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Experts gauge threat level for global trials amid staffing and funding issues.
Let’s discuss—no, parse—the impact of inflation on clinical trials. Will each type of stakeholder contract equally, or will one segment be affected more than the others? How much contraction has already taken place? The trial world has ongoing serious problems, such as finding enough qualified staff to run a trial and working within the approved schedule to complete it. Staff shortages and time delays already impact budgets without inflationary help.
A larger question is whether inflation will alter, as the pandemic did, the design and production of these studies. Hints that this could happen are popping up: trial designs considered more efficient and adaptive, for example, are showing up more frequently in ClinicalTrials.gov; data discussed at the recent DPharm conference in Boston showed a majority of sponsors were incorporating decentralized trial (DCT) components into their studies.
Another pivotal question is whether sponsors will pull back on running global trials. It won’t happen, believes David Fenske, principal, delivery and client advisory, Auxilius. Regulatory bodies want trials to run in their countries; the FDA wants diversity; and if it is a rare disease trial, “there are only so many patients in rare diseases,” he says. “You have to go where the patients are.”
However, inflation will affect the outlook, operations and possibly the existence of smaller biotech firms; money, used for a mortgage or biotech startup, is no longer cheap. Those with one, maybe two, promising therapies in their portfolios will be absorbed, bought, or left behind. From a societal point of view, being overlooked is okay if you make sneakers, but not if that product has the potential to cure amyotrophic lateral sclerosis (ALS), Alzheimer’s disease, or some other condition with a death sentence.
As a whole, no one interviewed for this article said the clinical trials world has met its demise. What has emerged from conversations and document reviews, including Q2 earnings reports, are industry viewpoints seen from macro and micro levels: industry is resilient, yes, but the cost of packaging and mailing temperature-sensitive samples from overseas could reduce the number of countries or sites involved in a trial. Anything that changes the costs of goods, says Jane Myles, vice president of clinical trials innovation at Curebase, will affect one or more aspects of the trial.
“Clinical trials are logistical puzzles,” Myles tells Applied Clinical Trials. The importation and exportation of samples are huge costs. Pharmacokinetic (PK) samples are fragile and maintaining that fragility “costs a lot of money,” she adds.
As do startups. With investment capital flowing more slowly, “the risk [of shutting down] is magnified if you are smaller,” says Sharon Langan, vice president, channel and strategic partnerships, Auxilius.
Before a sponsor will jettison a project, it will focus on increasing opportunities to drive project efficiency and the decentralized better monitoring that grew out of the pandemic, according to Craig Lipset, founder of the Decentralized Trials & Research Alliance. “I haven’t seen sponsors deprioritize entire development programs” he says. But inflation will be real, he continues: “As inflation drives up everything on a global basis, as those costs increase…[sponsors] may have to reduce the number of trials for next year.”
As for a possible recession, the clinical trial industry should be concerned, notes Justin Culbertson, life sciences senior analyst, RSM US LLP. The industry is experiencing capital funding slowdowns and extremely high labor demand—“which means [higher] wages, and it will cost more to bring a drug to market,” he says.
The No. 1 affected stakeholder, Culbertson believes, will be the consumer, should trials be axed. Deciding what nascent trial to eliminate will be difficult for the survival of a more mature one, adds Ken Getz, director of the Tufts Center for the Study of Drug Development (CSDD).
But reducing trial numbers, from the strict vantage point of the industry itself, may not be a bad thing, considering the record-number of studies ready to go and the lack of qualified staff to run them.
On July 14, The Wall Street Journal quoted analysts saying the pharmaceutical index was gaining because pharma can “weather recessions relatively well.”1 That doesn’t mean drug manufacturers won’t take a hit: in mid-October, the index’s year- over-year was 893.97 vs. 769.48.
In IQVIA’s second-quarter earnings call, Ari Bousbib, its chairman and CEO, said his company and the contract research organization (CRO) industry at large were, financially speaking, a hardy bunch.2 “During the recessionary times over the past two decades, annual S&P 500 revenue contracted by as much as 10%, while IQVIA’s clinical business and the CRO industry as a whole never experienced a year of revenue decline,” he said.
