Budgets and Contracts – Show Me the Money
Investigators often get excited about the prospect of contributing to cutting-edge research but forget about the more mundane aspects involved, such as reviewing the paperwork involved with budgets and contracts. This chapter will outline the important points to consider related to budgets and contracts before agreeing to participate and as the trial progresses.
To execute a successful clinical trial, you, the principal investigator, must understand how to review the budget and contract set forth by the sponsor. Although the main motivator for conducting clinical trials should be the propagation of medical knowledge, without proper budgeting, you and your institution can lose valuable time and money, which is not in anyone’s interest.
It is important to understand the overall cost implications of conducting clinical trials. Phase 3 trials are generally the biggest expenditure because they are often very large and may involve additional interventions and procedures. Based on a 2005 report, the cost per patient to the sponsor company for a phase 3 clinical trial exceeds $26,000. Phase 2 trials are associated with lower costs at $19,300 per person, and phase 1 clinical trials are the least expensive per person at $15,700, and they require a significantly fewer participants. These costs do not represent what is paid to the investigator but what the entire trial cost to the sponsor company. The main financiers of clinical trials are industry sponsors and governments through research grants. Study sponsors are increasingly being faced with tighter and tighter budgets. Plus, the number of investigators has increased. Both of these factors have had an impact on the cost of conducting clinical trials. To keep costs low, sponsors use databases to more accurately estimate the cost of a particular trial, and employ experienced negotiators to bargain on their behalf.
Budget Negotiation Basics
Most likely, the clinical trial sponsor will provide you with set fees for conducting the trial at your location. However, almost all budgets are negotiable, and you should look at what is involved in conducting the trial and if the allocated reimbursements agree with the potential actual expenditures. Costs for goods and services often vary by geographic location and institution; for example, the costs of performing a procedure in rural New Hampshire may be very different than in urban New York City.
If you do not feel equipped to handle budget negotiations, then appoint a representative whose qualifications may vary depending on the type of facility. Many times, having an independent party handle the budgeting process leaves more room for negotiating, as it becomes more of a business transaction. University-based research centers usually have a designated person who negotiates for them. At a private research center, a budget negotiator is usually a trusted representative, perhaps an office manager with training or a dedicated grants or contracts expert, or the role may be outsourced to a consultant who specializes in this area. The clinical staff should not negotiate the budget because they work too closely with the sponsor or their designated agent (CRO). Although one person is in charge of negotiation, all parties involved should understand the clinical trial protocol provided by the sponsor. The requirements outlined in the protocol determine how much time and supplies are needed, and are vital in determining the budget necessary to be in compliance with the protocol.
There are times when investigators may be willing to accept a marginal budget. For example, if the institution is a new investigative site, it may not be have the capacity to negotiate fully, or if the site has no previous experience with a sponsor, they may be willing to take a lower fee to build a future relationship. The investigator may also decide to accept budgets that are not ideal, if he or she has an overwhelming interest in the research topic. However, investigators need to know where to draw the line.
It’s important to note that phase 2 and 3 trials offer much more negotiation room than phase 1 trials, as they are typically more complicated and are being conducted in support of the sponsors new drug application (NDA) prior to approval. Phase 4 trial budgets are usually nonnegotiable as they are usually conducted to support a post approval marketing effort. This means that compensation for phase 4 trials typically reflects those fees that are usual, reasonable, and customary for the treatment of the condition under investigation.
Payment for Services Versus Cost to the Institution
Tabulating estimated expenditures is a vital component when determining if a budget is adequate. The finances behind clinical trials are very complex and involve a balance between the payments given by the sponsor and the many expenditures. Furthermore, the budget may appear sufficient to meet the needs of the trial, but there are a number of costs involved in clinical trials that are often overlooked. When formulating a budget, costs for office supplies or a document storage locker are all considered important.
