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A simple but overlooked way to save millions of dollars during new drug development.
Although the exact cost is debated, recent estimates suggest that bringing a new drug to market costs between $500 million and $2 billion, depending on the therapy and the developing company.1, 2 These costs continue to rise each year.3 Greater competition, more expensive trial technologies, increasingly complex clinical trial protocols,3 patient recruitment difficulties,4 and more arduous regulatory burdens,5 among several other factors, all combine to contribute to the increased, and ever-increasing, development costs.
In order to thrive in the competitive market of drug development, companies must find means to increase revenues and decrease costs, without sacrificing safety. By increasing clinical contracting efficiency during the clinical trial process, drug development companies can do both.
To understand how, companies must first understand the life span of typical drugs so that the cost of delays, even as early as the clinical trial contracting phase, can be fully appreciated. Once the costs, and causes, of delays are appreciated, companies can correctly emphasize the importance of clinical contracting efficiency and work with qualified legal counsel to implement the suggestions outlined in this article to potentially save millions of dollars in expenses and lost potential revenues.
Life span. If a new drug is patented, the company inventing it will have the exclusive right to exclude others from making, using, or selling the patented invention for 20 years from the date of the patent application. For the duration of the patent, the drug enjoys market exclusivity and the drug's price can be set at a level that maximizes its profitability. But following the expiration of a drug's patent, manufacturers of generic versions of the drug are often able to reverse engineer the branded drug and provide low priced bioequivalents that do not need to be priced to recoup the costs and risks associated with drug development and clinical trials. The generic drugs quickly erode the sales of the branded drug, which means the vast majority of a drug's value lies in the period between marketing approval and patent expiry.
A company usually spends seven to 12 years performing safety and efficacy tests, conducting clinical trials, and seeking marketing approval for a new drug before the drug can be marketed.2 Thus, during this seven- to 12-year period, a company spends hundreds of millions of dollars on a drug but generates no sales revenues from it.
Unfortunately, by the time a drug is patented (which at best takes two to three years after the patent application is first submitted) and receives marketing approval, only six to 10 years remain in its patent life. An extension to the drug's patent life of up to five years may be available to enable a company to recoup a fraction of the time spent seeking regulatory approval,6 but such extensions are relatively uncommon. Instead, after receiving marketing approval for a new drug, the typical company has only an eight- to 13-year period of market exclusivity to earn back the immense amount of money spent on the drug's research, development, and clinical trial costs before generic competitors can enter the market and capture a vast majority of the market share.
Value. By subtracting the costs expended for research and development, clinical trials, marketing approvals, and commercialization efforts from the revenue generated by a drug, discounted to reflect the time value of money and risk, the net present value (NPV) of the drug can be approximated. As an equation, NPV equals aggregate revenues, less aggregate costs, plus a terminal value, discounted for the time value of money and discounted for the risk of failure in reaching the market. All other things being equal, if the period during which revenue is generated can be increased by reducing the time to marketing approval, the NPV will increase as well (Figure 1).
Costs. Because companies have a limited period to generate the majority of the profits that are needed to recoup the substantial sum of money expended to bring a drug to market and make a profit, companies should appreciate that any delay with regard to clinical trials postpones potential marketing approval, resulting in both increased expenses and decreased revenues. This combination of increased expenses and decreased revenues costs drug companies, on average, $1.3 million for each day of delay.7
Causes of clinical trial delays. Industry research indicates that contract and budget negotiation and approval causes 38% of clinical trial delays, and that legal review causes another 24%. These two factors together constitute "clinical contracting," which cause the majority of trial delays;8 delays that result in millions of dollars in cost-overruns and lost potential revenues (Figure 2).
