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Economic and Financial Issues Impacting Clinical Trials
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Ari Armagan

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Abstract
One of the most important aspects of clinical trials are economics and financial issues
which can have a host of consequences to the success of a clinical trial, whether a
clinical trial can continue, or if a clinical trial can start in the first place. The first issue
which is one of the most essential in the realm of economics and finance is the
budgeting of a clinical trial (i.e. how funds are allocated and organized to be disbursed
for the best possible economic health of a clinical trial) as well as how a clinical trial is
financed and the different avenues of financing that are available and usually used.
Costs are a major issue and have a big impact in clinical trials and they require special
strategies in counteracting the problems that may arise from them throughout the
course of a clinical trial. Cost-effectiveness analysis and cost-minimization analysis
comes into play in reducing costs while maintaining and increasing efficiency in the
delivery of healthcare. In conclusion, the success of a clinical trial is closely related to
economic and financial issues and has to first start with the best method of funding to
take place so that funds are best allocated in ways to best counteract the issues
presented with the best strategies possible. Correct costs should be identified and dealt
with in the best way possible using these techniques so that the integrity and success of
the clinical trial is not jeopardized in the process.

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One of the most important aspects of clinical trials are economics and financial
issues which can have a host of consequences to the success of a clinical trial, whether
a clinical trial can continue, or if a clinical trial can start in the first place. Many
challenges that occur during the course of a clinical trial have do to with economic and
financial issues, and the handling of these issues have to be done with strategies that

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are in the best interest of the clinical trial which can greatly impact whether or not the
clinical trial will ultimately be successful.
The first issue which is one of the most essential in the realm of economics and
finance is the budgeting of a clinical trial (i.e. how funds are allocated and organized to
be disbursed for the best possible economic health of a clinical trial) as well as how a
clinical trial is financed and the different avenues of financing that are available and
usually used. The type of budgeting and financing for a clinical trial largely has to do
with the type of clinical trial itself and what is best for each situation, but mainly can vary
from getting federal funding in the form of grants (usually through the NIH) and also
other avenues such as seeking funding from private donors, healthcare associations,
and investors. (Phillips, 2005). “The key to clinical trial management depends on a
site's ability to successfully manage financial data and their trials portfolio with greater
business acumen. Successful financial results require sites to smartly select studies that
maximize the strategic and financial goals, and to effectively manage budgets, patient
accrual, and collection.” (Warnock, 2010). Basically, this means allocating financial
funds that best interest the longevity and long-term success of clinical trials, while
cutting costs in areas that are not as trivial for the clinical trial than other parts. How
clinical trials are funded are also one of the largest and most impactful issues in clinical
trials pertaining to economic and financial issues. This means how to get the best
avenue of funding depending on the particular clinical trial being pursued (such as what
stage, what type and what the clinical trial is actually for). This is because there are
different pros and cons for each type of avenue of funding as well as the amounts and
duration of funding for each type of avenue presented. The most usual source of

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funding is funding from the federal government which is usually through the NIH
(National Institute of Health in the U.S. Department of Health and Human Services).
(Phillips, 2005). This type of funding is usually done based on the merits of the clinical
trial and is awarded on an application basis. (Phillips, 2005). Thus, this type of funding
would be best for research that involves a rare condition, drug (such as an orphan drug)
where there is not a large amount of certainty that it will be successful or approved in
the long run. This is particularly beneficial for these types of research since federal
funding does not run out and these trials are not really dependent on profit to reinvest in
the research which will ultimately require drug approval (which is harder for orphan
drugs and the treatments they seek to treat). (Phillips, 2005). This is also beneficial for
these types of trials because government grants such as those from the NIH do not
have to be repaid or owed to the government (since they are in the form of grants); so in
the quite possible chance they are not successful (which is more likely the case with
orphan drug development and clinical trials for rare conditions, profits will not be
attained that would otherwise have been if clinical trial was successful, the money spent
on the research would not go to waste nonetheless. (Phillips, 2005). Some
disadvantages for seeking this method of funding is that because federal funding for
clinical research are given mostly on the merits of the clinical trial, it will most likely
have an application process that would include deadlines as well as other restrictions
which may be in conflict with the demands and goals of the clinical trial and possibly the
healthcare organization pursuing the clinical trial. (Phillips, 2005). Also, because these
funds are coming from the government, many extraneous situations can influence the
financial state of the federal government (such as problems in the federal budget,

