The Role of Fixed-Fee Pricing in the Globalization of Clinical Trials

Discover the potential of fixed-fee pricing in overcoming financial barriers and the challenges associated with globalized clinical trials.
Discover the potential of fixed-fee pricing in overcoming financial barriers and the challenges associated with globalized clinical trials.

Modern technology and innovations have allowed many industries to expand their reach across the world. The interconnectedness and international collaboration emerging from this process of globalization has opened up doors for new discoveries in clinical trials.

While the globalization of clinical trials brings about many opportunities, it’s not without its challenges. Researchers now have access to a more diverse pool of participants, but they also face challenges that come with remotely distributed ClinOps and cost – particularly when using variable pricing models.

Given the current multinational efforts within clinical research, fixed-fee pricing for studies may be the solution that pharmaceutical and biotech companies need.

The Globalization of Clinical Trials

Pharmaceutical companies have been conducting an increasing number of clinical trials in locations outside their home countries. More and more trials are being conducted at sites in Eastern Europe, the Latin Americas, Asia, and Africa – sites outside the “top five” countries that frequently initiate and hold these trials (the U.S., Germany, France, Canada, and the U.K.).

Clinical trials are a cornerstone in the development of new medications and treatments, as well as in updating and improving clinical practices. Traditionally, pharmaceutical and biotechnology companies would carry out these trials in more affluent countries in North America and Western Europe. However, since the turn of the century, there has been a shift in conducting these trials in developing regions.

The 2010s have shown over a 30% increase in clinical trials conducted outside of the U.S., with China, India, and Korea becoming the most active settings in emerging nations. In 2012, the Chinese pharmaceutical market grew by 21% compared to -1% in the U.S.

The clearest advantages to carrying out clinical trials in emerging nations are reduced costs, faster patient recruitment, expanded brand awareness, and increased diversity in participant pools. There are also opportunities to conduct studies in regions where the target disease is more prevalent. [1]

Challenges of Clinical Trials: Cost

A major challenge when it comes to clinical trials is cost. The cost of a clinical study is not necessarily static – as the project progresses, the company or the clinical research organization (CRO) may end up expanding the scope of the project. This means additional services, resources, and work.

Most CROs operate on “variable pricing models,” also known as full-time equivalent (FTE). This means the CRO charges its sponsor per full-time hour spent on the project, based on an agreed-upon rate. The concept is similar to “billable hours” used in various industries.

However, this constant fluctuation in the cost of the clinical trial means the budget is ambiguous and cannot be finalized. This often puts the sponsor at a disadvantage, especially for drug discovery start-ups that cannot absorb large increases in the budget.

There are also risks when following a variable pricing model, since companies may intentionally hike up their work hours to maximize their profits from the study. A CRO might also initially underbid to win a project, then systematically inflate the budget with change orders as the project proceeds.

One solution to this issue is the introduction of a new valuation strategy – fixed-fee pricing.

Fixed-Fee Pricing: A Rundown

CROs have begun introducing “fixed-fee pricing” as an alternative payment model when charging for their services. This involves charging a singular, flat fee for services based on estimates of the labor and resources required to complete the project. This flat fee remains in place regardless of any additional resources and work needed in the future.

The most significant advantage of fixed-fee pricing is the transparency of the study’s budget. Clinical trial sponsors know upfront how much their projects will cost, without the risk of driving up expenditures through changes that they could not have anticipated. This allows them better control over the financial aspect of the project.

The challenge of fixed-fee pricing, however, is that the CRO has less leeway to request additional funding for the project. The CRO may be responsible for planning contingencies for potential pitfalls and challenges in conducting the study, but it cannot reasonably plan for every situation. Placing a limitation on the research fees could prevent the CRO from carrying out additional research or tests, which would compromise the study’s results. However, these things can be worked out in initial discussions and contracts. For more information on how fixed-fee pricing benefits drug developer sponsors, read our article here.

How Fixed-Fee Pricing Supports Globalized Research

When it comes to globalized clinical trials, fixed-fee pricing poses several advantages over traditional models in maximizing the ROI for clinical trials.

High costs are a significant barrier to conducting clinical trials, both locally and abroad. The factors with the highest contribution to the cost of a clinical trial are Clinical Procedure Costs (15-22%), Administrative Staff Costs (11-29%), and Site Monitoring Costs (9-14%). [2] CROs utilizing fixed fee pricing offer transparency around these costs upfront, allowing sponsors the opportunity to budget and plan accordingly.

With 22% of Phase III Trials failing due to lack of funding [3], having a clear understanding of the project scope and costs involved upfront can help sponsors gauge the feasibility of conducting research in a specific country before the trial has even started. This can reduce the risk of running out of funds as the trial progresses.

One major consideration when conducting research overseas is that fluctuating exchange rates can impact the cost of the clinical trial. Fixed-fee pricing can hedge against any unexpected fluctuations in cost that are outside the sponsor’s control.

Changing the Landscape of Clinical Trials

The risks and challenges involved in clinical trial pricing models will always exist, but they should not dissuade biotech and pharmaceutical companies from taking advantage of the expanding landscape of clinical research. Globalization has brought about innovations – with the mRNA COVID-19 one prominent example – that have transformed medicine and healthcare.

Vial is a tech-enabled, next-generation CRO that offers affordable fixed-fee pricing models for all sizes of clinical trials within a range of medical fields. We believe in delivering faster, better, cheaper trials for sponsors that maximize ROI while minimizing overhead costs.

Contact Vial today to discuss your next clinical research project.

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