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CRO/SPONSOR
A View of Functional
Outsourcing
Yuri Martina, PhD
Project managers are key between the CRO and
sponsor in successful functional outsourcing
I
t is estimated that by the end of 2014, phar-
maceutical companies will lose approximately
$78 billion USD as a result of medications
going off patent.1 Additionally, the industry is
facing significant competition and a widening
gap between proposed pricing for new medica-
tions and what reimbursement structures are will-
ing to pay. To address some of these trends and
in an effort to do more with less, the pharma-
ceutical industry has been outsourcing not only
its IT and back-office functions, but also parts of
its core business for some years, and which led to
the emergence and growth of the large contract
research organization (CRO).
Some R&D outsourcing on the clinical side of
the pharmaceutical industry has been an all-ser-
vices approach, where entire clinical studies or
programs were outsourced to CROs, but also the
model of functional outsourcing (i.e., monitoring
only, clinical logistic services, central labs) was
used. Furthermore, there has been a trend in creat-
ing long-term partnerships with outsourcing coun-
terparts rather than program or project-specific
alliances.2
If handled well, functional outsourcing creates
the potential for greater efficiencies, cost savings,
and clearer communication. However, effective
functional outsourcing does not simply happen; it
is a complex and usually multidisciplinary project
that needs careful planning, execution, mainte-
nance, and buy-in from the whole organization. To
oversee and coordinate the interfaces between the
sponsor and the CRO, a project manager is usually
4 APPLIED CLINICAL TRIALS appliedclinicaltrialsonline.com
appointed by both partners to lead the project to
its goals through the use of project management
and other tools. In addition to the usual challenges
associated with the planning and execution of
clinical trials, the project manager will have to deal
with a particularly complex situation in respect to
internal stakeholders (ranging from upper manage-
ment to several peers in other departments); the
main challenge being how to reconcile different
views, expectations, and interests about the out-
sourcing across different departments.
The project manager also has to ensure that
at project completion the appropriate tools have
been considered and established to monitor the
successful achievement of the outsourcing strate-
gic goals (i.e., costs savings, higher quality, etc.).
This paper intends to present some consider-
ations on project management applied to out-
sourcing projects, also providing insights based
on a case study in pharmacovigilance functional
outsourcing. Finally, the paper provides a short
playbook for management of critical steps for such
projects within the industry.
Stakeholders, internal team, and planning
for success
Outsourcing projects usually involve different func-
tions and departments within a company. For ex-
ample, outsourcing pharmacovigilance services
will require interaction of IT, clinical, pharmaco-
vigilance, marketing, regulatory, and medical, to
mention only some of the involved departments.
When so many players are involved, it is critical
April 2015

Expanded Triple Constraint
Strategy
Core Business
Value Chain
Organization
(other functions)
Quality Cost
Processes
Metrics/Measures
Feedback
Technology Organization
Skills Culture and
Organization Values Services
Structure to outsource
Time
Source: Martina, 2014.
Figure 1. Expanded Triple Constraint for outsourc-
ing projects.
The figure represents the classic triple constraints for any
project and the specific context in a functional outsourc-
ing project. This model considers the additional factors
which will impact cost, quality and time. Many of these
factors need particular attention for outsourcing projects
since they will determine the balance between success
and failure not only during the project execution but also
once the project is launched/ completed and the daily
outsourcing business is running.
to properly identify each stakeholder as clearly as possible.
The external stakeholders can, in an outsourcing project, be
individuated mainly in the service providers and the corre-
spondent supply chain; what can be more challenging is the
definition of the internal ones. This process needs particular
attention in order to avoid actual or perceived project failure.
Indeed, research from 2002 established that many outsourc-
ing projects fail3,4 because of internal resistance, which causes
mistrust, lack of information sharing, wrong or miscommuni-
cated work scoping, unattended or unmet expectations, and
unmet deliverables, among other issues. To avoid these fail-
ures, internal stakeholder analysis needs to be as complete
and comprehensive as possible. There are useful tools such
as this three-step approach that worked well for our func-
tional outsourcing project based on the PMBOK approach.5
Identify your stakeholders by brainstorming with as many
people as possible
Prioritize your stakeholders based on a classic interest/
power grid
Understand your key stakeholders (what drives them, what
April 2015
CRO/SPONSOR
information they need, who might be influenced by their
opinion, etc.)
In our example, we used a stakeholder registry to make
sense of all the information collected as suggested by the PM-
BOK.5 This is probably one of the most important documents
for an outsourcing project because it will constitute a road-
map for further defining teams composition, and also how to
drive the project to success.
Another important initial step is to identify the sourcing
strategy that the company wants to follow. According to a
survey from 2004, more than 50% of companies manage this
with average or less-than-average effectiveness.6,7 The lack
of a proper sourcing strategy and methodology can result in
several risks for the company and the specific outsourcing
project: inconsistency across outsourcing projects and selec-
tion criteria, lower quality, higher pricing, loss of purchasing
leverage, higher internal resistance, and other risks. Unfortu-
nately, strategic outsourcing is far from being fully mature in
the pharmaceutical industry and, therefore, it could be dif-
ficult to have available a fully flagged sourcing strategy in your
company. Gottfredson et al. (2005) proposed an interesting
model, which could help pharmaceutical companies better
define their value chain, with upper managements support.8
This analysis should help provide the proper frame for the
project and, consequently, better define the stakeholders and
the team members to be involved.
As briefly mentioned, team members selection is strictly
connected to defining stakeholders and outsourcing strategy.
Based on these two factors, the project manager will want to
select the team members in order to ensure all departments
are involved, thus ensuring important strategic decision mak-
ers are either represented or have easy access to communica-
tion channels. This team should contain all the skills required
from planning to draft and the ability to execute comprehen-
sive and effective contracts with suppliers.
One more element for outsourcing needs to be considered:
negotiation planning. Indeed, proper negotiation planning
carried out together with the team and internal stakeholders
will allow better selection, negotiation, and contracting, which
are the initial critical phases in outsourcing projects. Further-
more, a negotiation plan7,9 enables proper consideration of all
key objectives, which include price, total cost, risks, business
impact, expectations, controlling tools and metrics, require-
ments, and timelines. Such a negotiation plan also allows
teams to focus on the project constraints, which in project
management would be the triple constraint of time, cost, and
quality. This can be expanded when dealing with outsourc-
ing projects to comprehend additional factors influencing the
basic dimension of the triple constraint (Figure 1 represents
the idea of an expanded triple constraint for outsourcing
projects).
When a comprehensive plan is prepared ahead of negotia-
tions and approved by all stakeholders, the project team will
appliedclinicaltrialsonline.com APPLIED CLINICAL TRIALS 5
CRO/SPONSOR
Project Risk Management Model
Project Goals and
Objectives
Identify and Assess
Project Risks
Improve Risk Information for Management
Management Process Decision Making Strategies
Monitor Project Risk Implement Project Risk
Management Process Control Processes
Source: P. OKeeffe, et al., 2004.
Figure 2. Generic Project Risk Management model.
The generic Project Management risk model can be used
to focus on the continuous loop which should be built to
ensure the project, its goals and objectives are success-
ful. This loop needs to be based on objective and solid
metrics (without the excess of measuring everything and
thus increasing costs). Additionally this should be built
into the outsourcing contracts/agreements and into its
processes. Not including this into the contracts/agree-
ments will result in the operational team not being able
to follow up the success of strategic goals at the out-
sourcing go-live.
be empowered to conduct the proper negotiations and be set
up to achieve outsourcing objectives more successfully.
Risk management and challenges
Risk management is a critical part of successful outsourcing
projects. The project manager and the team should dedicate
a great deal of time toward planning, and controlling and
monitoring risks. There is a large difference between planning
and controlling and monitoring, because often project teams
spend several hours working on risks analysis in the planning
phase, but very little time on controlling and monitoring the
risks and, consequently, adapting the plans. Approximately
60% of companies seem to manage risks in outsourcing proj-
ects either with average or less than average effectiveness.7
Using a generic project management risk model, reproduced
also by OKeeffe et al. (Figure 27,10,11), underlines the important
factors to take into account while thinking and designing a
risk-management plan for outsourcing projects. The principle
is to consider the project under continuous evaluation in re-
spect to the original goals and objectives. Wherever a barrier
6 APPLIED CLINICAL TRIALS appliedclinicaltrialsonline.com
occurs that could block the goal, a proper risk-management
strategy should be in place to ensure the strategy is followed.
Monitoring the controls and feedback loops provides the
chance to identify improvements and refine the risk manage-
ment plan.
Some of the major risks categories for outsourcing projects
are: (1) supplier selection risks; (2) transition risks (when the
project is transitioned from business to operations); (3) start-
up risks; (4) management and employee risks; (5) contract
management risks; and (6) supplier-performance risks. In my
experience in outsourcing pharmacovigilance, another major
risk is potentially outsourcing a function or process that is
potentially broken or non-existent. Many pharmacovigilance
requirements have been recently defined but not yet fully
absorbed by all companies (for example, how to capture huge
amount of data coming from follow-ups of pregnancy expo-
sure during clinical trials). In these cases, it could be chal-
lenging to outsource a process that is not yet even defined
internally to the company. In such cases, the key to success is
to, first, clearly define roles and responsibilities of the differ-
ent functions internally and to use such potential knowledge
to define the requirements with the outsourcing partner.
In terms of risk management, a major challenge with func-
tional outsourcing is to understand hidden risks. Functional
outsourcing projects will most likely not only impact one
business unit, but, consequently, impact several business
processes. This could bring additional risks that might escape
the original analysis when the wider organizational perspec-
tive is not fully considered. In doing all this, the team should
not lose sight of the final and main objectives:
Is the outsourcing achieving end-user satisfaction?
Is it achieving the promised requirements (i.e., cost
savings)?
The proper control processes and metrics will need to be
established in order to properly monitor this and the project
progression. On the other side, it is important not to become
enslaved by such processes and metrics, thus missing the
original objectives.
Monitoring and controlling
Once planning is on its way, it is fundamental to define clear
monitoring and controlling mechanisms and tools, so that
feedback loops can be effective. The first step is to ensure
these are properly accounted for and included in the con-
tracts and outsourcing agreements. This requires the project
team to critically consider what is really needed, what is not,
and what would be a nice to have. This is important since no
collection and analysis of data comes for free, and this is true
in terms of quality, time, and real costs.
There is no defined set of metrics that will fit all outsourc-
ing projects; however a starting point is the triple constraint
in relation to metrics (Figure 312). When seen in this way, we
can define the following metrics for an outsourcing project:
April 2015
 CRO/SPONSOR

