Magazine Article | July 1, 2015

The Evolution Of CRO Reimbursement: Shifting From Task-Driven Units To Desired Outputs

Source: Life Science Leader

By Suzanne Elvidge, Contributing Writer
Follow Me On Twitter @suzannewriter

Over the years, pharma and biotech companies have looked to create better models to speed drug development and make it quicker, more efficient, and more effective, and this includes using the specialist expertise in clinical research organizations to carry out clinical development.

Building relationships with outsourcing suppliers is based around crafting the best possible agreement between the two partners. The most common form of late has been the task-driven model, which pays the vendor by the units and milestones achieved. However, the popularity of this has decreased, and moving away from task-driven agreements toward a more flexible model based on desired outcomes has been seen as the next step in the evolution of the biopharma-outsourcing partner relationship. This has potential to help all parties involved to keep aligned with the ultimate goal — that of safe clinical trials and high-quality data in a timely and cost-effective manner.

The fixed-price contract was the staple agreement for relationships between biopharma companies and their outsourcing partners/vendors in the 1980s and 1990s. These provided the vendor with the reassurance of a predictable income, which is especially important for smaller companies , and provided a powerful financial incentive to complete clinical trials efficiently and within (or before) the agreed timelines.

While the fixed-price model is still prevalent, sponsors continue to look for ways to incentivize performance beyond the traditional fixed-price structure, according to David Agrella, executive director, functional service partnerships at PPD, a CRO. “If a trial ran longer than planned or required more vendor effort to complete, the vendor lost money, and the fixed-price contracts left both sides without the ability to change aspects and renegotiate unless the study design fundamentally changed,” explains Agrella.

The biopharma industry’s growing dissatisfaction with the fixed-price contract drove a move toward unit-based or task-based contracts in the 2000s, where CROs are paid based on tasks achieved. Unit-based pricing uses straightforward measures based on the completion of tasks and a measure of the number of hours needed to perform each task, combined with the rates for the personnel performing the various functions of the trial (rates vary depending on a person’s seniority).

Tasks in a clinical trial could include:

  • sending out essential documentation and contract templates to potential sites
  • generating a potential site list
  • completing site selection
  • completing site initiation visits
  • completing recruitment by steps or in full
  • carrying out monitoring visits
  • writing monitoring trip reports
  • processing data queries.

However, according to Agrella, payment for individual tasks, such as selecting sites, is difficult to administer by both the sponsor company and the CRO. It requires a level of tracking and reconciliation at the task level that may be onerous to both companies, when the efforts are better spent working toward achieving an output, such as an active site ready to enroll or an active site that has been screened. RFP specifications often will stipulate the number of sites to be activated. However, in practical terms, as much as 10 to 20 percent of sites may never become active for subject recruitment, and another 10 to 20 percent of activated sites may not recruit patients. If site activation and enrollment are the goal, then smaller tasks/units (i.e., site identification, site selection, site document collection, and site initiation) can be grouped into a larger output (i.e., site active and ready to enroll).

“In contrast with the fixed-price contracts of the 1990s, there is less direct financial incentive to complete a study ahead of schedule or find more efficient ways to deliver quality data under the terms of the unit-based project agreements unless supported through a governance structure or contracting terms. While the unit-based model remains the main method of contracting used today, it has not evolved in any great degree over the last 15 years,” says Agrella.

Deirdre BeVard agrees that the unit-based model is still the default for most CROs, but that there are flaws. BeVard is the VP of development operations at Nektar Therapeutics, a clinical-stage biopharmaceutical company developing a pipeline of drug candidates that utilize its PEGylation and polymer conjugate technology platforms. “With unit-based payments, we pay to recognize that someone has made the visit, for example, but there could be a lot of variability in the quality of the visit, dependent on the skills and the efficiency of the individual. However, the payment would be the same,” says BeVard.

To balance the incentives to complete a trial quickly and effectively with the desire to keep costs down, the biopharma industry has made a shift to a payment model that focuses on achieving the outputs to the quality standards required rather than just paying for tasks completed. This model has been growing in popularity since the mid-2000s, and is proving attractive to sponsor companies.

“The driver behind this move is that, for us, we have found that paying for time and materials is not the way to get the most value out of the relationship,” says an outsourcing/partnership manager at a Big Pharma company.

As well as making a difference to the costs, because the desired-outputs model is outcome-driven, it should result in higher-quality data and, therefore, greater value for the sponsor. And while it may appear that these types of agreements are skewed in favor of the sponsors, there are advantages to the CROs. For example, more efficiently run trials and higher-quality outputs are likely to lead to shorter timelines and better margins and promote long-term relationships between sponsors and CROs. Through its focus on productivity, this model also will drive innovation.

