The Cost of Drug Development
There is some debate about the real cost of drug development but what you can be sure of is that it is a very large number and increasing year on year. The US Journal of Health Economics previously published a figure of US$ 802m as the estimated cost of a pharmaceutical company bringing a new drug to market. This figure was based on the research and development of 68 drugs launched by 11 pharmaceutical companies. More up to date estimates suggest that these cost have risen to US$1.3 billion or even as much as US$1.7 billion (Collier, 2009).
According to CenterWatch less that 10% of clinical trials are completed on time. The largest causes of delays are contract and budget negotiation, patient recruitment and enrolment and protocol design and refinement. (CenterWatch, June 2009). With a typically drug trial costing between $5m and $15mm each, these delays lead to a significant overspends. We argue that the root cause of these delays and overspent is insufficient commitment to the feasibility studies needed to optimise the study protocol and commercial relationships between the sponsor (Pharmaceutical Company), clinical research organisation (CRO) and investigator sites.
We that propose a more collaborative approach to these feasibility studies based on the principles of value management could significantly reduce these overspends and identify significant reductions in cost.
Reasons for delays and overspends
The typical clinical research procurement process has a major limitation because the CRO project managers and clinical research associate (CRA) who have all the experience implementing studies are often not closely involved the development of the initial protocol and procurement process. This leads to the following issues:
1) Project objectives and protocol are often defined by the Sponsor without input from either the in-house or out-sourced research teams hence these objectives can be arbitrary and unrealistic.
2) The feasibility is sometimes done in isolation from the CRO which are going to complete the study or the CRO is asked to do feasibility as part of the selection process. As a result many assumptions about the best way to implement the protocol are made within either no or insufficient input from the CRO. The assumptions made at this point in the process may not reflect the most practical approach to key areas like recruitment of patients, selection of centres etc, which can have a profound impact on timelines and costs at a later stage.
3) During the procurement process CROs rarely have longer than two week to tender for the work and the contracts are usually some form of fixed price. The aim of the CRO at this point is to win the contract and limit the liability. Very little time exists to do any proper feasibility study into the proposed protocol and the CRO is in sales mode so is unlikely to be honest about a poor quality approach. The more likely strategy is to ensure that the scope is tightly defined and CRO is protected from the weakness in the protocol by clearly defined assumptions which pass the risk back to the sponsor.
4) During implementation phase virtual all project plans need to be amended, often in response to a more realistic assessment of site set up times, patient recruitment and practicalities of the protocol. The CRO will expect the sponsor to cover the costs of these amendments. Many of these changes could have been readily foreseen in the feasibility phase if the people involved in completing the study were involved in the design of the protocol.
Furthermore the design may not allow for new innovations in techniques which could have saved significant time and increased patient recruitment and retention. Typical examples include:
- The protocol does not reflect the typical medical practice in the selected country.
- Site set up is delayed by contract negotiations with investigational sites.
- Competitive studies change site selection.
- Over optimistic recruitment due to insufficient risk analysis.
In summary may studies fail because they set unrealistic timelines, don’t do adequate feasibility, sometimes they end up starting projects well into the process. As a result many trial runs late and the cost overruns become significant. For a £10m study an overspend of 10% is not unusually. We seem to have forgotten the advice of Abraham Lincoln “Give me six hours to chop down a tree and I will spend the first four sharpening the axe.”
We believe that more collaborative but challenging approach to the design and procurement of clinical trials, with more focus on the feasibility phase, could results in significant savings and a reduction in the delays by addressing the root causes early in the process. Value Management is a widely recognized framework to improve the collaboration and cooperation between the parties in projects.
Value Management; a Step by Step Approach to Collaboration
Many sectors facing the same challenge of getting the best value out of the supply chain, have moved towards a value management approach. The UK office of Government Commerce (Office of Government Commerce, 2007) has summarised a wide range of case studies in which value management has saved significant project cost. For this approach an integrated feasibility team (from both the sponsor and preferred supplier(s)) focus on value not cost by:
- Understanding and challenging the relative importance of the sponsor objectives. This helps define realistic criteria for the success of the project from the outset and prevents the adoption of arbitrary timescales. Value management ensures that everyone understands the relative importance of the project objectives, together with the project constraints and risk from an early stage.
- Identifying alternative courses of action including different techniques, approaches and methods which may be more cost effective. The early input from CRO project managers and CRA’s into the design of the protocol can significantly improve the selection of the most appropriate investigative sites, diagnostic techniques and data collection processes.
- Analysis and evaluation of different approaches against defined criteria to select the best option. This practical and collaborative input to feasibility reduces the chance of delays and additional costs introduced by amendment of the protocol once the study has started.