Triple Constraint with Metrics Project Management Playbook

1 2 3 4 5 6
Identify Characterize Assemble Address Create Monitor &
Outsourcing Stakeholders Team Risks Plans Control thru
Strategy Metrics

Effectiveness Efficiency
1 Quality 1 Productivity
2 Deliverables 1 Strategy/Scope 3 Project Team 5 Planning
3 Risk Quality
Collect requirements Select Team members Negotiation Plan
Cost Establish positioning Inform on Strategy Timelines & Resources
Organizational context Ensure Know-how Project Plans
Core competencies Establish Controls & Metrics
Overview of Strategy Contracts/Agreements
Supply Chain

Time
2 Stakeholders 4 Risks 6 Metrics/Control
Record Stakeholders Analyze Risks Monitor & Control
Analyze Stakeholders Create active plans Manage Risks
Management Strategy Manage plans Improve Plans
Improve plans Improve Controls & Metrics
Economy Evaluate objectives
1 Resources
Source: Martina, 2014.
Source: P. Jacklin, 2011.
Figure 4. Project Management playbook for out-
Figure 3. Triple constraint and metrics. sourcing projects.

The figure represents the triple constraint and its con-
nection to more effective metrics like Economy, Effec-
tiveness and Efficiency. These are particularly critical
in an outsourcing project. We also need to distinguish
between two phases: during the project execution and
after the outsourcing go-live. The set of metrics for
these two phases will be based on the same principles
(Economy, Effectiveness and Efficiency) but will differ in
what is measured and reported.
Economy metrics: measure of how much resources are
needed and indirectly an idea of costs
Efficiency metrics: productivity, which will measure the
number of deliverables/unit of resources applied
Effectiveness metrics: quality, deliverables, and risk
For all these metrics, we need to clearly define a target, fre-
quency of reporting, and a body to which should be reported
during and after the project. Finally, we should compare cur-
rent metrics vs. planned in order to keep the team focused on
the project and later to control and monitor to ensure we are
achieving the forecasted results with our outsourcing strategy.
In the pharmacovigilance case mentioned, we used the
following metrics: internal resourcing needed to manage the
new vs. old process (economy); the amount of cases which
were properly followed-up and closed in respect to the old
process (effectiveness); the quality of reports and database
entries and the risk of missing one or more cases (associated
regulatory risks) and the total amount of follow-ups collected
in the database and used for other activities, i.e. marketing or
label extension (efficiency).
A good set of metrics, derived from all sides of the triple
constraint, can support delivering a successful project and
The figure represents a basic Project Management play-
book to guide the project team throughout the main
fundamental steps of an outsourcing project. The main
steps are mentioned, but are not the only ones. The
main steps are connected to some of the fundamental
activities which need to happen during that specific
step/phase. Finally, the flow of information through the
different steps is shown under the assumption that the
strategic outsourcing has fixed objectives and it is a
guidance for the project and the consequent processes
implementation.
following up the outsourcing project to ensure it fulfills its
organizations goals. However, strict evaluation of what is
needed and essential is mandatory. Indeed, each metric
comes to a cost, which will ultimately impact quality, cost,
and time.
Summary and conclusions
Based on these critical steps, I drafted a project management
playbook for outsourcing projects underlining the following
steps (Figure 4):
1. Identify your companys outsourcing strategy; this is a
critical point and usually a difficult one for the pharmaceuti-
cal industry, which is more used to a fragmented rather than
holistic approach. It will be important to understand the spe-
cific strategy and its context within all organization and within
the supply chain.
2. Identify and characterize your stakeholders; the most im-
portant ones will be the internal ones, these are the ones who
can make the difference to success.
3. Create your team based on the two points above; include

April 2015 appliedclinicaltrialsonline.com APPLIED CLINICAL TRIALS 7

CRO/SPONSOR
the right team members from a stakeholders and technical
knowledge perspective.
4. Address the risks in a risk analysis, and ensure this is an
ongoing process; it will need processes and tools for reas-
sessing risks on a constant basis, especially in relationship to
the outsourcing partners. These controls and monitoring pro-
cesses will also need to be included in the contract.
5. Create a proper plan, including a negotiation plan, which
will drive you through the negotiation and the preparation of
an outsourcing agreement and be the foundation for a suc-
cessful outsourcing.
6. Use your defined metrics to control and monitor your
project progression and the achievement of the original stra-
tegic functional outsourcing objectives and goals.
By applying these concepts in a more rigorous way, organi-
zations and project teams can strive for successful functional
outsourcing projects and reach those goals and benefits
expected by these projects. Furthermore, the consideration
of the above factors will allow for evaluation of the specific
outsourcing project within the wider organizational context
and, therefore, prevent damages to other parts of the orga-
nization and, in the long term, foster a better integration and
outsourcing strategy.
Yuri Martina, PhD, MBA, PMP, is Managing Project Director,
PAREXEL International
References
1. KPMG Outsourcing in the Pharmaceutical Industry: 2011 and
Beyond; KPMG (2012).
2. J. Miller, (2007) Functional Versus Full-Service Outsourcing
Models; white paper, PharmaSource Information Services Inc.
(accessed from: http://www.pharmtech.com/pharmtech/article/
articleDetail.jsp?id=423553).
3. J. Barthlemy, (2003) The Seven Deadly Sins of Outsourcing; Acad-
emy of Management Executive; Vol. 17, No. 2, pp. 87-98.
4. N. Hatalkar, Eight Worst Mistakes in Outsourcing and How to
Avoid Them; white paper, Patni (accessed from: http://www.sourc-
ingfocus.com/uploaded/documents/Patni_-_The_eight_worst_
outsourcing_mistakes.pdf).
5. Project Management Body of Knowledge (PMBOK Guide) fifth
Edition; Project Management Institute (8 March 2013).
6. D. J. Bryce, et al., (1998) The Impact of Corporate Outsourcing on
Company Value; European Management Journal; Vol. 16, No. 6, pp
635-643.
7. P. OKeeffe, et al., (2004) Managing The Risks of Outsourcing: A
Survey of Current Practices and Their Effectiveness; white paper,
Protiviti / APICS (accessed from: http://www.protiviti.co.uk/en-US/
Documents/Surveys/ManagingOutsourcingRisks.pdf).
8. M. Gottfredson, et al., (2005) Strategic Sourcing: From Periphery to
the Core; Harvard Business Review, Feb., pp. 1-9.
9. The International Negotiations Handbook; Baker & McKenzie and
PILPG (2007).
8 APPLIED CLINICAL TRIALS appliedclinicaltrialsonline.com
10. Aprosoft webpage www.aprosoft.com/processsesPractices_risk-
Management.html; last accessed 7 April - 2014
11.Risk Modeling, Assessment and Management Second Edition;
John Wiley & Sons, Inc. (2004); New Jersey.
12. P. Jacklin, (2011) Dont Measure Time and Cost; How to Build
Project Metrics that Drive Project Success; white paper Acando
(accessed from: http://www.acando.co.uk/Insight/Orange-Papers/
Project-Metrics/).
What PMs Can Learn From this Article
Dr. Martina grasped the outsourcing steering wheel defining
the main challenges related with study planning and risk
control in an outsourced model. He shows us how contracts
may provide clearer direction as well as better defined study
objectives and requirements than an in-house effort. Thus,
efficiencies, cost savings, and communication effectiveness
might be increased compared with studies fully managed
internally across an assortment of departments and functions.
In an outsourced scenario, the captaincy success criteria are
well-stated: study needs and goals can only be satisfied and
attained after their proper identification and understanding
from the entire team. Dr. Martinas guidance on how to build
the proper frame for an outsourced project inflicts thorough
interactive planning techniques. These techniques comprise
team-wide brainstorming sessions for prioritization and
understanding of stakeholder requirements for better focus
on the most influential ones. The author refreshes our project
management biblical standards, like the PMBOK guide, by
carving out the stakeholder register reliance.
Likewise, as drug architects we are reminded that the goals
rather than process restrictions should lead the project. Dr.
Martina helps us to understand the need of adjusting processes
to the real scenario and not the way around. Adaptive risk
management must enhance control on major risks and provide
multidimensional metrics for measuring study performance
against the originally planned goals and objectives. Tight
processes might diverge us from study targets placing the focus
on process compliance. Particularly in an outsourced model,
processes should be orchestrated beyond the sponsor standards
with the aim of increasing their value.
Dr. Mara Proupn-Prez, Associate Project Leader, PPH plus
GmbH & Co. KG
April 2015

