Standard of Care in Clinical Study Budgeting


Applied Clinical Trials

Applied Clinical TrialsApplied Clinical Trials-07-01-2010
Volume 0
Issue 0

Survey reveals industry practices surrounding standard of care and insurance claims data.

Pharmaceutical executives readily acknowledge that their industry faces a number of broad challenges, not the least of which are the escalating costs of developing new drugs and a weak public image.1 Both issues intersect in one area of drug development: clinical grants. Based upon an industry survey of people working in clinical operations, and an analysis of grant payments from the perspective of standard of care (SOC), this article argues that cost management and fair market value can be far more effectively addressed than has been the practice to date.

Clinical grants represent a major and growing cost of developing new drugs. These rapidly increasing costs have been extensively documented and analyzed,2 and the research suggests that clinical trials are the largest single area of R&D operating expenses, with clinical investigator grants representing the bulk of these costs. Many drug development managers appreciate the need to control clinical trial costs. One important, if underappreciated, approach involves avoiding double payments for activities that would be normally covered by third-party payers (including Medicare and Medicaid in the United States) as part of the standard care that any patient would receive at that clinical research site, whether or not that patient is part of a clinical trial. While sites are ethically prohibited from enrolling a patient in a clinical trial if that patient would not otherwise be treated for the illness being studied, many of these patients would be partially covered by third-party payers as part of the standard of medical care.

Understanding the standard of medical care, however, can be particularly difficult when studies involve multiple countries. At one end of the health continuum some countries are moving toward national medical treatment protocols—the UK's National Health Service is one example. While health care in many countries has one dominant payer, few countries have just one agency delivering almost all their health care, as is the case in the UK. In sharp contrast, the United States has multiple payers and health care delivery organizations. Such differences challenge clinical development teams as they seek to establish medical standard of care guidelines for clinical trial grant payments. In the United States, however, it is easier to establish what constitutes standard of care through the payment practices of third-party payers.

A second pharmaceutical industry challenge is the changing relationship with physicians. After intense scrutiny from both within and outside the industry, pharmaceutical companies have now developed more stringent guidelines about what they can give to prescribing doctors. For instance, new guidelines prohibit gifts of any sort, restrict meals to those associated with actual medical education, and prohibit industry employees from giving any other objects to medical professionals.

Some pharmaceutical industry observers are also concerned about the financial relationship between investigators participating in clinical trials and the companies sponsoring the trials. These observers have questioned whether the grant amount for a clinical trial reflects payment only for work performed or whether the payment might be an attempt to influence investigator behavior. In these instances, the foremost concern is whether investigators are being paid at fair market rates or at inflated rates that might influence their behavior.3 While some published research links relative grant payment levels with subsequent investigator prescribing behavior, either of the study drug or all of the sponsor company's drugs, it is obvious that any payment may influence behavior. According to Morin, the number of physician investigators increased dramatically in the last decade as most research moved from institution-based settings to practitioners' facilities, where less stringent ethical standards may prevail. An AMA-adopted Report on the Council on Ethical and Judicial Affairs suggests that some payments to investigators may exceed the fair market value for services performed, and may influence behavior.4,5

In response to the perception of impropriety in these relationships, the industry has made transparent—through—the sites involved in clinical trials. In anticipation of the upcoming act requiring pharmaceutical companies to make public the total amounts paid to individual physicians for any type of work, most companies have already begun that process.

To address the fair market rate issue in clinical trials, companies often benchmark their payments against industry practices.6 The issue of fair market rates is of immense concern to those engaged in managing clinical studies; they recognize that there should be no appearance of paying above market rates by the possibility of double paying for medical activities that would be covered by normal standard of care (SOC) payments.

The University of the Sciences in Philadelphia (USP) and TTC, llc, have been conducting an extensive analysis of why some clinical trials finish faster than others, with a number of the findings already published.7 This analysis includes:

  • Study and site attributes associated with clinical trial studies that complete their work faster

  • Role of outsourcing in developing drugs

  • Profiles of clinical sites

  • Global grant payment practices

  • How SOC considerations influence clinical grant payment practices.

On this last point, our research shows that while drug development professionals want to use SOC data to manage clinical grant costs and to address fair market value, most of the current SOC data sources are limited and time consuming. We argue that, in the United States, third-party medical reimbursement claims data represent an underappreciated source of potent SOC data, and we demonstrate how these data provide SOC benchmarks quickly and efficiently. While many companies may incorporate SOC considerations in their clinical grant budgeting and negotiations, the amount of potential cost savings identified through insurance claims data are far greater than many may appreciate.

Use of standard of care

Most of the participants indicate that they place importance on the use of SOC costs in developing clinical grants for their study sites. There are no statistically significant differences by the type or size of company in the importance they place on incorporating SOC considerations into clinical grant budgets. In fact, we found that participants from pharma companies large and small, as well as biotech companies and CROs, all placed great weight on incorporating SOC information in the development of clinical grants (see Table 1). We also found no differences based on where the study participants were geographically located.

