Anesth Analg 2004;99:173-176
© 2004 International Anesthesia Research Society
doi: 10.1213/01.ANE.0000122633.97424.76
ECONOMICS, EDUCATION, AND HEALTH SYSTEMS RESEARCH
Budget Negotiation for Industry-Sponsored Clinical Trials
Kristy Beal*,
Juliette Dean, RN CCRC*,
James Chen, RN*,
Elena Dragaon, RN*,
Ann Saulino, RN*, and
Charles D. Collard, MD*,
*Division of Cardiovascular Anesthesiology, Texas Heart® Institute, St Luke’s Episcopal Hospital; and
Department of Anesthesiology, University of Texas Health Science Center and Baylor College of Medicine, Houston, Texas
Address correspondence and reprint requests to Charles D. Collard, MD, Clinical Associate Professor of Anesthesiology, Division of Cardiovascular Anesthesiology, Texas Heart® Institute, St Luke’s Episcopal Hospital, 6720 Bertner Ave., Houston, TX 77030. Address e-mail to ccollard{at}heart.thi.tmc.edu
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Abstract
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The specialty of anesthesia is well suited to attract industry-sponsored clinical trials and research revenues because of its fundamental contributions to surgery, critical care, and pain medicine. However, the performance and budgeting of industry-sponsored clinical research over the past decade has been significantly altered by the rapid growth of commercially oriented networks of contract-research organizations and site-management organizations. Further, the competitive nature of today’s clinical research climate can make the planning and negotiating of study budgets and contracts stressful, time consuming, frustrating, and full of pitfalls. Because a clinical trial contract is a fixed-price agreement, investigators are obligated to perform the work described in the contract, even if the actual costs exceed the study contract. Successful budgeting for the performance of an industry-sponsored clinical trial thus requires a thorough understanding of the direct and indirect costs associated with performing clinical research. We reviewed budget and contractual considerations for the successful negotiation and performance of industry-sponsored clinical research.
IMPLICATIONS: Industry-sponsored clinical research over the past decade has been significantly altered by the rapid growth of commercially oriented networks of contract-research organizations and site-management organizations. Successful budgeting for the performance of an industry-sponsored clinical trial thus requires a thorough understanding of the direct and indirect costs associated with performing clinical research.
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Introduction
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Of the $6 billion in industry-generated money for clinical trials worldwide annually, $3.3 billion goes to US investigators (1). Further, 70% of the money for clinical drug trials in the United States comes from industry rather than from the National Institutes of Health (2). Industry-sponsored research thus represents the primary source of revenue for many clinical investigators (1,3). In addition to salary support, these revenues also often represent an important source of preliminary funding for an investigator’s own studies.
The specialty of anesthesia is especially well suited to attract industry-sponsored clinical trials and research revenues because of its fundamental contributions to surgery, critical care, and pain medicine (4). However, the competitive nature of today’s clinical research climate can make study budget planning and negotiation stressful, time consuming, and full of pitfalls. Although numerous reference materials are available to study sponsors regarding clinical trial budgeting (5–7), the literature is remarkably devoid of peer-reviewed articles describing budget negotiation on the part of the investigator for the performance of a clinical trial (8). Further, proposed budgets by many sponsors are not congruent with the investigator’s fiscal interests (i.e., the sponsor’s goal is to do the study as quickly and inexpensively as possible). Because a clinical trial contract is a fixed-price agreement, investigators are obligated to perform the work described in the contract, even if the actual costs exceed the study contract. Thus, successful budgeting for the performance of an industry-sponsored clinical trial requires a thorough understanding of the direct and indirect costs associated with performing clinical research. Budget and contractual considerations for the successful negotiation and performance of industry-sponsored clinical research are reviewed.
Direct Versus Indirect Costs
The indirect and direct costs of performing clinical research differ widely among institutions and countries. Successful budgeting for an industry-sponsored clinical trial thus requires a thorough understanding of the direct and indirect costs associated with performing clinical research at your institution. Direct costs are those expenses directly related to the proposed project, including personnel, consumable supplies, permanent equipment, travel, publication charges, equipment maintenance, and laboratory costs (Table 1). Indirect costs are those costs incurred that are not directly related to the project, including accounting, payroll, purchasing, building maintenance, depreciation, departmental administration, and institutional costs (Table 2). Indirect costs are often referred to as institutional overhead. To thoroughly understand the direct and indirect costs associated with performing clinical research at your institution, investigators should always first conduct an internal cost-analysis independent of a sponsor’s proposed budget. This cost-analysis may include one or more of the following important line items.
