If you're a clinical research site accepting studies from industry, you've probably seen it. The dreaded cross-indemnification clause. It's an increasingly common element of standard contracts. Under cross indemnification, sites take full responsibility if anything goes wrong. That responsibility attaches to the site whether or not a mishap was its fault or the sponsor's.

Such clauses have been in use for a decade. Now roughly 90 percent of new contracts that cross the desk of Jeffrey Rosen contain such a provision, the 27-year veteran of the industry says. Rosen is medical director of Clinical Research of South Florida and one of the founders of The Alliance for Multispecialty Research, a network of 18 independent sites across the U.S.

“By indemnifying the pharmaceutical companies, you are, as a site, way past any contributory negligence you may have had [in a trial that has gone awry]; you are now at a level where you have said to them: we're responsible for the entire deal,” says Rosen. “If the sponsor was 95 percent responsible and you were five percent responsible for whatever happened, you have said to the courts: 'I'm fully responsible.'”

Legal Ugliness

The language has yet to trigger a lawsuit that brought down a site or investigator. But that's the concern in the site community. “It changes the dynamic from a lawsuit in which the sponsor or CRO [contract research organization] would be partners with the clinical site, to one where they would be adversaries,” says Jed Ervin, founder and president of the Center for Pharmaceutical Research in Kansas City, Missouri.

Adds Ervin: “If a pharmaceutical company is being sued, the jury tends to make huge awards. If I sign a contract with this clause in it, I become responsible for everything; I cover their losses, which is ludicrous. No sites have that kind of money. A site owner or investigator, in such an indemnification, would be out of the research business, and would risk his or her personal assets being targeted as well.”

How did cross-indemnification become so common? According to William Smith, president of the 25-year-old New Orleans Center for Clinical Research, it began when sponsors worked mostly with large sites connected either to a hospital or medical school.

“The attorneys were trying to broaden their risk,” explains Smith. Large medical institutions are self-insured and could take such a hit, says Smith. Commercial sites, however, would have to rely on malpractice coverage—and most malpractice carriers disallow coverage of any activity associated with a clinical trial.

Competitive Pressure

As sponsors began working with smaller, independent sites without deep pockets, cross indemnification clauses stopped making sense. But out of habit, sponsors haven't stopped pressing sites to submit. “Like most legal concepts, it has gotten distorted over time,” says Smith. About 90 percent of the time, he's able to negotiate the clauses out of the contracts.

“It's frequently an issue on trials that are competitive, where 200 sites are lining up to fill 20 slots,” Smith explains. “The sponsor will say, 'I'm sorry, but I have all these other sites that will sign this.' In that case, it's better to lose a trial than place your whole future at risk.”

Physician Beware

Even worse, sites that aren't physician-owned tend to sign cross indemnification clauses on behalf of principal investigators (PIs). But the physicians may have no idea of the level of risk. If a lawsuit is filed, it's the physician who would personally have to bear the risk and appear in court, says Ervin, adding, “Good sites will watch out for their doctors, but some sites will put their PIs out to dry.”

Principal investigators like Rosen, Ervin and Smith say that a lawsuit will eventually ruin a site. Our society is litigious; more sponsors are requiring the clause; more sites sign it. “You have so many new sites and wanna-be sites out there just dying for trials,” says Rosen. “I don't think they really know what they're signing. They get hoodwinked by the contract manager.” Adds Smith: “Lawsuits are coming. It's not a matter of if, but when.”

Better Strategies

How to avoid the mess? No trade group lobbies on behalf of principal investigators. Investigators are on their own. So Rosen advises physicians to examine every contract for the indemnification clause. The key words are “the site will indemnify [sponsor].” Ervin says sometimes sponsors will get tricky. Instead of “indemnify,” they try language such as “hold harmless.” Once you find the clause, tell the sponsor you won't agree to it and that that's non-negotiable, Rosen advises.

“I see it as a deal breaker,” he says. “I tell them, 'I can't work with you on the contract.' ”

And if a sponsor says, But you're the only one who's complaining about this, take that with a grain of salt, Rosen advises. In actuality, many sites may be complaining about it and/or refusing to sign it. But sites wouldn't know that as most are solitary and not in touch with each other.

Smith says the haggling can go on for weeks. Some sponsors ask the site to submit their own indemnification language. In general terms, that might be anything that is the fault of the sponsor (bad protocol, etc.) is the responsibility of the sponsor, but matters that go wrong at the site (say, gross negligence in adhering to the protocol) become the site's responsibility in the event of a lawsuit. Even then, caution is warranted. Some sponsor lawyers may just tweak their original language, and resubmit it to the sites. Nice, eh? It puts sponsor wooing of clinical sites in a darker, less sincere light.

Walk Away?

Rosen says he has successfully negotiated the indemnification paragraph out of all but one contract, and walked away from that one. But he's an industry veteran; he acknowledges that for newer, smaller sites, playing hard ball may not be as effective. Ervin says he's only had to walk away from two studies when the sponsor wouldn't budge on the indemnification issue.

If just saying no doesn't work, Rosen suggests getting a letter from your malpractice insurance carrier, most of whom don't allow a physician or site to indemnify anyone anyway. Or, he says, hire a lawyer who will look at any contracts that “smell fishy.” A lawyer can also write up a letter for you saying your site cannot indemnify sponsors. This may be all it takes to let a sponsor know you're serious.

And don't look to your contacts on the sponsors' clinical staff for help. They generally aren't connected to the activities of the sponsor's legal team, says Rosen. He spoke about the horrors of cross-indemnification at a conference, and afterward several representatives from sponsor companies approached him, aghast that their competitors were engaging in the practice. The irony was that their own employers were among the guilty. It's the lawyers in the contracting department that keep the cross-indemnification clause alive and well—not clinical staff.

The bottom line, says Ervin, is to stand up to sponsors and reject cross indemnification. Doing so will benefit your own site and, indirectly, other members of the research community. “No site should ever sign a contract, no matter how lucrative, that contains such an indemnification clause,” he says. “The more people who sign it, the less likely it is to go away.”

by Suz Redfearn 

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