How to Anticipate the Vendor Costs of Clinical Trials
by Auxilius on Apr 22, 2022 6:00:00 AM
Estimating the costs of clinical trials can be extremely difficult for two main reasons:
- Unforeseen clinical hurdles: Clinical trials can change dramatically throughout the trial process, with unexpected delays, enrollment issues, last-minute protocol changes, and other unforeseen hurdles.
- Outsourcing and vendor reliance: When you work with vendors, services and project management costs can add up quickly—especially if you don’t have transparency into their means and methods.
In our last post, we covered the challenges of unforeseen clinical hurdles. This time, we’ll look at how to anticipate the vendor costs of clinical trials.
Clinical trials rely on more vendors than ever. Once upon a time, clinical trials only worked with one or two vendors at a time. But, thanks to greater levels of interconnectivity, changing regulations, increasing complexity, and globalization, it’s not uncommon for a clinical trial to manage 10–20 vendors simultaneously, from lab vendors to bio vendors to market vendors.
Sponsors have only increased their reliance on outsourced vendors in recent years. Between 2016–2017, 43–45% of clinical trial operations were handled by third parties. Since then, the percentage of third-party vendors in clinical trials has jumped as high as 65%.
What’s driving all this outsourcing? It has a lot to do with the complexity of modern clinical trials. From the growing number of required trial procedures to changing legislation to the availability of specialized patient populations, outsourcing has become increasingly popular out of necessity.
Studies have shown that as protocol complexity goes up, so do cycle times and protocol amendments, while patient recruitment and retention rates drop. Also, because trials aren’t being conducted in-house, some of the data collected may be unnecessary or erroneous, which can further delay the timeline (e.g., due to longer studies and longer wait times on submission to the FDA).
Even on a trial-by-trial basis, there are compelling reasons to outsource. Take, for example, the cost per volunteer. In recent years, the cost has jumped 69% for Phase II trials and 49% for Phase III trials. Any opportunity to lower these costs should be seriously considered.
The clinical research organization (CRO) market size is growing as well. In 2015, the CRO market size was $25.7 billion. In 2022, the CRO market is estimated to balloon to $45.2 billion. Much of this growth can be attributed to biotech sponsors (startups and big pharma alike) relying more and more on vendors.
There are financial toolkits and best practices you can implement to vastly improve cost planning and better anticipate what your costs will be. Armed with this knowledge, you can adapt and, when needed, pivot to new, smarter financial planning. It’s about being proactive, prepared, and ready to react to changes as they arise.
Let’s take a deeper look, starting with accrual costs.
Accruals and accounting for clinical trial vendors
How much time do you spend tracking accruals? The answer impacts both project management costs (services) and passthrough costs. Passthrough costs, which cover both expenses and services, can easily add up to seven or eight figures.
This is why it’s so important to plan ahead and understand where and when these costs may arise. The “fair market value” of these services is a tangible number you’ll want to know before getting started. Miscalculating could cause drastic shifts in accrual balances and potential restatements of your financial reports. This can quickly turn into a nightmare for Accounting and Compliance—as well as your bottom line.
One of the most common ways passthrough costs come into effect is when clinical trials outsource to global labs. This is a common practice—global labs are part of a smart financial strategy for clinical trials. Offshoring can be cost-effective, speedy, and more efficient than conducting trials domestically.
Today, several destinations are very popular for outsourcing clinical trials, including Latin America, China, South Africa, Russia, and India.
However, outsourcing carries unique costs, including trial insurance (which varies from country to country), shipping costs (for tumor and blood samples and even paperwork), regulatory committee fees, and translations, among other costs.
Even if you conduct all your clinical trials in your home country, passthrough costs can add up quickly. Vendors can and will charge for everything from site contract fees to enrolled patient payments, medical testing, and technology (like video conferencing software).
One of the most staggering vendor fees for clinical trials? Investigator costs. Some estimates put investigator payments as high as 48–50% of the total cost.
Even worse, shifts of any kind can lead to audits—and auditing can be a costly endeavor. A sound and resilient accrual strategy and process is your best defense here.
Cash and runway projections for clinical trial vendors
It’s not just important to know how much you’re going to pay, but when you have to pay it. Even if your cost estimates are accurate, your trial can be derailed if you don’t have the right funding in place at the right time.
The average clinical trial takes nine years and carries a $1.3 billion price tag from origination to FDA approval. While there are notable exceptions, clinical trials are becoming more complex across the board, so more likely than not—you’ll often need funding for more than a decade.
This is also important when it comes to fundraising. While clinical trial fundraising has become more diversified in recent years (crowdfunding campaigns are becoming more viable), long timeframes and potential protocol changes mean it’s always better to have more money than less. Early planning and anticipating changes (including black swan events like the COVID-19 pandemic) is essential to effectively track spend and project financial runway remaining. This keeps fundraising needs top of mind while also having the reporting in place to communicate with current and potential investors on financial performance, tracking, and compliance.
Lastly, it’s important to remember that change is inevitable. Costs may change drastically, but being prepared means your trial will be adaptable and resilient, mitigating any financial shocks.
Invoice validation and managing vendor spend
Unfortunately, invoices are not always as transparent as they should be. They get rolled up with other costs, including services, passthrough, and investigator charges.
Delegates need to set expectations from day one. Invoices should be paid when certain milestones are achieved, as agreed upon in the contract. Monthly financial reports and payment tracking should be set up to ensure that everything is transparent and accounted for, as well as monthly protocol status reports, patient correction forms, patient care charges, and data analysis.
Having a heavily detailed, line-item invoice is crucial, since hidden trial costs are very common. For example, “time” costs, such as time spent monitoring visits, recruiting and auditing, or dealing with SAEs, should be itemized by vendors.
Transparency is key to ensuring that your trial costs are fair and within budget. Forcing vendors to itemize everything down to a per-patient level, including individual diagnostic and passthrough costs, is also your best negotiation tactic.
Anticipate clinical trial costs better with Auxilius
Vendor costs will add up—there’s no way around it. Changes are inevitable and it’s impossible to anticipate everything.
But being able to proactively plan for anything while staying financially prepared to react to changes as they come is the secret to keeping costs low.
Vendor costs shouldn’t be a question mark. Fortunately, there’s a better way to manage accruals, invoicing, and accounting. Clinical trial financial planning shouldn’t be a guessing game—it should be a reliable, lucid process that you can count on. That’s what you get with Auxilius.
Stop being surprised and start seeing into the future. We’ll help you flag issues before they arise and anticipate vendor costs that could catch you off guard while giving you real-time updates on what’s happening with your entire roster of vendors.
Auxilius keeps things running smoothly so you can go back to focusing on what really matters—running accurate, life-changing clinical trials.