Fortunately, such delays and their associated costs can be minimized, and sometimes even avoided, by improving one simple, overlooked step in the clinical trial process: clinical contracting efficiency. To minimize drug development costs, companies that sponsor clinical trials, in particular, and the medical research industry, in general, must find ways of minimizing potential trial delays. By focusing on clinical contracting efficiency, sponsors can: More readily identify investigational sites and investigators interested and capable of timely conducting clinical trials. Avoid sites and investigators that historically introduce avoidable delay, whether due to low patient recruitment/retention or difficulty reaching definitive agreements. Select sites and investigators with a proven track record of timeliness and reliability. Negotiate, review, and approve clinical trial agreements (CTAs) with sites more quickly.
The first opportunity to improve clinical contracting efficiency occurs even before the inception of the clinical trial protocol. All CTAs have certain provisions in common (e.g., confidentiality, rights to publish clinical results, indemnification, ownership of clinical data, ownership of inventions, choice of law, etc.). Although the common provisions appear in all CTAs, each provision can be drafted so as to give rise to several different rights and obligations of the parties.
As just one example, the provision regarding ownership of inventions could be drafted so that:
Each of these three positions will be further negotiated before both the sponsor and the site are typically able to agree (e.g., the site may own the rights to the inventions but provide the sponsor with a right of first refusal to license the rights to such inventions; alternatively, the sponsor may own the rights to the inventions but permit the site to retain the right to use inventions for the site's internal research and educational purposes).
Summarizing all the potential starting positions and compromise positions for the common provisions of CTAs would require a treatise and such a comprehensive summary is not provided here. Needless to say, the potential positions are nuanced and virtually limitless, which is exactly why CTA negotiation, review, and approval causes so many trial delays.
Playbook. Before ever contacting a site, sponsors should work with their legal counsels to identify the sponsor's fundamental position and acceptable fallback positions for the common provisions in CTAs. Then, each such position should be codified in a "CTA playbook." Additionally, the sponsor should clearly identify to its counsel the appropriate sponsor contact who can authorize a deviation from the playbook if a deviation ever becomes necessary.
A good playbook simplifies and narrows the issues that must be considered during negotiation and review, thereby streamlining the contracting process and minimizing back-and-forth between sponsors and their legal counsel. A good CTA playbook also ensures conformity and consistency of legal rights and obligations, helping the sponsor keep track of and abide by its legal obligations when working with numerous sites (Table 1).
Modular templates. Next, the "CTA template" can quickly be generated by selecting the appropriate provisions from the playbook and organizing them into a coherent CTA. Typically, the fundamental position should be selected for the first CTA draft that will be exchanged with a site, but, in certain circumstances, fallback positions may be more appropriate in order to facilitate faster review and approval.
Sites will usually request revisions to the template, but because virtually all of the CTA language that a site may request will have been drafted while preparing a proper playbook, revising the template and approving the final CTA becomes a rapid process that consists primarily of choosing from alternative, pre-approved provisions and then ensuring that the CTA is internally consistent.
Checklists. Lastly, a "CTA checklist" should be prepared summarizing each of the provisions (but not positions) of the template. Then, once a CTA is negotiated and approved by both parties, the checklist can be used to ensure that the CTA includes all necessary and desired terms (Table 2).
The checklist can also be used to note any deviations from the playbook language. Although most language that a site may request can be predicted and included in the playbook and template, occasionally a site will refuse the fundamental and fallback positions that are anticipated in the playbook or propose a provision that is not anticipated in the template. When this happens, the at-issue provisions should be negotiated by the site and sponsor's legal counsel and then highlighted for the sponsor's consideration upon final review.
After any new provisions are approved by the sponsor, the deviations from the playbook/template should be noted in the checklist, along with a summary of the rationale underlying such changes. The checklist can then be filed with the executed CTA in the sponsor's legal records to provide a concise summary of all the sponsor's legal obligations with atypical provisions clearly identified. This summary helps to simplify the sponsor's future compliance with its contractual obligations. The checklist can also be used to expedite future negotiations with a particular site by providing a documented history of prior negotiations and deviations to the template that were required prior to the CTA being executed with such site.
