Click to edit Master title style Click to edit Master title style Variable Billing vs. Fixed-Price Models: How Does Your Clinical Trial Stand to Gain? Mark Shapiro, MA, MBA, CCRA, RAC Executive Director, Clinical Solutions CLINIPACE WORLDWIDE David Hinds, MBA Global Project Director CLINIPACE WORLDWIDE
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
Click to edit Master title style
Click to edit Master title style
Variable Billing vs. Fixed-Price Models:
How Does Your Clinical Trial Stand to Gain?
Mark Shapiro, MA, MBA, CCRA, RACExecutive Director, Clinical Solutions
CLINIPACE WORLDWIDE
David Hinds, MBAGlobal Project Director
CLINIPACE WORLDWIDE
Click to edit Master title style
Click to edit Master title style
www.clinipace.comRIGHT-SIZEDTM CLINICAL RESEARCH SERVICES
Technology-Amplified CRO
Project ManagementSite Selection and Global Study FeasibilityClinical Monitoring and Site ManagementData ManagementBiostatisticsMedical Management/MonitoringPatient RecruitmentRegulatory Services GxP Quality AssuranceMedical WritingDrug/Device Safety
Frictionless Services
Click to edit Master title style
Click to edit Master title style
www.clinipace.comRIGHT-SIZEDTM CLINICAL RESEARCH SERVICES
Let’s get on the same page
Variable Billing Fixed-Price
HourlyBilling
FunctionalOutsourcing
Unit-Based Value-Based
Click to edit Master title style
Click to edit Master title style
www.clinipace.comRIGHT-SIZEDTM CLINICAL RESEARCH SERVICES
So, here we are…CROs get paid for hours worked or tasks performed, not value providedCROs earn most of their money from high-volume task-level activities {the area least valued by sponsors}CRO pricing is often based on costs or effort not valueCROs have extensive, process-based intellectual property for how to conduct of the trial, but…Have commoditized their services and removed value from services in favor of units and volume
Click to edit Master title style
Click to edit Master title style
www.clinipace.comRIGHT-SIZEDTM CLINICAL RESEARCH SERVICES
Variable billing is killing drug development, because it
Misaligns interests of the CRO and client…By not sharing project risk with the clientBy focusing on costs, not value creation
Focuses on efforts and inputs, not results, which…
Promotes a view of services as a commodityPenalizes technological innovationDoes not differentiate
Click to edit Master title style
Click to edit Master title style
www.clinipace.comRIGHT-SIZEDTM CLINICAL RESEARCH SERVICES
Hourly, effort-and task-based pricing leads to
scope changes and change fees
THE CRO STATUS
QUO:
Click to edit Master title style
Click to edit Master title style
www.clinipace.comRIGHT-SIZEDTM CLINICAL RESEARCH SERVICES
6 reasons we should change the status quo
1. It is time consuming without adding value2. It makes clients nervous3. It encourages lower productivity4. It lends itself to tedious work5. It doesn't stop scope creep6. It encourages an adversarial relationship
Click to edit Master title style
Click to edit Master title style
www.clinipace.comRIGHT-SIZEDTM CLINICAL RESEARCH SERVICES
Drivers that are pushing traditional ways of billing aside
the recognition that hourly billing is excessive in difficult economic timesa gnawing feeling that clients are poorly served by hourly billing and the bidding practices that it engendersa shift toward building strategic relationships between CROs and sponsorsthe desire to mitigate risk and contain budgets.
www.clinipace.comRIGHT-SIZEDTM CLINICAL RESEARCH SERVICES
Sponsors are buying results and
value, not time, work, or effort.
WHAT ARE SPONSORS BUYING?
Click to edit Master title style
Click to edit Master title style
www.clinipace.comRIGHT-SIZEDTM CLINICAL RESEARCH SERVICES
Why value-based price?Clients know from the outset what the study will cost and can budget appropriately for it. Clients find the predictability especially valuable in a turbulent economy, when cost containment and cash flow management is crucial.Clients appreciate not getting hit with costs associated with scope changes that should have been anticipated from the beginning.
Click to edit Master title style
Click to edit Master title style
www.clinipace.comRIGHT-SIZEDTM CLINICAL RESEARCH SERVICES
Common resistances to value-based pricing
Sponsor Different definitions of value Perception of risk CRO has little control over
clinical results Inertia Timing of measures Can discourage collaboration
around performance metrics Shared risk affects price Purchasing groups dis-
www.clinipace.comRIGHT-SIZEDTM CLINICAL RESEARCH SERVICES
A better modelSponsor/CRO first defines scope of value and performance metricsSponsor/CRO then determines scope of workAgreement of team composition and tenureCRO utilizes value-led costing rather than cost-led pricingSponsor/CRO agree upon invoicing methods –based on predictability not hours workedMeasurement systems provide continuous assessment of value creation
Click to edit Master title style
Click to edit Master title style
www.clinipace.comRIGHT-SIZEDTM CLINICAL RESEARCH SERVICES
Value-led pricing
Service Cost Billing Value Sponsor
Sponsor Value Price Cost Service
Activity-led billing
Click to edit Master title style
Click to edit Master title style
www.clinipace.comRIGHT-SIZEDTM CLINICAL RESEARCH SERVICES
The Value-Oriented CROStrategy
Delivery
Technology
Metrics
Value
Click to edit Master title style
Click to edit Master title style
www.clinipace.comRIGHT-SIZEDTM CLINICAL RESEARCH SERVICES
Foundations of value pricingFocuses on value and effectiveness, not time and laborPlaces more importance on results instead of effortFosters creativity and innovation instead of a unit-volume production mentalityIncentivizes CRO to reduce time and costsShares risk between sponsor and CROAligns the interests of the sponsor and CRO
Click to edit Master title style
Click to edit Master title style
www.clinipace.comRIGHT-SIZEDTM CLINICAL RESEARCH SERVICES
The CRO of the future
Profit Capacity Efficiency Activity-Based Price
Value Intellectual Capital Effectiveness Value-Based
Price
The CRO of the Past
Click to edit Master title style
Click to edit Master title style
www.clinipace.comRIGHT-SIZEDTM CLINICAL RESEARCH SERVICES