As of this writing, the US is facing—not in—a recession. A few figures to consider: The Bureau of Labor Statistics’ Producer Price Index3 shows that, from September 2021 to September 2022 the costs to businesses of basic inorganic chemicals rose 28.8%; basic organic chemicals rose 7%. Paper boxes and containers were up 19%; plastic packaging, 12.9%; water transportation, 27.9%; warehousing, 7.9%; and traveler accommodation services, 17.7%.
As for stock performance, the year-over-year changes for six of the larger CROs are all southbound, some more significantly than others. One organization dropped to 173.9 from a high of 313; another to 48.19 from a high of 194.18. Many are buying back stock shares, presumably to bolster stockholder value.
GlobalData reported that pharma had a month-on-month dip of 2% from July into August, but job postings went up 10% during the month.4
The Council for Insurance Agents and Brokers, generally speaking, said premiums for cybersecurity in Q1 2022 rose an average of 27.5%, slightly higher than during the same period last year.5,6
As for salaries and staff turnovers, this publication discussed those issues earlier this year. It found that average turnover for clinical trial professionals, especially for the lower paid but critical position of coordinators, was 26%. As for salaries, the differences between manager and associate coordinators, as compared to site directors, ranges from a high of $75,000 for the former, and $250,000, for the latter.7
According to RSM research, in 2016 a Phase III, biologics trial took 2.5 years to complete (based on 94 studies); a drug study, 2.6 years (608 studies). By 2021, excluding COVID-19 studies, a biologic study took 3.3 years (85 studies) and a drug study, close to 3.5 years to complete (435 studies).8
“Only 46% of Phase III studies started over the past five years reported having met enrollment requirements,” the report said, attributing most of these lag times to significant labor shortages at investigative sites.
Q2 earnings reports showed pass-throughs are on the high side: 20% of revenue for one company, another was $46 million above the unmentioned guidance range midpoint. Interest rates, discussed in one report, were already $50 million above the initial figures given in the company’s January guidance. The adjusted figure for the year was $210 million.
As for global digital health funding, the drop is remarkable—36% in Q1, according to CB Insights.9
Langan said Auxilius recently surveyed biotech organizations across the sector; she says 93% experienced site costs out of line with initial per-patient cost projections. The majority of respondents indicated they struggle with estimating clinical trial accrued expenses, in part due to variability in actual cost drivers.
Over the past five to seven years, Fenske says, investigator budgets “would go out 50%. Now I have seen that shift starting at the 75% percentile.” Sites are “being squeezed with staffing” and that is limiting the number of trials, he adds.
Tufts CSDD’s Getz started analyzing clinical trials in a scholarly way more than three decades ago. Since then, the US experienced at least four recessions. Getz notes that economic pressures constantly weigh down on sponsors, CROs, and vendors. So inflation, per se, doesn’t stop a sponsor from continuing a clinical trial or reducing the number of patients.
Sponsors, says Getz, have a way of responding to these pressures. Full-time equivalents might be replaced with more outsourcing. They can downsize, consolidate, and can turn to digital tools, he points out.
“It’s not sort of a linear this, then, that,” Getz tells Applied Clinical Trials. The pressure, he believes, will be on the CROs to follow the trial model and streamline the costs—which can be very difficult, say, with an oncology trial being conducted in numerous countries. Along with difficulty in finding patients, “most of these trials require DNA samples,’’ adds Getz.
While these difficulties extend timelines, these factors are not the primary cause of the extensions. “Our research shows that it is too difficult to determine what the individual factor is extending cycle time,” says Getz. “All of our trials are taking longer. So [any] argument that inflation will delay treatments getting into the marketplace isn’t supported by hard evidence.”
But they won’t get to market if there is no trial. “The CROs were saying a year ago they didn’t have enough people,” says Culbertson, adding that he thought there were too many trials “because [CROs] don’t have enough people to work on them.”
To put the industry’s labor shortage in perspective, Culbertson notes that the life sciences labor market returned to its pre-pandemic level one year ahead of the rest of the country, which took two years. But demand and inflation are driving up wages. RSM research shows that the unemployment rate would have to reach a minimum of 4.6% to start getting inflation under control, he says, so either reduce demand for research or increase available workers —but something has to give, Culbertson adds.