Timing. Notice that the playbook, template, and checklist can be prepared at any time, so sponsors have an incentive to complete them long before a drug is ready to be used in clinical trials. By completing these three documents prior to the initial exchange of the CTA with a site, clinical contracting efficiency will be improved and potential delays during the CTA negotiation, review, and approval process will be minimized.
The execution of the CTA is often delayed by time spent waiting for responses from the other party. When a sponsor exchanges the initial draft of the template with a site, the sponsor should express its urgency that the CTA quickly be reviewed, negotiated, and approved. Then, to reinforce that urgency, the sponsor should follow-up with the site frequently. If three business days pass without a response, a courteous follow-up is in order.
It is not only important to follow-up with the site. A survey of sites indicated that 75% of the time spent waiting for responses is spent waiting for the sponsor who drafted the CTA.7 Therefore, it is equally important for the sponsor to follow-up internally to ensure that the contracting process progresses in a timely manner.
To assist with the management of communications with multiple sites, sponsors should consider developing new or adapting existing software to track when the template was sent to or received from each site, when the last communication occurred, how many times the CTA has been exchanged, whom to contact at each site, etc. Ideally, the software will also include a customizable "alarm" that can remind the sponsor when it is time to follow-up with each site and/or with the sponsor's internal team again. Although potentially annoying for the sites and the sponsor's internal team, frequent follow-ups will help to keep clinical trials on schedule.
Acquire and maintain industry knowledge. Many sites and sponsors are repeat players in the clinical trial industry. Accordingly, a careful observer can identify certain patterns and reputations that play a critical role in clinical contracting efficiency. Knowing the industry and the industry's players, institutionalizing that knowledge, and capitalizing on it will save a significant amount of time and frustration.
For example, certain provisions in a template may be frequently rejected or renegotiated by each site that receives the template; certain sites may take weeks to review and return a CTA draft; or certain sites may require atypical or burdensome provisions in the CTA, thus introducing delays or potentially frustrating a final agreement.
By analyzing the industry's patterns and tracking the industry players' past performance, a diligent sponsor can quickly revise troublesome provisions in the template to make the template more palatable for sites; can contract primarily with sites that review and return CTAs quickly; and can avoid sites that impose atypical or unreasonable obligations. Similarly, once a site approves a CTA, that same CTA can be used as a template for a future clinical trial, so repeat players can customize their templates for sites with which they have previously reached definitive agreements, thus minimizing negotiation and legal review.
Finally, although not related to clinical contracting efficiency per se, certain sites develop certain core competencies with regard to clinical trials. For example, sites may have a high concentration of hemophilic or oncologic patients or investigators, which can correspond to better-than-average patient recruitment/retention and thus accelerate the clinical trial at such sites. By acquiring and maintaining industry knowledge, sponsors can select the correct sites for a particular clinical trial, which will help minimize the recruitment delays that attribute to 31% of trial delays.8
Metrics and reports. Making the commitment to improve clinical contracting efficiency is a good first step, but commitment alone is not enough: sponsors must monitor their performance so that they can identify areas that need improvement. Accordingly, sponsors should monitor key metrics relating to clinical trials—both with regard to CTAs and other agreements that may impact clinical trial schedules and efficiency—and compare those metrics with the sponsor's past performance.
Key metrics include the amount of time that contract preparation, negotiation, and final execution take; the suitability of the template, which can be evaluated based on the number and scope of revisions requested by sites, as well as any particular provisions to which several sites request revisions; and site's (and sponsor's teams) responsiveness, which can be gauged by the amount of follow-ups required during the CTA negotiation, review, and approval process. These metrics should be recorded and analyzed frequently to constantly tweak the clinical contracting process to improve clinical contracting efficiency (Table 3).
As the methods discussed in this article are implemented, subsequent trial metrics should evidence a significant reduction in the average number of days required for CTAs to be executed. If improvements are not noticed, it could be an indication that the template or playbook needs to be revised to be more palatable to sites, that additional follow-ups with the sites' or the sponsor's contracting team are required, that site selection could be improved, or a combination of several factors that will hopefully come to light with thorough record-keeping and careful analysis of the key performance metrics of the clinical contracting process.
