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cally authorizes the CRO to conduct a specific portion of the planned project over a defined period of time for an agreed cost. The sponsor and CRO should make every effort to reach a contract during the period covered by the letter of intent to avoid further delays and assure that neither party is inappropriately exposed to business risks and liabilities. The entire process of CRO selection and contract negotiation can be streamlined greatly through preferred provider or master service agreements (see below). |
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Although agreement on the scope of work, the associated timelines, and the budget is usually straightforward, arriving at an appropriate payment schedule may be more difficult. The costs commonly defined as indirect or pass-through, such as investigator and laboratory payments and travel and lodging costs for CRO monitoring personnel, are often treated separately from direct or CRO personnel costs. The indirect costs are often paid by the sponsor through an initial installment to cover start-up expenses followed by periodic payments for invoices submitted by the CRO. Although sponsors also commonly agree to make an up-front payment for start-up activities of the CRO's project team, agreement on a payment schedule thereafter can be much more challenging. |
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Sponsors recognize that CROs and investigators alike cannot be expected to fund the pharmaceutical company's research and, therefore, are aware that these service providers must be paid appropriately. At the same time, sponsors wish to hold CROs and investigators accountable and, accordingly, would like to pay for performance. Overall, this is a fully acceptable approach, assuming that the performance milestones on which the sponsor wishes to make payments are controlled by the service provider. Payment schedules, which are primarily based on the number of patients enrolled in a difficult clinical trial, may be considered unreasonable or even punitive by a CRO, if, for example, |
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the CRO is not responsible for selecting the clinical investigators, |
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the patient selection criteria in the sponsor's study protocol are too limiting to allow timely patient recruitment, or |
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the timeline for patient enrollment is unrealistically short. |
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On the other hand, payment schedules based solely on fixed dates may be considered unacceptable to sponsors unless the contract incorporates other performance measures to assure that the CRO is using best efforts to accomplish the task. Alternatively, payment schedules that require some type of risk sharing between the sponsor and CRO may be appropriate. This approach might require that the sponsor pays the CRO on a fixed-date-certain basis, but the CRO has to forfeit profit if work performance is |
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