Legal Activities and Issues
Life and law must be kept closely in touch, as you can’t adjust life to law, you must adjust law to life. The only point in having law is to make life work. Otherwise there will be explosions.
–Arnold Toynbee
This chapter discusses some of the activities performed by legal departments as well as some of the ways in which company staff interact with company attorneys. Attorneys usually advise on directions that a company or its employees may (or should) take, but attorneys rarely make the actual business decisions as to the specific actions to follow. Nonetheless, because of the high costs and often severe penalties of litigation and regulatory violations, legal advice and recommendations usually carry great weight within all pharmaceutical companies.
This chapter is written for nonattorneys, using the plain style of language found elsewhere in this book; it does not attempt to provide legal advice or thorough discussions of any legal issues. Readers interested in legal opinions should seek the advice of a qualified and experienced attorney.
TYPES OF ACTIVITIES CONDUCTED IN A LEGAL DEPARTMENT
The major types of legal activities conducted within a pharmaceutical company are described under a number of arbitrarily chosen headings: Corporate Activities, Employee Activities, Regulatory Activities, Product Liability Activities, and Medical Activities. An alternative classification could be based on the groups within the company and external to the legal department that it interacts with (e.g., finance, marketing, clinical). Other classifications are also possible, reflecting the proactive or reactive nature of a problem.
Whereas most clients approach attorneys in private practice in reaction to a problem, many company attorneys concentrate on preventing problems from arising. Their goal is to avoid problems by having early input to business decisions. In addition to prevention-focused activities, some company attorneys react to problems (e.g., lawsuits, regulatory letters) that arise.
Corporate Activities that Require Legal Input or Review
Contracts
Negotiations of contracts and their subsequent implementation are common activities conducted by groups throughout the company. Implementation of contracts involves monitoring the actions of the company and the other party to ensure that terms are being met on time and that there are no breaches of the contract. Almost every area of a company is at some time involved with many types of contracts that require legal input (Table 110.1). A few examples include the following:
Licensing contracts to license a product from, or to, another company. Highly complex contracts are commonly encountered in this area, in part because a period of several or many years is typically covered and many contingencies and terms (e.g., royalties, patent expiration) must be identified and discussed in detail. In addition, some terms and conditions of the license agreement may be extremely complex.
Contracts with academic institutions prior to initiating a clinical trial. These contracts vary markedly in complexity and may involve indemnification agreements that will apply if certain unexpected problems arise (e.g., a patient sues the hospital about his participation in a clinical trial).
Production contracts or supply agreements are required before a company is willing to produce a product or bulk chemical for another company or to have another company prepare a chemical or product.
Contracts between pharmaceutical companies and contract research organizations (CROs). Yingling (1992) discusses contract negotiations between pharmaceutical companies and CROs, focusing on the US experience. The article discusses relevant Food and Drug Administration (FDA) regulations and includes a sample contract as well as a list of subjects that should be considered in negotiations.
Consulting agreements between individuals, groups, or companies. These describe terms agreed to by both parties and generally include what may have been previously agreed on in a confidentiality disclosure agreement.
Service agreements with vendors to produce a book or videotape, organize a symposium, or provide other services.
Table 110.1 Types of contracts and legal agreements | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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While the other group may have a standard form contract, every contract is a negotiated agreement between two or more parties, and no company should assume that it cannot negotiate every important point. Originals of all contracts should be stored in the same place. Ideally, the company should appoint someone with the responsibility of ensuring that the company fulfills its duties under the contract. This person is usually outside of the legal department.
The legal review of any document is partly intended to ensure that what is written has a single clear meaning that reflects the intent and desires of the client (e.g., a company). The goal is to minimize the opportunities for opposing attorneys, in any future lawsuit, to present a different meaning in court than what
the company intended. Previous correspondence, memos, e-mails, etc., between the parties are often preserved as a means of determining the parties’ intent in the event conflicting interpretations of contractual provisions arise between the parties. Attorneys also consider the public relations and corporate politics of material they review as well as laws and regulatory policies of the country, grammar in the contract, and possible issues that may lead to litigation.
the company intended. Previous correspondence, memos, e-mails, etc., between the parties are often preserved as a means of determining the parties’ intent in the event conflicting interpretations of contractual provisions arise between the parties. Attorneys also consider the public relations and corporate politics of material they review as well as laws and regulatory policies of the country, grammar in the contract, and possible issues that may lead to litigation.
Other Corporate Activities
Some of the other corporate issues that are handled by a company’s attorneys include the following:
Securities and exchange (e.g., stock) issues
Antitrust laws
Copyrights and trademarks
Corporate by-laws
Company resolutions
Charters of various organizations formed by a company or in which the company participates
Personnel issues
The most important and routinely encountered issues that the legal department is concerned with involve food and drug law. That topic is discussed further in other sections of this chapter.