In this economic downturn, now more than ever, companies need to maximize their investments of time and money. Improving clinical trial efficiency provides a simple means to do that. Each day that marketing approval for a new drug is delayed, sponsors accrue additional expenses and lose potential revenue, at the cost of millions of dollars per day. Fortunately, with nothing more than foresight, teamwork and communication, dedication, organization, and knowledge, sponsors can save time, frustration, and a lot of money.
Long before the time-pressures inherent with any clinical trial, sponsors and their legal counsel should work together to prepare for the upcoming trial. At a minimum, a playbook should be drafted containing the sponsor's fundamental positions and acceptable fallback positions that can be used during the negotiation of CTAs with sites. The fundamental positions of the playbook can then be organized into a comprehensive template, which will provide the starting point of legal negotiations with the site. Finally, a checklist should be prepared to summarize the necessary and desired provisions of the CTA. Later, once the CTA is negotiated with the site, this checklist can be used to ensure that all necessary provisions are properly addressed in the final draft of the CTA, and the checklist can be used to simplify long-term contractual compliance.
Once the template is exchanged with the site, sponsors need to convey the urgency that the CTA be reviewed, negotiated, and finalized quickly. Sponsors should follow-up with sites frequently to ensure that the CTAs remain a priority and sponsors must also emphasize the same urgency internally by ensuring that the sponsors themselves cause no undue delay. Using software to help organize the follow-up process will further ease the management of the clinical trial contracting process.
Sponsors should acquire and institutionalize industry knowledge to optimize interactions with sites and accelerate the clinical contracting processes. By monitoring key metrics and keeping detailed reports regarding clinical contracting efficiency, sponsors can identify if any of the clinical contracting process has kinks that need to be worked out. They can also identify what CTA provisions are likely to be approved or to be problematic in order to streamline negotiations; they can re-use agreement templates that have already been negotiated and approved by particular sites in the past; and they can negotiate primarily with sites that have proven records of reliability and timeliness.
Finally, sponsors should innovate and experiment. The methods described in this article will improve clinical contracting efficiency, but they are by no means a comprehensive list that will negate all trial delays. Although we have provided some ideas that have, in our experience, significantly improved clinical contracting efficiency, we are still developing new ideas and trying new methods beyond what is described in this article to further accelerate trial-initiation for our clients: ways to accelerate site identification and feasibility assessment, trial budgeting, patient recruitment, screening, enrollment, retention, and more. This article focuses only on clinical contracting efficiency, but many other ideas and methods can be implemented to further accelerate clinical trials. Thus, if any of the above ideas are implemented, do not stop there: continue to innovate and experiment so that everyone can benefit from more efficient development of new drugs.
Sheila Mikhail,* is Managing Member, e-mail: [email protected], and Robb Giddings is an Associate both at Life Sciences Law, 870 Martin Luther King Jr. Blvd., Chapel Hill, NC.
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4. Tufts Center for the Study of Drug Development, "Rising Clinical Trial Complexity Continues to Vex Drug Developers," (May 5, 2010), http://www.marketwire.com/press-release/Rising-Clinical-Trial-Complexity-Continues-Vex-Drug-Developers-According-Tufts-Center-1160333.htm.
5. H. Moses III, E. R. Dorsey, David H. M. Matheson, and S. O. Thier, "Financial Anatomy of Biomedical Research," Journal of the American Medical Association, 294 (11) 1333-1342 (2005).
6. United States Patent and Trademark Office, "35 U.S.C. 156 Extension of Patent Term—Patent Laws," http://www.uspto.gov/web/offices/pac/mpep/documents/appxl_35_U_S_C_156.htm.
7. N. Goldfarb, "Winning Contracts," Good Clinical Practice Journal 11 (1) 16-17 (2004).
8. Thomson CenterWatch, "2007 Survey of Investigative Sites in the United States".