Table 1. A breakdown of the number of organizations working in a specific area.

When study participants used SOC data, they were more than likely to be concerned with managing costs and addressing fair market values. Drug development professionals want to avoid double payments in managing clinical grant costs; they also want to avoid any perception that they are overpaying physicians to take part in clinical research. As one survey participant summarized the situation: "We have to look for every way to manage costs, but at the same time be fair to the sites. Dissatisfied sites are not going to perform well. In our company we want to be fair, and look fair at the same time, in case we are ever audited."

Table 2. Reasons why participants use SOC data.

Managers also incorporate SOC data in protocol design. Clinical trials compare the safety and efficacy results from patients receiving the study drug to the results from patients who are not receiving the study drug. For some indications, it is possible to compare the patients in the active arms of the study to patients receiving a placebo. However, for ethical reasons, this is becoming less common. Clinical trials increasingly compare the results from the patients in the active arms of the study to patients not receiving the study drug but who are treated by the leading standard of care practices. For many, the company standard operating procedure (SOP) now routinely calls for including SOC information in clinical budgets (see Table 2). Many companies report making use of SOC data, to some degree, during the budgeting and investigator grant processes (see Table 3).

Table 3. A comparison on the use of SOC data by therapeutic area for budgeting and grant processes.

SOC information

Many of those who incorporate SOC considerations into developing clinical grants think that they need additional information. While those working in oncology feel most comfortable with the information they receive, even in this group one in four participants think that they need more information.

We found global concern for additional SOC data, especially for the newer clinical research geographies, led by Asia and the Pacific Rim. More than half of the participants who use SOC in the clinical grants also mention Eastern Europe, Latin America, and the Caribbean as areas needing SOC information. Of course, finding current SOC data can be a labor-intensive exercise. Data sources include:

  • Previous studies and protocols

  • Consultations with outside experts and sites

  • Third-party payer information such as insurance companies or government sources.

Yet these three commonly used information sources still require pharmaceutical companies to spend considerable time and effort gathering the budgeting and clinical grant management data they need for clinical studies. At times, even after they find an appropriate data source, they still need extensive back and forth communication with the source, and may often come away with a fairly limited amount of information.

According to one person taking part in the study: "We have to find the right people and then do our best to glean what we can. When we deal with sites in particular they will want to minimize what is covered by standard of care." Or, as another indicated: "If we talk with individuals in our company or outside our company they usually can only represent a limited set of experience, their own."

Study team members are concerned with the amount of effort needed to get usable SOC data. They also worry that the lack of data may compromise the study start-up, yet few study team members want the lack of SOC data to hold up the study start-up.

U.S. insurance claims data

While it may be difficult to obtain SOC data globally, it is far easier to find it in the United States. However, company professionals may also not appreciate the value of this data. Nor may they understand the extent to which third-party payers would be responsible for paying for the procedures covered in a clinical trial. For example, only about one quarter of companies that incorporate SOC information use insurance claims data. This may be because the data are, at times, difficult to access and use. According to one person in our survey: "Using insurance data is a very time consuming process. We have to get it first, look up the right costs and procedures, and then use a spreadsheet to enter the data in our grant budgets."

Still, insurance claims data are a powerful and underused information source. Looking at third-party medical reimbursement claims data we find that they:

  • Represent the activities for which the sites are actually charging. They go beyond interviews with experienced company experts, outside consultants or people at the clinical sites.

  • Involve a large number of patients.

  • Represent claims for work done, and as such constitute an unbiased source of information. While these data may not, alone, be adequate for the design of protocols, they are probably the best source of information for budgeting and investigator grant negotiations.

While we can discuss, from a scientific perspective, what constitutes standard of care, insurance claims data clearly show whether the third-party payers who routinely reimburse for costs consider the medical procedures in a protocol to be standard of care. Also, for claims data to be useful, those responsible for developing clinical grants must know the most widely used procedures in treating a specific disease and how those procedures fall within the time frames the study requires.

The study team utilized a HIPAA-compliant, deidentified, third-party medical reimbursement claims database (including third-party insurance providers, Medicare and Medicaid), supplied by SDI-Trialytics. The database consisted of more than 700 million patient records (from the most recent 12 month period) to test the clinical grant savings possible through elimination of payments by the sponsor for activities routinely covered by third-party payers.9

U.S. standard of care

U.S. clinical budgeting professionals may contend that there is no one standard of care, or argue that there are geographic differences in the standards. Most likely, this confusion results from what physicians are paid within the various regions for specific procedures, rather than differences in how patients are actually treated for specific medical maladies. In fact, we found that the medical claims data showed no consistent regional differences in the 150 most widely studied indications by the pharmaceutical industry.10

While we did find clear differences in how much physicians in different areas of the country were paid, we found no statistically significant differences in which procedures were covered by third-party payers. For example, the Northeast and Pacific Coast regions usually received higher average payments. Similarly, major urban areas like New York City, Chicago, and Los Angeles received higher average payments than the areas around these metropolitan areas. But the treatment patterns did not differ. Third-party payers account for the vast majority of payments U.S. physicians receive,11 and these third-party payers largely determine the SOC nationally. Payment levels reflect geographic differences; treatment patterns do not.

