Thinking of Conducting a Clinical Trial? There are 8 Legal Issues You Should be Aware of

Starting a clinical trial can be an exciting prospect for a healthcare organization. While the legal issues may seem daunting, there are about 8 issues to keep in mind, and their solutions.

1. You must identify the scientific value/purpose of the study. 


Clinical trials or other research with little scientific value implicate the federal Anti- kickback Statute and IRS requirements. In addition, clinical trial proposals that offer inducements to physicians to participate implicate the federal Anti-kickback Statute. So be extra careful of this. 

Questions to ask:

  • Does research have scientific value? (may need review by IRB (internal review board) for complete assessment).
  • Does study protocol demonstrate appropriate “scientific purpose”?

How to fix the issues:

  • Develop specific research intake process.
  • Ensure that all information is complete and accurate before being forwarded to legal/finance. Determine nature of study and nature of all financial arrangements. Make initial determination on scientific value of study before study is presented to IRB.
  • Determine extent of resources (including space, personnel) to be used to conduct the study.

2. Make sure you address IRS issues. 

Uncle Sam has specific rules about scientific studies, so make sure you are always in compliance with IRS requirements .That is,  your study must address issues of scientific purpose.       

How do you ensure this? Think about the following or ask these questions: 

  • The study must further your hospital or organization's mission statement.
  • It must be research undertaken for new applications of products or drugs in order to improve the ability to treat various conditions or diseases. (IRS)
  • The research cannot be just “quality control programs,” “ordinary testing for certification programs,” or the sole function of the principal investigator. (IRS).
  • You can also ask, does the study have scientific value and is it for new applications of drugs or products to improve the ability to treat certain conditions or diseases?
  • Does the study require the exclusive use by the sponsor of bond-financed facility space?


Make sure you have your attorney’s look over these issues. They can be quite complicated.  

3. Develop a proper research budget

It's very important that your budget is drawn up and allocated correctly. The development of the budget, money going directly to the investigator, and/or the ability to earn and keep profits generated from participation in the trial will implicate the federal Anti- kickback Statute and compromise patient care.  These are heavy duty Federal healthcare laws with large penalties. See my blog on the federal Anti-kickback Statute, and see Prescription Drug Marketing Special Fraud Alert.

Questions to ask to keep yourself compliant with the law:

  • Are budgeted amounts based upon Fair Market Value (FMV)?
  • Do any funds flow directly to any of the investigators (physician)?
  • Were there any inducements to the investigators to get subjects to participate in the study?
  • Do any financial incentives exist for physicians to coerce patient participation?
  • Are investigators or the hospital keeping profits derived from the research?
  • Is there a process in place to ensure allocation/return of excess funds?
  • Are time records being documented?
  • Are the study limited to the appropriate number of investigators/sites?
  • Are there direct payments?
  • Are there any payment terms not included in the budget?

Make sure:

  • You review the total impact of the aggregate of your financial relationships.
  • Develop written qualification criteria for investigators/sites  and stick by it, i.e. do not limit to high prescribers.
  • Ensure that there are no incentives for participation

 Are you going to be taking in any Federal Medicare funds?

Questions and solutions:

  • Develop process for conducting FMV analysis for rates paid for or to the research project. One such method might be to calculate physician’s time involved and pay based upon an hourly rate or to calculate based upon usual and customary charges for the services provided.
  • Include in FMV site resources needed for the study and the overhead amounts. Develop standard overhead cost calculation for use on all studies.
  • Develop procedures that has someone who follows the release of the study funds
  • Ensure that excess funds are not routed back to back to the investigator— if money allocated from the clinical trial exceeds a certain threshold in a 12- month period – all subsequent funds must be returned to sponsors. However, funds may be distributed to hospital or exempt affiliate (such as a related foundation).

4. Obtain financial conflict of interest disclosures. 

  • Financial conflicts of interest implicates the federal Anti-kickback Statute, which is bad news. 
  • Do a financial conflict check for everyone involved (e.g., nurses, medical students.)
  • “Financial interest” includes fees, gifts, honoraria, options, directorships, special relationships with potential for personal material gain.
  • Disclosure must be ongoing, meaning if something new arrises for one of the team, then they must disclose too.


  • Develop financial conflict of interest disclosure form to be completed by everyone involved with the study.
  • Develop patient freedom of choice forms.
  • Develop process for completion of form and for meaningful disclosure.
  • Develop a written policy for financial disclosure.

5. Require written contracts for terms of of 1-year 

Clinical research trial contracting can be structured to fall within the personal service and management safe harbor to the federal Anti-kickback Statute.

Compliance with the safe harbor offers protection against liability under the Anti-Kickback statute.

Conduct outside a safe harbor must be analyzed based on the “facts and circumstances.”

  • Signed written document.
  • Specifies services.
  • Part time vs. full time.
  • 1-year term.
  • Aggregate compensation set in advance, fair market value not based on referrals.
  • Legal activity.
  • Commercial reasonableness. 


  • Develop template contract, and require that all contracts are compliant with template. All deviations should receive legal review.
  • Provide template to all of your contracting parties.

6. Establish appropriate monitoring systems for billing federal health care programs. 

Participation in clinical drug trials raises a number of obligations with respect to billing Medicare for services rendered. In addition, the OIG (Office of Inspector General) is concerned that providers are billing the Medicare program for services for which the provider already has been reimbursed pursuant to a clinical trial agreement with a manufacturer. Improper billing implicates the Federal Anti-Kickback Statute and the Federal False Claims Act.

The billing rules for billing the Medicare program for clinical trials vary depending upon whether the clinical trial is for a drug, for a cancer drug, for an approved drug, non-approved use or for a non- approved use. The rules also differ for devices.


  • Appoint someone in the billing department to act as the clinical research trial liaison and the billing expert for clinical trials.
  • This person would be responsible for interfacing with the study coordinator, as needed, providing training to the billing department, monitoring the status of research trials and assessing the billing status of drugs/devices subject to a clinical trial.
  • Develop a training process for the billing department so that they are informed of all study services and the scope of the study to enhance more accurate billing.

7. Research Meetings-make sure they are modest. 

Research meetings to exotic locations or with no scientific purpose implicate the federal Anti-Kickback Statute.

Make sure they:

  • Are Modest.
  • Not promotional.
  • Have a scientific purpose.
  • Are the appropriate size.
  • Have appropriate participants.
  • Are at the appropriate locale. 

8. Completion of clinical trial. 

You must make sure that there is an appropriate completion of the study with appropriate follow-up demonstrates that the study had a valid scientific purpose and scientific pursuit.


  • Completion of clinical trial requirements.
  • Are study results published? Utilized?
  • Ensure that billing no longer bills patient as if study is in place.
  • Excess funds will need to be allocated.



Keep on Auditing Your Study for Compliance and audit it randomly during the course of the trial.  

Examples of audit areas (as explained above) could include:

  • Are services for enrolled patients billed correctly?
  • Has patient recruitment met requirements?
  • Is investigation following study protocol?
  • Is study operating within parameters of budget?
  • Do any financial conflicts of interest exist?
  • Does study continue to have legitimate scientific purpose?
  • Are funds correctly allocated?


At Khatri Medical Licensing & Law, we can set up a compliant study for you, create appropriate contracting, fee arrangements, advise you on best practices, and help you audit for compliance in regards to Stark Law, AKS, IRS issues and any state laws and regulations. 

Please contact us at or (310) 896-5183.