Standardised Pricing Strategies in Clinical Trials

27th February 2011 (Last Updated February 27th, 2011 18:30)

Fixed pricing strategies are said to provide higher transparency in outsourcing clinical trials. Elisabeth Fischer spoke to Wolfgang Eglmeier, head of clinical operations at Grünenthal in Germany, about the trends and consequences of standardised pricing strategies in the pharmaceutical sector.

Standardised Pricing Strategies in Clinical Trials
Standardised pricing strategies can influence the outcomes of clinical trials.

In May 2011, outsourcing and clinical operations professionals will gather at the Arena Outsourcing in Clinical Trials Europe event to discuss some of the most controversial and critical issues influencing clinical trials.

At the top of the agenda is the debate about standardised pricing strategies as many of the pharmaceutical companies seek the support of clinical research organisations (CRO) for their research into drugs and medical devices. They provide the industry with experience, research skills and in-depth knowledge about new industry areas and developments.

As pharmaceutical R&D efforts have become more complex and competition in the field has increased, the CRO industry has emerged. The organisations provide services, resources and new technologies to help businesses to explore new pharmaceutical areas and working fields.

In recent years however, relations between the industry and CROs has changed as the trend towards standardised and fixed pricing structures and strategies has gained a foothold in the outsourcing of clinical trials.

Wolfgang Eglmeier, head of the clinical operations at the German research-based pharmaceutical company Grünenthal spoke to us about the consequences and viability of the standardised pricing structure in outsourced clinical trials and whether the industry will profit from fixed prices or not.

Elisabeth Fischer: In what way can standardised pricing improve the outsourcing of clinical trials for the pharmaceutical industry?

"Standardised pricing strategies might endanger the quality of the outcomes of clinical trials."

Wolfgang Eglmeier: First of all, it makes things easier because it gives you a higher transparency. Outsourcing might become easier and faster because of the implementation of standardised pricing, but definitely more transparent.

But this depends on at what level the industry would like to implement these strategies. There are different models possible – you can agree upon a fixed price for the whole clinical trial project or you can agree upon prices for single patients. But at the end it will make the whole process more transparent between the different parties of the contract.

EF: What are the major issues currently influencing pricing strategies between CROs and pharma companies?

WE: One major issue influencing these strategies is that the pharmaceutical industry would like to get the services of CROs as cheaply as possible. Another thing, which we witness more and more, is a shift of risks over to the CROs because of these standardised pricing contracts. The pharmaceutical industry tries to lower the costs for clinical trials and to lower what they pay to CROs. With signing a fixed-priced contract the risk is at the CRO side and if a project then gets delayed it mainly causes problems for the CROs.

There are no laws or regulations regarding standardised pricing strategies between a CRO and a pharmaceutical company. It's just two industry partners who agree upon how they do business together. This agreement is freely negotiable between the vendor and the person demanding services. They will negotiate what the demanding party is willing to pay and what the provider would like to have. And they will also agree upon the risks.

EF: What are the consequences for CROs when signing a fixed-priced contract?

WE: Obviously, standardised industry prices make services of CROs better comparable and therefore they can compare themselves a bit more with their competitors on the market.

But there are major disadvantages for CROs. They only have a limited chance to ask for additional funding or services when they reach the end of a project period or contract. This is a main disadvantage as some additional research might be necessary to get reliable and consistent results.

That means that standardised pricing strategies might endanger the quality of the outcomes of clinical trials because CROs don't have the possibility to do any additional work on it or to get any additional funding. I'm afraid that in that case some CROs may just cut corners and provide much lower quality results.

If companies squeeze CROs too much regarding what they pay – and of course we all try to save money and to pay less – they might compromise the quality of the clinical trial's outcome. This problem might pop up at a very late stage of the project, at the very end of a clinical trial, and then it's rather difficult to allocate who is responsible – and then it might come to lawsuits between the CROs and the industry.

EF: To what degree can fixed prices simplify costing estimation of outsourcing clinical trials?

WE: To some degree it will simplify the comparison between different clinical trial service providers but I think that it doesn't simplify the estimation of costs. Different trials are difficult to compare with each other because they always depend on the design of the project. It depends in which country, in which region you conduct this trial, what indication you have and what investigators, as well if it's a hospital-based clinical trial or a GP-based trial. There are many different factors that influence the price rates of clinical trials.

However in general, my point of view is that pharmaceutical companies should rather enter a real partnership with CROs. They should pay for the services they get and not press or 'squeeze' to lower the costs of a trial. You would always endanger quality and the CRO's performance. If these organisations don't see a chance to get their money then they might completely step back and not even conclude the clinical trial.

"One major issue influencing these strategies is that the pharmaceutical industry would like to get services of CROs as cheap as possible."

When you don't get out anything from a clinical trial, when the CRO doesn't bring any results, then all your previous investment is lost – and this can happen quite easily.

It even could be that these substandard results get published or that low-quality products get released on the market. Of course, this is always difficult to say because usually companies keep this a secret but there are always rumours and discussions when industry people meet and give you a little insight into their clinical research trials. Many projects have failed in the past because CRO's couldn't do a good-quality job as they had only received a limited amount of money and they couldn't do research in all the necessary areas to provide a good documentation and trial at the end of the project.

EF: What is Grünenthal's strategy?

WE: We at Grünenthal are outsourcing too. However, we are currently in a process of scaling down this part of our company. We have started to develop more and more new substances and at the beginning we contracted out everything that had to do with monitoring and study management. Now, we use more and more of our own resources at our R&D centre in Germany but there will still be some outsourcing. You cannot hire that many people to conduct all the tests because if projects fail you have to lay off people and we don't want to risk that. It should always be a good mixture between internal and external staff.

We believe in partnerships between pharmaceutical industries and a CRO and that's why we don't agree on fixed pricing contracts. It really would endanger the quality of the outcomes and our products because we would pressurise them to provide us with some outcome. We don't want to endanger quality.

EF: What are the future trends in the relationship between pharmaceutical companies and CROs?

WE: I think that most pharmaceutical companies will go back to quality again because that's what at the end really affects us and what endangers our product development as well as the reputation of the pharmaceutical industry in general. I think standardised pricing strategies are not viable in the long run.

The Outsourcing in Clinical Trials Europe 2011 conference will take place in Zürich-Regensdorf, Switzerland, on 10-11 May 2011.