By Ann Neuer  

February 20, 2012 | Imagine buying a new car or a new house but not knowing the price until the papers have already been drawn up and it’s time to sign on the dotted line.  According to Christine Pierre, President of RxTrials, that’s exactly the situation investigative sites face as they attempt to negotiate budgets and contracts for clinical trials. 

“The budget still comes so late in the study start up process for the site.  We’ve been trying to address this for more than two decades, and here it is 25 years later, and we still are being asked to consider studies and go through site selection, the pre-site visit and regulatory process before we have the budget in front of us.  It makes no business sense,” Pierre says.    

In addition to its late appearance during study start-up, there are a host of other budgeting and contracting challenges, all of which make this step a notorious bottleneck in clinical trials.  According to a CenterWatch survey, budgeting and contracting remains the top cause of study delay.  Of 950 participating investigative sites, 49% of respondents pegged contract and budget negotiation and approval as a key factor in study delay, more than any other activity, edging out patient recruitment, which scored 41%. 

To bring some much needed attention to the contentious budgeting issue, RxTrials Institute, a management and training organization operating separately from RxTrials, recently sponsored a workshop entitled “Hidden Costs of Conducting Clinical Research.”  It discussed ways to improve budgeting and contracting through topics such as recognizing how poor payment terms conceal hidden costs, and gaining a greater understanding of the other party’s position regarding budgetary constraints.  The workshop also addressed how to overcome the top 10 negotiation roadblocks sites hear such as, “No other site is asking to be compensated for that,” or “Our company doesn’t have the ability to change the payment terms because it’s already set up in our system.”      

As Pierre explains, “There isn’t any one magic bullet that strengthens negotiation positions, but the place to start is with the site understanding what its costs are for doing business.  The site needs to be able to justify its costs and then articulate this information to the other party, generally someone from the contract research organization (CRO), who handles negotiations for the sponsor.”  

And there is the significant problem of cash flow.  Many sites accept budgets with poor payment terms, namely quarterly payments.  To make matters worse, those payments often arrive late, sometimes weeks beyond the due date.  So, while a site is waiting to get paid, it is essentially funding the study for the sponsor as soon as it begins work. Except for a small amount of negotiated upfront money, usually less than $3,000, the site finds itself paying all expenses linked to the study, such as use of outside services for x-ray or CAT scans, use of third party specialists, such as ophthalmologists or dermatologists, and paying the subjects if the contract calls for subjects to receive payments at each visit. 

“We typically do three months of work before the study is initiated. Then with the study initiation, the study begins and it could be four to five months before you see your first penny,” Pierre laments.     

This point was driven home in a study conducted at the Site Solutions Summit, an annual conference sponsored by RxTrials Institute.  In both 2009 and 2010, attendees were questioned as to their frequency of payment for work performed on clinical trials.  In 2010, based on 1,059 protocols, 51% of payments were made quarterly, as compared to 52% one year earlier, based on 1,198 protocols.  But for monthly payments, there was a significant improvement in 2010.  Some 28% of payments were monthly, versus 23% in 2009.  This jump of five percentage points in one year could be the result of ongoing efforts to educate stakeholders as to the critical importance of improving cash flow for sites. 

“We have raised our collective voice to the industry, mentioning that sponsors have to change their payment terms to standard business terms, which means 30 days.  And now that much of the clinical trial data are captured electronically, there is no reason not to pay on a monthly basis for data they already have in their possession.” 

According to Pierre, some sponsors and CROs state that the payment problem has to do with their internal financial infrastructure, but on a positive note, some stakeholders are starting to get it.  “Several sponsors and CROs that attended this year’s Summit have made commitments to go back to their companies and stress the importance of paying sites in a more timely manner.  And with the growing trend toward improving site relationships, forward thinking sponsors and CROs see the value in ensuring that sites are not being asked to continue operating under the kind of financial pressure quarterly payments bring, ” she comments.