Employee Activities that Require Legal Input or Review
Many employee activities require legal help, review, or input. Attorneys have to deal with many questions about company policies and treatment of employees. These include the need for the company, through its legal staff, to do the following:
Adhere to all national, state, and local laws (e.g., antitrust laws, Equal Employment Opportunity laws in the United States, patient privacy laws). Attorneys may help develop company policies and practices to ensure that the company meets all applicable laws. The attorneys review these policies and may also monitor relevant company practices to ensure that the company is fulfilling its legal responsibilities and is compliant with applicable laws.
Adhere to fair practices within the company to prevent discrimination based on gender, race, religion, handicap, age, or other factors. The basis of this adherence may be law, company guidelines, or commonly accepted ethical standards. Fair balance must be involved in applying such discrimination guidelines because the nature of an employee’s position may require him or her to have particular attributes (e.g., agility) or follow particular practices (e.g., the wearing of hair nets) that some people may not possess or may not be willing to accept.
Provide employees with programs to help individuals with drug abuse, alcohol abuse, or other related problems find means to avoid these practices. Other employee benefits may also require legal input (e.g., disability leave, child care, healthcare, pensions).
Ensure that dismissed employees are treated fairly and that their rights are upheld during termination procedures. In this situation, the attorney primarily represents the company’s interest.
Be informed of the company’s legal obligations regarding potentially hazardous materials that employees are exposed to. There are right-to-know laws in many countries, so employees may learn about the chemicals they work with or are exposed to. Safety in the workplace (e.g., safety glasses, lighting restrictions) is a broader aspect of this issue.
Understand immigration law. This need arises when a company desires to employ people from another country. The new employees may or may not already work for the same company in another country.
Attorneys are often involved in what appears to be a difficult position: protecting the rights of both the employees and the company. What is in the interests of one may not be in the interests of the other. For example, if protecting the rights of one or more employees will cost the company a large amount of money, then the interests of the two groups can be viewed as divergent. But if regulatory or other government groups would exact enormous penalties if something was not done for the employee(s), then the interests of the two groups will be more or less consonant. Nonetheless, the company lawyer does not directly represent the interests of employees because the attorney’s client is the company.
Company attorneys do not represent employees in an adversarial proceeding versus the company, nor do company attorneys provide advice on personal matters. This can be particularly acute in cases where employees are charged with wrongdoing and, as a result, the company may itself have legal exposure. In such cases, the company’s attorneys are in the difficult position of investigating the possible wrongdoing while also protecting the company. Employees are urged to hire their own attorneys in relevant situations. On the other hand, an officer of the company sued (in addition to the company) by an outside group would generally be defended by the company’s attorneys if the subject of the lawsuit related to matters within the scope of the employee’s employment duties.
Laws protecting handicapped employees have led to major changes in the design and construction of various facilities as well as in hiring practices within pharmaceutical companies.
Regulatory Activities that Require Legal Input or Review
Interactions between regulatory authorities and regulatory affairs groups within a company encompass the following activities:
Evaluation of legal implications and propriety of statements made in regulatory documents and in some or all correspondence submitted to the government. Issues identified are dealt with according to the standard operating procedures of the individual company. These activities and evaluations may have a profound effect on product liability exposure.
Review of advertisements and promotions and, generally, all company communications to outside parties, including financial information, reports of company activities, press releases, etc., to ensure that they adhere to company standards and regulatory guidelines. Other professionals (e.g., marketing, medical, regulatory affairs) also review these documents. A formal sign-off procedure usually exists, either through routing documents or at formal team meetings. This procedure ensures that all communications receive the required approvals before dissemination and also provides a record of the development of communications in the event that they are later challenged.
Compliance with environmental regulations. Environmental laws that apply to pharmaceutical companies have become
increasingly important and complex over the past two decades. This category includes disposal of hazardous waste and low-level radiation waste. Air, water, and ground pollution must be minimized or totally prevented. This involves not only a recycling of solvents and other materials, but in some countries also includes a degree of responsibility for the activities of the company’s vendors. Both the costs of compliance and the potential fines for noncompliance often constitute large sums of money. The interpretation of these laws is often complex and requires considerable knowledge and expertise.
Development of labeling. The team responsible for development of a product’s label should always include an attorney. Typically, attorneys evaluate labeling rather than write it. Labeling should avoid any guarantees, warranties, or vague statements. Attorneys look for omissions in the labeling and are sensitive to whether sentences are written in a positive or negative way. The labeling is the means by which the company satisfies its duty to warn, the failure of which can lead to significant product liability risks. Notably, some agencies, such as the FDA, consider communications made in connection with the sale of a product to be “labeling” and fully subject to labeling regulations.
Review of scientific discourse in continuing medical education programs, reprints given out by sales representative, and other professional scientific or clinical programs. Review of symposia will be in terms of policies and codes of (a) the company, (b) regulatory authorities, (c) trade associations, and (d) any other groups (e.g., medical societies) that are involved. The credibility of the speakers, medical value of the program, and any sensitive issues are also evaluated.
Attendance at meetings. Attorneys often accompany professional staff to meetings with regulatory authorities. In some companies, this practice is mandatory, whereas in others, the exclusive contact with a government agency, particularly the FDA, is by the company’s regulatory affairs department.
