The pharmaceutical industry is one of the most profitable in the world. However, due to a sluggish pipeline of new drugs and rising competition from generic drugs, pharmaceutical companies must devote a disproportionate amount of time and resources on new trials of existing and new medications. This work is often done through the use of contract independent and employee contractors. Contract toxicology consulting firms can be an important and cost-effective part of this work. Physicians, biochemists, pharmacologists, bioinformaticians, cellular biologists, molecular biologists, pharmacologists, and laboratory technicians and specialists are frequently used in pharmaceutical toxicology by employees and independent contractors working directly or indirectly for pharmaceutical companies. Contract toxicology consulting firms have all these individuals on staff. When pharmaceutical companies are engaged in traditional drug research and development, they require the services of all these specialists. Increasingly, however, as pharmaceutical companies pivot toward more post-market research and development, the demand of the services of independent contractors and consulting firms with specific toxicology skill sets has consistently increased.
As most research and development work is required on short notice, consulting firms often have little to no time to have their employees and contractors on non-compete agreements. Even then the non-competes may not be in the contracts. Confusion can arise when difficult legal questions the validity of non-competes in employee or contractor situations or other issues that may arise during the contract. Frequently, the resolutions of those legal issues may not be satisfactory to the parties to the contract, or sufficient to protect the interests of the consulting firm from the pharmaceutical company. For example, most non-competes only restrict the activities of the contracting independent contractors for the duration of the contract. After the contract terminates, the non-compete looms over the head of the consulting firm, whether it is seeking new contracts or existing contracts are going well. Often the problem is compounded when the consulting firm requires its employees and contractors to bring their own contracts and agreements to the firm. A common scenario is when an existing employee or contractor obtains a contract for themselves or the firm, and the firm wishes to prioritize the contract to itself. In that case, the employee or contractor may use the firm’s name, resources, and other identifiers to further their own business, or start a competing business. If that happens, the employee or contractor may have violated their non-compete. In any instance, the firm may want to consider including any questions about the validity of a non-compete in the non-compete itself. Alternatively, the firm may add a dispute provision to the contract itself that describes the manner of resolution they would like for that particular contract, including specific forums, fees, governing where the firm will be reflected as the manufacturer, and the implications on the employee or contractor. The contract can also be written in a way to disallow most non-competition, non-solicitation, and related contract clauses. The goal is to make the contract as broad as possible and to favor the objectives of the firm in regard to the benefits of broad enforcement of the contract terms and provisions. Finally, in order to avoid or dissolve any restrictions or disputes that may arise from the potential use of non-competes in the course of the contract, the firm may add a release of said restrictions and disputes. In this way, the firm hopes to craft the most fair and predictable arrangement that adds to its benefits and protections, while still avoiding or dissolving any disputes arising from those provisions.
Contractors, clients, and consulting firms, whether in the pharmaceutical fields or other similar fields, should consider the implications of non-compete agreements before they are executed. For independent contractors, consulting firms, or employees, the implications of a non-compete should be made clear in the context of the independence of those individuals, including any expectations, restrictions, and obligations. Likewise, the consulting firm itself should take care not to restrict the ability of its employees or contractors to continue to work independently after their contract. The needs of consulting firms are different from the needs of independent researchers or other contractors who wish to directly or indirectly profit from their skills. In addition, the limitations on employees or contractors are usually limited to the duration of the contract itself. Those limitations do not consider the fact that work in pharmaceutical companies, or unrelated companies that require the toxicological skill set, is generally high turnover. As a result, a consultant or contractor may find themselves without work if the project is terminated, and the contract expires, meaning that the contractor and the consulting firm may not have the same priorities. On that note, while the contract may require an individual employee or contractor to bring their own contract, the firm itself will ultimately be liable for those agreements. Furthermore, the firm may business not require any such restrictions, and expect their independent contractors to come directly to them. In that event, a consulting firm’s burden can become greater, despite the advantages that may come from such an arrangement. For instance, the firm may have to pursued civil action against the offending individual, or take criminal action to enforce their non-compete despite not being a party to the contract. To avoid such burdens, the party to these agreements, whether a consulting firm or an employee and/or independent contractor, should consider the use of independent contractors carefully. Likewise, they should consider whether or not consulting firms will use their services in the future. Finally, however, the party should always consider incorporating dispute resolution and dissolution of those disputes and risks into their contracts. In that way, a contractor or consulting firm can enjoy the spoils of their contracts without dramatically elevating their costs or legal budgets, and in the process, avoid damaging the opportunity or needs of their employees and independent contractors.