Closing the Variance Gap
Heather Schultz
The challenges with clinical trial budget
management and forecasting
A
s clinical trials continue to grow in com-
plexity, tolerance for the growing variance
between forecasted and actual clinical trial
costs is shrinking.
To set the stage, lets take a look at what
is considered an acceptable variance in todays
clinical trial scenario: A recent survey from Clin-
verse showed 38% of sponsors will accept a vari-
ance of <5% and 31% will accept a current variance
of 5%-10%. Yet, remarkably, the variance between
forecasted and actual clinical trial costs for life sci-
ence companies can be as high as 16%, according
to an industry survey.1 With pressure on earnings,
financial predictability and accurate reporting, a
high variance is less tolerable today as it affects
revenue and future R&D budgeting and cash flow
for all involved. Inaccurate accruals can also have
an effect on earnings in the next reporting period.
What are the top causes of high variances?
1. Outsourcing. The estimated average cost of
bringing a drug to market in the U.S. is $2.6 billion,
according to a recent Tufts CSDD report. In a simi-
lar study published in 2003, Tufts CSDD estimated
the cost to be $802 million, equal to $1.04 billion
in 2013 dollars, which indicates a 145% increase
to develop and win marketing approval for a new
drug. That said, clinical trial costs are typically one
of the biggest expense categories for biopharma-
ceutical companies. Due to the dynamic nature of
clinical trials today, sponsors have opted to move
fixed expense to variable expense, which has been
accomplished by outsourcing parts of trial man-
agement to multiple vendors.
April 2015 appliedclinicaltrialsonline.com
CRO/SPONSOR
A major influence on forecasting has been
the increase in outsourcing clinical trials
from 20% in 2012 to 41% in 2014, according to a
Nice Insight survey. Large pharmaceutical com-
panies have the highest rate of outsourcing at
46%, and emerging pharma showed the lowest
incidence at 36%.3 The trend in outsourcing more
and more trial management activities to mul-
tiple vendors has not only resulted in the lack
of effective financial management systems, but it
has also driven a wedge in having access to a com-
plete financial picture in a single consolidate man-
ner. Multiple vendors and contracts end up in dis-
parate systems, and the lack of integration doesnt
allow that data to be brought together and used for
financial management in an easy or efficient way,
which makes forecasting and budgeting extremely
challenging.
2. Delays. More than 80% of clinical trials ex-
perience delays range on average from one to six
months, costing companies upwards of $35,000 per
day per trial. A mere 10% of trials are completed on
time.4 Time delays generate significant variability
in clinical development budgets and can add sub-
stantial costs. Not surprisingly, only 14% of clinical
financial planners at pharmaceutical companies
are highly confident in their budget forecasts.
3. Complexity of trials. Another cause of fore-
casting difficulty is the expansion in number, size,
length and complexity of clinical trials. In fact, as
of Dec. 22, 2014, the current number of registered
studies on clinicaltrials.gov is 181,107 with loca-
tions in all 50 States and in 187 countries.5 Over
APPLIED CLINICAL TRIALS 9
CRO/SPONSOR
the past two decades, the average length of a clinical trial
increased 70%, the average number of routine procedures per
trial has risen 65%, and the average clinical trial staff work
burden increased 67%.5 Trials today often undergo protocol
amendments, which can add new trial populations, extension
arms, increased assessments, and other design modifications.
In addition, due to the rapidly changing nature of clinical
trials, forecasters may not be able to use historical data to
accurately predict expenses for future clinical trials. The trend
toward adaptive trial design, where the trial can be modified
during its progress based on interim results, makes forecast-
ing difficult.
4. Unexpected events. Forecasters are also challenged by
unexpected events such as the impact of slower or faster site
activation, lags in enrollment activity, and underperforming
sites. When sites do not enroll enough subjects, it may be
necessary to add more sites across multiple geographical re-
gions and to close sites early due to non-performance. On top
of that, many trials have significant funds tied up in proce-
dural costs that may or may not occur in that particular trial,
and it can be hard to predict since it isnt known if patients
will progress to a certain stage or if additional procedures
will need to happen. And with forecasting often done for
the worst-case scenario (i.e., every patient completes every
procedure and visit), it may result in not having the ability to
release funds early. This can be prohibitive to other R&D ef-
forts since those funds cant be allocated to other studies or
efforts that may be underfunded. Since site start-up costs and
protocol design drive the significant portion of study expense,
these changes drastically impact the forecast and expense
requirements.
5. Globalization. In the past decade, there has been a major
increase in the globalization of trials, with multiple countries
using their own cobbled-together financial management sys-
tems and managing expense in their own local currencies.
Its also important to note that forecasting typically falls to
the clinical operations team, which means the manual and
labor-intensive task of forecasting to a team who is already
managing trial execution, data collection, site relationships,
and a myriad of other service responsibilities. Now they must
also be responsible for tracking, evaluating, reconciling and
more accurately re-forecasting future expense needs based
on study information, which likely is not real time or even
near it. In addition, these tasks require pulling data from
multiple systems and analyzing it in cumbersome excel work-
sheets, which is a laborious effort that takes away critical time
from trial execution.
As a result, the life science industry is struggling to forecast
and re-forecast present and future trial expenses accurately
and efficiently to allow for real-time decision making and
risk mitigation to an already expensive effort, especially with
spreadsheets continuing to be a predominant method. In
Clinverses survey, a whopping 70% reported the primary tool
10 APPLIED CLINICAL TRIALS appliedclinicaltrialsonline.com
used for budgeting and forecasting at their company was
Microsoft Excel. Spreadsheets are cumbersome to share and
consolidate with other financial forecasting and budgeting
data, do not help forecast subject and site activation, take too
long to update, and are prone to error. Using this rigid, time-
consuming method, it is difficult to get a clear, consolidated
view across all sites and protocols.
Clearly, the industry needs a better approach to forecast
expenses and easily track the financial progress of a trial as
compared to the original budget. The necessary solution is
a robust, purpose-built, operational-based tool designed
around a core site and subject-forecasting engine to achieve
timely, accurate forecasting.
Am ideal system would be customizable by both organiza-
tion and trial with unique user-definable variables to forecast
sites, subjects, using dynamic dates, and projected expense
amounts. Such a system would enable financial managers to
calculate expense and cash forecasts as well as have a view
into operational performance and changes that drive this
expense. Further, the system can generate an expense fore-
cast, let users see when cash will be needed, and designate a
primary budget to compare and report against actual results.
Heather Schultz, Senior Vice President of Product Solutions, Clinverse,
Inc.
References
1. Grygiel A. The Struggle With Clinical Study Budgeting. Contract
Pharma. Oct. 11, 2011. Accessible at: http://www.contractpharma.
com/issues/2011-10/view_features/the-struggle-with-clinical-
study-budgeting/.
2. Cost to Develop and Win Marketing Approval for a New Drug Is
$2.6 Billion. November 18, 2914. Accessible at: http://csdd.tufts.edu/
news/complete_story/pr_tufts_csdd_2014_cost_study
3. Hammeke K. Can CROs Help Reduce the Expense of Clinical Tri-
als? Clinical Leader. April 29, 2014. Accessible at: http://www.phar-
maceuticalonline.com/doc/can-cros- help-reduce-the-expense-of-
clinical-trials-0001.
4. Clinical Trials Forecasting for Finance Professionals. July 2011.
Accessible at: www.healthtech.com/zctf.
5. Active trials as of November 2014. Accessible at: http://clinicaltrials.
gov/ct2/results?term=active+tria ls+2014&Search=Search http://
clinicaltrials.gov/ct2/ resources/trends#RegisteredStudiesOver
Time.
April 2015

Positive Negotiating with
Research Sites
Jeff Parke
Skills to shape clinical trial agreements, budgets,
and more for effective and fair contracts.
F
or each clinical trial, a clinical trial agree-
ment (CTA) and budget are negotiated be-
tween the investigator and the sponsoring
company so that the costs of carrying out
the trial are reimbursed. Negotiation is a
part of everyday life, especially in clinical trials.
Many professionals and lawyers spend hours
daily negotiating. However, few people have ever
formally learned the strategies and techniques of
effective negotiations, and even fewer still have
mastered them. This article is aimed to share
some lessons learned throughout my career as
a clinical trial contract negotiator and team lead.
The lessons learned have come from my own con-
tract negotiation experiences in a variety of situa-
tions, as well as research on the most up-to-date
negotiation theories and techniques.
It is important to understand the guiding princi-
ples that permeate the entire negotiation process.
Some of these principles include:
Negotiating strategically and not instinctively
Importance of being prepared
Protecting your reputation
Expertise comes from knowledge and practice
Negotiate strategically, not instinctively
Let us say you are at your desk on a Monday
morning following a long holiday weekend and
you are overwhelmed by your to do list and your
inbox, and wondering if this years merit raise will
in any way reflect your true value to the company.
So, as you sit at your computer and start to dig
out of the unrelenting number of messages, Jane,
a contracts manager from a large academic uni-
April 2015 appliedclinicaltrialsonline.com
CRO/SPONSOR
versity, calls and asks if you have a few minutes to
chat about some outstanding budget items that
need to be ironed out before the contract can be
executed and the site initiation visit (SIV) can be
scheduled. Knowing the value of this site and of
the principal investigator (PI), who is a key opinion
leader (KOL), you ultimately agree to take her call
and walk through the budget issues. Since youre
mostly up to speed with the current issues and in-
tended to call Jane later in the day anyhow, you tell
Jane that you are fine to chat now. You just ask Jane
to hang on for a minute or two while you pull up
the last revisions of the budget. While you dig up
the necessary information Jane asks some innocu-
ous questions to keep the conversation flowing.
Once you find what you need, you jump right into
the negotiations.
Twenty minutes later after Jane has rejected
most of your counteroffers in your revised budget,
you ultimately agree on the major deal points. Jane
then suggests that she take the revised draft that
you both agreed to and finalize it on her end and
send it back over for signatures. Remembering your
overflowing inbox and the multiple items that need
to be addressed before noon, you readily agree to
let Jane clean up the document and send it back to
your attention.
A few days later, despite some misgivings, the
contract is finalized and the deal is inked. You
know it is not a great deal as you have basically
offered the site the maximum amounts allowed
for the study, but after discussing with your proj-
ect manager you realize this is a better agreement
APPLIED CLINICAL TRIALS 11
CRO/SPONSOR