An excellent discussion of regulatory law focusing on the United States is given by Hutt and Merrill (1991).
Product Liability Activities that Require Legal Input or Review
When a pharmaceutical company is sued, it must prepare its defense. Some companies appear to be more willing than others to settle certain types of cases (i.e., make payment to a plaintiff) without going to trial rather than risk adverse publicity and the possibility of losing even more money. Other companies have a policy of contesting vigorously every legal case that arises for fear of creating a precedent of easy settlements. Most companies are somewhere in between. Even the largest pharmaceutical companies do not have a large enough legal staff to take their cases to court themselves. As a result, companies hire outside legal firms to handle their cases. Outside attorneys work closely with internal company attorneys to help prepare the case. The company attorneys may:
Assist with identifying expert witnesses
Conduct specific investigations to help the case
Assist in identifying and obtaining relevant information
Arrange depositions
Manage outside attorneys
Answer interrogatories
Work with outside attorneys in a large variety of other ways
This topic is discussed in greater detail later in this chapter.
Medical Activities that Require Legal Input or Review
Although attorney involvement in medical activities often focuses on regulatory activities, there are additional situations that involve attorneys (e.g., contracts between a company and institutions). Most medical professionals interact with the company’s legal staff at several points during their careers. If involvement with the defense of legal cases will be required of medical staff, this should be made clear during the hiring process. Many physicians enjoy the challenges of being involved with legal issues, either in providing legal analyses, depositions, or courtroom testimony. If there is a choice of medical candidates within a company who are needed to assist attorneys, then those people with the greatest experience with the nature of the case, as well as personal interest in the case, should be chosen for the assignment.
While problems with some investigational drugs may result in legal suits, these are relatively rare due to the extensive warnings and “informed consent” provided to all subjects. The majority of legal problems a company encounters involve marketed products. As a result, medical staff in Phase 4 groups and in marketing support operations are more likely to become involved in legal cases than are those staff in most other clinical areas.
Contracts for Clinical Trials
Prior to 1984, few contracts were drawn up between medical investigators (usually in academia) who were conducting clinical trials and the pharmaceutical companies that sponsored them. The number of such contracts and letters of indemnification have grown rapidly over the past two decades. Many of these are required by the investigators’ institutions, and some are required by the pharmaceutical company. At present, no statutes require such contracts to be negotiated and signed.
The advantages to drawing up such contracts are as follows:
They clarify the basis and details on which the clinical trial is based (e.g., the sponsor owns the data generated; the trial and its documents are confidential).
They address more potential issues than does an informal letter of understanding between the two parties, including specifically setting forth the duties of the investigators and monitors to ensure the adequacy of the trial’s performance.
They may be used to retain ownership rights for the company to any other data obtained in the course of the clinical trial, including to any patents resulting from new uses of the drug, as well as include provisions of confidentiality governing the trial and its results.
They may be used in a positive manner to build a relationship (as opposed to treating the investigators as if they are adversaries).
They will almost always clarify publication rights (e.g., right of investigator to publish whatever he or she has found at their site and whatever he or she believes based on their data) and specify that the company is entitled to review the manuscript prior to submission to a journal or society if it is to be published as an abstract or full paper at a professional meeting (e.g., to ensure no patent problem could arise) and the allowed time allotted for such company review.
They may clarify details of responsibilities (e.g., financial) for a clinical trial with two or more sponsors.
A standard contract may be processed expeditiously if the terms have been agreed to by the institution and company.
Disadvantages of clinical trial contracts are as follows:
They may delay the start of a clinical trial, possibly by several months, while details are being discussed.
They may prevent a clinical trial from ever being initiated.
They require a significant amount of both legal and medical staff time and effort to complete (the time preparing and negotiating a contract might be better applied elsewhere, depending on what other activities are competing for staff time).
They may be used for ulterior purposes. For example, either side may insert items into a contract that they know cannot be met; these are then used as “bargaining chips” to give up in exchange for points they strongly wish to retain. This approach may greatly delay or even stifle progress on negotiating the contract. Also, if either group uses an outside independent attorney to negotiate the contract, a fairly common practice for small companies or investigators in private practice, then the attorneys may be partially motivated to continue negotiations to increase their professional fees.
Adverse Events
Attorneys may check to assure that adverse events are reported to regulatory authorities, particularly if they are reported to the company through an irregular route. Any adverse event represents a potential product liability lawsuit. The connection between adverse events and the need for new or modified product labeling is one that must always be considered.
A company may wish to include many possible adverse events in the informed consent that the patient signs. The principal investigator may believe that listing more than a few adverse events, even as remote possibilities, may discourage patient recruitment, or the investigator may disagree with the listing for other reasons. If either the investigator or Institutional Review Board/Ethics Committee says not to include certain adverse events in the informed consent, then the sponsor has no legal right to insist on their inclusion.
Attorneys are frequently responsible for working with the medical staff that receive and monitor adverse events. Attorneys help ensure that systems are in place and operating for the timely reporting of relevant events to regulatory authorities; they also consider the influence, if any, of such reports on product liability.
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