Change Orders: Antiquated Contract Research Organization (CRO) Pricing Models

CRO Pricing Models
CRO Pricing Models

Contract Research Organizations (CROs) are companies that work on a contract basis within the pharmaceutical, biotech, and medical device industries to assist with research services. A rise in the number of clinical trials and the COVID-19 pandemic has led to an increased dependence on CROs by sponsors, which is expected to continue. The CRO market is projected to increase by approximately USD 47 billion in the next 5 years.

As most CROs are equipped with expertise, technology, and standardized protocols for these services, they can help increase efficiency, decrease errors, and improve the likelihood of approval from regulatory agencies. Streamlining the research process brings a lot of benefits, including reduced costs. Although average costs of clinical trials vary by phase, therapeutic area, and the number of subjects, lengthier clinical trial timelines have been found to be more expensive. Thus, improving the efficiency of the trial is one of the most significant cost-cutting measures that can be taken.

When searching for a CRO, sponsors should consider the CRO’s pricing model that will be used and pay close attention to the details of the contract as many CROs use variable pricing models that include change orders. Below we explain traditional CRO pricing models, the challenges of change orders, and how sponsors can save money with more modern CRO pricing.

Traditional CRO Pricing Models

Traditional pricing, especially used in large CROs, relies on a variable pricing model — the FTE or full-time equivalent. The FTE measures the number of full-time hours an employee dedicates to a particular project for a sponsor or client to determine the utilization of resources according to time and personnel. Based on this, the FTE is charged by an agreed-upon rate. As changes occur within the clinical trial, whether it is the number of patients being recruited, changes to the protocol, data being analyzed, or the addition or removal of trial sites, it can change the number of people or hours being dedicated to the project by the CRO. This leads to a change in the number of FTE, and subsequently the cost of the project.

What are change orders?

Change orders are amendments to a contract that change the contractor’s scope of work. They are often used within the contract research industry, especially as a part of variable pricing models, because of the complex, dynamic nature of clinical trials that may require additional services from the CRO.

Challenges of change orders

Change orders are used wherever there is a revision made within the process of the clinical trial. These changes can cause disruptions to the workflow as new resources may need to be allocated, costs calculated, and approvals needed, burdening the sponsor and the CRO.

Common challenges faced with using changes orders include:

  • Initial underbidding by vendors to win the trial bid leads to an increase in total cost with the use of change orders.
  • The length of time needed to approve a change order by different teams and levels of management at the sponsor and CRO. This leads to an increase in cost by several thousand dollars due to a delay in the trial.
  • Insufficient transparency in costs from the CRO and lack of clarity in expectations from the sponsor.

The Fixed-Fee Pricing Solution

In order to increase efficiency and reduce the complexity of the contract research process, a fixed-fee pricing model can offer a simpler solution.

Smaller and more specialized CROs are now more frequently offering modern, fixed-fee pricing to ensure clarity and transparency in the contract. The pricing model includes a flat fee that is inclusive of the services offered for the duration of the clinical trial. Many CROs with fixed-fee pricing will take on some of the risk-share and costs, even if there are amendments made during the trial process.

Anticipated amendment and delay costs are often included in the original contract between the CRO and sponsor. However, even with fixed-fee pricing many CROs will reserve the right to modify pricing in accordance with amendments to the study design or protocol that are made by the sponsor. If a sponsor requests amendments that significantly increase the budget beyond the agreed-upon scope, the fixed price would in some cases be adjusted. These terms should be discussed in initial negotiations. Fixed-Fee pricing is a promising alternative to FTE pricing and has many benefits.

Benefits of fixed-fee pricing models include:

  • The ability to create and stay within an agreed-upon budget.
  • More time spent on the study than on negotiating the cost of changes.
  • Strategic relationships created between the sponsor and CRO.
  • More aligned incentives and shared accountability on commitments.
  • Increased transparency in costs and expectations.
  • Sponsors have more control over the budget.

Ready to work with a CRO that offers fixed-fee pricing?

Vial CRO is a full-service, next-generation CRO that offers affordable, end-to-end clinical trial services. Through the use of best-in-class technology, including electronic data capture (EDC), eSource, and ePRO, integrated into one digital platform, Vial is able to minimize human error, and streamline workflow, while delivering efficiency in onboarding, enrollment, communication, and data collection.

The availability of experts in the ClinOps team, industry leaders on the scientific advisory board, and a strong network of investigators ensures expertise in running clinical trials that are faster, cheaper, and better. Vial offers fixed-price agreements with zero change orders and unexpected charges. Through this pricing model and clear communication, Vial CRO brings increased transparency and improved visibility to the clinical trial process. Connect with us today to save money on your next clinical trial!

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