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Cost inefficiencies in drug development are a major focus of discussion, especially with the many financial impacts affecting the pharmaceutical sponsors.
Cost inefficiencies in drug development are a major focus of discussion, especially with the many financial impacts affecting the pharmaceutical sponsors. One area in the crosshairs is centered right in the finance realm—budgeting and contracting for clinical studies. Recently, the Tufts Center for the Study of Drug Development conducted research on this process, which was funded by an unrestricted grant from ClearTrial. The results were discussed with leading executives at a roundtable last month.
Ken Getz, Senior Research Fellow at the Tufts CSDD, offered that based on the research, budgeting and forecasting is a very unsophisticated activity and in a very nascent stage.
Clement Popovici (left) Amy Guzman (center), and Scott Treiber (right) participated in a roundtable conversation on the financial aspects of clinical trials last month.
In developing study budgets, 35% of the 31 respondents in the Tufts CSDD survey said that function rests with the clinical operations department, and is also a very decentralized activity. The remainder falls to procurement, project management, clinical teams, clinical finance, and a full 20% falls to "other."
Other topics that were surveyed included the use of budget planning tools and software; formal processes to track time to plan the budget; importance of said activity; factors that affect study budget accuracy; and modifications to the study budget.
Amy Guzman, Associate Director, Clinical Business Planning and Resource Management at Biogen Idec, noted that her company has had upper level management changes, including a new CEO within the past two years. New leadership and other organizational changes have led to modifications to the budgeting process. One is that Clinical Operations was moved into the Development Sciences organization aligning responsibility for the design and execution of clinical protocols in one organization. "When those two things were separated," said Guzman, "it was more challenging, as those developing the protocol were doing so without the full understanding or consideration of the costs."
In addition, Guzman notes balancing the need for managing resource demand strategically over a multi-year horizon with very specific near-term commitments in terms of meeting annual plan targets. "During last year's annual planning process, we made significant strides by presenting to senior management a combination of total program and individual study costs along with an analysis of current year variances to our annual plan. This allowed our executive teams to see how shifting spend in or out of current year impacted our multi-year planning trajectory as well," she said.
Scott Treiber, Vice President, Global Clinical Operations and Medical Affairs for Hospira, says the company is largely in the generic injectables and consumables for hospitals. Hospira is moving some of its generic injectables globally, but the overarching goal is toward biosimilar development. To that end, Hospira is running a large Phase III in the United States. So, the company has seen trial costs jump from a historical point of $5 million to $10 million per program, to over $100 million. Treiber's focus has been to find the right vendors for the Phase III trial, and to keep the budget at a 10% variance. Treiber noted that they, too, are tracking from a program standpoint, as is Biogen Idec.
Treiber emphasizes planning and feasibility, two areas where there hasn't been sufficient time invested in the past. "When you get into complex global trials, everybody forgets about communication, logistics, and culture. And those are to me the driving forces behind a successful trial. If you get those things right, you're going to save money," said Treiber.
Clement Popovici, Associate Director, Clinical Operations at Takeda Global R&D, notes that his company's historical path has led to clinical operations being responsible for the external study budgets. "That's not every individual's professional or educational background. The expectations, besides running the study, now also include extensive financial responsibilities regarding how to manage the spend over the next 12 months."
The issue of cross-functioning teams working on a budget again led Popovici to point out the missing financial education piece. For example, additional functions like pharmacovigilance or regulatory departments will need to understand the costs of what they are outsourcing. Even study design teams don't necessarily understand the cost of different tests or procedures being considered. "We need to look at this as an opportunity to provide a training session like "finance and budgeting for the non-financial employee" to make them accountable and aware that the work they're doing and the work they are outsourcing and asking vendors to do has a direct impact from the fiscal area," said Popovici.
Guzman, Treiber, and Popovici were clearly on track to improve and manage the financial expectations of the studies within a 10% budget variance or less. But when the topic evolved over to tools or software to help the budgeting process, it became clear that a dispersed situation existed.
While there may be a move to standardize and/or aggregate data such as Oracle, which recently purchased ClearTrial, the difficulty for others is the ability to have flexibility, and to integrate and share the data with providers. And these participants noted that passing spreadsheets back and forth is not an ideal way to plan or budget.
The Tufts CSDD survey uncovered these top four factors that harm study budget accuracy:
Clearly, the ability to share data and forecast budgets among internal and external collaborators would make the job of these executives a bit easier.
Editor's Note: ClearTrial offers an on-demand webcast at www.pharmexec.com/hospira.