Most budgets are quoted per subject, but fees are usually required before any participants are selected. These fees are called start-up fees and include administrative fees, Institutional Review Board (IRB) fees, and pharmacy fees. Administrative time is spent starting Day 1, when a sponsor first approaches an investigator with a protocol. The protocol has to be reviewed for feasibility, and once found acceptable, the investigator and coordinator will typically travel and attend an investigator meeting to learn about the protocol. The IRB has to review the trial protocols before any other steps can be taken, and their fee can be as high as several thousands of dollars. Depending on the institution and the type of study, investigational drugs may have to be ordered, stored, and dispensed from the pharmacy. Most pharmacies charge for these services, and fees may have to be paid up front. The amount of money also varies, depending on the type of investigational drug (ie, controlled substance, intravenous versus oral, etc). It is important to remember that when evaluating the payment plan set forth in the budget, the first payment should cover the start-up fees because, most likely, they are nonrefundable.
Payment of the clinical investigators and staff, as well as the institution itself, is particularly important. Payments to investigators and staff typically comprise 60% to 80% of trial costs. The amount of time your study coordinator will put into the trial is an area that is typically overlooked in an overall study budget. All payments should be agreed on and included in the contract. The amount and type of payment is sometimes controversial because a clinical trial should be completely unbiased. It is critical that the investigator has no financial interest in the outcome. This is one of the reasons that the International Conference on Harmonisation (ICH) Good Clinical Practice (GCP) Guidelines has recommendations regarding investigator fees, and the FDA requires full disclosure. The bottom line is that payments made to PIs should have no bearing on the outcome of the trial. As such, bonuses based on the number of participants completing the trial or compensation in the form of stock options in the company are generally considered unacceptable.
Besides determining the amount of money owed, a payment schedule is also outlined in the budget and contract. Investigators are usually paid in installments after certain milestones have been reached. It is important to remember that these milestones are negotiable. An example of a risky payment schedule is a study sponsor that withholds payment until all of the participants are randomized. If no eligible patients can be enrolled, the investigator or institution will have lost all of the money spent on advertising and screening. The contract should also clearly state the conditions when these payments will be denied. For example, payment may be denied if the investigator does not submit the raw data to the study sponsor by a specific date. Take note that anything that is outside of the per-patient study grant, for example, advertising, start up costs, IRB fees, or pharmacy charges, should be invoiced separately from the site to the sponsor. Sponsor payment systems are usually not set up to accommodate outside charges, and without an invoice, the site may never receive payment for these activities.
Another cost is the stipend paid to subjects for participating in the trial. Study subjects are usually compensated for their time and travel. The payments made to study participants must be reviewed and approved by an IRB to determine appropriateness. Payments should be reasonable and accommodate needs included in participation, such as parking, travel expenses to and from site, and time missed from work. The participants’ payment should not be contingent upon results or completion of the trial, which may encourage people to underreport side effects or stay in a trial from which they should have withdrawn. Compensation should be evaluated on a study-by-study basis, and be based on time and inconvenience to the subject.
The previously mentioned costs are fixed and are fairly straightforward, but there are other variable and hidden costs that cannot be forgotten. Variable costs are difficult to estimate; a good budget will allow invoicing of these costs throughout the clinical trial. The research subjects have a number of associated variable costs, such as laboratory fees, procedure costs, radiology fees, medication costs, and even hospitalization costs. These expenditures are dependent on the number of follow-up visits and other protocol requirements. There are also a number of variable costs associated with equipment and administrative considerations. Equipment fees include office supplies, copying, faxing, phone calls, and shipping. Administrative fees include sufficient workspace for study personnel, locked equipment rooms, and document preparation and storage. Many trials require long-term storage of study documents, which would be a continuing fee if the institution cannot provide its own space. Hidden costs can range from investigator meetings, contract/budget negotiations, and source document preparation during the pre-study setup; to medical waste disposal, electricity for refrigeration, and dry ice used during the study; to depreciation on equipment/furniture and fax/toner cartridges, which have an impact well beyond the completion of the study.
Below is an example of a study activities matrix. This document outlines the particular duties outlined in the protocol in an easy-to-read table. Outlined in blue are those duties carried out by the physician-investigator and those in yellow are performed by the study coordinator. Additional duties may be performed by other staff members or outside vendors, and the equipment and space requirements of each procedure are specific. Thus, all of these procedures have a direct impact on costs, and should be cross-checked with the study budget to ensure that the costs associated with these tasks do not exceed the budget.