erly prepare themselves. We often have the best intentions,

Seven Key Principles to Contract/Budget Negotiation
but we often find ourselves diving right into the negotiation
Lessons without adequately exploring the many avenues down which
learned: key
principles to negotiations may proceed. Adequate preparation will not only
contract/
budget
make a difference, it will be the difference between success
negotiations
and failure.
As a contract and budget negotiator, it is our required
processes as well as our responsibility to comprehensively
analyze every substantive element of a contract and engage in
Negotiate Be prepared Control the Protect the Be ethical in Maximize Expertise
strategically and be agenda, but reputation your your comes from consistent due diligence to ensure that we do not miss a sub-
negotiation knowledge
and not
instinctively
proactive.
Know how
know when
to stop
of the CRP
and sponsor
leverage
and practice
stantive point during the negotiations. We should never short
to gather
information
talking and
start
(learn by
doing)
change the process element of the negotiations. To consis-
listening tently get what we need in a negotiation, we must marry the
substance to the process. Adequate preparationon both
Source: Jeff Parke
substance and processis essential to success.
Figure 1. Seven key principles to contract/budget
negotiation. The power of reputation
We should always protect our reputation during the negotia-
tion phase. This may seem simple, straightforward, and even
than no agreement at all, especially since the PI is a KOL in common sense, but many negotiators often do not protect
this study. their reputation and apply different negotiation tactics and
So, you then might sit back and ask yourself what hap- ethics during a negotiation. Justifications are all around
pened here? You, like hundreds of other contract negotiators, us...everyone lies in negotiations, some will say. Or, its
made a major error when you agreed to speak with Jane be- just a white lie. But here is the bottom line, even the most
fore you had strategically prepared yourself for the final leg of competent and professional negotiators involve a certain
the negotiations. Most individuals negotiate instinctively or amount of salesmanship. In fact, a significant dynamic in
intuitively. That is a natural course of negotiation. It can also many negotiations involves one party attempting to convince
be devastating. In this instance, Jane, a very experienced con- the other party that their bottom line is different than what it
tract and budget negotiator had a significant advantage. Not is in reality. Or that they have more leverage than is actually
only did she set the tone of the conversation, but she likely the case. Or they try avoiding answering certain questions or
put her negotiation knowledge to work before ever picking up revealing strategically important information. However, at the
the phone to call you, by strategically determining: end of the day, with an agreement or no agreement, everyone
How to create the right atmosphere that would help her will leave the negotiations with an impression of whether their
achieve her goals counterparts dealt with them in a professional and honest
The questions she needed to ask to improve her leverage fashion. If you gain a reputation as an honest and trustworthy
The strength of her alternatives if the deal started going negotiator you will be more likely to get what you want down
down the drain (i.e., mention that if you two could not reach the road. If not, you will lose credibility, fewer opportunities
an agreement she would possibly get the PI involved and will come your way, and fewer negotiations will conclude with
call the project team directly) you reaching your goals. Reputation is vitally important when
What independent standards she might use to justify her trying to establish effective negotiation relationships.
offers or concessions The best way to be ethical in your negotiations is to use
What might be her next offer or concessions and why negotiation tactics that are not morally objectionable to you,
What issues to discuss first, and last, and how to control and dont bluff, mislead, be vague or ambiguous in your state-
the agenda ments. By ensuring that you have sufficient factual informa-
Now contrast this with your situation. Were you thinking tion, you can provide sites with legal rationales for any objec-
strategically about the negotiations that Monday morning? It tions to their requests. Its also helpful to not give into the
is unlikely that you were. difficulties of other people. If they are rude, do not respond
in kind. Always be professional and let the site know you are
Be prepared aware of and understand their frustrations.
What tends to be the most universally ignored but most effec-
tive negotiation tool? Being prepared. The more you prepare Strategic tactics of effective negotiations
yourself for a negotiation, especially a complex and highly As with any skill, becoming an effective negotiator takes time,
stressful one, the better you will do. Most people fail to prop- effort, understanding, and relentless practice. Always remem-

