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Norman M' Goldfarb650 4650119

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Now my back is bent; my hair is grayed. Each sponsor so loved me, ... Source: www.firstclinical.com/magi/documents. Page 25 2006 Norman M. Goldfarb. Slide 25 ... – PowerPoint PPT presentation

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Title: Norman M' Goldfarb650 4650119


1
Budget Development Negotiation at
the Investigative Site
First a PI when just a young maid. Now my back is
bent my hair is grayed. Each sponsor so loved
me, For doing its study. One of these days, might
even get paid.
Norman M. Goldfarb (650) 465-0119 Managing
Partner ngoldfarb_at_firstclinical.com First
Clinical Research www.firstclinical.com
2
Agenda
  • Understanding the sponsor
  • Preparation Understanding your costs
  • Analyzing the proposed budget
  • The negotiation
  • Getting paid
  • Achieving break-even

3
Understanding the Sponsor
Budgets are not going up
4
Tough Times for Sponsors
  • It costs some big number to develop a new drug
  • Over 94 of clinical trials fall behind schedule
  • Increasing margin pressure (globalization,
    regulation, litigation, …)
  • Drug patent terminations, failures recalls are
    at record levels

5
U.S. Site Demographics
  • 24,000 investigators signed 1572s in 2004
  • 2,200 real investigators (at most)
  • Investigator population is moving to low-cost
    areas
  • Most investigators are not experienced budget
    negotiators

Its tough competing with crazy people.
6
Globalization
76
62
Source www.fda.gov/cder/foi/special/bmis
If research goes overseas, where do sponsor
CRO jobs go?
Western Europe 10 Eastern Europe 15 Source
CenterWatch Monthly, August 2006
7
Sponsor Perspective (1)
  • Behind schedule
  • One piece of RD budget
  • Annual Plan
  • Bottom-up/Top-down
  • 1/3 of studies spend under budget
  • Project manager viewpoint
  • Comparison to other studies
  • What is fair? (What does fair mean?)
  • What is legal?

8
Sponsor Perspective (2)
  • Delegation of negotiation
  • Standardization consistency
  • Qualified motivated sites
  • Relationship with opinion leaders ( customers?)
  • Objective is completed subjects
  • Pay for performance

9
Sponsor Cost to Initiate Close a Site
  • Site Initiation
  • Administrative 2,000
  • Qualification Visit 2,000
  • Initiation Visit 2,400
  • Investigator Meeting (PICRC) 3,000
  • Initiation Total 9,400
  • IRB 1,500
  • Interim Visit 2,000
  • Closeout Visit 2,400
  • _______
  • Total 15,300

10
Cost Data
  • Previous current studies
  • Databases
  • Fast Track
  • TTC
  • RapidTrials
  • Medicare/Medicaid (regional)
  • CRO bids
  • Consultants
  • Friends at other companies
  • Consultation with sites
  • During negotiation
  • Other sites with same study
  • Other studies at same site

11
Databases
1 99205 History, Physical Vitals 2 71020 Chest
X-Ray 3 45378 Colonoscopy (10) 4 36415 Blood
Draw 5 Overhead ()
Source Fast Track Systems Trial Space
Grants Manager (PICAS) 2004 1st, 2nd and 3rd
quartiles
12
Budget Customization
  • Availability of investigators opinion leaders
  • Appeal of study
  • Competing studies
  • Time of year
  • Availability of subjects
  • Line items
  • Unusual features of protocol
  • Definitions
  • Cost estimation

13
Preparation Understanding Your Costs
Planning is the substitution of error for
uncertainty
14
Tough Times for Sites
  • More difficult enrollment
  • More stringent regulatory environment
  • More hidden costs (e.g., EDC)
  • Lower margins
  • Naïve competition
  • Global competition

15
Types of Costs
  • Direct Costs
  • Subject-driven
  • Study-driven
  • Contingent
  • Overhead
  • Departmental
  • Institutional
  • Hidden Costs
  • Expected
  • Unexpected

16
Fixed vs. Variable Costs
  • Fixed
  • Study start-up
  • Study close-out
  • Period (semi-variable)
  • Monitoring visits
  • Meetings reports
  • Staff availability
  • Variable
  • Subject-related
  • Contingent

17
Contingent Costs
  • Screen failures
  • Serious adverse events
  • Protocol amendments
  • Extra visits
  • Lost to follow-up
  • Audits inspections

18
Overhead
  • Typically a of direct costs
  • Pass-through costs excluded
  • May be based on federal rate
  • Averages 24 in the U.S.

