1. Variable Billing vs.
Fixed-Price Models:
How Does Your Clinical Trial Stand to Gain?
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Mark Shapiro, MA, MBA, CCRA, RAC
Executive Director, Clinical Solutions
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CLINIPACE WORLDWIDE
David Hinds, MBA
Global Project Director
CLINIPACE WORLDWIDE
2. Technology-Amplified CRO
Frictionless Services
Project Management
Site Selection and Global Study Feasibility
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Clinical Monitoring and Site Management
Data Management
Biostatistics
Medical Management/Monitoring
Patient Recruitment to edit Master title style
Click
Regulatory Services
GxP Quality Assurance
Medical Writing
Drug/Device Safety
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3. Let’s get on the same page
Variable Billing Fixed-Price
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Hourly Functional Unit-
Value-Based
Billing Outsourcing Based
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4. So, here we are…
CROs get paid for hours worked or tasks
performed, not value provided
CROs earn most of their money from high-
volume task-level activities {the area least valued
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by sponsors}
CRO pricing is often based on costs or effort not
value
CROs have extensive, Master title style
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property for how to conduct of the trial, but…
Have commoditized their services and removed
value from services in favor of units and volume
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5. Variable billing is killing drug
development, because it
Misaligns interests of the CRO and client…
By not sharing project risk with the client
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By focusing on costs, not value creation
Focuses on efforts and inputs, not results,
which…
Promotes a Click to edit Master title style a commodity
view of services as
Penalizes technological innovation
Does not differentiate
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6. THE CRO Hourly, effort-
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STATUS and title style
QUO: to edit Masterpricing leads to
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scope
changes and
change fees
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7. 6 reasons we should change the
status quo
1. It is time consuming without adding value
2. It makes clients nervous
3. It encourages lower productivity
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It lends itself to tedious work
5. It doesn't stop scope creep
6. It encourages an adversarial relationship
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8. Drivers that are pushing
traditional ways of billing aside
the recognition that hourly billing is excessive in
difficult economic times
a gnawing feeling that clients are poorly served
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by hourly billing and the bidding practices that it
engenders
a shift toward building strategic relationships
between CROsClick to edit Master title style
and sponsors
the desire to mitigate risk and contain budgets.
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9. WHAT ARE Sponsors are
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SPONSORS buying results and
BUYING? value, not time,
work,
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10. 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
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in a turbulent economy, when cost containment
and cash flow management is crucial.
Clients appreciate not getting hit with costs
associated with scope Master title style should have
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been anticipated from the beginning.
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11. Common resistances to value-
based pricing
Sponsor CRO
Different definitions of value Little control over
Perception of risk outcomes
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CRO has little control over Sponsors reluctant to
clinical results share metrics
Inertia Requires much greater
Timing of measures pre-project feasibility
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Can discourage collaboration title style
around performance metrics Requires accounting
Shared risk affects price innovation
Purchasing groups dis- Works best for new clients
incentivized and projects
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12. A better model
Sponsor/CRO first defines scope of value and
performance metrics
Sponsor/CRO then determines scope of work
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Agreement of team composition and tenure
CRO utilizes value-led costing rather than cost-
led pricing
Sponsor/CRO agreeedit Master title style methods –
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based on predictability not hours worked
Measurement systems provide continuous
assessment of value creation
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13. Activity-led billing
Service Cost Billing Value Sponsor
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Sponsor Value Price Cost Service
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Value-led pricing
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14. The Value-Oriented CRO
Strategy
Delivery
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Technology
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Metrics
Value
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15. Foundations of value pricing
Focuses on value and effectiveness, not time and
labor
Places more importance on results instead of
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effort
Fosters creativity and innovation instead of a
unit-volume production mentality
Incentivizes CRO toedit Master title style
Click to reduce time and costs
Shares risk between sponsor and CRO
Aligns the interests of the sponsor and CRO
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16. The CRO of the Past
Activity-Based
Profit Capacity Efficiency
Price
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Intellectual Value-Based
Value Effectiveness
Capital edit Master title style
Click to Price
The CRO of the future
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17. In summary…
Variable Fixed
Hourly Functional Unit-
Value-Based
Billing Outsourcing Based
Functionally- Input- Output-
Contract Focus Task-oriented
oriented oriented oriented
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Billing Unit
Actual Hours
in arrears
FTE-based
Actual Units
Milestones
/
Planned Units
Highly Slightly Highly Fixed /
Monthly charges
variable variable variable smoothed
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Estimated Resources x Estimated
Upper limit driver Fixed Price
Hours Duration Units or Fixed
“Cookie- Complex,
Balance sheet
Best for…. Consulting cutter” shared risk
mgmt
projects projects
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18. Q&A
Mark Shapiro
mshapiro@clinipace.com
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David Hinds
dhinds@clinipace.com
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