Institutional Review Board (IRB) Costs.
IRB approval is required before the initiation of an investigational drug or device trial in humans (Note: this is not true of all countries outside of the United States). Sponsors often significantly underestimate investigator time and labor cost required for IRB preparation and submission. Furthermore, it is not uncommon for a sponsor to amend the study protocol after initiation of a clinical trial, requiring additional IRB resubmissions. Investigators are also required to notify the IRB of the occurrence of any serious adverse events (SAEs) throughout the study (even if they occur outside the investigator’s institution). Thus, it is incumbent upon the investigator to sufficiently budget for any IRB fees and the time and labor associated with IRB preparation, amendments, and the reporting of SAEs.
Institutional Overhead.
As mentioned before, institutional overhead refers to the indirect costs of performing a clinical study. In most major academic centers, this is usually a mandatory, fixed fee expressed as a percentage of the total direct cost. Although indirect costs vary from institution to institution, they usually average to be about 20%–40% of the total direct cost of the study. Investigators at sites where indirect cost fees are not mandated by the institution should still budget for institutional overhead because this money will be required to cover such costs as rent, building maintenance, equipment depreciation, basic utilities (e.g., electricity, water, gas, telephone, and copier/fax use), paging services (e.g., wireless pagers or cell phones), accounting, and payroll.
Staff Labor and Training.
Staff labor and training usually represents the largest single line item of an industry-sponsored clinical trial budget. However, in our experience, it is also the hardest portion of the budget to estimate, and is potentially the greatest source of error. Furthermore, salaries for staff labor and training vary widely among different geographical areas and countries. Inexperienced clinical investigators should thus seek out the advice of more experienced investigators or the local research administration when budgeting for staff labor and training.
In general, staff labor can be broken down into five personnel categories: investigators, nurse coordinators, research assistants, administrative-secretarial staff, and consultants. Budgeting for each of these categories depends on a number of interrelated issues. First, you must determine the level of employee education required for patient sample and data collection (e.g., nurse coordinator versus research assistant). In general, staff labor costs are directly proportional to the level of skilled labor required. Studies requiring continuing specialized nursing or consultant support are thus more likely to be associated with larger base salaries than studies requiring minimal skilled labor. Second, how many end points are to be measured in the study? The greater the complexity of a study, the greater the anticipated labor need, both in terms of the number of staff and salaried hours. Complex studies are also more likely to be associated with numerous data queries by the sponsor, incurring further labor costs. One of the biggest pitfalls in budgeting for industry-sponsored clinical research in our experience is underestimation of the staff labor required for data monitoring, reporting of SAEs, and patient follow-up. Third, investigators should determine at how many different time-points patient sample or data collection will occur. Labor for patient sample or data collection on weekends and evenings is likely to require overtime salary rates. Fourth, does the study protocol require consultant expertise? Example consultant labor may include the need for specialized cognitive testing, surgical procedures, or drug preparation. Fifth, investigators should budget money to cover staff salaries during the site initiation and training phase of an industry-sponsored clinical study. Although this issue is frequently overlooked in many sponsor-proposed budgets, it is not unreasonable or uncommon to require the sponsor to pay the full price of one to three completed patients up front to cover the immediate costs of study initiation (i.e., money to be paid to the investigator before the first patient is enrolled). Finally, sufficient money should be budgeted for the investigator’s salary so that volunteer time and effort are avoided throughout the study period.
Laboratory Costs.
Most industry-sponsored clinical trials involve one or more blood, urine, or tissue assays. To facilitate clinical investigations, many institutions will offer investigators a reduced research rate for the performance of in-house assays (usually about two thirds of the normal cost). However, these costs generally only cover assay performance. The investigator must still budget for sample collection supplies and the labor required for sample preparation and storage. In certain instances, the sponsor may request that the required assays be performed by an offsite commercial designate. In this situation, money will also have to be budgeted for sample shipping (often at overnight rates and requiring special biohazardous handling and refrigeration).
Pharmacy Costs.
Investigational drug studies may entail a variety of pharmacy costs, including medication preparation, storage, dispensation, and accounting. Additionally, money should be budgeted for training of the pharmacy staff on drug preparation and handling. Pharmacy cost quotes, including staff training, should be obtained in writing before the budget is submitted.
Equipment and Supply Costs.
