Life Science Clinical Study Planning Sharpens Accuracy Using Sophisticated Budgeting Tools

Impacts

• Leadership and clinical budgeting tools can enable clinical development groups to materially improve clinical study budget accuracy.
• Using sophisticated budgeting tools can enable clinical finance to contribute a new level of value to clinical development and contract research organization (CRO) partner engagement.
• Leveraging sophisticated commercial off-the-shelf (COTS) clinical budgeting tools can free clinical budgeting staff from maintenance of custom tools, allowing them to focus more attention on insight-driven performance.
• Failure to engage experienced clinical finance staff when implementing new budgeting tools may derail benefits potential as their custom solutions are retired.

Recommendations

• Leverage improved budget performance into business performance in efficient resource allocation and in productive partner relationships.
• Establish a baseline budget process that includes activity-based costing and benchmarking data, and leverage spreadsheets by exception only.
• Utilize simulation and scenario planning to gain deeper insights into clinical resource requirements.
• Put experienced staff in charge of the effort to accelerate time to benefit and to gain buy-in on new tools.

Life science companies, including CROs engaged in clinical studies, have faced an old question, "How much will this study cost?" When the study is completed, it is followed by, "Why did this cost so much more than expected?" And the discussion will often provoke the question, "How can we better understand the trade-offs between clinical decisions in a protocol and their financial implications?" Or perhaps the counter question, "Did we sandbag the estimates too much so we would come in way under our estimates?" Clinical finance groups have long been in the middle of these questions and have built war chests of sophisticated spreadsheet-based tools to address them.

Clinical finance and development leaders are combating rising clinical study costs by becoming more insight-driven using sophisticated budgeting applications. By leveraging these specialty budgeting applications and benchmark data, more-accurate assessments of resource needs can be achieved and leveraged in the decisions that impact real costs and partner relationships. We highlight this area because it is a critical leverage point on the way to achieving improved cost management of clinical study resources. Resources include supplies, monitors, contract research services, investigative sites and other assets and consumables that can be translated into costs. A better understanding of what a study will cost can lead to better insights into how to design a study, how to manage risks during a study, and can enable more-effective engagement between sponsors and CROs.

Clinical finance and development leaders can partner with IT leaders to deliver new capabilities that will positively impact the organization. The time to use more-sophisticated tools and methods is now because:

• Life science companies are struggling with the complexities of clinical studies at a time when fewer clinical resources are available to contend with the challenges.
• Clinical development groups and their finance support groups have outgrown heavily customized spreadsheet-based toolkits and there are now COTS applications tailored to the industry to leverage forward.
• Performance demands that budget accuracy improve significantly to enable more realistic resource deployment and a clearer understanding of expected ROIs.

In the process, innovators are embracing technology to structure the clinical budgeting process, take advantage of benchmarks and leverage insights into negotiation with contract partners, such as CROs.

Source: Gartner (April 2012)

Impact: Leadership and clinical budgeting tools can enable clinical development groups to materially improve clinical study budget accuracy

With clinical study budget overruns common and resources lean, leadership, combined with good technology, can make a difference and substantially reduce budget versus actual variance. A material improvement in the outcome of any business process would be welcome, even by skeptics who would make the point that it all depends upon how well the process was performing at baseline. Others might quibble that we are talking about budgets and not real costs, or that budgets are biased to control costs. They would all be right — to a degree. The key point to recognize is that a more-accurate budget means you will have higher quality — and realistic — expectations about future resource use and also an improved understanding of cause-and-effect relationships in a clinical trial. It also means you will have unlocked the potential of predictability and can change the discussion to forward issues and avert problems before they might occur. These insights, demonstrated by the accuracy of the budget, are an asset to be leveraged in study design, negotiations between sponsor and partner, and in managing critical path or costly resources.

Recommendations:

• Implement structured processes supported by applications and retire custom spreadsheets.
• Leverage the budget accuracy into cost savings in study execution by actively monitoring study costs and intervening where necessary to keep it on track.

