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

Jul 01, 2012

Photos: John Halpern
Mastery of the clinical trial process has become essential to positioning new therapies for leadership in an increasingly crowded—and lengthy—race to registration. Internal capabilities are a key differentiator against the competition, particularly as the cost, scope and complexity of the trials mandated by regulators continues to expand. The Tufts Center for the Study of Drug Development (TCSDD) looks periodically at best practices in the management of clinical trials; in cooperation with software vendor ClearTrial LLC, TCSDD recently completed a research study looking specifically at how Big Pharma plans and executes its budgets for individual trials. On May 15, Pharm Exec, ClearTrial, and the Center convened a group of leading industry players to review the findings and explore the implications for improving what has become a strategic necessity—to get trials done quickly, across functions and geographies, with the right information required by regulators, and at a cost that accommodates the finely parsed P&L goals set by top management.

William Looney, Pharm Exec: There is an implicit perception that the development cycle in Big Pharma suffers from a lack of attention to operational excellence—the science may be golden, but the process is perfunctory. Is this accurate based on what you have observed from the review of how companies execute around trial budgets, especially as trials now account for a larger proportion of the cost to bring a compound from discovery to market?

Ken Getz, TCSDD: External forces bearing down on the industry—the patent cliff is one—require more attention to the management of resources. With so much uncertainty, the focus is on enhancing efficiencies around internal activities you can control. One red flag is the cost of development failure, which is also a surrogate for risk and predicting the successful performance of R&D investments. The numbers are sobering: roughly 70 cents of every dollar spent on R&D ends up as failures, many at the most costly late stages of the trial process. This figure is unacceptable now that more products face generic competition, pipelines are weak, and new drugs confront a slower take up in the market. An interesting statistic is that drugs coming on the market in the next two years are expected to generate only 40 percent of the revenues foregone due to loss of patent exclusivity. In addition, little progress has been made on speed to market; development cycle time on average is what it was in the early 1990s.

Complexity is a key factor that creates unpredictability in the trial protocol and leads to higher costs. Our research with companies found that timelines were being slowed by a significant increase in change orders to the protocol, especially at late stages in the trial. On average, we calculated five change orders in Phase III. In contrast, site performance—defined as how well each site selected for a trial does in enrolling the right cohort of patients—is better than we expected; only 11 percent of sites in our survey failed to enroll any patients. The real problem is the time it takes to achieve the enrollment target. Most companies report it is now about double what was originally planned. When resources were flush, companies would simply engage more sites and absorb the costs. It is much harder to justify that ad hoc strategy as margins for existing medicines decline.

At the same time that a harsh operating environment demands that companies do a better job at forecasting, budgeting, and planning, there is a trend toward outsourcing many critical functions. The result creates a disconnect: while management presses for more certainty and accuracy in meeting development goals, the resources needed to execute these goals are more dispersed and less subject to internal control. In this situation, how well you manage the trial budget makes the difference between success and failure.

The conclusions from our review of the trial budgeting process are as follows. First, there is no common home for the budgeting function in the 31 companies we covered. Surprisingly, only a quarter of the companies located this task in finance or procurement. Most—more than a third—housed the function in clinical operations, leading to a high degree of decentralization; each therapy unit or even each trial might have its own in-house staff handling this task. In general, what you have is a large degree of fragmentation, leading to silo approaches.

This is reflected in our second finding, which is a significant variation in budgeting tools and technologies. These ranged from reliance on sheer intuition and experience drawing from previous trials, and captured on simple spreadsheets, to the latest customized software. What was surprising is the poor integration of these tools across functions, within the same company, where the only practical way to share and interpret is through face-to-face meetings—which of course takes time. Lack of standardization and compatibility across functions is a big drain on productivity.

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