Legal Aspects of Outsourcing in the Pharmaceutical Industry

Summary

This report will provide a guide to creating contracts for outsourcing in the pharmaceutical industry:
Understand the term 'outsourcing'
Be aware of the key legal issues
Know what contracts should contain, both generally and in specific circumstances

Scope of report:
The scope of outsourcing
The key issues
Preparing the preliminary documentation
Drafting the contract
Service level terms and documents
Contract negotiation and managing disputes
Specific considerations in different types of agreements
Six agreement examples

The report includes an extensive selection of examples of the various types of outsourcing agreements. In addition there is a glossary of legal terms to assist the non-lawyer and information and specific considerations in different types of outsourcing to support contract development.

This report is targeted at individuals responsible for and interested in:
Board and executive management
Marketing
Business development
Licensing/partnering
Deal making
Business strategy
Marketing and promotion
Distribution and manufacturing (including contract services)
Legal professionals new to pharmaceutical licensing and partnering

View a sample in PDF format

Contents

1. Introduction: The extent and nature of outsourcing and the procurement of services

1.1. Screening
1.1.1. Identifying targets and leads
1.1.2. Lead prioritization
1.1.3. Lead identification
1.2. Preclinical development
1.2.1. In vitro/in vivo studies
1.2.2. Chemical manufacturing controls (CMC)/pharmaceutics
1.2.3. Pharmacology/toxicology
1.3. Clinical research
1.3.1. Preparing for clinical studies
1.3.2. Phase I clinical studies
1.3.3. Phase II clinical studies
1.3.4. Phase III clinical studies
1.3.5. Post-marketing trials
1.3.6. Central laboratories
1.3.7. Enrolment
1.3.8. IVRS
1.4. Manufacturing
1.5. Logistics
1.5.1. Finished product inventory
1.5.2. Order processing, allotment and inventory management
1.5.3. Transportation
1.5.4. Import/export
1.6. Sales and marketing
1.7. Information technology, other aspects of facilities management and outsourced services
1.7.1. Information technology
1.7.2. Other outsourced facilities and services

2. Some key legal issues in outsourcing agreements

2.1. Contract law
2.1.1. Origins of contract law
2.1.2. Common and civil law
2.1.2.1. Consideration
2.1.2.2. Privity of contract
2.1.2.3. Good faith
2.1.2.4. Interpreting a contract
2.1.3. EU harmonized contract law
2.1.4. Making the contract
2.1.4.1. Offer and acceptance
2.1.4.2. Completeness and certainty
2.1.4.3. Consideration
2.1.4.4. Intention to create legal relations
2.1.5. Substance of the contract
2.1.5.1. Negotiation statements
2.1.5.2. Promises
2.1.5.3. Implied terms
2.1.5.4. Exclusion clauses
2.1.6. Ending the contract
2.1.6.1. Breach
2.1.6.2. Damages
2.2. Intellectual property
2.2.1. Introduction
2.2.2. Patents
2.2.3. Confidential information
2.2.4. Trade marks
2.2.5. Copyright
2.2.6. Designs
2.3. Employment issues
2.3.1. Introduction
2.3.2. Ambit of the ARD
2.3.3. Effect of the ARD
2.4. Product liability
2.4.1. Introduction
2.4.2. The Directive and negligence
2.4.3. Product
2.4.4. Producer
2.4.5. Defect
2.4.6. Damages
2.4.7. Defenses under the Act

3. Selection and due diligence

3.1. Introduction
3.2. The request for proposals
3.2.1. Introduction
3.2.2. The structure of the RFP
3.2.3. Setting the terms of the RFP
3.2.4. Due diligence
3.2.4.1. Capacity and flexibility
3.2.4.2. Capability
3.2.4.3. Experience
3.2.4.4. Financial stability
3.2.4.5. Quality Control and Assurance Procedures
3.2.4.6. Location
3.2.4.7. Cultural fit
3.2.4.8. Compliance
3.2.4.9. Staff training
3.2.4.10. Existing client loyalty

4. Preliminary documentation

4.1. Confidentiality agreements
4.1.1. The parties
4.1.2. Definitions
4.1.3. Obligations of the recipient
4.1.4. Further rights
4.1.5. Duration
4.1.6. Exclusions
4.1.7. Choice of law
4.2. Letters of intent/recording understandings
4.2.1. Purpose
4.2.2. Drafting issues
4.2.3. The duty to negotiate in good faith
4.3. Term sheets and heads of terms
4.4. Preferred provider agreements

5. The outsourcing agreement: General drafting issues

5.1. The role and structure of the contract
5.1.1. Introduction
5.1.2. Master agreements
5.1.3. Service level agreements
5.2. Common terms in outsourcing agreements
5.2.1. The parties
5.2.2. Recitals
5.2.3. Definitions
5.2.3.1. Affiliates
5.2.3.2. Applicable legislation
5.2.3.3. Authorities/regulatory authorities
5.2.3.4. Confidential information
5.2.3.5. Effective date
5.2.3.6. Improvements/inventions
5.2.3.7. Intellectual property rights (IPRs)
5.2.3.8. Know-how
5.2.3.9. Patents
5.2.3.10. Territory
5.2.3.11. Trade marks
5.2.4. Interpretation
5.2.5. Appointment
5.2.6. Performance terms
5.2.7. Confidentiality
5.2.8. Ownership of data, inventions and rights
5.2.9. Publication
5.2.10. Financial or commercial terms
5.2.11. Relationship of the parties
5.2.12. Warranties, indemnities and insurance
5.2.13. Duration and termination
5.2.14. Consequences of termination
5.2.15. Force majeure
5.2.16. Assignment and sub-contracting
5.2.17. Entire agreement modification and waiver
5.2.18. Notices
5.2.19. Data protection
5.2.20. Governing law, dispute resolution and jurisdiction
5.2.21. Third party rights
5.2.22. Severance of illegal terms
5.2.23. Schedules

