Description of a Sample Management Services Agreement
A sample management services agreement is a contract between a pharmaceutical, biotechnology, or medical device company (referred to as the "Company") and a contract research organization or contract laboratory (collectively referred to as "CRO") and involves the services of the collection, storage, testing and/or distribution of samples, whether human, animal or other source in some manner. Sample management services agreements often refer to human-derived samples as biospecimens. Human-derived samples are often referred to as biospecimens because they are used both in their original biological form and/or after processing into components to make them easier to store, distribute and test, and because they often contain genetic material which many have argued is part of the definition of a biohazard. As used in this context, the term biospecimens include human tissue, blood and blood components, including plasma and serum. However, as outlined below, the management of animal-derived samples are frequently treated differently for regulatory purposes, although the management of all samples is often handled as though they are biospecimens, despite the actual source of sample. The provision of biospecimens to third parties for analytical or product testing is a multi-step process. Many of these steps are provided within the relationship between the Company and the CRO, but other steps may involve a variety of third parties, including IRB approval, third party laboratories, vendors to which a CRO outsources certain activities , and so forth. A particular CRO will often play the role of general contractor or middleman, which entails the management of all aspects of the sample management process. In this case, the CRO works with the Company to determine the scope of the services to be provided pursuant to the agreement and then provides for those services directly or indirectly. The ultimate goal of a sample management services agreement is to provide for the collection, storage, testing and distribution of samples. Sample management services agreements generally require a CRO to provide all personnel, facilities, equipment, materials and related services to collect, store, test and distribute samples on the Company’s behalf, and to maintain all testing records and analytical data generated through the use of these samples. In addition, sample management services agreements will usually set forth a quality control plan, which describes how the CRO will ensure that all samples meet specified standards. Sample management services agreements should also describe the recordkeeping requirements for samples, the procedures to be followed for the storage and release of samples, and require that the CRO use appropriate transportation means for the samples. While sample management services agreements in general for many CROs, or for any CRO, they are individualized to the requirements of the Company and the particular project, so a sample management services agreement can sometimes become rather lengthy, in contrast to other types of legal arrangements that might otherwise form the backbone of the relationship.
Sample Management Services Agreement Components
The key components of a sample management services agreement should include the following clauses:
Scope of Services. The scope of services clause should set out in detail the services to be provided by the service provider. Whenever possible, the service provider should use its knowledge and experience to clearly describe the specific services to be provided. To the extent that the services are to change over time, a high level summary of the description of the services should be included.
Application of Laws. The agreement should clearly state that all the parties should comply with the legal requirements of the applicable laws of both the country where the service provider is headquartered and the countries where the services are being supplied. All the legislation that governs the provision of those services should be included. The agreement should expressly exclude any application of the local laws that will hinder the implementation of services or the role of the service provider.
Directives from the Principal. The agreement should specify that the service provider will comply with the directives provided by the principal. The agreement may also include a statement that the service provider shall implement such directives in accordance with the deadlines set in material received from the principal. If the directive is not in accordance with the applicable legislation, limitation of liabilities may be set out in the contract to indemnify the service provider from damages from non-compliance.
Confidentiality. Confidentiality plays a significant role in a management services agreement. The principal will generally require the service provider to sign a separate confidentiality agreement prior to the signing of the MSA. The service provider should be required to protect the principal’s confidential information against unauthorized use or disclosure, subject to a number of exceptions. The agreement should further clarify that the service provider’s employee, agents or any third parties shall be required to maintain the confidentiality of the principal’s confidential information.
Benefits of a Sample Management Services Agreement
A well-crafted agreement offers the promise of differentiation:
• The IP protection provided by a sample management services agreement will allow you to ensure that all parties to the agreement have committed to the confidentiality of the information shared, including PII
• A sample management services agreement can help you fully describe relevant and effective implementation rules to ensure uniform implementation across the organization
• Effective contract management will help you to minimize risk of inadvertently releasing confidential information and potentially damaging your business: demotivation of sample suppliers and fraud prevention
Common Pitfalls in a Sample Management Services Agreement
A substantial number of the issues that arise in sample management agreements are relatively straightforward and avoidable. The following is a list of the most common items that create problems for sample management companies and their clients.