The demand for research, at least in oncology, isn’t shrinking. Recent data show grant applications to NIH’s National Cancer Institute (NCI) are up more than 50% as compared to about 5% for the agency’s other institutes.10
Small biotechnology companies, and even more established ones, are facing a contracting capital market that is holding back investment dollars. “That capital will not stretch” to cover all trials out there, says Lipset. Will they sell to large pharma, will they make deals with smaller firms?
The big organizations will be scooping up those “biotechs that are hurting,” and the firms with just one product in their pipeline aren’t likely to start any trials, adds Fenske.
According to Culbertson, biopharma is already reacting to market forces. “We are seeing hesitancy picking next products, seeing more desire to negotiate prices,” he says. But he also noted that even though clinical trials are costing more money, if a trial is still running once the market reopens, that sponsor could secure more funding and finish the study.
Getz strikes an optimistic note, explaining that when a developer has a great molecule, one would be surprised how it can find merger opportunities. His research, he points out, hasn’t shown evidence of a mass exodus of biotech firms. “They find other ways to adapt,” says Getz.
Fenske was asked if there is wiggle room within trial phases to see what could be cut. In Phase I, there is not a lot of give and take in a negotiation, with the volunteers from healthy populations. The CROs have it down to lunch for $8 and dinner for $12. There is no place to cut dinner. But some agreement terms can be adjusted. Fenske had one sponsor client who objected to paying the CRO 100% upfront for a six-month Phase I trial. However, the sponsor CEO said give the CRO 10%—with 30 days to pay; they eventually compromised to 25%.
The CRO wasn’t being unreasonable and the sponsor prevailed. But now, in current master services agreements, the payment window is much shorter and the upfront money is paid in 10 days.
Phase II is more flexible, says Fenske. And while there isn’t “a lot of slush” in there, if this part of the trial has 75 patients and eight sites, for instance, Fenske suggests reduce the number of sites and increase the number of patients per site. Another place to cut would be to reduce the number of face-to-face meetings with the sponsor. A meeting every six months on an 18-month trial isn’t necessary, says Fenske. Another possible time saver is to adapt the monitoring plan from a former trial. Fenske notes he regularly reviews costs from previous studies.
CROs do not regularly review prior study costs, he adds, as such a review depends on how much time the sponsor gives the CRO to put together the proposal. “Sponsors are shooting themselves in the foot, when they say ‘we need it in 10 days,’ says Fenske. “They are not giving the CROs enough time” to build the budget more efficiently. But CROs have run thousands of studies, the sponsor likely just a few. Ideally, the sponsor should say to the CRO, “‘Here are the endpoints I want, you go design the study, we will agree on the price and the risk is on you,” explains Fenske.
A Tufts CSDD study found that in the long run, DCT components used in Phases II and III can save time—perhaps three months each—and money, with a seven-fold ROI. The study found reductions in screen failure rates and in the number of protocol amendments when decentralized components are in use.2
That time-savings, says Curebase’s Myles, is vital. If the DCT model can save six months between the last patient out and data becoming accessible, “that is huge,” she notes.
But, cautions Myles, planning a DCT can be complicated. The trial team, she says, has to consider how the components are distributed: Some patients may want to visit a brick and mortar site, others like being at home, and those visiting nurses are earning more these days. Not everything happens in the cloud, reminds Myles. Another consideration is the investigator grant—it won’t extend to at-home visitation. “The doctor isn’t paid for what happens in the home,” says Myles. Investigators will be paid for oversight and data review of patients. “It is more a distribution of costs over a broader network,” she adds.
In the long run, according to Getz, these new solutions and tools indicate opportunity in the research enterprise, pointing to artificial intelligence, augmented and risk-based analytics, and new protocol designs. ClinicalTrials.gov listed 32 active interventional adaptive design studies, and 79 enrolling as of Oct. 11. “All of these things are new innovations that can improve on and address economic pressures,” he says.
Christine Bahls, Freelance Writer for Medical, Clinical Trials, and Pharma Information