Where To Find The Real Crisis In Clinical Research? Follow The Money

In August, the Society for Immunotherapy of Cancer’s virtual summit, “The Crisis in Clinical Research” virtual forum addressed an existential question critical to the development of new drugs for cancer patients. How can the clinics and hospitals who treat patients with new drug candidates retain the nurses and study coordinators who oversee the treatment of patients who enroll into clinical trials? The answer lies in recognizing that the “clinical research crisis” isn’t clinical at all – it’s contractual. Specifically, the disingenuous incentives employed by contract research organizations (CROs) that reward operational inefficiencies.

The status quo in drug development is that pharmaceutical companies sponsor clinical trials, meaning they pay for and take the ultimate responsibility mandated by the US government to ensure that clinical trials are conducted according to the Code of Federal Regulations. Some companies possess the development infrastructure to manage all the myriad regulatory, data management and safety reporting responsibilities required by the FDA and work directly with clinical research sites that treat patients with an investigational drug. For example, my company TRACON Pharmaceuticals does this, as do companies like Seagen and BeiGene. We directly negotiate a budget with the clinical research site and pay as each patient is enrolled. I call that “pay for performance”, because sites are not paid until they enroll patients.

However, most biotechnology and pharmaceutical companies—due to lack of infrastructure and personnel needed to work directly with the clinical research site—contract oversight of the clinical trial to a CRO. The CRO then acts as a middleman between the sponsoring drug company and the clinical research site. While this may seem to be a simple and straightforward solution, the economics of payment by the drug maker to the CRO perturb alignment, making big winners out of the CROs and big losers out of both drug companies and clinical sites.

Put Performance First

CROs operate on a fee-for-service plus guaranteed payment model, meaning they are paid for every service they perform whether or not that service actually improves the overall quality and execution of the clinical trial. They are also paid a monthly management fee regardless of performance or work quality. Yes, you read that right. Even if no patients are enrolled, CROs still collect large monthly management fees from the pharmaceutical companies. In fact, CROs start charging the second they sign the contract. In some cases, that involves millions of dollars of payments without a single patient to show for it.

This not only flies in the face of economic principle, it misaligns CROs with pharmaceutical companies that rightly seek rapid, high quality and low-cost clinical trial execution. CROs don’t share that incentive because they get paid regardless of how they perform. Clinical sites also lose out because only a sliver of the fee paid to a CRO by the sponsoring pharmaceutical company goes to the site. That is because sites operate on a pay for performance basis based on accrual while CROs earn the bulk of the fees through their fee-for-service model, plus guaranteed monthly management reimbursement. One way to appreciate the misalignment would be to consider if the clinical site were paid a monthly fee regardless of whether it enrolled a patient—imagine the cost of drug development then! The only benefit would be that sites could better retain staff who understandably respond to economic incentives including employment at the CRO, which collects the majority of the costs, estimated at $250,000-$300,000 per patient, paid by the drug maker over the course of the study.

The Way Forward

I propose two solutions. One is for more pharmaceutical companies to scrap the middleman and perform clinical trials without employing a CRO. The monetary savings of forgoing dependence on a CRO can then be passed onto the site. Second is for CROs to be paid by the drug maker in the same way the site is paid by the CRO—through a pay for performance model based on accrual. This will encourage efficiency within the CRO in the same way pay for performance encourages efficiency at the clinical site. When payment structures are aligned then all parties have a common incentive—enrolling patients to assess the safety and effectiveness of an investigational drug in a timely manner.

This would serve the best interests of pharmaceutical companies, clinical researchers, and, most importantly, the patients who count on the fast, efficient, and low-cost development of drugs that can improve quality of life and indeed save lives. After all, isn’t that the point?