“Ultimately, sponsor companies don’t need lists and templates and selection visits; the industry needs active sites screening and caring for trial participants. And, if vendors are not paid until a site is active, then it is in their best interest to get as many good sites active, as quickly as possible, at a minimum of effort,” says Agrella.

According to the Big Pharma outsourcing/ partnership manager, the most important step to creating a successful agreement is to have a good initial feasibility study. “We have found that the better the feasibility study, the better the contract and the relationship. Problems occur when the feasibility study is carried out before the protocol is finalized or the outcomes aren’t agreed upon by the two parties.”

One of the key points for the agreement is to define who is in control of the clinical trial process. Establish who has responsibility and authority. This includes decisions on choices of sites, project teams, and investigators.

“We believe the CRO has to be in charge of choices such as sites and investigators, rather than sharing the responsibilities. We have found that this avoids any holdups because the CRO is waiting on decisions from us as sponsor, and it reduces frustration. However, it does mean that the CRO must be accountable,” says the Big Pharma outsourcing/partnership manager.

The options for operational control included in the agreement will vary depending on the chosen suppliers and their in-house experience and systems. As BeVard explains, “Operational control in the hands of the CRO can be more efficient if it means the CRO can follow its own systems and has the freedom to operate. However, some CROs have too many systems in place, which we feel makes the process too complicated. While we hand over day-to-day decision making — for example, choices of sites and investigators — we retain project director- level control,” she says.

In some cases, sponsors may want to include sites with lower rates of enrollment, for example, where they want to include a specific population or involve influential key opinion leaders. This option should be discussed as part of the feasibility process and included in the agreement, and recruitment should be monitored separately in order not to affect the CRO’s outcome measures.

The agreement needs to outline deliverable-based milestones and set the quality standards. Because payments will be driven by both the completion of the deliverable and its quality, it is important to include protocols for monitoring the time, cost, and quality, all of which need to be assessed throughout the process by both the sponsor and the CRO. These agreements also need to be flexibile, taking into account that CROs may have to spend more time (and therefore, more money) on slower-recruiting sites.

The payment schedules can be critical, especially for some of the smaller CROs, and these terms can be discussed up front to suit both partners — for example, payment on percentages of sites enlisted or patients enrolled, rather than waiting for full enrollment. The payments also can be weighted to cover up-front costs — for example, money that has to be paid out to set up studies. “We don’t tend to make a lot of up-front payments, but we can negotiate early milestones,” says the Big Pharma outsourcing/partnership manager.

"While the unit-based model remains the main method of contracting used today, it has not evolved in any great degree over the last 15 years."

DAVID AGRELLA, Exec. Dir. of Functional Service Partnerships at PPD


One of the challenges of the desired outputs model is dealing with the issue of rework — for example, when a report is not up to the expected standards of quality or where poor choices of sites or key opinion leaders have been made. While the obvious response may simply be not to pay out, the situation may be a lot more complex than that.

The first step is to understand exactly what is behind the situation and who is culpable. It could be as a result of demands from the sponsor, such as too restrictive inclusion and exclusion criteria, or limiting the CRO to specific sites or key opinion leaders, or pressure on recruitment from competing studies. According to Charles Romano, senior director of Clinical Research at Amniox Medical, a subsidiary of TissueTech, incomplete or substandard projects may come down to incompetence or misconduct. However, this is rare, and the problems are more likely to be poor training or poor oversight.

If the issue is entirely the fault of the vendor, then the rework should be done promptly and without charge. “We would only expect to pay if we bore some of the responsibility for the issue, and this is why clear accountability is important,” says the Big Pharma outsourcing/partnership manager.

However, sometimes partners need to make compromises, particularly to speed the remediation. In these cases, sharing the cost of the rework may be necessary. A lot of rework issues can be prevented by ensuring that the agreement has a degree of flexibility that allows partners to work closely together right from the beginning of the project.

It is vital that CROs and sponsors bring innovation and value to the clinical trial process, as drug R&D is currently too slow and too costly. This will require better management of relationships, improved communication, and agreements that foster the concepts of partnership and collaboration. Both parties need to have a greater mutual investment in time, effort, and money.

“If both sides are prepared to both win and lose, this makes it more of a partnership,” concludes BeVard. “However, there is still likely to be a space for transactional-type partnerships, as one size of agreement will never fit all projects and partners.”