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European Pharmaceutical Contractor

Speed Versus Accuracy

Anna Ravdel at Synergy Research Group examines the advantages and disadvantages of the change order process

There are an endless number of issues that require consideration when planning a clinical study. These issues can be divided into different groups, such as scientific, logistics, marketing and regulatory. One of the key issues is finance: how much will the study cost?

In order to make an accurate estimation, the study should be carefully mapped out, and therefore the choice of outsourcing approach is a matter of great significance. To arrive at the correct decision, the following questions, among others, should be answered:

  • Will the study be outsourced?
  • What services should be outsourced?
  • What is best for the study – one-stop shopping (global full services CRO) or multiple service providers?
  • If multiple service providers are preferred, how will the distribution between providers be realised? For example, for monitoring, a global CRO for all the countries or a number of local CROs; for data management, the same CRO which is furnishing the monitoring services, or special data management company; for clinical trial materials handling, one global packaging and distribution facility, or local depots, and so on

There are advantages and disadvantages to each of the outsourcing approaches. One of the advantages of global CROs is that they can perform the country feasibility assessment and propose the most suitable countries for the study. Another is that the sponsor will manage one vendor instead of multiple vendors, which leads to a reduced workload for the sponsor’s project manager, as well as for the sponsor’s legal and financial departments.

The disadvantage of global CROs is that they are usually considerably more expensive than the local ones, and that they also use sub-contractors in some of the countries, which makes study management multi-staged.

KEY CHOICES

Decisions regarding the outsourcing approach should be made before or during the process of service provider’s choice. If such a decision is made beforehand, requests for proposals (RFPs) should be sent out to either global full-service CROs or to multiple nicheservice providers. In cases where the conclusion is made in the course of the bidding procedure, initial RFPs can be dispatched to both types at once. If multiple niche-service providers are involved, the sponsor should make at least a preliminary choice of the participating countries in order to send RFPs to relevant local CROs.

During RFP preparation and the following budget approval and negotiation processes, a lot of study planning issues should be taken into consideration. Questions to be resolved include:

  • How many countries should participate and which are they? The relevant criteria should include enrolment rates, quality of data, regulatory issues, clinical trial materials handling and marketing considerations
  • How many investigator sites are required for timely study conduct (based on thorough feasibility research)
  • Should investigator meetings be conducted? If yes, how many of them should be organised (for example: one American and one European)
  • Are site initiation visits (SIVs) required or can a site’s initiation be performed during an investigator meeting? Or should the decision on SIVs be made based on each particular site’s experience?
  • What percentage of source data verification (SDV) should be done? What frequency of monitoring visits is required to receive the desired SDV percentage?
  • What data management approach should be used (paper versus EDC)?
  • How should clinical trial materials be handled?
  • Is a central lab essential, and if so, where should it be located? Is this location feasible in terms of logistics for distant sites?

The list of questions may be long, but all of them should be answered. After the decisions are made, RFP is finalised and goes out to the chosen service providers. Companies participating in the bidding process send proposals to the sponsor. At the end the sponsor chooses the CRO(s) based on different objectives and internal criteria. Negotiations are completed, the contract is signed, and the project starts (or, in most cases, the project starts under the award notice and Letter of Intent, while final negotiations continue). Finally, all parties reach an agreement, and the study agreement is executed. Usually such an agreement includes provisions that:

  • Without the prior written approval of the sponsor, the CRO will not perform tasks that are not included in the current contract and budget
  • Without the prior written approval of the sponsor, the CRO will not incur pass-through expenses which are not included in the current contract and budget
  • No changes to this contract are effective unless signed by both parties

These provisions are fair for both parties. The sponsor, as the money holder, should be aware of the costs and have the possibility upfront to decide if it agrees to incur such expenses. The CRO also has to know in advance how much it will receive for the work. So, if the situation changes, the CRO should prepare the budget to reflect the new reality, and the sponsor and CRO should agree on it before going forward. After all the parties reach a consensus on the budget, a change order (contract amendment) should be executed, and then the additional tasks performed.

THE PRACTICAL APPROACH

But all this works only in an ideal world. In the real one, even if the study has been planned very carefully, the situation changes frequently and it is both impossible and unreasonable to sign the contract amendment to reflect each and every single change in the study. Also, even for considerable budget changes, the decisions should sometimes be made much faster than it takes to negotiate and sign a contract amendment. As a simple example, we can take the situation where customs fees for the study drug turn out to be higher than expected. This can happen for different reasons: for example, at the stage of study planning it was impossible to calculate shipment customs value (and consequently, customs fees), or it was decided to make an additional shipment, or during the study conduct importation regulations were changed. Customs fees can be quite high (up to 40 per cent of the customs value), and the payment should be made quickly in order to avoid penalties or storage fees at customs and delays in drug shipments to the sites. Under these circumstances there is no possibility to negotiate and coordinate a change order – work must be done and money paid immediately, and this is just one of numerous examples. Though the need of a timely coordination of the change order is clear to all parties involved, in some cases those change orders are prepared and signed after the additional tasks have already been performed, and sometimes the execution happens even towards the end of the project. There are several negative aspects to this situation.