12 APPLIED CLINICAL TRIALS appliedclinicaltrialsonline.com April 2015


When is Escalation Necessary?
Explain to the site that although you will recommend
whatever the site is requesting, that there is a higher
authority that needs to be checked with before certain
decisions are made. Higher authority works best when
the higher authority is in fact an entity like a sponsor
or a contract review team. Do not wait too long before
employing the advice from your project lead, legal, or
the sponsor. If you wait too long, problems tend to
fester and parties become too invested in their posi-
tions. By the time you get around to going to a higher
authority, you will have wasted considerable resources
and the momentum toward reaching an agreement. The
time to mediate is as soon as the negotiations founder.
Bottom line, you must develop clear paths of escalation
and always stick to those lines.
ber that some negotiations will require split-second decisions
and leave little room for error if you inadvertently spill critical
information. The more you apply these strategies in your daily
negotiations, the more effective you will be. Below are some
of most important strategic tactics you can possess in order
to become an effective negotiator.
How to gather information. Ask questions and get as much
relevant information as possible throughout the negotiation
process. Open ended why questions are best for obtaining
information on interests. Innocuous questions keep the other
side off guard and usually lead the other side to help you
rather than compete with you in the negotiation. Questions
can also be used as a non-confrontational way of making a
point. A question may even lead the other side to adopt your
unexpressed point of view as their own
Leave your ego at the door. Be sincerebe the nice guy.
This will allow people to open up to you, and information will
flow smoothly from party-to-party. Always open up an e-mail
message to your site with a hello, hi, or a Dear xxx. This Let the site know that responses are required within a certain
establishes sincerity while still being professional.
Establish trust with the site. If you make commitments with
the site, ensure that you keep them. If you tell the site you will
get back to them in 24 hours, make sure you get back to them
Know when to stop talking and listen. Do not interrupt and
pay attention. Know when to defer judgment.
Employ solid lines of communication with your sitebuild
rapport and establish a lasting working relationship. Com-
munication is critical to a good negotiation. Always ask ques-
tions and keep all lines of communication opened with the
sponsor and the study site.
Maximize your leverage. Use timelines/deadlines/enroll-
ment goals. Inform the site up front that changes to the CTA
and budget templates are typically not acceptable as this
could lead to a phenomenon called template drift. Template
drift will inevitably create undue restrictions on both the
April 2015
CRO/SPONSOR
sponsor and CRO and will also jeopardize the integrity of the
entire agreement. Once this happens, things could take an
ugly turn and will certainly drag out the negotiation process.
Thus, consistency is the best practice when negotiating an
agreement.
In CTAs there are several key factors: necessity, desire,
competition, and time. These factors usually come along
with the contract negotiations; they are intrinsic. Leverage is
indeed a negotiating tacticwhen developed and used ap-
propriately it can be of great advantage to you. Leverage can
indeed lead to quicker execution of CTAs.
Be prepared. Come to the negotiation organized and
knowledgeable about the issues at hand. Try to familiar-
ize yourself with the protocol and the contract and budget
templates prior to opening up any discussions. Ensure that
you know the sponsors management plan. Create a list of
frequently asked questions so you will be prepared if the
same items come up with other negotiations. Keep e-mails
and approvals readily available if there is a discrepancy be-
tween what you and the site had thought was finalized during
the negotiations. Be mindful of the process and customer
expectations. We need to provide quality deliverables. Make
sure all definitions in the contract and/or budget are clear
and understood the same way by yourself, the study site, and
the sponsor. What exactly does an enrolled subject mean?
What is an evaluable record? How do you define a dropped
patient? When is a protocol completed? What constitutes a
screened patient? A randomized subject? You should have
operational definitions of any such terms and those defini-
tions should appear in your contract. Make sure you read the
clinical trial agreement.
Control the agenda. Provide written agenda that details
goals for the negotiation and what needs to be accomplished
and whenset deadlineskeep important timelines in mind
(i.e., SIVs, first patient in). Prioritize and analyze the issues.
When first contacting the site, set the tone of the negotiations.
timeframe. Inform the site that certain documents, such as
budget and CTA comments need to be submitted by a named
date. Professionally control the environment. Discuss up front
what the most efficient mean of communication will be for the
site (i.e., e-mail, phone). This information will inevitably speed
up the process and help meet expected timelines.
Be proactive in your negotiations. Assess the short- and
long-term impact of the negotiations. Ensure that you have a
decent negotiation tactic in place, which will ultimately help
you achieve your goals and help you achieve your required
metrics.
Have a plan in place to deal with impasses. Know when
to put aside contentious issues, and revisit it later, after you
have gained momentum by agreeing on minor issues. Know
when to move up the chain. Sometimes you might not have
the authority to agree to certain terms. Thus, you must know
appliedclinicaltrialsonline.com APPLIED CLINICAL TRIALS 13
CRO/SPONSOR
What is Legal Responsible For?
When you are reviewing the contract, ask yourself: Does
the language pose a risk to the sponsor or CRO?
Keep in mind that sites often have a checklist of items
that their legal group wants to see in the agreement and
the site will sometimes just copy and paste this language
into the agreement without taking the time to notice that
the language is already covered in the templatemake
sure to look for redundancies.
Any change that imposes a new obligation on a CRO/
sponsor or restricts activities requires administration
approval from legal and/or payments. Crucial sections
to most CROs are: terminations, disclaimers, access to
records and inspection rights, and anti-kickback language.
Legal is responsible for reviewing all contractual terms
not reviewed by the sponsor. In general, legal is respon-
sible for reviewing contractual terms of a legal nature.
when to properly escalate terms to your legal team. This is
particularly effective in situations involving larger academic
sites with seemingly inflexible policies. If you have to escalate
a specific request to the sponsor or legal for review, you must
obtain the justification/rationale behind the sites request.
Best practice is to get this in writing (for documentation pur-
poses) and to obtain as much info as possible. Sometimes it
is a good practice to ask for web links that can direct you to a
website that lists a sites general policies regarding CTA/bud-
get negotiations. This information gathering will streamline
the negotiation process.
Always actively explore alternatives that will expedite your
negotiations. Ensure that you have a fair and efficient way to
resolve disputes in a timely manner. Always explore options.
There are usually a number of workable solutions to the prob-
lematic issues that arise. Finding out what those solutions
are may take a little work, and, even though a solution may
be workable, it will not necessarily be palatable to everyone.
Nevertheless, a good negotiator knows that once they get an
understanding of the whys and wherefores of each partys
positions, more often than not, there will be several options
for bridging the gap, solving the problem, or resolving the is-
sue in an expeditious manner. Good negotiators care about
being fair, but they are also assertive about their goals. They
push the other party to find the best solutions, not just the
simplest compromises.
Summary
Understanding negotiation strategies is one thing, but per-
sonalizing them so they work for you in various situations is
another. Effective negotiations require that you understand
how you personally come across and how you interact with
others negotiation styles. And you must learn when and
where to open up with more information, in what situations
14 APPLIED CLINICAL TRIALS appliedclinicaltrialsonline.com
A payment analyst is responsible for reviewing contrac-
tual terms of a financial nature.
Example: A sponsor may approve a site to receive funds
for an infusion nurse, pharmacy start-up feesthe lan-
guage would be drafted and sent to the analyst assigned
to the study, to review and approve.
In general, the sponsors legal department is respon-
sible for reviewing and approving all changes related to
the following contractual terms: confidential information;
intellectual property; ownership; publications; indemnifica-
tion; insurance; protocol compliance; and inspections. In
general, any modifications to these sections will need to
be escalated to the study lead and then to the sponsor.
And this is when it is important to have as much informa-
tion as possible as to why the site made any changes to
these sections.
to talk openly about your leverage, and where to simply hint
at it. In order to be an effective and reputable negotiator it is
essential that you learn how to apply the above negotiation
tactics in various circumstances.
Jeff Parke is Associate Site Start-Up Team Lead, Regulatory and
Start-Up at Quintiles, 4820 Emperor Blvd., Durham, NC, e-mail: jeff.
parke@quintiles.com
What PMs Can Learn From this Article
This article raises key points on how to effectively negotiate
while maintaining strong partnerships which is critical
to effective study startup. Depending whether or not the
negotiator from the pharma/CRO side plays a dual role
in the operational aspect of the study (ie, project manager)
defining agreement boundaries upfront are essential. These
boundaries, endorsed by the organization, justifies a position
without compromising a valuable relationship with the site.
The boundaries allow for open dialogue and discussion which
also support a good working relationship. Investing in an
organizational budgeting tool helps to provide transparency
in reasonable costs across varied ranges to have a more
informed discussion with the site. Being informed and
educating through discussion builds trust and expedites the
overall process.
Brooke Derby, MBA, MS, Associate Director,
BioDevelopment Operational Excellence Global Project
Manager for UCB Biosciences, Inc.
April 2015

Fair Market Value Pricing
for Site Contracts
Andrew Snyder
Finding FMV solutions for sponsors and sites to
support contract and budget negotiations
C
linical trial budget development continues
to frustrate industry sponsors and inves-
tigative sites. While private practice inves-
tigators may approve a study budget in 1.5
months, sites at academic medical centers
need three months to complete this activity and
hospital systems may require up to six months
to conclude these sensitive budget negotiations.1
Nearly 50% of sites report feelings of fear or sus-
picion when working with sponsors on budget
development. It is not a surprise that contract and
budget negotiations represent the most signifi-
cant delay to study start-up project schedules.1
Budget development has been a challeng-
ing task to both sites and sponsors for decades.
Through articles, conferences, and various educa-
tional opportunities, the industry has improved
cost identification and overall negotiation work-
flows. Sponsors have made important advances in
understanding site resource costs, study start-up
fees and overhead expenses. Unfortunately, spon-
sors and sites continue to wrestle with understand-
ing the fair market value (FMV) of medical services.
Confusion is widespread over the definition of FMV,
with many sites and sponsors struggling to cor-
rectly apply the concept when developing a study
budget. The purpose of this article is to decipher
the regulations on FMV and provide realistic solu-
tions to this conundrum for those conducting clini-
cal research.
Fair market value framework
The relevance of FMV in clinical research can be
traced back to landmark regulation published by
the Office of Inspector General (OIG) in 2003 titled
April 2015 appliedclinicaltrialsonline.com
CRO/SPONSOR
OIG Compliance Program Guidance for Pharma-
ceutical Manufacturers. 2 In the Research Fund-
ing section of the document, the OIG regulation
stipulates, Payments for Research Services should
be fair market value for legitimate, reasonable and
necessary services. Unfortunately, the OIG does
not provide any further clarification concerning
the definition of FMV. Without additional guidance,
both site and sponsors have created erroneous
FMV interpretations and budget development prac-
tices. An elucidation of FMV begins with examining
the finance and accounting standards from which
the concept originated.
For nearly 120 years, the business community
has had a single definition of FMV: Fair Market
Value is defined as the price for which property
would exchange between a willing buyer and a
willing seller, each having reasonable knowledge
of all relevant facts.3 In rulemaking, the Centers
for Medicare and Medicare Services (CMS) defines
market value as the value in arms length trans-
actions, consistent with the price an asset would
bring as the result of bona fide bargaining between
well-informed buyers and sellers who are not oth-
erwise in a position to generate business for the
other party.4
For clinical research purposes, the exchange of
property or asset is exemplified by the financial
purchase of a medical service as required in the
study protocol. The finance and CMS FMV defini-
tions are straightforward and only specify a few
requirements that apply in the context of research,
to summarize:
Willing buyer negotiating the purchase price
with a willing seller
APPLIED CLINICAL TRIALS 15
CRO/SPONSOR
Well-informed buyers with reasonable knowledge of all im-
portant facts
Armed with the understanding of these basic criteria, how
do industry sponsors and investigative sites define FMV? How
do both parties place a dollar value on the clinical services
required in the study protocol? To illustrate these FMV prac-
tices, this article will cite the following diagnostic services
that are frequently included in research protocols: MRI (head),
CTA (chest), transthoracic echocardiogram (TTE), and trans-
esophageal echocardiogram (TEE).
(Note: Many standard-of-care and other clinically relevant
medical services in a research protocol can, and should, be
billed to the patients third-party medical insurance. It is not
within the scope of this article to review the established CMS
billing and coverage regulations. This article is focused on the
pricing of medical services that both sites and sponsors agree
cannot be billed to a patients medical insurance).
Sponsors and FMV
Industry sponsors are increasingly aware of the legal concerns
related to the development of clinical trial budgets. Phar-
maceutical, medical device, and diagnostic companies are
required to comply with the FMV stipulations, but the federal
regulators do not provide advice on the determination of FMV
for medical services. This places sponsors in an ill-defined
situation fraught with potential legal and financial risk.
Sponsors that elect to disregard the federal FMV regula-
tions may suffer harsh penalties. In May 2008, Biovail pleaded
guilty to conspiracy and Anti-Kickback Statute charges and
agreed to pay a criminal fine of more than $24 million for
allegedly conducting a sham study involving Cardizem. The
study paid physicians up to $1,000 per patient if they enrolled
11-15 patients in the trial, which involved prescribing Cardi-
zem. The prescribing physicians conducted three regularly
scheduled visits for each enrolled patient, which involved no
additional work for the physicians. The payments exceeded
the reasonable FMV of the physicians time necessary to en-
roll the patients and complete the questionnaires.5 The legal
penalties in this real-world case were focused on unfair incen-
tivizing of physicians; however, FMV concerns were addressed
in the final settlement.
Industry sponsors are cognizant of the regulations and
strive to follow published FMV requirements. In order to re-
main compliant with the regulations, many sponsors desire
documentation to support the pricing of medical services in
a clinical study budget. Unfortunately, most sponsors do not
have access to realistic FMV pricing information. The lack of
real pricing information commonly results in sponsors fre-
quently employing two inaccurate pricing strategiesMedi-
care pricing and benchmark pricing.
Research sponsors have historically utilized Medicare pric-
ing in clinical trial budgets. The Medicare pricing strategy has
a significant benefit because Medicare pricing for clinical ser-
16 APPLIED CLINICAL TRIALS appliedclinicaltrialsonline.com
Medicare Pricing
SERVICE MEDICARE REIMBURSEMENT
MRI (HEAD) $586.30
CTA (CHEST) $361.98
ECHO (TTE) $416.66
ECHO (TEE) $596.10
Source: Snyder
Table 1. A survey of Medicare pricing in the Midwest.
vices is well-documented and publicly available. Sponsors can
completely mitigate the FMV legal risk by proposing Medicare
pricing. Unfortunately, hospital and clinic administrators will
quickly report that Medicare rates are significantly below FMV.
For this reason, surveys indicate that about 17% of all doctors
nationally are refusing to treat new Medicare patients6 and ac-
cept the below-FMV reimbursement.
Healthcare institutions understand that Medicare pricing
does not fall within the FMV definition of reasonable. More-
over, the Medicare pricing strategy for clinical services in a
research protocol does not follow the definition of fair market
value. A primary tenet of FMV is a willing buyer negotiating
the purchase price with a willing seller. CMS coordinates the
reimbursement rates on a national level. The agency creates
and publishes the prices for medical services; the providers
of these services are not provided with an opportunity to ne-
gotiate. In short, Medicare rates do not comply with the FMV
regulations. To support an illustration of this concept, a sur-
vey of Medicare pricing in the Midwest is included in Table 1.
Sponsors have heard about the inaccuracies associated
with using Medicare pricing from astute sites for many years.
Unfortunately, industry sponsors do not have many other op-
tions for finding documented FMV pricing information. To fill
this data void, there are companies that sell comprehensive
benchmark pricing for clinical services. However, it should be
noted that purchased benchmark data that is marketed as a
tool to reduce investigator payments, may not provide locally
accurate fair market analyses to sponsors attempting to follow
FMV. The rule of thumb would be to examine how old the data
is, as well as where the original data came from. The rates
could originally have been based on Medicare pricing or well
below FMV pricing. Benchmark pricing may represent a help-
ful reference point when initially developing a study proposal,
but cannot be relied upon solely when creating study budgets.
Sites and FMV
While sponsors struggle to find fair market value pricing for
medical services, investigators find themselves in a similar
situation. Physicians, nurses, and other medical providers
are largely removed from the details of healthcare economics.
The myriad of medical insurance products, various plans, and
confusing billing tactics make it nearly impossible for provid-
April 2015