19
Subject Recruitment Costs
What do patient recruiting firms charge?
20
Developing a ChargeMaster (1)
  • Market prices
  • Sponsors budget template
  • Previous study templates budgets
  • Retail clinical fees
  • Internal price list
  • Third-party reimbursements
  • Other sites
  • Industry databases (e.g., RapidTrials)

21
Developing a ChargeMaster (2)
  • Actual costs Resources x Rates
  • Staff estimates
  • Time studies
  • Account for 100 of time
  • 80-90 of time is hidden
  • Track billable/non-billable hours
  • Compare top line to bottom line

22
Analyzing the Proposed Budget
23
Preparing a Response
  • Use your own worksheet for analysis
  • Secure approvals
  • Transfer data back to sponsors form with site
    worksheet as back-up

24
Budget Worksheet (1)
  • Source www.firstclinical.com/magi/documents

25
Budget Worksheet (2)
26
Find the Costs
  • Proposed budget
  • Study flowchart
  • Rest of protocol
  • Clinical trial agreement
  • Experience

27
Line Item Coding
  • CPT - Current Procedural Terminology
  • Clinical care activities
  • Physical Exam
  • EKG
  • Endoscopy
  • CRT - Clinical Research Terminology
  • Clinical research activities
  • R1060 - Local Laboratory, Set-up
  • R1211 - HIPAA Authorization, Obtain
  • R1241 - Stipend, Process
  • www.firstclinical.com/resources/codes

28
What the Sponsor Asked For
  • Targeted neurological/sensory examination of
    the area(s) to receive investigational treatment
    (worksheet to be provided).

29
What Did the Sponsor Want?
  • 99241 Problem-focused examination with
    problem-focused consultation (15 minutes)
  • 99242 Expanded problem-focused examination
    with expanded problem-focused consultation
    (30 minutes)
  • 99243 Detailed problem-focused examination
    with detailed problem- focused consultation (40
    minutes)

30
Clarify Line Items
  • Definitions (enrollment, screen failure)
  • What PI cannot delegate
  • Standard-of-care reimbursements
  • Local or central lab
  • Materials (butterfly syringes)

31
Incomplete Subjects
  • Consented
  • Screened
  • Enrolled
  • Randomized
  • Subject adverse event
  • Subject non-compliance
  • Subject withdraws consent
  • Subject lost to follow-up
  • Subject withdrawn for medical reasons
  • Protocol violation by site

32
Payment Section in Contract
  • Covered items
  • Screen failure limits
  • Comparator drugs
  • SAEs
  • Record storage
  • Unanticipated costs
  • Additional requirements
  • Inflation (long studies)
  • Study cancellation, hold or early termination
  • Payment terms
  • Triggers
  • Hold back

33
The Negotiation
34
Goals
  • Sponsor
  • Reasonable budget
  • Pay for completed subjects
  • Site
  • Break-even
  • Intangible benefits
  • Help patients
  • Publications
  • Professional reputation
  • Intellectual curiosity
  • Both
  • Conduct successful trial
  • Initiate quickly
  • Minimize administrative burden
  • Avoid surprises

35
Cost for Net Good Data Point
  • High-competence site 14.89
  • Standard-competence site 23.53
  • Low-competence site 37.14
  • Site monitoring 147.44
  • Data management 96.83
  • Is there another industry where the customer
    is responsible for the quality of the suppliers
    product?
  • Source Unpublished manuscript

36
Sponsor Red Flags
  • Bottom line vs. authorized limit
  • Inconsistency
  • Out-of-line line items
  • Added line items
  • Changes in terms
  • Refundable to non-refundable
  • Changes in definitions
  • Management expectations
  • How much do I want this investigator/site?
  • How much do they want this study?
  • Should much time effort should I invest?

