Today's Mission Critical: Making Sense of Spending on Clinical Trials - Pharmaceutical Executive


Today's Mission Critical: Making Sense of Spending on Clinical Trials

Pharmaceutical Executive

Scott Treiber, Hospira: Hospira is a spin-off from Abbott Labs and our focus is on hospital products, including generic injectables. About three quarters of our revenues are in the United States, but we are seeking opportunities in other countries with particular emphasis on Asia and the emerging markets. Biosimilar products are part of our growth plan. Among other tasks, my role is to coordinate budgeting for two major Phase III programs focused on obtaining approval for a biologic equivalent to Amgen's Epogen. This is a high-stakes move for us. Overall we are earmarking upwards of $100 million for this project; $55 million this year alone, out of a total R&D budget of $300 million. Hospira is mainly a generic business and margins are very thin. Churning that revenue back into R&D represents a sacrifice today in the hopes of a buoyant future.

My main concern right now is spending this money productively and keeping within the 10 percent budget variance that we adopted at the start of the trial process. With $100 million at stake it's a big deal when you exceed that variance. It may be counterintuitive but I also work to see that we don't underspend too. Spending too little means that you are not working toward the goal of getting a compound to the market as quickly as possible. As soon as a drug moves off patent, we want to be there waiting, ready to go. We have a fixed date; a real deadline when the market opens up. So I follow that spend and make sure we are spending all that we said we would in executing against plan.

Like Biogen, we have made good progress in coordinating the tracking of our trial spend with a common software system. The challenge is working with our finance people to help them understand that a lot of trial costs involve seemingly unrelated activities that are not invoiced for long periods of time. Trials are now global, which magnifies the importance of good logistics, frequent communication, and sensitivity to cultural variations. If you get these right, you will save money. Hospira is taking a close look at whether our trials need to be global. Can we run a well-controlled trial here in the United States and another in one other region and just combine the data? The proposition that a definitive trial is a global trial is worth challenging, particularly because the complexity can outweigh the benefits of a broader enrollment pool and lower recruitment costs.

Clement Popovici, Takeda: We are now managing against a five percent target for the overall budget variance. Due to the current nature of the industry, the scrutiny on the financial side has increased. In order to spend the available budgets, teams need to become more accountable on what we are going to spend on our trials. In order to improve efficient use of the R&D budgets, the teams are doing a monthly evaluation of actual spend and current plans against the previously submitted plans. This allows for a quarterly review with senior management to address where opportunities may have arisen or if additional funding is necessary. The teams are encouraged to pressure test their assumptions in order to minimize variance against the plans. This also allows for greater transparency on the assumptions and plans across the organization—the "no surprises" philosophy. It is building awareness and managing expectations. So if we know we have a change to the protocol on the way, we can anticipate early any impacts. For example, if more site monitoring visits are required we build that into the budget updates. Instead of a significant 20 percent variance that pops out at the end of the study you have a series of smaller ones that are more easily managed in a fiscal year perspective and don't end up surprising everyone, including senior management.

Lisa Henderson, Applied Clinical Trials: If budgets have to be reviewed every month, how do you account for the different perspective and awareness levels of members of the cross-functional oversight teams? Do the monthly reviews lead to significant changes in activities or a frequent reallocation of resources?

Guzman: Our reviews are mainly done to help finance get a clear picture of where we are heading and to identify any possible red flags that might require a course correction.

Popovici: For us, the process is to build awareness and agreement in from the leadership before decisions are made. This is critical when you have a cross-functional group that may carry individual assumptions based on the way each group operates.

Treiber: We address this by making our accounting activity-based so that all can understand where and how the spending takes place. So if we have to do 40 new monitoring site visits, we tell them what the cost is going to be for this activity and what bill they can expect for that next month.

Grygiel: Please explain how trial performance around budget variances affects how your work is evaluated. Is it linked directly to your compensation? In other words, how does your company create an incentive to ensure these variance targets are met?

Guzman: Adherence to the annual budget is included in the overall department budgets. Clinical operations teams and individuals are held to the goal and are expected to meet it. Performance is evaluated against that and to how much control your job gives you over meeting the target.


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