Clinipace worldwide-webcast-new-cro-pricing-model-value-based-vs-hourly

Variable Billing vs.
Fixed-Price Models:
How Does Your Clinical Trial Stand to Gain?
Click to edit Master title style
Mark Shapiro, MA, MBA, CCRA, RAC
Executive Director, Clinical Solutions
CLINIPACE WORLDWIDE

David Hinds, MBA
Global Project Director
CLINIPACE WORLDWIDE

Technology-Amplified CRO
Frictionless Services
Project Management
Site Selection and Global Study Feasibility

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

RIGHT-SIZEDTM CLINICAL RESEARCH SERVICES www.clinipace.com

Let’s get on the same page

Variable Billing Fixed-Price
Hourly Functional Unit-
Value-Based
Billing Outsourcing Based


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
by sponsors}
CRO pricing is often based on costs or effort not
value
CROs have extensive, Master title style
Click to edit process-based intellectual
property for how to conduct of the trial, but…
Have commoditized their services and removed
value from services in favor of units and volume


Variable billing is killing drug
development, because it
Misaligns interests of the CRO and client…
By not sharing project risk with the client

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


THE CRO Hourly, effort-
Click to edit Master task-based
STATUS and title style
QUO: to edit Masterpricing leads to
Click title style
scope
changes and
change fees

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
4. Click to edit Master title style
It lends itself to tedious work
5. It doesn't stop scope creep
6. It encourages an adversarial relationship


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
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.

http://www.lifescienceleader.com/index.php?option=com_jambozine&layout=article&view=page&aid=3931


WHAT ARE Sponsors are
SPONSORS buying results and
BUYING? value, not time,
work,
Click to edit Master title style or effort.


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
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
Click to edit changes that
been anticipated from the beginning.


Common resistances to value-
based pricing
Sponsor CRO
 Different definitions of value  Little control over
 Perception of risk outcomes

 CRO has little control over  Sponsors reluctant to
clinical results share metrics
 Inertia  Requires much greater
 Timing of measures pre-project feasibility
 Click to edit Master  Inertia
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


A better model
Sponsor/CRO first defines scope of value and
performance metrics
Sponsor/CRO then determines scope of work
Agreement of team composition and tenure
CRO utilizes value-led costing rather than cost-
led pricing
Sponsor/CRO agreeedit Master title style methods –
Click to upon invoicing
based on predictability not hours worked
Measurement systems provide continuous
assessment of value creation


Activity-led billing

Service  Cost  Billing  Value  Sponsor

Sponsor  Value  Price  Cost  Service

Value-led pricing

The Value-Oriented CRO
Strategy
Delivery
Technology
Metrics
Value

Foundations of value pricing
Focuses on value and effectiveness, not time and
labor
Places more importance on results instead of
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


The CRO of the Past
Activity-Based
Profit Capacity Efficiency
Price

Intellectual Value-Based
Value Effectiveness
Capital edit Master title style
Click to Price

The CRO of the future

In summary…
Variable Fixed
Hourly Functional Unit-
Value-Based
Billing Outsourcing Based

 Functionally-  Input-  Output-
Contract Focus  Task-oriented
oriented oriented oriented

Billing Unit
 Actual Hours
in arrears
 FTE-based
 Actual Units
Milestones
/
 Planned Units

 Highly  Slightly  Highly  Fixed /
Monthly charges
variable variable variable smoothed
 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


Q&A

Mark Shapiro
mshapiro@clinipace.com
David Hinds
dhinds@clinipace.com


Clinipace worldwide-webcast-new-cro-pricing-model-value-based-vs-hourly

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Clinipace worldwide-webcast-new-cro-pricing-model-value-based-vs-hourly