Equipment and supply costs for the performance of industry-sponsored clinical research may include such items as phlebotomy supplies, centrifuges, freezers, computers, software, laboratory notebooks, and copy/fax machines. In recent years, many institutions have formed communal, clinical research centers containing basic laboratory equipment and storage space available to investigators for a nominal fee in an attempt to reduce the overall cost of performing clinical research. In addition to direct equipment and supply costs, one should also budget for indirect costs such as equipment depreciation, extended service contracts, and secure patient record storage.
Patient Follow-up.
Because of the importance of obtaining patient follow-up data, most sponsors are willing not only to negotiate the cost of staff labor, but also the cost of such items as patient transportation, meals, parking, and outpatient clinic fees. Additionally, many sponsors are willing to pay to send an investigator’s staff member directly to a patient’s residence to obtain patient follow-up data. Although these costs will not be incurred until near the end of the study, these items should still be considered and addressed during the initial budget negotiations with the sponsor.
Putting It All Together: The Study Contract
Budget negotiation for the performance of an industry-sponsored study ultimately ends with the execution of the study contract. Once the various direct and indirect costs have been determined, the investigator should then ensure that the study contract addresses several important fiscal issues. First, does the study contract limit the number of patients that may be enrolled at the investigator’s site? This is important issue to consider as the amount of effort required on the investigator’s part to initiate a new protocol varies little between a study that will enroll a total of 5 patients versus one that will enroll 100 patients. Investigators should thus weigh carefully the effort and cost of initiating a clinical trial versus the overall profit to be obtained when determining the profit margin per patient required for the performance of an industry-sponsored clinical study to be fiscally worthwhile. Second, the study contract should specify a payment schedule. Will the investigator be paid at regular intervals or only upon completion of specific study milestones? Furthermore, if the investigator is to be paid only upon completion of specific study milestones, are the payments for each milestone to be weighted equally? This is an important issue to consider because, in general, the bulk of the work of most clinical studies occurs while patients are still in the hospital. Additionally, it is not uncommon for investigators to be unable to complete later study milestones because patients refuse or become lost to follow-up. Investigators should thus make sure that the study contract specifies when they are to be paid and that the payments are weighted appropriately for the required effort for each time interval. It is also not unreasonable to require that the sponsor be willing to cover the costs of returning a patient to the study site or sending a nurse to a patient’s home for long-term follow-up if payment is dependent upon completion of these milestones. Third, does the study contract specify a startup payment to cover the investigator’s immediate costs (e.g., staff training) while initiating the protocol? As noted previously, is not uncommon to ask the sponsor to pay the full price of one to three completed patients up front to cover the immediate costs of study initiation (i.e., money to be paid to the investigator before the first patient is enrolled). The study contract should also specify that should the study be terminated before enrollment of the first patient, the investigator’s site will be paid a percentage of the total budget to cover start-up costs, payable immediately after a 30-day written notice. Fourth, it may be advisable to add a clause to the study contract stating that a percentage of the total budget (
3%–5%) will be payable to the investigator should start-up of the study be delayed >3 mo. Fifth, the study contract should specify payment for screen failures. Screen failures are patients whom are enrolled into a study but are subsequently excluded from, dropout of, or are unable to participate in the study (e.g., a patient is enrolled into an off-pump coronary artery bypass surgery trial, and the surgeon elects to do the case using cardiopulmonary bypass). The study contract should specify payment for screen failures because the investigator is still responsible for the labor and supply costs associated with the screening of these patients. Sixth, although the Food and Drug Administration will not audit most studies, investigators who have conducted pivotal studies, accrue the most patients in a trial, or have participated in several phases of the same study are more likely to be selected for an audit. Investigators may thus wish to add a contingency to the study contract covering the costs of audit preparation. Finally, an inflation adjustment to the study contract may be advisable for studies anticipated to last longer than 1 yr because the cost of providing health care services is likely to increase over time. Execution of a study contract without giving serious thought or negotiation effort to all of the above issues may significantly negatively impact the long-term fiscal goals of an investigator’s research group.
Summary
Successful budgeting for the performance of an industry-sponsored clinical trial requires a thorough understanding of the direct and indirect costs associated with performing clinical research at your institution. Inexperienced clinical investigators may thus benefit from the advice of more experienced investigators or the local research administration when preparing a budget and negotiating the contract for an industry-sponsored clinical trial. Additionally, the budget of every project should be reviewed upon study completion to identify discrepancies in the estimated and actual costs. Only through careful retrospective budget review and thoughtful prospective budget planning can a clinical investigator survive in today’s competitive clinical research market.
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References
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Accepted for publication February 2, 2004.
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Abstract
Introduction
