rivate equity (PE) investors poured billions into healthcare investments in 2022 and 2023. However, they slowed down their pace in 2024 since the FTC (US Federal Trade Commission) has increased its interest in healthcare-related mergers and acquisitions. Such investors who previously primarily bought doctor’s offices or pharmaceutical companies are now diverting their attention to clinical trial sites. However, these changes pose unexpected complications for clinical trial sponsors and their relationships with clinical trial sites.

While sites are well-placed to ensure that they financially benefit from these transactions, sponsors may find themselves sidelined since they are not parties to the transaction; nevertheless, they may find their studies impacted by these merger and acquisition (M&A) transactions. Accordingly, such concerns should be addressed not only in the clinical trial agreement, but also in the M&A transaction and/or in a transition agreement. Additional steps including proactive planning and appropriate due diligence can also ensure uninterrupted operations and compliance.

Understanding Site Ownership Updates

When a site changes hands, this may be reflected not only in the ownership structure but also in the management structure. Ownership and management changes, although often related, are not necessarily linked directly. Accordingly, in the event of a change of hands, administrators and investigators working on a study may be impacted.

Some PE investors may insist only on changing the ownership, while others may require that the site management also change. Similarly, while some investigators may be satisfied continuing with a trial post-transition under the same conditions, others may choose to ask for either more money or new rights. Sellers, on the other hand, may have to choose between getting all their monies up front in the context of a sale versus having greater financial benefit down the road by staying on for one or more years after the sale.

These complications cause a natural tension between continuity of operations of a trial site and the site owner financially benefiting from the sale of the site. Sponsors must therefore ensure that they protect their own interests in the event of such a transaction. The clinical trial agreement (CTA), transition agreement, and M&A agreement are well-positioned to address these concerns and to ensure that sponsors retain the right to terminate the clinical trial agreement in the event of a sale and change of ownership.

Challenges for Sponsors

Operational Continuity: Risks of disruption in trial activities.

In the event of a site sale, site ownership, site management, and sponsors must work together to ensure continued operations. This means that sites and sponsors should ideally work to ensure that there is a “key person” in the event of a management change. This key person would generally operate as an alternative to the founder and/or owner and would ensure continued operations of the site. Alternatively, a sponsor should plan to either retrain the site or have the option to terminate the site and transition patients to a new location.

Data Integrity: Ensuring transfer of accurate and complete data.

Sites are known to be data rich. Healthtech (healthcare technology) investors often want to buy sites to acquire such data. However, sponsors, doctors, patients, EMR vendors, and many others all claim rights to this data. Accordingly, it is often unclear whether new site owners can own, license, or otherwise use such data. This natural tension between PE companies and others who would lay claim to the data is another area of complexity. It is critical that there is clarity in the clinical trial agreement confirming that not only the intellectual property (IP) but also the data is actually owned by the sponsor who is often paying for the data to be acquired. Failure to clarify ownership could destroy the fundamental reason the study exists: to generate study data.

Regulatory Compliance: Managing FDA, IRB, and local/state requirements.

Most PE and VC (venture capital) investors are relatively new to site ownership. This means that they may be inadequately conversant with clinical research requirements and depend on site owners to guide this process. Accordingly, management changes without adequate oversight can result in errors that can impact subjects’ safety and welfare. Therefore, a change in ownership or management necessarily increases the risk profile of a site and, consistent with FDA expectations, must result in increased oversight. This change in management must not only oversee local site operations, but also ensure compliance with FDA, IRB, and other local requirements to make sure that they continue to be met even if there’s a change in ownership.

Contractual Obligations: Addressing potential contract renegotiations or breaches.

Experienced clinical trial site owners are aware that while the contract does tend to control, a lot of important conversations are not “on the books.” Several agreements, including agreements between sites and investigators, may be in the form of “handshake agreements.” Therefore, with new ownership or management, such handshake agreements may simply lapse. It may therefore behoove a sponsor to avoid such lapses by reviewing and requiring site-investigator agreements and/or transition agreements to the extent they impact site operations in general and/or trial operations specifically. These expectations must be reflected in the clinical trial agreement, the purchase agreement, and/or the transition agreement.

Due Diligence Strategies

Pre-Transition Assessment

Understand the reasons for the change in ownership or management

It may also make sense to understand the reasoning for the change in ownership or management. If the site has found itself unprofitable, it may mean an impending list of closures as a result: The study may have been badly designed from a financial standpoint (for example, by using 90-day payment terms) and may hence result in a cascade of sites that may be shut down. In such situations, sponsors have looked at advancing payments to ensure continued operations and minimize impact on site operations.

Evaluate site’s operational history and compliance track record

In the event that a sponsor is notified that there is an impending change in site ownership or management, the sponsor must immediately review the site’s history and compliance track record. To avoid being surprised, sponsors must ensure that there is continued oversight consistent with the terms of the CTA. Additionally, to the extent necessary, sponsors may need to require that outstanding queries are closed out prior to a change in ownership or management.

Proactive updates to IRBs and regulatory bodies

In the event of an impending transition in ownership or management, sites must ensure (and sponsors must oversee) appropriate and proactive updates to IRBs and other appropriate regulatory bodies. While some IRBs and/or regulatory bodies may have additional expectations that may impact site ownership changes, others may consider it irrelevant to the individual study’s operations as they relate to overall patient safety and therefore site operations.

Risk Management Considerations

In the event a trial site is about to be sold or its management structure transitioned, a sponsor should consider:

1. Reviewing the clinical trial agreement and updating it to ensure that the appropriate new owners are reflected in the updated clinical trial agreement. This will prevent future disputes as to whether a pre-existing clinical trial agreement continues and inures to the benefit of the new owners.
2. Notifying regulatory or quasi-regulatory bodies including the FDA, the US Office of Research Integrity (ORI), NIH, and/or IRB as necessary.
3. Confirming and clarifying data and IP ownership with the new or prospective management before and after the ownership transition.
4. Establishing an interim management structure to ensure that sites being sold are being actively monitored before, during, and after the transition in ownership. This may require developing a transition-specific oversight structure, appropriate training and onboarding, and customized monitoring plans that include increased frequency of monitoring for a limited period of time.
5. Retaining legal and regulatory counsel to ensure that neither sponsor nor site rights are compromised in the event of a sale and to appropriately address legal, compliance, and regulatory needs.
6. Ensuring closeout of all appropriate data in the event oversight is compromised.

The sale of a site is an exciting opportunity for site owners. However, it can be a cause of great anxiety for sponsors and clinical research organizations (CROs), and may mean increased monitoring, training, and oversight. Nevertheless, sites are private companies that have the right to undertake such transactions. Accordingly, sponsors and CROs should have policies in place to ensure appropriate oversight in the event of changes in ownership and/or management.