Q & A - BUILDING A BETTER BUDGET
By Jess Krone, Team Manager; Jill Shilbauer, Director of Network Operations
Q: The average offer for start-up to my sites is $2,500. Is there a more appropriate market rate? I seem to only reach $3,500, and our costs really are higher than this (this is not including the line item of pharmacy prep).
A: The bottom line is if your costs are higher than $2500, then you should be requesting the actual incurred start-up amount. I recommend having pass-through start-up costs, such as pharmacy, IRB, laboratory, etc., broken out individually. Just be ready to provide the supporting documentation (on official letterhead or actual invoices) when the sponsor requests it so you can justify the amounts you are requesting and show how that fee is broken-down. Your primary study start-up costs should be inclusive of SIV costs, training expenses, protocol and ICF review, regulatory and all other required documentation preparation, source documentation, and budget/contract/coverage analysis development and negotiation costs, along with any other site specific start-up costs you may incur. The key to getting the higher start-up approved is to have everything broken-out, on official letterhead, demonstrating how you calculated that amount and what is included in your start-up. Provide this to the sponsor/CRO as justification for your costs. Don’t be afraid to push back if they try to low-ball you, and know what you are comfortable accepting ahead of time. You may not get everything you ask for, but hopefully with this approach you will have more success than you currently at negotiating your start-up fees.
Q: Are invoiceable items (excluding patient & travel reimbursement) normally allowed to have overhead applied?
A: In my experience, it is standard for invoiceable items that are not pass-through expenses to have institutional overhead applied to them. Make sure you specify in both the CTA and budget which items are inclusive of overhead. For example, “a study close-out payment of $3000, inclusive of 30% institutional overhead, will be charged upon completion….”
Q: This is all good stuff, but in reality I give all the line items to a sponsor, and they just say “no, no, no, no.” Often they might increase the budget per visit by up to 10%, but they never give any extra costs like change of monitor, audit, termination, etc.. They all just say “take it or leave it, there are plenty of other sites that will take the budget as is.” Do you really have success in your plan?
A: This is a great question, and it prompted me to calculate out our average percent increase for budget clients. Looking at the tracked negotiation data, I calculated an 83% increase from initial offer to final accepted per patient budget. There are typically multiple rounds of negotiations, and we do sometimes have to elevate budget sticking points to the sponsor for consideration if the CRO is putting up roadblocks during negotiation. I expect to be told things like “you are our most expensive site,” or “no one else has ever asked for this,” and (my personal favorite) “I have never seen this cost before and have never approved it” (regarding common requests like audit, IRB, or close-out fees). My advice is to gauge how serious they are about dropping your site. Usually this is an empty threat used to frighten sites to acquiescing to budgets that do not support their actual costs. Remember, they have already vested time in your site and PI, and they do not want to start over either. At the end of it all, know if you are truly willing to walk away if they are not willing to play ball. We always push hard in negotiations, and I can honestly say I have never had a site dropped from a study by the sponsor because of budget negotiations. I have had sites that have chosen to walk away from a bad budget when there was no other option, and I don’t believe any of them have regretted that decision.
Q: Is 30% overhead easily achieved? I struggle to get 25%.
A: I completely understand your dilemma! In all of our budget negotiations, we always request overhead at 30% (or build it into the visit cost if overhead is not a separate line item). I would estimate that we are successful more often than not in obtaining it. The key, in my opinion, is to make sure you have justification documented on your company letterhead. For example, your management team can execute policies such as, “Our company policy is to apply overhead to all research studies, regardless of sponsor, at the same rate. As of January 1, 2015, our standard overhead rate is 30% and is non-negotiable. It is mandatory for all clinical trials and is inclusive of building use and maintenance; IT hardware, software and infrastructure; telephone; technical support; janitorial services; insurance costs; utilities; furniture; office and clinical supplies; equipment purchases and maintenance; printing expenses; employee costs (e.g., benefits, training, certification, etc.); general site management (e.g., marketing, business development, accounting, legal, human resources, etc.); and property taxes. We review the overhead percentage annually to account for changes in expenses and cost-of-living adjustments.”
Q: Should FDA audits be invoiced? I have been audited twice on one study with no findings either time.
A: My short answer is ABSOLUTELY! The longer answer is that it really will depend on what language was negotiated in your contract and payment terms. We recommend that you always include language in your request that any audits or inspections by a Sponsor, CRO or regulatory agency be covered and should include not only your office expenses (e.g., paper, copy toner, printer, etc.) but time and effort as well. It is often easier for a Sponsor to accept if you put some type of parameters around the cost such as a fee of $500 per day for a maximum of five days. One other point is that we specifically state the fee only applies to audits or inspections that are “not-for-cause”. Certainly, be ready to explain that your site must be compensated for the effort required by the audit since it is taking away from the time you would be putting into the actual study.
Q: Some sponsor payment records are horrendous, if you can get it out of them at all. Do you ever have payment detail requirements part of the CTA? We like to reconcile to our CTMS.
A: This is a great question! As a business, you need information in order to reconcile payments. A very simple way of addressing this is to include a request in the payment terms and/or contract that states not only when payments will be made, but that it will include sufficient payment detail so as to reconcile it against the budget. It is up to you as an organization how important this type of language will be in the actual negotiation process as you may need to concede on this point in order to obtain other terms that are more important. I always take the stance that it never hurts to ask.
Q: I know this is becoming rare but sponsors will entertain withholding percentages. I avoid those at all costs but didn’t see that addressed here as a payment term sponsors will offer. Could you address this for the group?
A: The holdback amount on a study can be a tricky topic. It is our position that the withholding should be as little as possible because it is very difficult for a site to operate without being paid in full. The rationale that I utilize is that payment for services rendered is akin to payroll. You do not withhold a portion of an employee’s paycheck as “insurance” they will perform the work they were hired to do, just to pay it out when employment is terminated. That is essentially what a holdback is in the context of research. We also try to negotiate a maximum total amount of withholding, depending on the study budget. For example, we may ask for a 5% withholding up to a maximum of $5,000 holdback for the study. We also try to request that the withholding not apply to patient stipends and invoiceable items. One thing to keep in mind is that your negotiation around withholding could go hand-in-hand with when payments will be made. The ideal is no withholding and monthly payments for patient visits. However, you may need to give in on the withholding in order to get monthly payments. As such, you could agree to a 5% holdback with monthly payments. I would recommend nothing more than 10% withholding on any study.
Disclaimer: PFS Clinical has made reasonable efforts to ensure the accuracy of the information contained in this document; however, this document is provided “as is” without any express or implied warranty. This document does not constitute legal advice. If you require legal advice, please consult with your attorney.