CRO Variable Pricing Explained: The Frustration of Change Orders

As the field of clinical trials advances towards efficiency and better resource allocation, more sponsors are opting to initiate partnerships with contract research organizations (CROs) for more specialized expertise. However, not all CROs are created equal, and one of the most important points to consider when choosing the right CRO is their pricing model. Starting and maintaining any clinical trial is no small burden to a biopharma/biotech sponsor’s pockets, but the right CRO’s cost model can alleviate this pain point.

When you outsource a clinical trial to an experienced CRO, how can you tell which approach is the most affordable and realistic? In this article, we’ll dig into why the variable approach is becoming less desirable for sponsors seeking cost-effective, transparent pricing.

Traditional CRO Pricing Models

Traditional cost models are still widespread, but they’re especially relied on by larger CROs. Time and materials (T&M) contracts are the simplest pricing model; these include set labor rates for time spent by the CRO’s employees, as well as unit rates for materials purchased. However, because clinical trials are complex dynamic projects, many CROs, especially larger companies like PPD and IQVIA, will charge sponsors with variable pricing models.

Variable pricing, also known as the full-time equivalent (FTE), relies on an agreed-upon rate that is charged based on the number of full-time hours their employees spend on that particular project. This model often results in unpredictable rises in cost because clinical trials are highly susceptible to regulatory, site-related, or internal changes. As these changes occur, the scope of the project gradually expands, which leads to the project becoming increasingly expensive for the sponsor over time. To discover why this pricing model is antiquated by today’s standards, click here.

What are Change Orders?

We’ve established that clinical trials are by no means static projects, but this then presents the challenge of somehow accommodating unforeseen changes into the contract. This is where change orders come in. A change order is a documented contract amendment between a sponsor and their CRO when the scope of the trial shifts or expands. Although the concept of variable pricing and submitting change orders may seem logical, considering it does allow every cost to be itemized, they come with frustrating limitations in reality.

The Pitfalls of Change Orders

The very nature of a change order will cause a CRO’s running of the sponsor’s study to halt temporarily for the sake of reallocating resources, reassessing costs, and gaining the appropriate approvals. When multiple shifts in the project occur, as expected with trials, change orders quickly become a tedious bureaucratic obstacle that undermines the sponsor’s original goal of meeting their goals efficiently. Time is money in the world of clinical research, so this pause in the CRO’s work to restructure the contract can not only cause delays but thousands of dollars in losses due to those delays.

Another similar pitfall is that many vendors may initially win the project simply by underbidding. However, with the use of change orders, the total cost charged for a clinical trial may end up far exceeding the sponsor’s estimations. Additionally, there is inherent ambiguity between the sponsor and a CRO in terms of what a project will cost overall, as well as what one’s expectations are for the other. When CROs provide variable pricing, transparency, and affordability are sacrificed for unpredictability and friction in the long run.

Modern CRO Pricing Models

T&M and FTE contracts are not the only options available out there where pricing models are concerned. Fixed-fee pricing is the solution to the challenges of variable cost models. As its name suggests, sponsors are charged an agreed-upon flat fee that includes all services offered throughout a trial. Unlike larger companies, modern CROs like Vial CRO are forgoing the use of variable pricing entirely and only offering fixed-fee contracts for the convenience of their clients. Visit Vial CRO’s article here to learn how we’re achieving this.

Why Fixed-Fee Pricing Benefits Sponsors

First and foremost, fixed-fee CRO pricing models are far simpler and conducive to the efficient use of time and resources to run a sponsor’s clinical trial. This allows a project to remain within budget, and the CRO’s trial team can spend more time on the study itself, rather than on negotiating. Ultimately, fixed-fee pricing affords each party more transparency and trust. This fosters a stronger partnership, especially because both the CRO and sponsor have a balanced stake in the project’s risks and rewards.

Vial is a full-service, tech-enabled CRO with a proven track record of innovating the trial management process at affordable costs for sponsors around the world. To learn how you can save more on your next clinical trial, connect with us today!

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