Charge Master Comparison
MEDICARE
CLINICAL SERVICE REIMBURSEMENT CHARGE MASTER
MRI (HEAD) $586.30 $3,133.00
CTA (CHEST) $361.98 $1,579.00
ECHO (TTE) $416.66 $1,853.00
ECHO (TEE) $596.10 $1,592.00
Source: Snyder
Table 2. Medicare, benchmark, and charge master data
are universally not accurate representations of fair mar-
ket value.
ers to understand the actual reimbursement for their clinical
services. When reviewing a trial protocol and associated bud-
get, research professionals frequently communicate with their
billing office about specific procedures and inquire what do
we charge? Unfortunately, this situation exposes the investi-
gative team to a disconnect between the healthcare institu-
tions charge master and FMV.
In the United States, the charge master is a comprehen-
sive listing of items billable to a patients health insurance
provider. The charge master has long been a critical element
in the coding, billing, and payment process of hospitals and
health systems. The charge master includes thousands of
hospital services, medical procedures, drugs, supplies, and
diagnostic evaluations such as imaging and blood tests. Every
hospital maintains its own charge master, but approximately
40% of hospitals pay external companies to help create and
adapt their charge masters on a yearly basis.
Charge master coding and pricing rates serve several im-
portant functions for the healthcare institution. For example,
the coding information in the charge master is used by the
payer to adjudicate claims.7 A primary role of the charge
master is a starting point for contract negotiations between
healthcare institutions and commercial insurance providers.
Commercial insurers may negotiate to provide reimbursement
as a percentage of the values described in the charge master.
A large medical commercial insurer may propose paying 40%-
50% of charges; while a smaller workers compensation insurer
may reimburse 85% of charges. In these situations, the health-
care institution can be incentivized to keep the rates in the
charge master elevated. The healthcare industry understands
that a charge master may list high prices that are devoid of
any calculation related to cost.8
The rates in an institutions charge master may have been
initiated 30 or more years ago, and no longer represent FMV
for medical services. Unfortunately, research sites frequently
quote these rates when negotiating study budgets with spon-
sors due to the easy availability of this financial data. Sites
understand that Medicare and benchmark rates are inad-
equate, but need to realize that the charge master is not a
realistic FMV source of pricing information.
April 2015
CRO/SPONSOR
Medicare, benchmark, and charge master data are univer-
sally not accurate representations of FMV. The charge master
extension of this illustration is included in Table 2.
FMV recommendation
Research sites and sponsors are in mutually difficult situa-
tions in their attempts to create FMV rates for medical ser-
vices. The sources of information and documentation readily
available to sponsors and sites do not meet the definition of
FMV. The budgeting process would benefit from pricing that
meets the FMV criteria. The budget development process
would be more effectual if there was a situation in which a
willing buyer and willing seller, with reasonable knowledge
of the relevant facts, meet to negotiate the purchase price of
medical services. Fortunately for sites and sponsors, this pro-
cess occurs on a regular basis in healthcare institutions. The
open market negotiation of pricing for clinical services is a
required activity when contracting between healthcare provid-
ers and commercial insurers.
Healthcare institutions, including private practice and
hospital systems, negotiate with commercial medical insurers
on a methodical schedule. Six to eight months prior to the
end of the current contract, both parties meet to begin the
negotiation process. Hospitals and insurers outline their cur-
rent financial status and economic challenges and initiate the
justification of their pricing proposals. The insurance provid-
ers compare and contrast the pricing proposal of the hospital
with other local healthcare providers. In turn, the hospital
may summarize rate information comparing the negotiat-
ing insurer with other commercial payers in their region. The
negotiations can include a review of the charge master, Medi-
care rates, and historical pricing for services at the institution.
In the end, the healthcare institution and commercial insurer
agree upon an arms-length contract for the medical services
provided. The signed contract is commonly drafted for one
to three years, thus, ensuring timely and accurate financial
terms.
The negotiation process described between hospitals and
commercial insurance payers represents the perfect defini-
tion of FMV. There is a willing buyer and willing seller of the
services under consideration. Both parties are well informed
with reasonable knowledge of the important facts. The FMV
pricing rates contained in the signed contracts between com-
mercial insurers and healthcare providers reflects the current
market trends, meeting the stipulations included in the federal
regulations.
The commercially negotiated rates can be a FMV resource
for both sponsors and sites. Average negotiated FMV rates for
the illustration have been added to Table 3.
FMV implementation
The primary obstacle in using commercially negotiated rates
is the availability of this site-specific cost information. The
appliedclinicaltrialsonline.com APPLIED CLINICAL TRIALS 17
CRO/SPONSOR