Savings for actual protocols

From an industry database, we drew a random sample of 50 U.S. studies in a range of indications to determine the possible incremental cost savings in using standard of care data to eliminate double payment for procedures covered by third-party payers.12,13 For each protocol, we overlaid the information from the project team's claims database.


One case study from this larger study illustrates the size of the potential incremental savings. Through GrantPlan, we first determined the market prices actually paid by sponsors for the individual procedures, nonprocedures, and overheads. If the sponsor company had already determined a specific procedure was covered by standard of care, and had not paid for it, we did not include that procedure in our analysis. We were able to determine SOC cost savings in a matter of minutes, not days or weeks.

The program identified all the procedures in the protocol visit schedule covered by third-party payers within the time frame of the protocol in question. We found that incremental cost savings for the study sample averaged 22%. If each company could reduce its U.S. clinical grant payments by 22%, they would eliminate paying double for unnecessary medical procedures and free up considerable funds for more valuable activities.

Case study

An example of one study in our analysis, an ulcerative colitis study, illustrates the size of the incremental cost savings available through a claims-based measure of standard of care. The total amounts covered by SOC payments are summarized in Table 4. Most important, we did not base the savings in this example on expensive procedures, which we defined as those costing more than $1000. The savings also show the reduced overhead that would have been applied by an institution conducting the study.

Table 4. The impact standard of care had on cost and savings in an ulcerative colitis study.

Using SOC data that reflect actual payments to physicians to treat patients rather than experiential reports by sponsor companies or site personnel, makes our findings even more dramatic. We believe that using SOC calculations based on actual payment data makes it more likely that sites will agree with our findings.


The pharmaceutical industry faces an immediate and growing need to manage drug development costs, and contain expanding clinical study costs. Clinical grants constitute a large portion of clinical development spending, and companies must find better ways to use their clinical grant dollars. The pharmaceutical industry must also ensure that public officials and the general public know that clinical investigators are being compensated at fair market rates.

Table 5. Percentage of participants who indicate a higher need of SOC information by area.

While pharmaceutical industry professionals want to use standard of care data, they need improved, more accessible, data. Correctly formatted U.S. insurance claims data can be a ready source of standard of care data for U.S. clinical sites, and can be used where SOC data has not already been used to design a clinical grant. Moreover, insurance claims data can be used to achieve even greater savings when standard of care information has already been used.

Table 6. Analysis of top five sources used by companies including SOC data.

As the pharmaceutical industry uses standard of care data to employ its clinical trials' financial resources more effectively, it can also ensure that it is paying appropriate fair market rates. Eliminating the potential of double payments to clinical investigators represents another step in the process of improving the pharmaceutical industry image worldwide.

Harold E. Glass, PhD, is a Professor at the University of the Sciences in Philadelphia and President of TTC, llc, email:


1. H. Glass and L. Poli, "Pressure Points on Industry Executives: What Lies Ahead?" International Journal of Pharmaceutical and Healthcare Marketing, 3 (1) 2009.

2. J.A. DiMasi et al., "The Price of Innovation: New Estimates of Drug Development Costs," Journal of Health Economic, 22 (2) 151-185 (2003).

3. H. Glass, "Clinical Grants Under the Microscope: What is a Fair Market Value?" Good Clinical Practice Journal, August 2006, pp. 23-25.

4. K. Morin, H. Rakatansky, F.A. Riddick Jr. et al., "Managing Conflicts of Interest in the Conduct of Clinical Trials," Journal of the American Medical Association, 287, 78-84 (2002).

5. H. Glass and K. Hollander, "Managing Clinical Grant Costs," Contemporary Clinical Trials, February 2009.

6. J. Pierre and K. Brooks, "Database Dynamics," International Clinical Trials, November 2009.

7. TTC, LLC, Publications,

8. (2009), A copy of the questionnaire and all the responses can be found at:

9. The Standard of Care Tool was created as a result of joint collaboration between TTC and SDI Trialytics LLC. Standard of Care Tool captures HIPAA compliant, de-identified U.S. third-party medical and hospital claims submitted to various third-party payer types, including commercial insurance, Medicare and Medicaid, and covers approximately 70% of reimbursed care in the US. Standard of care tool tracks around 1 billion medical claims submitted by physicians and 200 million claims submitted by hospitals annually.

10. Clinical Trials.Gov, 9/25/2009,

11. A. Beattie and G. Krishna, "Recession Pushes Healthcare Into Shade," Financial Times, No: 36,834, 27 October 2008.

12. TTC, llc, Products—GrantPlan, (2009).

13. (10/ 9/2009),, shows that the GrantPlan subscribers conduct 76% of all clinical trials.

Related Content
© 2024 MJH Life Sciences

All rights reserved.