From the sponsor’s perspective, the CRO incurred the unapproved costs which were unbudgeted, not only in the sponsor-CRO budget, but also in the internal sponsor’s study budget. One has to bear in mind, however, that the sponsor has a defined internal budget approval process which should be followed; sometimes these procedures do not allow money to be allocated after the work is done. It could also happen that the budget is used up, and further payments require re-allocation of the funds from other programmes or internal sponsor’s goals.

From the CRO’s perspective, the situation is different. It is no secret that the speed of work is one of the most important criteria for a successful trial performance. Every day saved leads to cost reduction for the sponsor, and in the case that the drug is successful, brings nearer the time of profit making from sales. It is for this reason that the sponsor wants the CRO to implement all the changes as soon as possible; the same is true for the CRO who wants the project to succeed from every perspective, including speed, and so acts immediately on the sponsor’s request.

As a result, the work is done, but as it is completed before the change order is negotiated, the cost of the work is unclear (if new tasks are involved) or just uncalculated and not approved according to convention.

Needless to say, there are also plenty of positive experiences to be gained. One of them is the opening of new sites or a prolongation of the recruitment period which can be discussed, agreed upon and signed before going into action. However, the frequency of situations where change orders are negotiated after the work is done requires tools and approaches which minimise (if not eliminate) complications arising from the constantly changing reality.

ASSESSING PRIORITIES

The controversial nature of the change orders situation (the necessity to perform additional tasks immediately at the sponsor’s request, and, at the same time, to have change orders signed before moving forward) leads to the question of what is more important: to work quickly and to react instantly to all the sponsor’s requirements, or to stay within budget constraints and perform new tasks only when all budgetary and legal issues are resolved? Real life experience says that it is not good for project performance to stick to the latter choice. However, if we refrain from this option, some activities will be performed without a signed change order. This means that a way should be found to balance the situation, to minimise the disadvantages and maximise the advantages of both approaches, removing the need to choose between time, money, speed and accuracy.

One of the possible approaches is to include provisions on change order coordination into the contract – not simply to write that ‘no changes are approved unless they are signed by both parties’, but to spell out the procedures of different levels of approval for the change order. There are different ways of handling this matter, for example:

  • Changes in services or pass-through costs up to a certain amount can require written approval of the sponsor’s project manager only
  • Change orders can be signed not more than on a quarterly (or other timeframe) basis, or when the additional amount reaches a certain barrier. This is advisable, as the change order process coordination requires time from all parties involved, and therefore the execution of a change order for each small alteration can be a costly procedure; however, it is also important not to procrastinate with it
  • The change order log form and the frequency of its provision to the sponsor can be included in the contract. For example, the sponsor should receive a change order log on a monthly basis (whether or not changes took place). In this case, even without a formal process of change order coordination, both sides will know the amount of the change order cost to be eventually signed

Even if, for different reasons, such provisions are not included in the contract, a CRO can use the latter approach to make the sponsor aware of budgetary changes. This way, the sponsor can either stop further unbudgeted activities, or allocate funding for them.

COORDINATING RESPONSIBILITIES

Another factor which is vital to minimise the burden of belated change orders is continuous coordination between people in the field and those who are involved in the change order process. In order to track changes accurately, it is advisable that, for each project, a CRO appoints a person (be it a financial analyst, accountant, clinical trial assistant or project manager, depending on the size of the project and CRO) whose duties include tracking the project performance strictly in terms of change order issue necessity.

Another possible approach to resolving the issue of delayed change order coordination is a preparation of performance reports, regardless of payment schedule structure. If payments are based on performance, tracking of units performed is done more or less automatically. However, it is advisable that performance reports do not just calculate the number of units done during the reported period of time, but also the total number of units performed from the beginning of the project, as well as a reference to the total amount of planned units in the project. This will help to track the volume of the work performed, and to begin preparation to the change order process in time, enabling accurate calculation and coordination.

If payments are made based on milestones achieved, the performance reports might be not necessary. However, it is beneficial to keep them for the reasons outlined above.

CONCLUSION

We have sought to show that, although there is no way to eliminate the inner conflict of the situation when the work is done, or pass-through expenses are incurred only after a change order is signed by both parties, there are ways to prevent the complications connected with the amendment coordination. Some simple solutions proposed are:

  • To discuss the situation upfront, and this conversation should not be limited to ‘prior written approval’, but should explicitly spell out the process
  • To have special staff on board to track possible changes in the budget
  • To keep change order log and to maintain performance reports whether or not they are required by the contract

Adherence to these simple rules will aid the CRO and sponsor to eliminate issues of additional funds incurred by the sponsor, an underpayment for the CRO, and will lead to a successful project performance and a satisfactory and fruitful collaboration for both sides.


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Anna Ravdel is Director of Business Development at Synergy Research Group (SynRG). Anna graduated from the University of Manchester with an MBA degree in 2001. Prior to joining SynRG in 2009, Anna worked as a Director of Business Development at Evidence Clinical and Pharmaceutical Research, and Director of Business Development, Eastern Europe, at Worldwide Clinical Trials. In her current position, Anna’s responsibilities include elaboration of business development strategies, key goals and methods to achieve them. In cooperation with operational departments, Anna is in charge of overall clients’ proposals development, as well as of budgetary and legal relationships with the sponsors throughout project performance.
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