Understanding Buyer Representation Agreements in Drug Development

Successfully executing drug development studies is one of the key areas pharmaceutical R&D partners like TigerTox focus on. For us, being able to ensure that our customers’ resources are utilized in a strategic manner is among our primary goals. However, the details of making such assessments must be made very carefully. With that in mind, I would like to take a step back from drug development for a moment and consider the value of consulting in other areas. In particular, the idea of how best to represent buyers when they are purchasing a service. To help me look at this topic, I consulted an article by Kenneth R. Elkin titled “Non-Exclusive Buyer Representation Agreements.” The article explains what a buyer representation agreement is and how it can be used.

Buyer representation agreements are meant to clarify the process of advertising available services. Much like TigerTox wants to use our customers’ resources in the most efficient way possible, a buyer representation agreement clarifies the terms of a service being sold, so that the buyer knows what to expect before purchasing the offered service. When my company is thinking about allocating study resources, it is important for us to understand the full cost of the study beforehand. If not, we can allocate study time and budget while overestimating the agreed upon timeframe. If the timeframe can be reduced, and the budget reduced as well, then the drugs and their design can be kept in-house as long as possible. By doing so, any revenue from the drugs will be kept in house as long as possible, maximizing potential revenue. When the resources of a study are reviewed by all parties, it allows us to be more focused and efficient with our resources. A comprehensive buyer representation agreement essentially serves the same purpose, though from the other side of the coin.

The agreement clarifies what will be provided as part of the study and contract, and what will not. For example, it can be agreed that the sales representative will be paid regardless of whether or not the service is sold, but if the service is sold, they’ll receive a percentage of the total study cost as commission. Similarly, it may be agreed that the service provided will include a simple set of reports and verification’s of results, but will not include a full review of the data set. By explaining the scopes of the study upfront, it ensures clarity for the buyer of the service. Depending on the type of study being offered, this can be made more or less restrictive, and can help the seller demonstrate all that the service covers. Especially in an industry where extensive data sets can be produced with more or less effort, depending on the type of product being developed, having a clearly defined scope can mean that the customer does not have to suffer through unnecessary delays, or face sudden raises in costs.

More importantly, it helps protect both parties, since the contract can cover issues like unexpected damage due to inaccurate information. But, as with all things in life, there are risks to the process.

If a buyer representation agreement is not carefully considered, defined, and executed, it could lead to issues for the person purchasing the service. In fact, since few people are lawyers, or have the ability to navigate through the complexities of law, it could lead to both time and money being lost as a result of a badly defined agreement. For instance, imagine that a laboratory is being hired to provide toxicology data for a potential drug. The laboratory is expensive, as such laboratories tend to be, and as such, costs need to be kept under control. In the case of our company, tiger tox, the study budget is directly tied to how long resources are committed toward achieving the study goals, and so we need to keep costs low. Although the stated goal may be to provide information to demonstrate the product is safe for human consumption, that does not mean that all study time is of equal importance.

However, if the laboratory performs studies with limited data, as a result of a poorly defined statement of work, it might be the case that they have to repeat the study, and waste a large amount of resources and time. In a regulated industry like pharmaceuticals, anything that requires additional study or retesting can result in serious delays. This can lead to a loss of credibility before the government, and it can also delay any potential revenue from the sales of the drug. The ability to anticipate issues such as this, and prevent unnecessary resource expenditure, is why a clearly defined buyer representation agreement is so important, as it enables both lab and pharmaceutical company to more effectively spend their limited resources.

In dealing with companies like myself, finding an agreement that encourages both of us to put our best foot forward will benefit drug development, in the same way that crisp, well defined studies will limit the wastage of resources for my company. Likewise, for those in need of a study, a proper contract can reduce the chances of conflict between the study provider and the provider. The process of correctly documenting a study through an agreement can be very involved, but, as you can hopefully tell, it is an important piece of modern-day drug development.