Reviewing Contracts
Once the budget is agreed on, the next step is to review and sign the contract. This legal agreement can be very confusing and overwhelming, and it is important to be well versed in the review of such documents. Some investigative sites have an on-site representative that reviews contracts, or this activity can be outsourced to a consultant or attorney that specializes in this type of document review. Many investigators are more comfortable with outsourcing, as it takes them out of the “push back” associated with the contract and budget negotiation process. Remember that the sponsor has a contracts group that is looking out for the best interest of the company, not necessarily the investigative site.
While contract review is a complicated process that is difficult to cover in only 1 chapter, the following are a few specific areas of a clinical trial agreement which should be thoroughly reviewed:
The study protocol title should appear in the document.
An investigator statement should be included explaining that the investigator has read the protocol, is qualified to conduct the trial, and will comply with all applicable federal, state, and local laws and regulations.
A Health Insurance Portability and Accountability Act (HIPAA) compliance statement should be present for studies conducted in the United States.
The term of study should be explained, and reasons for termination should be included. Be sure that the investigator has the right to terminate participation in the study if there is a material breach of the agreement.
Indemnification should be provided by the sponsor and should include the institution, directors, shareholders, officers, physicians, investigators, agents, and employees. Many draft agreement now include a statement of indemnification of the sponsor by the investigator or intuition. As a rule, it is prudent to strike this type of clause as the investigative site has no control over the sponsor’s activities.
Confirm that the budget and payment terms meet the agreed-on specifications.
Another important item to look for in the contract is insurance, which is described in another chapter. Briefly, the contract should provide protection for the investigator, the institution, and importantly, the subject. Your standard malpractice insurance might not cover events that occur during the conduct of a clinical trial. Conversely, conducting a clinical trial may nullify your standard malpractice insurance. Thus, you should contact your insurance carrier before agreeing to participate in any clinical trial. Safety concerns are a major consideration, and these concerns must be addressed in the contract. This list is by no means all inclusive but is a good place to start in your contract review.
Three parties should sign the clinical trial agreement: the sponsor, the principal investigator, and the institution. If negotiations reach an impasse regarding the budget, you may want to engage the sponsor’s Medical Director and explain the problem, which usually involves the granting of insufficient funds to meet your expenses. Be prepared to compromise on the budget but know where to “draw the line.” Importantly, know when to pass on a clinical trial.
If you do decide to move forward, ensure that the legal entity of the institution appears in the first paragraph of the agreement (ie, LLC, PC, etc). In some instances, the investigator is employed by the institution, so only having a representative from the institution sign the document also encompasses the investigator. Once the contract is signed, any amendments will need to be fully reviewed and an addendum to the contract approved. Do not blindly accept changes by the sponsor, which may affect not only the budget but the safe conduct of the trial, as well.
Conclusions
Although there are many benevolent reasons for participating in clinical trials, serving as a study site should be considered a business decision. As with any business, bad budgets and contracts can lead to serious problems that, in the setting of clinical trials, may mean harm to its human subjects. The terms and conditions of all budgets and contracts are generally negotiable, so if you believe that a particular budget cannot meet the needs of what is being asked, it is your responsibility to discuss the issue with the study sponsor. Just because you disagree with something in the proposed budget or contract does not mean that the study sponsor will not want to work with you moving foreword on this trial or future trials. Like the saying “good fences make good neighbors,” good contracts make good business partners.
Resources
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PR Newswire. Phase 3 clinical trial costs exceed $26,000 per patient. Available from: www.prnewswire.com. Accessed March 10, 2008.
US Food and Drug Administration. Information sheet guidances: guidance for institutional review board, clinical investigators, and sponsors. www.fda.gov. Accessed March 10, 2008.
Clinical trial guidelines. University of North Carolina website. www.research.unc.edu. Accessed March 10, 2008.
New Trial Start-Up: Budgeting. Georgetown University Medical Center website. www.clinicaltrials.georgetown.edu. Accessed March 10, 2008.