An Analysis Based on Strategic Contracting of How the General Data Protection Regulation Affects the Collaboration Between Research-Based Pharmeceutical Companies and Their Strategic Partners

Sebastian Bayer

Student thesis: Master thesis

Abstract

This thesis explores the General Data Protection Regulation (GDPR), effective as per 25th May 2018, and its expected effect on cooperation between companies in the pharmaceutical industry doing clinical trials, e.g. a research-based developer of pharmaceutical products (“Originator”) and a Contract Research Organization (“CRO”) assisting the Originator with doing the clinical trial testing in Phases I, II and III. The GPDR regulation is of relevance when an Originator uses a CRO to manage all or parts of a clinical trial process, because the GPDR puts forward regulation that governs their roles in a GPDR-context as “data responsible” (the Originator) and “data manager” (the CRO) respectively. To put the importance of wellfunctioning clinical trial processes into perspective, the point is made that the pharmaceutical industry is the second largest contributor to Danish exports of physical goods. The legal analysis is a comparison of current Danish legislation and the new GPDR. The analysis suggests five ways in which the GDPR will change the legal framework for clinical trial cooperation agreements: 1) The GDPR’s extended geographical scope makes it much more difficult for companies in the EU to cooperate with companies outside the EU. 2) The fine which can be imposed in case of breach has been increased to a level considered a potential deterrent to cooperation. 3) Costs to comply with the GPDR will increase as the costs associated with drafting contracts for Originator-CRO partnerships will increase. 4) It will become more expensive to monitor that cooperation is done “by the book”, and 5) GPDR introduces a heightened reputational risk. To consider the economic effects of the findings, the theories of Strategic Contracting, Incomplete Contracting Theory, Prospect Theory and Principal Agent-Theory have been used. Except for the PrincipalAgent theory, interpreted to suggest that the increased risk of fines reduces the parties’ incentive to act in an opportunistic and self-serving manner, the economic analysis suggests that GPDR will reduce the number of Originator-CRO partnerships. However, a hypothetical analysis of the net present value of a research project, does not suggest that projects will be become unprofitable because of the GPDR. The thesis concludes that the GPDR, in the short to medium term, will reduce the number of clinical trial projects done in Denmark - and indeed within the EU - with non-EU partners. However, when the Originators and the CROs have “learned” to navigate the partnership agreements and when case law has been developed, then the activity level can be expected to return to normal, driven by the parties’ general desire to cooperate, e.g. by the forces driving strategic contracting

EducationsMSc in Commercial Law, (Graduate Programme) Final Thesis
LanguageDanish
Publication date2018
Number of pages97
SupervisorsBent Petersen & Kim Østergaard