Clinical trial budget negotiation is well understood to be one of the biggest contributors to lost time during study start-up, and most of the reasons for this have been exhaustively documented in articles and conference presentations over several decades. While a few vendors have pursued innovation through the use of technology, by far the majority of Top 20 pharma companies and their CRO partners continue to rely on spreadsheets and email to negotiate trial budgets with their sites. As a result, budget negotiation processes are manual, error-prone, and can increase the use of unhelpful negotiation tactics that further erode trust.
Given these dynamics, this blog outlines three fundamental challenges with the status quo and discusses a few examples of how many community sites (like those on Inato’s platform) possess inherent advantages along the path to eliminating this complexity. Transforming budget negotiation practices and bringing efficiency, clarity and old fashioned common sense back into the negotiation process is a realistic goal which requires willing partners who are empowered to drive change.
Fundamental Challenges
Many sites simply don’t have a comprehensive list of fixed (start-up fees, overhead) and variable (procedures, clinical items and services) costs established for quick reference during negotiation.
Without an established research fee schedule and methodology, sites must make an educated guess and/or navigate institutional bureaucracy, which many find frequently complicates the budgeting process further. For example, many US-based sites have difficulty accessing the financial data required to develop a list of research rates. For clinical items and services, institutional bureaucracy is usually a primary obstacle to determining internal costs from which to base their requested reimbursement from sponsors. Large hospitals and academic medical centers guard their chargemasters closely, and it takes experience and skill to match a protocol’s requirements with the accurate hospital codes/charges. When the financial data is available, sites struggle with sponsors to explain and justify their budget requests which requires extensive correspondence to explain. For non-clinical protocol requirements, there is no trusted source of what is “fair” to charge industry beyond what the sponsor views as acceptable during negotiations.
The processes and tools of the future will leverage both technology and sources of reliable data to quickly produce historic trial financial and performance data to improve the estimation of costs and the corresponding justification.
Top 20 pharma sponsors are using fair-market value (FMV) (1) tools to justify their initial budget grids and to meet their compliance obligations (2); but FMV for a sponsor does not mean fair to sites.
There is no single, credible source of clinical trial reimbursement data that can meet the needs of both sponsor and site. For example, a sponsor’s initial budget offer is often viewed by sites as insufficient. From the site’s perspective, the sponsor estimates are without consideration of the ancillary or delivery costs (e.g. time and effort) required to perform the protocol’s requirements. The sources of FMV data used by sponsors are costly and most sites, regardless of size, can rarely afford access. In addition, sources utilized for FMV are based on past data, representing a lagging indicator in the face of rising costs and lengthy study timelines. In addition, large FMV databases often rely on data aggregation/comparisons and assumptions (i.e. “fragmented” data) to create a more desirable product. Some have even conflated the issue further by using medical claims reimbursement data which is not an accurate or appropriate reference for an investigational trial budget.
FMV is calculated by sponsors for compliance purposes. Negotiators and CROs are typically given some leeway (e.g. FMV + 20%) for negotiation room, but so often these ranges do not equal fair reimbursement to a site. There remains a healthy negotiable range that can only be reached through an understanding of costs and generating a thorough and timely justification. Lastly, different countries and geographies and local reimbursement standards also increase the complexity. Processes and tools of the future will need to level the playing field during negotiation and access historic data to drive what is and isn’t fair and justifiable to both sides of the transaction.
Negotiating with clarity and clearly documenting what is/is not included in a particular budget line is nearly impossible using spreadsheets and email correspondence.
Most budget grids use the protocol’s schedule of events grid to begin populating reimbursement for each requirement; however, sites sometimes rely on multiple resources with multiple costs. For example, large providers have to consider both technical and professional fees and consider both in-light of the protocol’s specific requirement(s). As a result, sites bundle items, services, and labor costs all into the same budget line which often pushes beyond the sponsors FMV range. The result is often more email, extensive edits to spreadsheets. Yet still, phone calls are often needed to hash out what is and is not included. Some sponsors bundle entire visits into a single sum which puts their site partners in the position of having to negotiate in the dark without any clarity into what dollars are associated with which protocol requirement. While convenient for the sponsor, it is an incredibly time consuming burden for sites that bill insurance for standard of care procedures required by a study protocol.
Considerations for Budgeting Innovation
By and large, community sites have a clear understanding of their costs and charges and most have a ready-to-go pricing list for research items and services. Given their relative size in contrast to large healthcare systems, community research study teams can generally make decisions and move the process along more quickly than large sites, and in many cases are capable of making decisions much faster than CROs and/or sponsors can. This is one of the many reasons that working with community sites can be rewarding and the primary reason they represent great innovation partners when considering and testing new processes and tools. In addition, community sites are accustomed to working with less than perfect information and staff are empowered to make business decisions more quickly than their academic site counterparts.
How can we leverage technology to move us into the 21st century and get away from cumbersome spreadsheets and endless emails? How might technology be used to improve accuracy, timelines, and overall site and sponsor satisfaction? Answering these questions will require sites and sponsors to agree on methods of negotiating that can 1) accurately capture what sites require to deliver on a line-item in the budget, 2) translate the requests back to the protocol visits and procedures so that sponsors have a better understanding of what the site is proposing, 3) transparently capture and document the agreed upon reimbursement, and 4) provide the sponsor with adequate justification for the reimbursement in a way that meets their ability to defend the site payments for their regulatory compliance obligations. The tool of the future will allow sites to “work the way they think” while making it easy for sponsors to understand. The result is improved clarity, improved communication, and the opportunity to build trust and good will while serving our number one constituent: the patient.
Footnotes
- The term “fair-market value” is a legal term used by many parties in ways which obscures its meaning. For the purposes of this article, Inato will use it from the enforcement perspective where a legitimate business relationship provides identifiable value to the Sponsor, and not just an opportunity to influence physicians and prescribers. The “value” in this case is usually patient data.
- As outlined in the Anti-Kickback Act and Physician Payment Sunshine Act, drug manufacturers are prohibited from offering anything of value in exchange for healthcare services and are required to report payments made to physicians and teaching hospitals.