Fixed-Fee Pricing and the Importance of Budget Predictability in Clinical Research

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Clinical research for new drug development is a lengthy and expensive process, with the clinical trial stage being the most time-consuming and costly. The high cost of clinical trials is driven by the resources needed to activate trials and reach accrual targets. Kim et al. (2023) juxtapose the significant investment of time and money required with the modest success rate of 7.9% from conception to new drug registration. Reducing costs and increasing clinical trial efficiency, e.g., through efficient trial design, is a sponsor priority. The choice of contract research organization (CRO) pricing model, specifically focusing on fixed-fee pricing, also plays an important role in assuring budget predictability in clinical research.

Clinical Trial Cost Drivers and Challenges

From initial discovery to final market approval, the journey to bring a new drug to patients is complex and resource-intensive. These cost drivers encompass a wide array of elements, including research and development expenses that come with running clinical trials.

Cost-driving challenges

A prominent cost-driving challenge within the clinical trial landscape is patient recruitment and retention. A Johnson (2015) study indicated that approximately 80% of clinical trials do not meet initial recruitment goals and timelines. Resulting delays cost sponsors an estimated US$8 million in revenue per day.

Other challenges come from change orders and protocol amendments. Modifications to trial protocols, procedures, or logistics can introduce additional costs and delays, requiring careful management to balance scientific integrity and financial impact.

Cost drivers

The high cost of clinical trial execution substantially impacts a trial’s long-term feasibility and the choice of clinical research. According to Sertkaya et al. (2016), the top three cost drivers of clinical trials were:

  1. clinical procedure costs (15%-22% of the total)
  2. administrative staff costs (11%-29% of the total)
  3. site monitoring costs (9%-14% of total)

Below, we outline a few prevalent cost drivers encountered during the execution of clinical trials.

1. Start-up

Start-up is a key determinant of clinical trial success as delays associated with start-up translate to an increase in overall study timelines. The extension of timelines incurs significant costs and affects the trial’s feasibility. Start-up delays may also result in wasted drugs or lack of drugs due to expiry and loss of clinical sites.

2. Therapeutic area

Sertkaya et al. (2016) examined different factors, e.g., therapeutic area, patient recruitment, administrative staff, and clinical procedure expenditures in the U.S., and their contribution to clinical trial costs. The authors found that the therapeutic area was an important determinant of clinical trial costs. The average cost of a study conducted at a U.S. site by phase:

  1. Phase I: was from US$1.4 million (pain and anesthesia) to US$6.6 million (immunomodulation), including estimated site overhead and monitoring costs of the sponsor.
  2. Phase II: US$7.0 million (cardiovascular) to US$19.6 million (hematology).
  3. Phase III: US$11.5 million (dermatology) to US$52.9 (pain and anesthesia).

3. Duration of clinical trial

Clinical trial duration is a crucial factor for sponsors in determining the financial risks and rewards of drug development. According to Thomas (2021), the duration of Phase I clinical trials is 2.7 years, Phase II trials is 3.2 years, and Phase III trials is 3.8 years, while the success rate for new drug approval is less than 7.9%. Delays increase the trial duration, financial risk, and research expenses for sponsors. Further, a review by Bentley et al. (2019) revealed that delayed trial activation impacts clinical research budgets, while poor accrual results in low-value trials and, consequently, wasted resources.

4. Indirect costs

A study on comparative costs of UK clinical trial units found that indirect costs varied considerably, from 15% to 59% (median 35%) of the total economic cost of the grant provided.

Increasing Clinical Trial Efficiency to Reduce Costs

Reducing costs and increasing clinical trial efficiency is a priority for sponsors. Examples include:

1. Decentralized clinical trials

Decentralized clinical trials (DCTs) are increasingly implemented to increase quality and efficiency in clinical trials. Benefits include faster recruitment, improved retention, increased convenience for trial participants, and increased access to trials.

