, except to protect the safety and welfare of the Subject the injury or illness was not caused by the negligence or misconduct of Site or Investigator the injury or illness is not attributable to any underlying illness, unless such injury or illness was exacerbated by the Study the apparently-causative Study {Drug/Device/Biologic} was {administered/used} or Study procedure performed in accordance with the Protocol; and such costs are not covered by the Subject�s private insurer, government payor, or other responsible third-party.

22. 22 Subject Injury and Medicare/Insurance Is it ever appropriate to bill subjects insurance for a clinical trial injury?

23. 23 Medicare Secondary Payer Rules DHHS Centers for Medicare & Medicaid Services issued an April 13, 2004 letter which restricts the ability of sponsors to agree to operate as a payer of last resort Medicare Benefit Policy Manual, Chapter 15 section 40.2 � providers may bill Medicare for clinical trial costs even though a research foundation may cover the same costs for the uninsured Title 42 section 405.207 � Medicare payment may cover conditions/complications from the use of a noncovered device or services

24. 24 Insurance Contract where one party will indemnify another or agree to pay a specified amount upon determinable contingencies First party - the insurer Second party � the insured The contract � the insurance policy The consideration � the premium The contingency � the hazard or peril The exclusions � no coverage for specific actions or occurrences

25. 25 Insurance Sponsor shall maintain insurance sufficient to provide coverage for its obligations under this indemnification and subject injury, subject to a minimum of ____ million dollars per occurrence combined single limit and ___ million dollars aggregate, and shall provide Institution with a copy of its insurance certificate upon request Should Institution be added as additional insured? Should Sponsor be added as additional insured on Institution policy?

26. 26 Certificates of Insurance Why obtain certificate of insurance? Verify coverage is what required in agreement Typical malpractice policies do not provide coverage for clinical research Use in case sponsor goes out of business so you can file claim against insurance carrier

27. 27 Disagreements Over Indemnity and Subject Injury Language Can Cause Prolonged Negotiations Evaluate the risk being addressed by the language relative to the specifics of the particular study There are occasions when the parties are unable to reach resolution after great expenditures of time Both industry and academia suffer the consequences of contentious negotiations: Expenditures of time Expenditures of resources Trial delays, patient recruitment delays Other sites enroll and recruitment closes before your site has reached agreement Frustration of all involved

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