6. Service level terms and documents

6.1. Introduction
6.2. Service level content and language
6.3. Specifying formulae and metrics
6.4. Measuring service levels
6.4.1. Which service levels should be measured?
6.4.2. What process should be used to measure achieved performance?
6.4.3. The measurement period
6.4.4. Reports
6.4.5. Performance commitments
6.4.6. Improving service levels
6.4.6.1. Continuing improvement
6.4.6.2. External metrics
6.4.7. Use of service level credits
6.4.8. Service level bonuses
6.4.9. Service levels and termination

7. Successful contract drafting and negotiation

7.1. Introduction
7.2. Building in partnership
7.3. Using lawyers in negotiation and developing the agreement structure
7.4. Openness
7.5. Fairness
7.6. Building in flexibility
7.7 Providing for continuous support
7.8. Establishing disciplines
7.9. Negotiating international outsourcing agreements
7.10. Common negotiating mistakes
7.10.1. Conflict model
7.10.2. Misplaced trust
7.10.3. Fixed positions
7.10.4. Over-commitment
7.10.5. Overconfidence
7.10.6. Ignoring bargaining power

8. Specific considerations in contract manufacture

8.1. Introduction
8.2. Selection and due diligence
8.3. Creating a contract
8.4. Technical transfer
8.5. Manufacturing methods and supply
8.6. Orders and forecasts
8.7. Price and terms of sale
8.8. Acceptance/rejection of compound/product and failure to supply
8.9. Obligations of the client
8.10. Obligations of the service provider
8.11. Licenses and IP
8.12. Warranties and Indemnification
8.13. Term and termination
8.14. Miscellaneous
8.15. Technical (or quality) agreement
8.15.1. Introduction
8.15.2. Communication
8.15.3. Quality investigations
8.15.4. Production documentation
8.15.5. Batch numbering and tracking
8.15.6. Deviations
8.15.7. Visits, audits and inspections
8.15.8. Sampling and testing
8.15.9. Subcontracting
8.15.10. Complaints and recall
8.15.11. Annual product review
8.15.12. Change control
8.15.13. Final approval

9. Specific considerations in logistics

9.1. Specific contract considerations
9.1.1. Services
9.1.2. Service provider's obligations
9.1.3. Management of staff
9.1.4. Premises
9.1.5. Proprietary rights
9.1.6. Liability
9.2. Miscellaneous

10. Clinical research

10.1. Introduction
10.2. Specific contract considerations
10.2.1. Appointment
10.2.2. Service provider's obligations generally
10.2.3. Key individuals
10.2.4. Patient numbers
10.2.5. Study drug
10.2.6. Reports and reporting
10.2.7. Adverse event reporting
10.2.8. Site inspection
10.2.9. Contractors
10.2.10. End of study obligations
10.2.11. Debarred persons
10.2.12. The principal investigator
10.2.13. Client's obligations
10.2.14. Fees and payment
10.2.14.1. Fixed price and fixed adjustable price contracts
10.2.14.2. Unit price agreements
10.2.14.3. Fee for services
10.2.14.4. Outcomes-based
10.2.14.5. Risk-share agreements
10.2.15. Variations
10.2.16. Termination and effects of termination
10.3. Miscellaneous

11. Contract Sales

11.1. Introduction
11.2. Specific contract considerations
11.2.1. Services
11.2.2. Obligations of the contract sales organization
11.2.3. Obligations of the client
11.2.4. Property
11.2.5. Liability and indemnity
11.2.6. Adverse reactions
11.2.7. Termination and consequences of termination
11.2.8. Schedules

12. Facilities Management

12.1. Introduction
12.2. Specific contract considerations
12.2.1. Services
12.2.2. Contractor's obligations
12.2.3. Management staff
12.2.4. Change order
12.2.5. Review of services
12.2.6. Premises
12.2.7. Health and safety, training and employees
12.2.8. Third party contracts
12.2.9. Records and inspection

13. Managing disputes and exit routes

13.1. Introduction
13.2. Avoiding and managing disputes
13.2.1. Flexibility
13.2.2. Documenting decisions
13.2.3. Separating issues
13.2.4. Good faith
13.3. Exit routes
13.3.1. Introduction
13.3.2. Grounds for termination
13.3.3. Action on termination
13.3.4. Service provider cooperation on termination
13.3.5. Giving an incentive for the service provider to provide termination assistance
13.3.6. Building in measures to deal with service provider crisis

14. Appendices

14.1. Master contract manufacture agreement example
14.2. Master contract clinical research agreement example
14.3. Contract sales agreement example
14.4. Multi-purpose services master agreement example
14.5 Contract logistics agreement example
14.6. Facilities management agreement example
14.7. Glossary, abbreviations and resources
14.8. Biography: Paul Ranson
14.9. Acknowledgements