As the intricate puzzle of drug development unravels, one component often slips under the radar yet holds the potential to either propel, disrupt or halt the entire process: The Contract(s) between sponsors and suppliers.
These documents, often meticulously detailed yet somehow frustratingly vague, play a pivotal role in shaping the trajectory of drug development projects and the relationships they govern.
Navigating drug development requires more than a steady hand and scientific acumen. It requires mastering the art of contractual agreements, a dance as complex and delicate as the science it supports. In the intricate ballet of sponsors and suppliers, contracts form the choreography that guides each step. Yet, with their dense legal language and well-defined terms, these contracts are not infallible.
People sometimes feel protected by the legal jargon, but in fact, lurking beneath the surface of these documents are pitfalls and vulnerabilities that could spell disaster for a project or damage the relationships they are meant to protect.
There is a huge area that is often overlooked when entering into contract negotiations – the spirit of the contract. Let’s dive in and look at how we can bring this to the forefront of the negotiation process and use this to overcome some of the weaknesses found within Sponsor/Supplier contracts.
The Crux of the Issue
Contracts in drug development are complex creatures, weaving together countless threads of technical, legal, and operational considerations. These documents are expected to serve as a roadmap, guiding sponsors and suppliers through the wilderness of development projects and the services they are meant to deliver. Yet, the terrain they traverse is often far from straightforward.
Misaligned expectations, ambiguities, and ineffective communication can transform these contracts into minefields, primed to disrupt the delicate balance of relationships in drug development.
The nature of contracts and agreements are, in essence, extremely basic. They define parties, accountability, liability, scope, and other straightforward clauses. At the start of a relationship, they are meticulously reviewed and often only pulled out of the drawer when “divorce” is being considered.
Therefore, contract negotiations between Sponsors and Suppliers are stripped of emotion, and when exercised – the letter of the contract is more important than the spirit of the relationship. However, if we shift our thinking from a “divorce-ready document” to a “collaboration roadmap”, we have much more chance of executing a marriage that is successful and mutually rewarding.
Another issue we often create is only having the “lawyers” involved in the creation of the collaboration roadmap. Of course, the contract must work from a legal perspective, but it must also protect and support the underlying spirit of the collaboration between the sponsor and supplier. Ensuring that those team members who will be overseeing the work are included in these discussions, or at a minimum, that they understand the underlying spirit, will lead to behavior that aligns with the agreement. This involvement also assists the legal drafting to reflect the practicalities of what really is important to the relationship. Failing to establish such a common understanding puts the already complex task of conducting clinical trials at greater risk.
Dissecting the Fine Print
To truly understand the weaknesses in these contracts, we must first unravel their complexities. Common contractual pitfalls in drug development services and products include:
- Unspecified or poorly defined deliverables – Often, contracts fall short in detailing the “what” of a project, leading to confusion and misaligned expectations.
- Vague or misaligned timelines and milestones – Projects can quickly become rudderless, drifting off course and timeline.
- Intellectual property rights and confidentiality clauses – This can be a thorny issue if not clearly addressed in contracts, potentially leading to disputes and contention.
- Risk-sharing mechanisms – Often, these contracts fail to adequately define how risks will be shared between parties, which can lead to conflict when things go awry.
- Lack of process definition – For example, non-conforming services or disputed invoices, or late payments, have consequences for either party. But how is that process meant to be handled, communicated, and escalated?
The Impact of Weak Contracts
Weak contracts do not necessarily guarantee a disaster UNLESS there is a strain on the relationship and either contracted party is not happy. Then, get ready for an uncomfortable and expensive battle once the contract is brought out into the light.
At Seuss+, we often say that the supplier-sponsor contract is often treated as a pre-nuptial agreement, but I think that seeing it that way is a missed opportunity. We could actually use the negotiation and the resulting contract for two reasons. Weak contracts, namely, have two pitfalls, they do not help set up a relationship to succeed, and they also do not create a happy divorce if so required. We believe that there is a way to utilize contract negotiation to avoid the pitfalls AND set up a relationship to be more successful in the first place. If, for whatever reason, the contract must terminate, both parties can walk away with their heads held high, following the pre-agreed process that was created for that exact purpose. -.
Weakly negotiated contracts are not an isolated incident but a systemic issue. In addition, the process of negotiation is often used in an isolated manner, ensuring that its weaknesses stay intact and the opportunity for team alignment is unrealized. This, in turn, causes delays when scope changes or change orders are requested, inflated costs due to insufficiently defined timelines, and strained relationships, which puts additional pressure on an already volatile team turnover.
These impacts reverberate beyond the immediate project, affecting the broader mission of delivering life-saving solutions to those in need.
The Need for Change
We must challenge the status quo and rethink how we approach contracts in drug development. Specifically, between sponsors and their suppliers, there are elements of the contract that MUST be well negotiated to ensure balance. Secondly, the negotiation process should be managed to ensure alignment between both companies, ensuring a foundation of collaboration for the road ahead. This is not a call for more bureaucracy or red tape but rather a plea for strategic, thoughtful contract development that is attuned to the realities and complexities of drug development.
To address these weaknesses, consider the following strategies:
- Define deliverables and Scope of Work (SoW) precisely: This is the piece of contract negotiation that will take the most time, but if you can deliver the strongest budget, you will limit misalignment, which impacts relationships. Clarity here can prevent a lot of misunderstandings down the line.
- Set clear timelines and milestones: Having a roadmap keeps everyone on track and aligned. Ensuring that both parties in detail understand and agree on what exactly is a successfully completed milestone, what is out of the span of control, and who is accountable for any delays. Ensure that the consequences are also clearly stated.
- Agree on intellectual property rights and consequence of a breach of confidentiality: Generally, this is an article that is not time-consuming to negotiate, but it is simultaneously both of crucial value to the sponsor and also an area where human error may cause this issue. Aligning these topics and the related damages prevents disputes and ensures a smoother collaboration if major issues in either area arise.
- Establish balanced risk-sharing mechanisms: When risks are shared fairly, both parties are more invested in the project’s success. The balance of risk correlates to the balance of power in an agreement. You will know when you have reached a balance as both parties will feel slightly uncomfortable with elements of the contract, but this often leads to a more positive outcome.
Sponsor and supplier contracts: Conclusion
In the intricate dance of drug development, contracts between sponsors, and their suppliers in clinical research, manufacturing, systems, and more, set the rhythm. By addressing the weaknesses in these documents and the process which we go through to execute them, we can create a more harmonious, effective choreography for drug development. It’s time we looked beyond the fine print and created contracts that truly support the life-saving mission of drug development.
Need help with your contract negotiations? Why not get in touch, and schedule a call
CEO and Co-Founder
Kieran brings more than 18 years of industry experience to the table. With Seuss+, she built an organization that leads by example, bringing together regulatory, growth, clinical and subject matter experts at the forefront of their life science specialties to energetically support their clients in overcoming challenges and find new strategies for success. Her passion for diversity and empathy in business brings new approaches to traditional life science consulting and organizational development.
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