rates documented in the contract between healthcare institu- Average Negotiated FMV Rates
tions and commercial payers are considered confidential and
strategic corporate information. This sensitive information CLINICAL MEDICARE CHARGE COMMERCIAL
SERVICE REIMBURSEMENT MASTER RATES
will not be found in a publicly available source. A core at-
tribute of FMV reporting is a reasonable level of market effi- MRI (HEAD) $586.30 $3,133.00 $1037.00
ciency and transparency.9 In order to gain the benefits of FMV CTA
$361.98 $1,579.00 $872.98
commercial rates, sites must conduct an internal rate analysis (CHEST)
and prepare the corresponding documentation. ECHO (TTE) $416.66 $1,853.00 $981.65
Sites can begin the pricing research project by contacting ECHO (TEE) $596.10 $1,692.00 $1007.67
their internal finance director that manages the charge mas- Source: Snyder
ter or commercial contracts. These financial professionals Table 3. Commercially negotiated rates can be a fair
have immediate access to all current commercial contracts market value resource for sponsors and sites.
and can provide investigators with pricing information
quickly and easily. Sites should request the actual reim- Healthcare institutions continually negotiate FMV rates for
bursement terms for all likely ordered medical services. To medical services with commercial medical insurance corpo-
support an accurate FMV analysis, the sites need to request rations. These arms-length contracted values represent the
the rates from three to five of the highest volume commer- spirit of the fair market value requirements and a financial
cial insurers. In further support of the FMV concept, the top compromise between Medicare and charge master rates. By
three to five insurance products may represent >80% of the using these commercial FMV rates, sites and sponsors can
non-Medicare business with the healthcare institution. Due comply with FMV value rates and complete the budget nego-
to the negotiation techniques and goals with commercial tiation task more efficiently and effectively.
insurers, sites may find variability in the rates between the
top commercial insurers. Sites should calculate the average Andrew Snyder, MBA, FACMPE, PMP, is System Wide Director of
commercial reimbursement and document this pricing as Research, HealthEast Care System, email: atsnyder@healtheast.org.
their local FMV rate.
Sponsors do not have access to FMV commercial pricing. References
Sites should not be frustrated or concerned when initial spon- 1. J. Jones, Streamlining the Negotiation of Clinical Trial Agreements:
sor budget proposals include below-market pricing for medi- A Model to Dramatically Improve the Time to Full Execution of a
cal services. Instead, sites should embrace this opportunity to Contract, SoCRA Source, May 2009.
partner with sponsors and educate the budgeting profession- 2. U.S. Department of Health and Human Services, OIG Compliance
als about the negotiated rates in their region of the country. Program Guidance for Pharmaceutical Manufacturers, Federal
Over time, sponsors will collect this information and provide Register 68(86), 2003.
more accurate budget proposals in the future. 3. A. King, Determining Fair Value, Strategic Finance, January 2009.
During the budget negotiation process, the site should pro- 4. D. Melvin, The Start Fair Market Value, Volume/Value & Commer-
vide their local FMV pricing for each medical service. Spon- cial Reasonableness Standards An Outline of CMS and Judicial
sors may require additional documentation as proof of the fair Interpretation; referencing 60 FR 41921.
market value rate. Sites can describe their FMV rate research 5. Health Care Fraud and Abuse: Practical Perspectives: 2nd Edi-
process, and provide their research FMV price list. If the tion2009 Cumulative Supplement, Ch.11.II.A.2.b., p. 436.
sponsor requires additional supporting documentation, sites 6. D. Hodberg, Primary Care Physicians are Leaving Medicare, The
can have the sponsors budget representative speak with the National Center for Public Policy Research. August 2012.
contracting manager. Finally, sites can simply produce a PHI 7. D. Abbey, Designing and Maintaining an Effective Chargemaster,
redacted copy of an actual patient reimbursement statement Healthcare Financial Management, March 2001.
the very definition of FMV in action. 8. S. Brill, Bitter Pill: Why Medical Bills are Killing Us, Time, Febru-
ary 2013.
Conclusion 9. J. Alex Milburn, The Relationship between Fair Value, Market Value,
Industry sponsors and research sites continue to experience and Efficient Markets, AP, Vol 7, No 4, 2008.
exasperation with the research study budget negotiation pro-
cess. Sites feel that sponsors are proposing inadequate Medi-
care or Benchmark-based rates for medical services. Sponsors
feel that sites are quoting inaccurate charge master-based
rates. Both sites and sponsors are required to comply with
federal FMV value regulations; neither have efficient access to
FMV pricing information.

18 APPLIED CLINICAL TRIALS appliedclinicaltrialsonline.com April 2015


Streamline and Improve
Study Start-Up
Marie Kieronski and Carolann Schimanski
Work is needed if true efficiencies are to be gained
in clinical trial performance.
A
chieving predictability in study start-up
has become a critical goal within the clini-
cal research timeline. Until recent years,
activities associated with study start-up
which include site identification and fea-
sibility, negotiations of contracts and budgets,
planning for patient recruitment, managing/track-
ing regulatory documents, and drug accountabil-
itywere largely executed through numerous and
often cumbersome manual processes. This would
frequently lead to inefficiencies in study timelines
and cost. Today, with the advancement of elec-
tronic, real-time document collection and data
reporting systems, along with increased efforts by
biopharmaceutical companies and their contract
research organization (CRO) partners to align
these technologies with specialized personnel in
areas such as critical path project management
(CPM) and resource centralization, strides have
been made in streamlining study start-up and re-
ducing trial initiation times.
While recent studies have reported improved
trends, sponsors and CROs continue to experience
significant challenges in meeting overall clinical
trial timeline demands. According to Cutting Edge
Information, 72% of studies run more than one
month behind schedule. Such delays can impact
the bottom line, with sponsors standing to lose
between $600,000 and $8 million for each day that
a trial delays a products development and launch.1
Challenges in patient recruitment and retention
are considered the major cause of drug develop-
ment delays, but start-up activities are key factors
April 2015 appliedclinicaltrialsonline.com
CRO/SPONSOR
as well, particularly issues around site contract and
budget negotiations and approval. This may be a
result of increased costs of clinical trials at the site,
a more competitive environment, or the result of
financial pressures on sponsors to keep investiga-
tor payments low. The Tufts Center for the Study
of Drug Development finds that while the majority
of clinical trials globally meet their patient enroll-
ment goals, sponsors and CROs typically need
to nearly double their original timelines to reach
those targets. Nevertheless, Tufts reports that 89%
of clinical studies meet enrollment expectations,
with site activation rates reflecting success with
study start-up in particular.2
Historically, the study start-up phase has been
viewed as a labor intensive, costly, and time-con-
suming component of the clinical trial process.
Today, sites must perform a number of specific
activities related to documents, submissions, con-
tracts, and visit schedules across multiple studies
with multiple sponsors. These documents include
site feasibility survey forms, protocols, investiga-
tor brochures, site contracts, budget worksheets,
patient recruitment plans, informed consent forms,
and advertising materials. Ensuring that the most
recent versions of these documents are used can
be challenging if there are multiple versions and
amendments.3 Heavy paper-based processes have
long burdened efforts in study start-up. For in-
stance, Form 1572, which each investigator partici-
pating in a trial must complete,4 was identified as
the single most redundant paper received by the
FDA. Manually processing each 1572 could result
APPLIED CLINICAL TRIALS 19
CRO/SPONSOR
in weeks of elapsed time per investigator. Devoting resources
to the manual routing and tracking of these forms also fre-
quently requires the use of valuable resources that could be
allocated to other more critical tasks.
Several inefficiencies and limitations continue to threaten
the data-collection process during study start-up. For many
global trials, there is little standardization for what data is
collected, and there are typically multiple places where the
information is stored. There is significant need for sites to
be able to provide and update their information to a single
source rather than multiple sponsor and CRO databases, all
with differing criteria. Also impeding efforts in this area is a
lack of industry standards regarding the terms or milestones
to measure.5 Though initiatives around integration have in-
creased, sponsors largely feature standalone databases that
typically do not feed information into vendor workflow sys-
tems, making it difficult for clinical teams to measure the data.
Instead, CROs usually are required to mine the database and
pull out information. This can present challenges because
study start-up does not just focus on metrics around what
sites have conducted a particular project and how many pa-
tients they enrolled, but also involves timelines related to
regulatory activities and site contracting.
Another challenge for outsourcing providers, in particular
during study start-up, is the management of resources in
cases where there is no global source of information regard-
ing a development program and the window from a request
for proposal to award of a study to a CRO can be as short
as one month. When assigning staff, CROs must be able to
predict the number of personnel and resources that will be
needed within each country to assist with language and cul-
tural barriers, as well as how to distribute and utilize those re-
sources as efficiently as possible. With start-up staff at these
organizations routinely moving in and out of projects, CROs
need the necessary visibility to plan across their overall re-
sourcing strategy. It is crucial, therefore, that technology used
in study start-up be built in to allow for more proactive and
effective resource planning at the country level.
Similarly, better strategies are needed to reduce any proj-
ect downtime often associated with study start-up. Sponsors
and CROs have traditionally functionalized start-up activities,
which inevitably creates inefficient handoffs between the
various steps in the process. This can lead to gaps in time
between activities that may range from hours to days, thus
slowing down overall clinical trial timelines and potentially
compromising study budgets. The use of technologies allow
for the seamless sharing and visibility of documents and in-
formation in real-time throughout the world that streamlines
any necessary handoffs. Technologies that use workflow man-
agement systems, alerts, document collection, version control,
and reporting eliminate the number of handoffs, errors, and
downtime along the start-up continuum, and produce critical
efficiencies in CPM and workflow design.
20 APPLIED CLINICAL TRIALS appliedclinicaltrialsonline.com
In the United States, activities involving local institutional
review boards (IRBs) have traditionally challenged efforts to
simplify study start-up. Typically, in multicenter clinical trials
a site can use a central IRB or a local IRB. Central IRBs review
the protocol for multiple sites. Sites that are required to use
a local IRBusually academic and institutional centersap-
pear to have a less efficient review process and require more
time to gain approval. Each sites local IRB conducts a full
review of a multicenter protocol, and this process, repeated at
each site, produces very similar outcomes that add significant
delays to the start-up phase.
With multicenter studies becoming increasingly more com-
mon, some have questioned whether local IRB review actu-
ally enhances the goal of protecting patients. A recent study
contends that multiple reviews and differences in informed
consent forms may result in differences in the way patients
are treated from site to site, with no ethical justification. The
report notes that the FDA and other US agencies have encour-
aged the use of a central IRB to improve the efficiency of trials
with multiple sites, though research institutions differ in their
willingness to defer to centralized IRB review.6
Studies have shown that the use of a central IRB results in
a sites approval an average of 27 days sooner than when us-
ing a local IRB.5 With more pressure being placed on shorten-
ing the timeframe to start studies, site selection is becoming
more competitive. Sites utilizing local IRBs can be at a greater
disadvantage in cases of competitive enrollment. Central IRB
sites have more resources to achieve optimal quality and
performance goals as well as ensure appropriate oversight to
adhere to regulatory guidelines. There has been a large trend
globally for the centralization of IRBs and ethics committees.
This trend will also lead to better oversight from regulatory
agencies and will increase consistency and protections for
study participants.
Strategies evolve
Amid the growing challenges in study start-up, strategies in
this area are increasingly emphasizing workflow management
as opposed to simply the tracking of data. This approach al-
lows study teams to better manage key start-up steps through
process improvement techniques such as CPM and Lean Six
Sigma methodologies. The goal is to create global visibility
and foster better communication and understanding around
issues such as when sites are available for pre-study visits, for
example, or when they are qualified after pre-study visits, and
then being able to perform those project handoffs on a global
and much more visible basis. Workflow management also en-
ables greater focus on certain start-up activities that may be
outside a sponsors or CROs specific functional areas. Drug
shipment to sites, for example, will be easier to manage as
workflow systems continue to evolve and predictability of site
activation is enhanced. Staffing of clinical research associates
can benefit from these approaches as well.
April 2015

