From The Editor | November 8, 2016

Are Outdated Pricing Models Hurting Clinical Research?

Ed Miseta

By Ed Miseta, Chief Editor, Clinical Leader
Follow Me On Twitter @EdClinical

Are Outdated Pricing Models Hurting Clinical Research?

Darlene Panzitta has been involved with clinical trials for more than 20 years, at first consulting for Organon and later for Berlex (acquired by Bayer in 2006), managing its CROs.

In early 2000 her clients were outsourcing pretty much everything and needed someone to manage the large CRO relationships. “I remember feeling I didn’t like the way CROs were handling the smaller clients,” she says. “It seemed the larger CROs were more interested in working with Big Pharma firms than they were with small companies. As a result, small pharma was simply not getting the attention it needed.”

It was at that point Panzitta decided to form a CRO that focused solely on the needs of smaller to mid-sized companies. She knew smaller companies needed a CRO that could provide the advice they needed along with the handholding they desired.

Today her philosophy has not changed. Panzitta still targets small- to mid-sized companies and is focused on women’s healthcare trials, including hormone therapy, in vitro fertilization (IVF), birth control, and other female related indications.

In this interview, Panzitta shares her views on patient recruitment, pricing, and the practice of CROs switching trial personnel.  

Ed Miseta: Is recruiting a challenge in the women’s health space?

Darlene Panzitta: Small- to mid-sized companies have many common challenges, regardless of therapeutic area. One of them is certainly patient recruitment. The only change is the recruitment challenges companies faced 15 years ago are different than the ones they face today. Social media and the internet have completely changed how we recruit patients and chances are you’re impacted by these technologies even if you are not using them. 

We all need patients in our studies. Big Pharma needs patients. I need patients. With multiple sponsors and CROs conducting trials, every patient has to decide which study to participate in. If the choice is going with Big Pharma or a company they have never heard of, many will opt to go with the name they recognize.   

Miseta: Is there a way for small sponsors and CROs to compete with that mindset?

Panzitta: I think company reputation is always important, since patients want to know they will be taken care of by professionals. That is always going to be the case. The smaller companies need to put a lot of time and resources into patient education.  The patient needs to know who the company is and why they are doing the trial.  The internet and social media is a good starting point.  But with infertility, it’s a little different since cost and reimbursement is a big factor. A $20,000 infertility/IVF cycle is simply not affordable for many women. Taking part in a clinical trial might be their only option for getting it paid for. In those cases, the recommendation of their physician is important. They may not care who the CRO/sponsor is because they trust the advice of their doctor. 

As long as we continue to do research, recruitment will always be a challenge. What the industry needs to do better is tap into all of the resources available, including the Internet, social media, and patient groups. In the U.S., at any given time, we’re doing 5,000 trials. That means a lot of patients we need to volunteer to participate in experimental research. And the more trials we have underway, the harder it’s going to be.

Miseta: The cost of trials is a concern throughout the industry. Are smaller companies feeling a pinch?

Panzitta: The higher cost of trials is something every company is experiencing. Something that might have cost $2,000 a patient in 1996 is $10,000 a patient today. While both large and small pharma are impacted by those costs, large companies may be able to deal with them a little better.

Staffing, resources, and experience are also common pain points. Our industry is currently experiencing significant turnover. Even if you manage to get a qualified and experienced staff member, you’re retaining them for two or three years before they move on to another company. It is difficult for them to truly develop the skill sets they need if they are constantly changing companies. Even if someone stays long enough to develop the skill sets, there is a likely chance they will be promoted to a different or higher level position within a short amount of time.

For the small companies, the problem is made worse by the fact that larger, better known companies can go to them and cherry-pick the employees and skill sets they need.

Miseta: One of the biggest complaints I hear from sponsors is they get an initial quote for a trial, but then it constantly changes. They eventually feel they are being nickeled and dimed to death by their CRO.

Panzitta: Oh yes, I completely agree. I think that is the biggest complaint I hear as well. In fact, when I started my company I adopted a fixed-cost billing model for that exact reason. I experienced the same thing when I was managing CROs for pharma. If I had a study that took two years to complete, I think I spent more money on the change orders than the quote I received for the entire trial.

Costs can be very frustrating because every trial will have changes. Adjustments will be made and should always be considered at the beginning of the trial. Unfortunately, the number of changes has gotten significantly worse over the years as trials get more complex. Changes seem to be more acceptable now than they were just 10 years ago. Today you really have no choice. If you don’t make the change, you run the risk of disrupting the study.

Miseta: Do companies need to change how they handle pricing?

Panzitta: I think the pricing models definitely need an overhaul. This is just my opinion, but I think every CRO should be working off a fixed-price model. It should stay consistent throughout the trial and there should be penalties in place if CROs change staff on you or if pharma companies make changes to protocols.  

CROs should not have to find ways to recoup their money when dealing with significant changes made by pharma. But at the same time, if a CRO promises to devote a certain individual or team to a trial, it should be held accountable for that and be penalized if they make changes. Those changes create a learning curve and will delay the study and increase the costs.

Unfortunately, we have a lot of large CROs out there who prefer the variable pricing model and do not want to change. Pharma will have to get involved, put its foot down, and insist on a flat-rate model that only changes if a penalty situation arises.

Miseta: Fixed pricing is nice, but if we know changes will occur, what is the solution?

Panzitta: What we try to do is anticipate the changes. When we are starting out a study we know, just based on our experience, that there are going to be three to four protocol amendments. If that is something you can anticipate, then you can incorporate it into your pricing model.

For example, we often know that patients will be added to a study. If the client adds 10 or 20 patients, we do not have to charge them for that, because we anticipated it and adjusted for it in our quote. But if they add 100 patients, there will be a charge for that which we agreed on ahead of time.

To be fair, we do have pharma clients who see that pricing and ask, “Why would we pay this if we only have one protocol amendment?” I explain that the assumption is they’re going to have up to four. By paying that fixed price, when they get to five or six amendments, they will still only pay for four, and that price will not change.  However, if they only have two amendments they are not getting a price reduction. There needs to be a balance of risk and reward for both parties.

Miseta: So why don’t all CROs use a similar model?

Panzitta: It’s difficult for a large company to do that because they have overhead, investors, and are working from a resource/hourly based model. Still, we feel this is the right model for us and for our clients. We work from a month to month billing cycle and sometimes lose money, but our goal is always to get the client to the point where they minimize their changes and know what changes they will have to pay for. About half of them appreciate the fixed billing and half do not.  The point is a client finishes their trial with a similar budget from the start of the trial. Knowing your budget is not going to increase over the course of the trial is pretty significant factor for smaller clients.

Miseta: Earlier you said CROs should be held accountable if they make personnel changes in the middle of a study. It’s odd to hear that coming from a CRO.

Panzitta: I suppose it is. But for the CRO/sponsor partnership to work, we have to be honest and trustworthy with one another. We can’t dangle one team or price in front of a client when it’s time to sign the contract and then replace the team or change the pricing later on. If the CRO does that, they should have to pay a penalty for it which is spelled out in the contract.

Think about it – this is a contract between two parties where they both agree to do certain things. It’s a two-way street. If the sponsor makes certain changes to a study, they pay penalties and that is spelled out in the contract. Why should that same thinking not apply to CROs as well? 

Miseta: CROs would argue that sometimes personnel change is unavoidable. People get promoted or leave the company.

Panzitta: True. But I’ll take the penalties for staff changes. It is my job to keep my staff motivated, happy, and wanting to stay with the company. I think the flip-side of that argument is: Why would you want to work with a company that can and will change staff at any time during your study and not face penalties for doing so?