May 27, 2019
Establishing a fair market value for a clinical trial that both sponsors and sites can agree on often is easier said than done. There is little or no consensus on the “fair” price to be paid for clinical trial services. Instead, sites should focus on providing a solid defense for each expense they expect a sponsor to foot.
“Often, people say they can’t pay more than fair market value,” says David Vulcano, vice president of research compliance and integrity at the Hospital Corporation of America, “and that’s great, but not everybody agrees on the dollar amount of what fair market value actually is. Instead of fair market value, we should probably use the term ‘defendable market value.’”
“First and foremost, sites need to have a better understanding of how to defend their costs,” Vulcano continues. “There’s probably a fair market value “safe harbor,” a range that we can work comfortably in. But in general, sites often are not willing or capable or knowledgeable to push back and obtain the funding they require.”
According to Vulcano, many sites arrive at a crossroads when faced with sponsors that won’t pay more than a certain amount on a line item, basing their limit on a value that too often has been set in deals with less experienced sites. “If a sponsor … sees a median rate of $100 for a line item, they might offer it at $80 because they know some people might try and negotiate up,” says Vulcano. But if 70 percent to 80 percent of sites accept the lower price, he says, then the average could drop to $90 the next time a sponsor checks the price. And the cycle continues from there.
“Sometimes, sponsors call us and tell us that their budget is non-negotiable and that they’re only paying as high as they can without exceeding fair market value,” explains Vulcano. “But that’s their fair market value for research-naïve sites,” he says. “And about six months later, we often get a call from these sponsors and they tell us that they’re not recruiting very well and they’re looking for new sites and they’ve increased their budget.”
To determine value, sites generally must look at various aspects of the study, including payments toward nurses, physicians and administrative staff, says Russell John, global director of grants management at Clintrax Global. “Sites that do less research don’t build a granular financial budget and don’t consider how much time it’s going to take,” John adds. “I think it’s important for sites to build up a dossier or database of their own on how much time they spend on certain services that are not subject-related, such as administrative time-related costs.”
Sites need evidence to support what they ask for, agrees Wendy Tate, director of analytics at Forte Research. “Many research sites don’t have empirical data on how long it takes to do something,” Tate says. “One of the things I highly recommend from an analytics perspective is to determine how long it takes to do something, like obtaining consent of participants or how long it takes to prepare a sample. That way, sites have a little more justification for their line items and aren’t just pulling a number out of the air.”
“It can be very valuable to discuss what considerations go into determining a dollar amount,” explains Laura Hilty, vice president of product management & strategy at Forte Research. “Documenting this and sharing these details with the sponsor can go a long way in helping them understand the real reason and justification for costs,” Hilty says.
In addition to the challenges of establishing a fair market value that ensures a well-run clinical trial, both payers and payees are responsible for navigating the regulatory framework that governs clinical trial funding. “Sponsors, sites, investigators and certain downstream contractors may be wise to have policies and procedures to ensure that payments made in the context of clinical trials are in each case fair market value for legitimate, reasonable and necessary items or services,” says Andrea Ferrari, a partner at HealthCare Appraisers in Florida.
Ferrari suggests a “toolkit” of policies that include a summary of and/or access to previously determined fair market value ranges for services that are most common in clinical trials of a similar nature. This toolkit might do well to include general guidance for how to apply the fair market value ranges in the context of applicable laws and regulations, she says. “Guidance should focus on how to deconstruct a budget to match budget line items to actual items/costs, caveats to applying the fair market value ranges to certain specific circumstances and triggers for higher-level or more specific review than can be accomplished through the tools in the general toolkit.”
-By Brandon May