2. Recruitment

Toly et al. (2022) found that virtual recruitment was highly successful in meeting recruitment strategy benchmarks. The overwhelming majority of potential participants (91.7%) approached agreed to be contacted for enrollment.

3. Adaptive designs

Wason et al. (2022) and Wilson et al. (2021) highlight adaptive designs and their promise to improve the efficiency and patient benefit of clinical trials.

As the pharmaceutical industry strives to optimize efficiency and streamline processes, the choice of contract research organization (CRO) pricing model also plays a pivotal role in determining the financial landscape of clinical trials. The use of fixed-fee pricing by CROs, for instance, introduces a level of budget predictability that can significantly impact the cost structure and financial planning of a clinical trial.

Why Fixed-Fee Pricing?

Given the challenges and financial risks described above, the predictability of sponsor budgets is called into question. While variable pricing models were the status quo, sponsors are seeking a more cost-effective and transparent finance model like fixed-fee pricing. In tandem, more and more CROs are switching to a fixed-fee pricing model to benefit themselves and their sponsors.

Fixed-Fee pricing is a pricing model whereby CROs charge a flat fee for the entire clinical trial, regardless of how long it lasts. Unlike the traditional full-time equivalent (FTE) or variable pricing model, the fixed-fee pricing model guarantees budget predictability for CRO services for the entirety of a project.

Variable pricing models usually include protocol or scope changes and change orders. Change orders document amendments to the contract between sponsors and CROs due to, e.g., sponsor requests for more CRO services or CRO recommendations for a change in the course of action. Fuelled by the cost drivers described above, unexpected changes and unforeseen circumstances may require additional (chargeable) work by CROs that negatively impact sponsor budgets. The issue with change orders is it slows the progress of clinical research, causing delays and reducing trial efficiency.

Fixed-Fee Pricing Benefits for Biotech Sponsors

The benefits of using a CRO with a fixed-fee pricing model include transparency, predictability, and ease of understanding. The sponsor and CRO have shared accountability on clinical trial commitments. Further, this model creates upfront conversations and keeps communication ongoing. Sponsors have more control over how funds are spent, thus improving trial efficiency. Additionally, sponsors can only get charged for changes within their control. Emerging biotech companies and start-ups with smaller budgets and limited ability to absorb cost changes can benefit from fixed-fee pricing for budget predictability. Fixed-fee pricing aligns incentives and builds trust between CROs and sponsors, and keeps costs low. As all parties agree on the terms at the outset of their relationship, there are no surprises during the trial.

Vial CRO’s Fixed-Fee Pricing Model

Clinical research aims to maximize efficiency and productivity while minimizing risks and costs. CROs are not exempt from this, and at Vial, the goal is to augment a sponsor’s return on investment and return quality results. Vial is a tech-first CRO delivering faster, better, and more affordable clinical trial results for biotech sponsors. Vial can work within budget constraints to deliver results on schedule and offer the most optimal pricing model – fixed-fee pricing.

How Vial Offers Fixed-Fee Pricing

At Vial, a fixed-fee pricing model applies to all contracts and helps sponsors stay on budget by avoiding costly unanticipated change orders. Vial offers affordable fixed-fee pricing for clinical trials of all sizes.

How do we do it?

  • An experienced team committed to timelines – Our team is experts at meeting agreed-upon timelines through clear communication and transparency during all trial phases.
  • Next-generation technology – Our intuitive tech platform integrates multiple trial procedures, from data management and recruiting to reporting, in one seamless system. Process automation streamlines workflows for both sponsors & CROs.
  • Transparency – We remain flexible during negotiations and are upfront about costs at the start. Vial reserves the right to modify pricing in accordance with amendments to the study design or protocol made by the sponsor.

Ready to select a CRO partner that prioritizes cost-efficient trial management without unexpected expenses or delays? Get in touch with a Vial team member today for streamlined, budget-conscious collaboration!

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