In the current business climate, pharmaceuticals and biotechs are facing increased numbers of uncertainties with regards to financial planning. For many biotechs, change orders are a common experience in clinical trials. And they are an additional source of uncertainty in the clinical trial process as they entail an increase of the development costs. They might be spurred by unforeseen circumstances or emergencies or unfortunately by a lack of diligence in the clinical trial planning and budgeting process. Change orders represent a headache for project managers, as they represent the unenjoyable task of seeking management approval for the increase in budget and spending.
By experience change orders do not necessarily need to bring about an increase in cost. When change orders occur, take the time to reassess and reanalyze the financial planning of the trial budgets in total. Understand change orders as a chance to bring a list of other sections in a budget where there is room for cost reductions. Usually, some budget items increase as assumptions changed, but they might be balanced out by other changes in the project where cost efficiencies allow cost reductions to be realized.
Can you imagine going to your management and announcing that there has been a 6-digit change order request from the CRO, but then being able to tell them that after several negotiation rounds the project costs did not increase? The importance is to negotiate about efficiencies where quality and patient safety is not affected.
In order to do this, PHARALL provides quite unique service for small and mid-sized biotechs. With our experience in clinical trial budgeting and CRO contracts, sponsors can reduce overall clinical project costs while ensuring that the CRO spends the funds allotted in a responsible and effective manner. This process includes not only the selection of the CRO but also the negotiation of the budget and contract. Lastly, during the project, PHARALL assists with the ever-troublesome change orders.
Project managers need to demonstrate to their management how funds are being spent in clinical trials and the ability to avoid costs increases where possible. If you are faced with cost increases in your current change order process, contact us and request a non-binding estimate on how to alleviate your situation to give your clinical trials more financial reliability. Understand your next change order as a chance to reshuffle the cards.
The following list of questions describe some of the many approaches we take to challenge change orders from CROs which you might find insightful:
1. Are there any tasks that are no longer needed in the budget?
When change orders occur, it is important for project members to discuss the additional tasks that need to be included in the budget. However, as the project progresses, it may become clear that certain tasks that were initially thought to be necessary are no longer required. If the project is progressing better than expected in some areas, it may be worth reviewing the task list to identify any portions of the budget that are no longer needed. In order to reduce the change order budget, it is advisable to ask the CRO to remove these tasks from the budget. This will help to avoid unnecessary negotiations or debates.
2. Did we spent all budgeted hours for the completed tasks?
If a significant change order is proposed by the CRO, it may be worthwhile to request an interim reconciliation of completed tasks. This information can be provided by the CRO and can help to identify any potential efficiencies in the project. By considering these efficiencies, it may be possible to reduce the change order amount. It is important to communicate and recognize the good work performed by the CRO, as this can help to reduce tension during change order discussions and encourage the project team to be even more efficient. Additionally, sharing this information with management can help to gain approval for the change order, as it demonstrates the project manager’s ability to work effectively with the CRO.
3. Who is responsible for the change?
It is important to differentiate responsibility for estimating project assumptions at the start of a project. In the event that assumptions change, such as lower than expected patient enrollment, it is crucial to openly discuss and determine the respective responsibilities. This can help to explain to management that the change is reasonable and acceptable. A common scenario is when patient enrollment is lower than expected and the team suggests opening additional sites. If the CRO is responsible for the recruitment estimation and feasibility, it is not the responsibility of the sponsor to pay for the inclusion of additional sites or the delay of the trial and associated costs. If it is possible to provide a good reason for the cost increase, such as the normal risks and uncertainties of clinical development, it may be easier to gain approval for the change order. It is worth considering any new competitors or changes in the market that may affect the allocation of responsibilities.
4. What can we do to mitigate further cost increases?
In order to mitigate further cost increases, it is advisable to ask the CRO about the measures they have taken to address the current cost increase. If they are unable to show significant efforts, it is important to avoid taking on the full burden alone. The sponsor and CRO should work together to handle cost increases and consider any opportunities to avoid them in the future. If it is necessary to accept a cost increase, it is advisable to seek the CRO’s advice on how the team can work together to prevent similar costs in the future. It is important to ensure that the CRO is committed to implementing mitigation processes in the future, and this should be documented in writing to help convince management that unexpected cost increases will not occur again. This can help to gain approval for the current cost increase.
5. Can we fix the costs now?
If a unit-based payment schedule is in place, it may be worthwhile to request a revision of the payment schedule in order to fix certain costs going forward. While a variable budget may have been appropriate at the beginning of the trial due to uncertainties, the project may have progressed to a point where more accurate cost predictions are possible. Data management and biostatistics in a running clinical trial are often good starting points for this discussion, as the size of the CRF is a clear and defined figure that can be used to predict overall costs in this category. Other sections of the budget may also be suitable for discussion, depending on the status of the project.
6. Can we have a discount?
It is always advisable to ask for a discount when discussing a change order. Asking for a discount is not impolite, and the other party is free to refuse at any time. However, it is often the case that a discount will be accepted, which can save time and resources that would otherwise be spent on further negotiations. Additionally, offering a discount can help to reduce tension and provide financial security for the vendor. It is reasonable to ask for a discount, but it is important to do so after all other discussions have been completed in order to avoid the risk of recurring costs.
Bonus Tip: Initiate actively a change order process yourself
In addition to responding to change orders proposed by the CRO, it may be worthwhile to initiate the change order process yourself in order to identify potential cost efficiencies. By asking the CRO project manager for a project cost analysis and addressing the questions outlined above, it may be possible to prevent tedious discussions in the future. This process can also help to improve overall cost adherence in future projects and can serve as a starting point for building a long-term relationship with the CRO. Consider implementing this as a regular, ongoing process to continuously improve budget quality.
What CROs can do
CROs can improve the approval process for change orders by anticipating potential questions and providing reasonable justification upfront. Sponsors will appreciate a well-prepared change order that includes clear explanations of the benefits and reasons for acceptance. It is important to make it clear that the additional costs are offset by benefits and to provide evidence that possible efficiencies have been included, as well as information about any mitigation processes that have been implemented to avoid further financial drains. Supporting the sponsor in seeking internal management approval for cost increases can help to reduce tension and improve the overall project. Change orders may not always be accepted quickly and easily, but there are steps that can be taken to improve the approval process. It is important to consider the way in which the change order is handled, as sponsors may compare this to the processes used by other vendors.
Summary:
Pharmaceuticals and biotechs often face change orders in clinical trials, which can lead to uncertainty and increased costs. However, by taking the time to reassess and reanalyze the trial budgets in total, project managers can identify where cost reductions can be made without sacrificing quality or patient safety. By negotiating efficiencies with the CRO, costs can be reduced without affecting the success of the trial. It is important for project managers to demonstrate how funds are being spent in clinical trials and to avoid cost increases where possible.
If you are faced with cost increases in your current change order process, contact us and request a non-binding estimate on how to alleviate your situation to give your clinical trials more financial reliability. With our experienced team you can start understanding your next change order as a chance to reshuffle the cards can help to reduce overall clinical project costs while ensuring that the CRO spends the funds allotted in a responsible and effective manner. Don’t let change orders be a headache for your project management team. Contact us today to learn how we can help.