Companies today are building their databases to allow
sponsors and CROs to see more clearly into the future based
on past project experience. Using this information to evalu-
ate new protocols and products according to their overall
design and composition can help identify risks or trouble
spots that may occur along the same path. However, simply
basing projected timelines on general comparisons with past
trials in the same phase and indication is not sufficient. De-
pending on the level of complexity, there are several aspects
of study start-up that require in-depth evaluation to attain
predictability in start-up. Protocol design evaluated against
the regulatory environment, patient population, and standard
of care allows for the identification of risks that can poten-
tially be mitigated through better selection of countries and
changes to submission documentation or approach with the
regulatory agencies to gain advice in advance of submission.
Investigational products, concomitant medications, supplies,
and laboratory exports also need to be reviewed against the
regulatory environment to ensure the ability to import and
export needed clinical trial products, as well as samples for
evaluations at centralized laboratories. It is critical, therefore,
that study teams are able to enter multiple unique parameters
of a new study into the intelligence databases upfront to cre-
ate plans that increase the likelihood of predictability around
timelines.
During the clinical trial, measuring against performance
is key to ensuring baseline timelines and plans are managed
appropriately and variability is understood. Study tracking of
key deliverables should be performed against a baseline plan
that establishes realistic end-to-end goals at the beginning of
the project. If circumstances arise that change the timeline,
then a projection should be created, however, the original
plan should always remain as the baseline. Staying as close
as possible to the baseline plan will ensure that the appropri-
ate data is available when measuring predictability. If there
is a delay that is inevitably part of the start-up process, this
approach will allow for the gathering of information that will
lead to a quicker mitigation strategy.
Activities related to site identification and feasibility can
benefit significantly from improved data strategies. Identify-
ing high performing investigators and sites is essential for re-
search outcomes because the activity directly correlates with
quicker patient enrollment, the attainment of overall enroll-
ment goals, higher quality data, fewer queries, and better sub-
ject retention.8 Poor selection of trial sites, however, remains a
problem in the industry and reportedly increases the cost of
clinical trials by at least 2%. Poor site selection is largely at-
tributed to the lack of knowledge of active and relevant clini-
cal investigators. In addition, database-driven site selection is
still a relatively new option for the industry, as many sponsors
continue to rely heavily on their relationships with previously-
used sites to find suitable investigators.9
Typically, when recruiting sites, sponsors and CROs first
April 2015
CRO/SPONSOR
identify which regions the targeted patient population is more
commonly located. Next, they determine whether the protocol
is appropriate for those particular regions. Access to regula-
tory intelligence databases can help improve the success of
these decisions by applying key information to country and
site feasibility assessments. Those companies able to com-
bine information around timelines and metrics data with ro-
bust regulatory intelligence will be able to establish a strong
foundational knowledge when exploring geographies to con-
duct trials. That should, in turn, help expand and refine their
network of qualified sites and investigators.
The practice of enrollment modeling can also help improve
study start-up efficiency. This method allows study teams
to estimate the time needed to recruit the required number
of enrolled patients using a set number of sites. Enrollment
modeling has application throughout a trial, providing a plan
to measure enrollment progress as the study advances. Tech-
nology in this area enables study teams to view in parallel
enrollment data and intelligence regarding specific protocols,
countries, and sites from an end-to-end perspective. It is
important that all systems built into a clinical development
program feed into the specific enrollment modeling technol-
ogy being used.
Technology push
Global reporting systems and technologies in clinical devel-
opment have advanced considerably over the past decade,
largely shifting from the tedious exercise of compiling Excel
spreadsheets to technologies that allow for more real-time
data and reporting. Systems today, for example, enable que-
ries from ethical committees and regulators to sites in various
countries to be shared globally in real-time. The process of
communicating with investigators is becoming increasingly
digital, although site adoption of web-based tools for clinical
document exchange remains slow. A global survey conducted
by CenterWatch in 2011 found that 73% of sites were still using
traditional methods of e-mail, fax, and courier as a primary
tool for exchanging clinical trial documents.10 Nevertheless,
the majority of investigators, even those in developing re-
gions, have access to smartphones, tablets, and other mobile
devices. This reality puts further onus on sponsors and CROs
to consider sites needs accordingly. That could mean making
sure that investigator questionnaires, for instance, can be dis-
tributed electronically, completed on a handheld device, and
signed with an electronic signature. Providing investigators
routine, pre-populated documents that can be quickly com-
pleted via mobile would help speed up the overall start-up
process. As technology improves, the clinical trial environ-
ment will need to keep up with the demands to manage start-
up in order to remain competitive and reduce timelines.
Online clinical document exchange portals are being used
to simplify the task of tracking study start-up activities for
multiple sites. These portals can enhance visibility into the
appliedclinicaltrialsonline.com APPLIED CLINICAL TRIALS 21
CRO/SPONSOR

status of a sites progress through reports generated directly
from the system. Streamlined communication with sites po-
tentially allows sponsors and CROs to track and collaborate
on operational data in a more transparent, regulatory-com-
pliant, and user-friendly manner. In addition, smart workflow
technologies make it easier for study teams to provide real-
time status updates to management that it can use to find
process bottlenecks and optimize resources. However, that
adoption of digital portal systems is not without challenge.
For sites already overburdened with work from multiple spon-
sors with their own systems for start-up, there may be reluc-
tance to learn a new technology. In addition, adopting a new
system requires the creation of new SOPs and a commitment
to additional staff training. For sponsors and CROs, there are
issues to consider such as cost of the initial investment and
the potential return on investment.3
Because study start-up activities are repetitive and consis-
tent across all clinical trials, there is increased recognition
that implementing technologies that deliver process efficien-
cies can generate valuable time and cost savings.
Conclusion
Although notable advances have been made in the way study
start-up activities are conducted, there remains much work
to be done if true efficiencies are to be gained in clinical trial
performance to increase predictability in site start-up. The
emergence of new approaches to streamline burdensome
and time-consuming start-up procedures offer promise, but
with still uneven adoption of digital document management
and integrated data systems, challenges in predicting start-
up timelines and identifying potential holdups will continue.
Therefore, the need for companies to compile intelligence and
drill deeper into the evaluation of protocols and the regula-
tory environment when projecting site activation is crucial.
5. A. Chasse, Site Metrics for Study Start-Up: Clinical Trials Trans-
formation Initiative, DIA 2012 presentation, (2012), https://www.
ctti-clinicaltrials.org/steering-committee/contact-information/dia-
2012-presentations/Chasse_Site%20Metrics%20for%20Study%20
Start%20Up.pdf.
6. K. E. Flynn, et al., Using Central IRBs for Multicenter Clinical Trials
in the United States, PLoS ONE, 8 (1) e54999 (2013).
7. S. O. Joseph, J. Wu, and F. M. Muggia, Targeted Therapy: Its Status
and Promise in Selected Solid Tumors Part II, Oncology, 26 (11)
1021-1030, 1035 (2012).
8. V. Rajadhyaksha, Conducting Feasibilities in Clinical Trials: An
Investment to Ensure a Good Study, Perspect Clin Res., 1 (3) 106
109 (2010).
9. Manufacturing Chemist, Poor Clinical Trial Site Choices Inflate
Costs by 20%, (2011), http://www.manufacturingchemist.com/
news/article_page/Poor_clinical_trial_site_choices_inflate_costs_
by_20/58943.
10. Bio-IT World, IntraLinks Survey Highlights Need for e-Clinical
Document Exchange Tools, (2011), http://www.bio-itworld.com/
news/06/14/2011/IntraLinks-sur vey-need-clinical-document-
exchange.html.
11. TransCelerate BioPharma Inc., TransCelerate Initiatives, (2013),
http://transceleratebiopharmainc.com/?4a17eb50
12. D. Beasley, J&J, Lilly, Merck Plan Clinical Trial Site Database,
Reuters, (2012), http://www.reuters.com/article/2012/11/15/us-phar-
maceuticals-trials-idUSBRE8AE0XS20121115.

Marie Kieronski is Director, Study Start-Up and Regulatory at INC

Research. She can be reached via e-mail at marie.kieronski@incresearch.
com. Carolann Schimanski is formerly with INC Research.

References
1. 1. PR Newswire, Clinical Trial Delays Cost Pharmaceutical Compa-
nies, (2004), http://www.prnewswire.com/news-releases/clinical-
trial-delays-cost-pharmaceutical-companies-55044607.html.
2. Tufts Center for the Study of Drug Development, New Research
from Tufts [CSDD] Characterizes Effectiveness and Variability of
Patient Recruitment and Retention Practices, (2013), http://csdd.
tufts.edu/news/complete_story/pr_ir_jan-feb_2013.
3. IntraLinks, Faster Study Start-Up and Reduced Costs Through the
Use of Clinical Document Exchange Portals, (2009), http://www.
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