37
Negotiating Tactics for Sites (1)
  • Assume you can negotiate
  • Have alternatives
  • Understand negotiators role
  • Establish a constructive relationship
  • Keep your eye on the ball
  • Build/protect relationship
  • Just ask (negotiators authority)
  • Support your proposal with cost and performance
    data
  • Provide line-item standard pricing

38
Negotiating Tactics for Sites (2)
  • Reference pricing in sponsors other budgets
  • Know when to escalate
  • Create a sense of urgency
  • We are going to a health fair this weekend.
  • Show both confidence interest
  • We really want to work with you, but the
    sponsors are beating down our doors.
  • Negotiate from weakness
  • Personally, Id love to work with you on this
    study, but…
  • Know when to walk away
  • Best Alternative to a Negotiated Agreement
    (BATNA)

39
Fast Negotiations (1)
  • Have alternatives
  • Think relationships, not transactions
  • Know who you are talking to
  • Show both interest confidence
  • Have and set realistic expectations
  • Manage negotiation as a business process
  • Negotiate professionally
  • Train staff

40
Fast Negotiations (2)
  • Prepare FAQs back-up positions (or start there)
  • Choose your battles Focus on the bottom line
  • Define roles escalate appropriately
  • Respond quickly meaningfully
  • Manage the queues
  • Measure performance
  • Know when to walk away

41
Getting Paid
42
Payment Scenario
  • Study visit on May 19
  • CRA visit on June 28
  • Payment approved on July 8
  • Payment mailed October 15
  • Payment received October 18
  • 153 days (5 months)

43
Collections Cash Flow

Payment period 2001 78 days 2003 139 days
Source caBIG
Metrics on Clinical Research 2/06
44
Timely Payment
  • Cost of paying sites on time
  • 50,000 budget
  • X 90-day financing
  • X 4/year cost of borrowing
  • 500 financing cost
  • Charge interest
  • 1.5 per month for 60-day-old advances
  • 1.5 per month for payment 60 days after billable
    activities

45
Getting Paid
  • Understand payment terms
  • e.g., holdback
  • Negotiate payment terms
  • Track billable activities
  • Generate (internal) invoices
  • Forecast collections (good luck)
  • Require line-item detail with payments
  • Remittance advice
  • Communicate with sponsor A/P dept
  • Reconcile invoices and receipts

46
Achieving Break-even
Income - Expense Profit (Job) or Loss (No Job)
47
If we take the study, well lose money. If we
dont take the study, well lose money.
48
Financial Viability
  • Low-cost location
  • Research that sponsors want
  • Access to subjects
  • Competence
  • Financial viability as goal

49
Medicare Geographic Cost Adjustors
  • San Francisco 132
  • Manhattan 130
  • Boston 117
  • Northern New Jersey 114
  • Chicago 111
  • Philadelphia 109
  • Brazoria 100
  • North Carolina 92
  • Arkansas 85
  • Pop 2,787, Household Income 36K, House 55K
  • Source http//www.cms.hhs.gov/apps/pfslookup/step
    0.asp

50
Accounting for Study Costs
  • Sponsor Bottom-up/Top-down
  • Study personnel
  • Supporting departments
  • Contractors
  • At Site Bottom-up
  • Budget template
  • Hidden costs

51
Site Cost to Initiate Close a Study
Site Initiation Administrative
2,000 Qualification Visit
500 Initiation Visit 1,000 Investigator
Meeting (PICRC) 4,000 Initiation
Total 7,500 Interim Visit
500 Closeout 1,000 ______ Total
9,000 Note Excludes IRB
review
52
Hourly Rate for Profitable Operations
Source The True Cost of a Study
Coordinator Hour Journal of Clinical Research
Best Practices, Nov 05
53
Productivity Metrics
  • Studies/coordinator
  • Subjects/coordinator
  • Visits/week/coordinator
  • Revenue residuals
  • You cannot manage a study coordinator like a
    nurse.

54
Resources
  • A Win-Win Solution to the Study Budget Problem
  • ACRP Monitor, Dec 04
  • Accounting for Study Costs
  • Journal of Clinical Research Best Practices,
    Oct 06
  • Clinical Research Terminology (CRT) Codes What
    We Do and How Much It Costs
  • Journal of Clinical Research Best Practices,
    Mar 06
  • The Four Requirements for Profitable Clinical
    Research
  • Journal of Clinical Research Best Practices,
    Dec 05
  • The True Cost of a Study Coordinator Hour
  • Journal of Clinical Research Best Practices,
    Nov 05
  • Where Does the Time Go?
  • Journal of Clinical Research Best Practices,
    Sep 06
  • Winning Contracts
  • Good Clinical Practice Journal, Dec 04
  • Available at www.firstclinical.com

55
Agenda
  • Understanding the sponsor
  • Preparation Understanding your costs
  • Analyzing the proposed budget
  • The negotiation
  • Getting paid
  • Achieving break-even

56
Budget Development Negotiation at
the Investigative Site
Norman M. Goldfarb (650) 465-0119 Managing
Partner ngoldfarb_at_firstclinical.com First
Clinical Research www.firstclinical.com
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