By Salman Shah and Nick Davies, Ernst & Young LLP
Clinical trials are critical to life sciences innovation, providing the indispensable framework for developing new medicines and validating their effectiveness. But the rapidly changing regulatory, tax, and global business landscape, driven in part by COVID-19 and ongoing economic and political shifts, means that biopharma executives must keep careful watch over how they implement and monitor decentralized clinical trials (DCTs). As industry leaders face looming losses of exclusivity and the need to replenish the therapeutic pipeline, the successful execution of DCTs is paramount.
There are several best practices for DCT administration in the current landscape. Below, we outline key considerations for biopharma executives in overseeing hybrid or fully decentralized clinical trials.
The Rise Of Patient-Centricity And Impacts On Data
Today, while patient‑centricity is imperative, it is not a new idea; even before the pandemic, there was increasing focus on giving patients choices. It took the widescale disruption of COVID-19 to push patient-centricity in clinical trials to the top of the agenda and shift telemedicine, remote monitoring, and virtual patient care from “nice-to-have” to “need-to-have.”
Many of these enablers of DCTs have been on the market for some time; the FDA, for instance, recommended a shift to remote monitoring for clinical trials back in 2013. Technology-based solutions for site activation, patient recruitment, eConsent, and many other aspects of the clinical trial initiation and administration processes offer a wide spectrum of opportunities to virtualize activities. And over the past 18 months, in recognition of challenges posed by the pandemic, the FDA has demonstrated flexibility in clinical trial regulations for protocol design and review, eConsent, operational management, direct-to-patient drug and supply logistics, and patient treatment management.
Although sponsors have traditionally been conservative in the adoption of new technologies, these solutions have now become vital to continue study progress and mitigate any delays in time to market. Near-term, while prioritization of solutions for DCT patient recruitment and management of patient treatment and data will be key, sponsors can also more broadly improve site satisfaction, drive management efficiencies, and even accelerate the clinical trial life cycle.
But while some biopharma executives may believe the industry’s patient-centricity should have no limits, a mixed approach of hybrid and in-person trials could create issues with data consistency. If trials collect data virtually in one market, but do so face-to-face in another, there may be statistical challenges in integrating the data from these non-fully comparable studies. Any data analysis of DCTs or even hybrid trials must account for these variations and adjust modeling accordingly.
The virtualization of clinical trials involves more than simply building the technology platforms that can enable them – it also requires development of architecture needed to extract data. An example of this challenge is remote electronic health record (EHR) access: Based on our conversations with biopharma executives, only one in three in-person clinical trial sites have the privacy safeguards to allow remote access to records. The industry needs the capability for “building pipes into EHRs” for DCTs to succeed long-term — part of the broader challenge of building an effective data infrastructure across the whole ecosystem, connecting sponsors, clinical research organizations, and study sites. Strict adherence to patient privacy during use of these tools is required not only to comply with federal protections like the Health Insurance Portability and Accountability Act (HIPAA), but also to cultivate the trusted environment needed for regulatory approval and patient buy-in.
Managing Indirect Tax Considerations for DCTs – Customs And Value-Added Taxes (VAT)
DCTs represent significant spend, especially when conducted globally; with all the pressures on clinical trials, having a tax-efficient structure can make your clinical trial budget go further. This is particularly important for customs and VAT, which are due on clinical trial drug products moved to patients across borders. This is true as well for DCTs that take place across multiple markets. With proper planning, negative financial impacts such as irrecoverable VAT or duties may be mitigated or deferred. In addition, noncompliance can result in significant penalties and delays that may impede the ability to operate clinical trials, as well as negative implications for patients. Given typical VAT rates are on average 20% or more,1 the amounts at stake can be significant, having a material impact on the DCT budget.
It is important to first understand the supply chain, including the parties responsible for various movements, and where cross-border activity will occur. With this knowledge, customs-related obligations can be established. Additional attention is warranted in many import jurisdictions if the trial sponsor is not established in the country of importation.
Once the party responsible for the import is established, relevant customs data elements need to be determined, most notably, classification, country of origin, and value. These elements ultimately dictate the associated customs duty costs. Further, a supply chain that which has multiple cross-border movements can also complicate the origin analysis.
In addition, customs valuation can be particularly challenging for clinical trial drug products, as there is likely not a “sale for export,” with the sponsor retaining title throughout the supply chain. The most common method of customs valuation is the transaction value. This method is often not applicable to clinical trial transactions, so an alternative method of valuation will need to be established. Use of another method generally requires documentation to support use of the alternative method and a review of the elements of value to include.
Import VAT is typically recoverable in principle, but in practice can commonly become a cost. This is particularly the case when the sponsor holding title to the goods does not have a resident company where the patient is located. This can happen when a U.S. sponsor imports into the local country but does not have an establishment or presence there. Sponsors may not always have visibility on the import VAT incurred for moving clinical trial materials across borders, as these can be on-charged as a line item on the invoice from the carrier or the local partner.
There are actions organizations can take to better manage the VAT and customs impacts of clinical trials, whether in-person or decentralized. These include establishing a clear understanding of the supply chain, tracking import documents and invoices to accurately reflect VAT and customs treatments, understanding VAT rules in advance of importation or transactions, and monitoring legal and policy changes. Biopharma leaders should also closely assess impacts of VAT and customs on clinical trial budgets, tracking the bottom-line impacts as well.
Rapid advances in implementing and monitoring DCTs, made possible during the pandemic, have transformed the clinical trial landscape. In this environment, biopharma sponsors should carefully track VAT, when relevant, while also aligning data and infrastructure of trials with a patient-centric approach. This will help ensure optimal execution of virtual clinical trials and ultimately deliver better patient outcomes.
About the Authors:
Nick Davies is the EY-Parthenon R&D strategy leader. He has more than 25 years of experience working in and with pharmaceutical companies as a scientist, strategist, entrepreneur, and leader. He works extensively with healthcare and life sciences companies and private equity firms for both front-end strategic analyses and transaction-related advice. Davies’ strategy, consulting, and industry experience covers research and clinical development, compliance, quality, commercial and marketing, business development, M&A, external payer, access, and regulatory environments. He holds a Ph.D. in immunology and genetics from Cambridge University in England.
Salman Shah is a partner at EY, where he advises healthcare payers and providers, life sciences organizations, and universities with strategic planning, operational performance optimization, technology selection and implementation, and compliance management. His specialties encompass provider care (e.g., ICD-10, HER, revenue cycle, clinical trials) and payers (e.g., CM/DM&UM, BPM, rules engine, claims, etc.). Salman holds a BS in cellular and molecular biology and economics from the University of Michigan.
The views expressed by the authors are not necessarily those of Ernst & Young LLP or other members of the global EY organization.
1 Consumption Tax Trends 2020, Organisation for Economic Co-operation and Development, December 3, 2020.