Impact: Using sophisticated budgeting tools can enable clinical finance to contribute a new level of value to clinical development and contact research organization (CRO) partner engagement

There are a number of key roles in life science that can directly benefit from improved performance by their groups:

• Sponsors: Clinical finance, sourcing and project managers. These groups can drive deep understanding of the cost structures of studies and of potential partner processes that lead to more-effective negotiations with partners. Transparency of the study and relationship factors can establish more-meaningful engagement with partners. An environment supporting rapid assessment of clinical study costs, protocol amendments or variations can empower clinical finance with the ability to influence and shape studies in a way that more effectively utilize resources while preserving scientific integrity.
• CROs: Sales, relationship management and clinical finance. The CRO competitive environment is intense with lean margins and high responsiveness to customer needs essential to winning and keeping business. Budgeting tools can be part of a capability to translate potential customer bids into a more-accurate assessment of costs and to reveal insights into critical drivers of the study. The right tools can support making these decisions more rapidly and allow exploration of study variations to determine a better operational strategy for its execution.
• Both groups will benefit by greater transparency in planning assumptions and factors through more-effective communication and more focus on the forward solution in the event a protocol amendment or a dispute on the study's scope and costs occur. Control and agility can be achieved in clinical budget preparation and in engagement between sponsors and their partners with technology playing the role of enabling flexible engagement on this complex topic.

Recommendations:

• Implement rapid, rough-cut planning capability to address ad hoc "what if" questions.
• Establish SLAs with partner groups in clinical development.
• Actively leverage tools in concert with negotiations between sponsors and CROs to ensure common assumptions and expectations.
• Leverage improved budget performance into business performance in efficient resource allocation and in partner relationships.
• Establish a measurement process for value differential with clear business rules to deal with change.

Impact: Leveraging sophisticated commercial off-the-shelf (COTS) clinical budgeting tools can free clinical budgeting staff from maintenance of custom tools, allowing them to focus more attention on insight-driven performance

The alternative to COTS applications are custom-developed applications or sophisticated spreadsheets that require deep expertise in the development and maintenance of the toolkits. Oftentimes, the highly skilled clinical budget staff provides this support independent of IT, and as studies evolve and change, the urgent need for enhancements or new tools can divert these resources at those times when they are needed most to evaluate the economics of a study. Working with a configurable commercial application that offers reference benchmarks for related cost factors can refocus clinical finance staff on the dynamics of a study and the implications of alternative protocol and execution decisions on costs. With greater focus, energies can be directed forward to ensuring stakeholders understand the implications of decisions, the risks expected, and to explore scenarios of alternatives before committing resources. By leveraging their insights into working with other areas of clinical development, budget stakeholders can institutionalize best practices of clinical study design and how that impacts the study cost. It is important to note that common tools across clinical finance staff can provide synergies in understanding past studies or to back up other studies when needed, which may be hard to accomplish when spreadsheet tools are uniquely prepared by staff.

Recommendations:

• Establish a baseline budget process that includes activity-based costing and benchmarking data, and leverage spreadsheets by exception only.
• Utilize simulation and scenario planning technologies to gain deeper insights into clinical resource requirements.

Impact: Failure to engage experienced clinical finance staff when implementing new budgeting tools may derail benefits potential as their custom solutions are retired

Highly experienced and talented staff with ownership of tools integral to their work will naturally be skeptical of replacing software they depend upon and that may have taken years, for example, to fine-tune to their needs. In extreme cases, these business owners may dismiss the possibility that other tools could capture their uniqueness or their advantage. They may be right with some studies, but it is likely they will benefit more from configurable approaches, integrated benchmark data, archives of previous study plans, simulations, and other benefits of a standard software environment. The key point to remember in engaging teams with this opportunity is that it is the tool in the hands of the master that delivers the value, not the tool out of the box.

Recommendations:

• Put experienced staff in charge of the effort.
• Set goals in use of new application tools for accuracy and responsiveness that could not be achieved with existing tools.
• Reward leadership for innovative usage of applications.