Intellectual Property Rights
Intellectual property rights are probably the most commonly overlooked items in a sample management agreement. Many clients mistakenly believe that sample management companies are not working with any proprietary formulae and thus do not require any intellectual property rights provisions. This is not the case. Even if the client does not provide any confidential information or intellectual property to the sample management company, the intellectual property rights for any new or modified formulae belong to the party that created them, which, in the absence of an agreement to the contrary, would be the sample management company. Numerous disputes arise due to the failure to address this issue specifically.
Exclusive vs. Non-Exclusive Samples
Some K sampling agreements used by some companies in some industries grant the company exclusive rights to all samples generated by the sample management company on the company’s behalf. Other K agreements do not. Exclusive samples belong to the company, while non-exclusive samples (unless otherwise specified) can be re-sold by the sample management company multiple times . It is critical to be specific in the K about how the company will use the samples.
K Schedules
Schedules should be specific. K schedules should not be vague such as: "samples generallly used to increase palatability". Instead the K should specify the class numbers that apply and/or the ingredients that apply. If the K is intended to cover all samples, then the K should state, "all samples", rather than, "basis brand samples".
Openness
Sample management companies should be as open as possible with their clients and must keep perfectly accurate records of everything that they do. Audits are frequently not an issue if the sample management company is completely open and honest with its clients and audits are useful to clients to understand what work was done for them. If a company does not earn its client’s trust, that company will eventually lose that client.
Designer Approvals
Approval of formulated samples should be separate from approval of the designer’s work. Designers generally provide the ideas and the parameters for their designs and ask the sample management company to produce them, wearing their designer’s hat. The designer should not be asked to sign approvals since they are not responsible and are not the client.
Sample Management Services Agreement Drafting Considerations
- Clearly Define Deliverables: The agreement should define the samples or batches that will be tested, giving precise details that include the number of samples, the types of testing to be conducted, and the parameters of the testing.
- Specify Project Schedule: To avoid disputes, set a clear timetable for sample delivery, testing, and reporting. If deadlines need to be adjusted, have a clear process for amending the schedule by written agreement.
- Address Additional Testing and Studies: The contract may require additional or follow-up studies after the initial study. In that case, both the Scope and Compensation sections should outline how these subsequent studies will be handled.
- Include Indemnification Provisions: Add an indemnification clause to protect both parties from liability due to the other party’s breach of the agreement or negligent conduct, provided that the other party has notified them of the claim in question.
- Include Intellectual Property Rights Statement: Confirm that the customer owns all tests, results, and reports generated during the course of the contract. Additionally, if the customer desires, the customer could also own work product used or created during the project but not included in the work product agreement.
- Obtain a Non-Disclosure Agreement: Confidentiality agreements may be necessary for both parties or subcontractors and employees, depending on the nature of the project. A typical agreement states that all personnel and employees will strictly protect the confidentiality of the project materials and that neither party will publicly use any project materials.
- Lay Out Payment Schedule: Clearly designate how many payments there will be, and whether the customer expects to receive reports at each stage along with the payments. For example, will the customer require that the supplier submit a progress report at the end of each stage or will a single, consolidated report be submitted at the end, entitling the supplier to full payment?
Legal Issues of a Sample Management Services Agreement
When drafting or reviewing a sample management services agreement, companies must ensure that the "sampling services" performed pursuant to the agreement comply with all FDA regulations, FDA guidance documents and industry standards that apply to an outsourced site. Companies should consider whether the use of an outsourced sample management company is appropriate under applicable federal and state regulations, guidance documents, and FDA policy documents.
There are numerous considerations that must be addressed when setting forth the terms of a sampling services agreement. For example, the agreement should clearly and specifically delineate the responsibilities of the parties without assigning responsibilities of the sample management company that are no longer subject to all applicable requirements . This will assist the two parties in ensuring compliance with all applicable requirements and avoid regulatory issues for both the company and the service provider. The agreement should also ensure the service provider obtains elements necessary to establish the qualifications of the provider’s employees performing sampling. The agreement should also address the party responsible for controls over drugs undergoing sampling such as quarantine, distribution and destruction.
An outsourcing arrangement is not the same as establishing and maintaining a "centralized repository". Centralized repositories are associated with more restrictive standards and must consider its role as not being subject to or able to extend the expiration dating of samples collected. Centralized repositories are further described in our previous blog post.