The change however in not just procedural it is also cultural with sponsors and suppliers adopting a more open approach to collaborative working. Some of the areas for change are:
- Joint leadership and commitment from the top, with a collaborative approach to project management. This eliminates the need to duplicate project managers in the Sponsor and the CRO with the formation of an integrated study team.
- Rewards for CRO against balanced scorecard which measure the overall success of the study financially, in terms of quality, for the staff and the customers, not just the just cost. Ideally CRO and Phama staff incentives would be linked to the successful completion of the project within the agreed objectives.
- An integrated knowledge management database using shared electronic data management systems. Much has been done in this area to use technology to improve the flow of information within the study teams but an integrated approach using an integrated system has potential to further improve the follow of information between the sponsor and the CRO.
- A flexible work force with strong team working (secondments etc) between the partners in the project in this way the members of the Phama team get an appreciation of the challenges faced by the CRO and vica-versa.
- Multi disciplinary team working across all phases of the study to bring the key people involved in the design, feasibility and implementation of the study together at critical times.
- Most controversially the use of open book accounting in which the true costs of the study are open and reward is based on a more holistic assessment of performance.
Bridging the Gap between Feasibility and Implementation
The processes for value management are well defined and include clear steps completed at each of the stages. A number of workshops are conducted at each stage of the project. The aim is to bring together the different teams in a collaborative view of the projects objectives and strategy. The main studies conducted are:
VM 1: stakeholder needs, objectives and priorities
The primary objective of value management at concept stage is clarifying why the need exists, to ensure that the project objectives have been thoroughly analysed and understood. The workshop would be conducted early in the development of the protocol with input from the CRO who will be bidding for the contract to complete the study. It gives the CRO the opportunity to understand the sponsor’s objectives and influence the approach for the protocol to avoid unnecessary complications and unrealistic constraints.
VM2: project definitions and options
The purpose of VM2 workshop is to ensure that the project options are evaluated and the one which offers best value for money is selected.
Selecting the best value option requires:
- Review the validity of the objectives.
- Agree modifications.
- Evaluate the feasibility of options.
- Develop the preferred option (best value).
- Determine if the preferred option (best value) can be improved or enhanced.
- Agreed recommendations about the preferred option.
- Produce a programme for development.
- Develop an action plan.
This workshop would ideally be conducted during the feasibility phase just prior to the issue of the RFP so that the CRO organisations who are bidding can bring their experience to the design of the protocol.
VM3/4: value engineering to reduce cost
Value Management during the feasibility stage is termed ‘Value Engineering’. The objectives are to ascertain elements of the study design and specification that add no value to the project in terms of satisfying the brief and objectives or those which could be provided through another method thus increasing value. It could be completed between the submission of proposals for the study and the award of contract. Typically one preferred bidder would be asked to participate in the value engineering workshop.
Value Engineering provides a structured approach to ensure that the most cost-effective means of implementing the project are identified.
VM 5/6 Value Reviews
Value reviews repeat the exercise undertaken in VM 3/4 with during the implementation of the study. Value reviews shall be undertaken as part of the project’s change control mechanism to allow the opportunity to value manage / the project to determine if the functionality could be altered and be more cost effectively so the project may be delivered within the original budget.
Ideally a value review must be undertaken at least once during start up and implementation phases to identify more effective ways of working. More frequent reviews may be necessary due to the complexity of the project.
Conclusion for Clinical Research
Value management is a tried and trusted way to reduce the overall cost of projects and has a successful track record in many sectors. It brings together the complete project team to understand the challenges and identify smarter, quicker and more cost effective ways of completing the project, often by simple changes to the approach and requirements. The clinical research and development sector could learn much from these more collaborative and value focused approaches. For more information including clinical trials project management training visit www.parallelprojecttraining.com
WPI Economics Consultancy (October 2021) Understanding the impacts of investing in training for clinical radiology and clinical oncology.
CenterWatch. (June 2009). U.S Sites Rate Medpace, Kendle and ICON at TOP CROs in 2009. The CenterWatch Monthly
Collier, R. (2009, February 3). Drug development cost estimates hard to swallow. Canadian Medical Association Journal , 180(3): 279–280.
DiMasi, H. G. (2003). The price of innovation: new estimates of drug development costs. Journal of Health Economics , Vol 22, pp. 151-185.
1 Comment Leave a comment
As far as I can see from my experience, the gap mentioned in this review really forces different teams involved in the same project to “move” away from each other, showing a negative impact on project performance. The proper implementation of the processes of value management will be the right solution to bridge the gap and make the teams work collaboratively, contributing to the overall increase of project performance.
Thanks for the review. That’s interesting!