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politics, etc.) which may negatively influence the processing of the grants, which may
mean that a grant gets denied or a grant gets approved in a lesser amount than usual.
“Congress and the administration have slammed the brakes on the growth of the NIH
R&D budget.” (Shaw, 2005). Therefore, looking at other sources of funding
simultaneously is a good idea no matter what type of clinical trial is being pursued, and
this may be from private or public healthcare associations dedicated to investing and
donating towards the research and cure of specific and certain diseases (such as the
American Heart Association). The advantage of this type of funding is also that they do
not have to be repaid (like federal funding and grants). (Phillips, 2005). Another pro
compared to federal funding is that there is a less cumbersome process in getting these
grants since they do not have to go through government bureaucracies, and entities that
come with a lot of red tape and strict requirements in getting a grant approved. (Phillips,
2005). On the other hand, because these are not government grants, one con to this
avenue of funding is that they are not continuous over the life of the clinical trial like
government grants are and because of this, they may run out in the middle of a clinical
trial. (Phillips, 2005). Many types of these associations and foundations also do not
have enough monetary and financial resources to compare to the same level as funding
coming from the NIH or similar governmental entities, so they may also be a lesser
amount. Thus, a third option of funding should definitely be looked at regardless of the
type of clinical trial and this is to seek funding from individual or private donors.
“Individuals are by far the biggest sources of charitable donations in the United States.
According to Giving USA, individual donors give nearly $200 billion every year.” (Shaw,
2005). One major benefit of this type of funding is that they are usually the most

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generous in the amount given since they are from private donors or investors as well as
charitable donors which all do not have nearly as much of the requirements of proving
merits and the application process that comes along with funding from the federal
government. (Phillips, 2005). However, it is important to know that one significant
drawback is that they are not given continuously over the life of the clinical trial like
government grants are (which are given continuously without regard to its potential
long-term success or not) and also the fact that the more funding that is received from
these sorts of entities results in getting less governmental grants due to different
regulations that come as a condition of receiving government grants. (Phillips, 2005).
The concepts of equity, efficiency, and scarcity have to do with health economics
and this is also applicable to clinical trials, because these concepts relate to the aspect
of supply and demand of healthcare (where healthcare supply is most often limited and
the demand is infinite). “The concepts that underpin health economics-efficiency and
equity-are explored, before a more detailed explanation of health economics and its
relevance to health professionals…the discipline of economics is founded on the
premise there will never be enough resources to completely satisfy human desires,
referred to by economists as scarcity.” (Phillips, 2005). Since there are not enough
resources to satisfy human desires, particularly in healthcare, this presents problems
encountered in the realm of clinical trials as well. An important way to encounter and
mitigate these problems is using the concepts of efficiency and equity. Without the
utilization of concepts and strategies related to efficiency and equity, given the fact that
the supply of healthcare restricted and the demand is always constant and infinite, cost
of healthcare can skyrocket which can ultimately be damaging to clinical trials (such as

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having operating costs that are way to high which does not leave enough revenue to
invest in further clinical trials/research or even continue a present one). “The term
efficiency is used by economists to consider the extent to which decisions relating to the
allocation of limited resources maximizes the benefits for society and has been defined
as ‘maximising well-being at the least cost to society’”. (Phillips, 2005). Thus, the
concept of efficiency is important here in enhancing whatever limited healthcare
resources or supplies that are available to its greatest benefit to society without needing
extraneous healthcare resources so that not only there is greater benefit to society
(mainly trial subjects in clinical trials) but also less cost overall in not utilizing these
unneeded healthcare resources. An example of this pertaining to clinical trials might be
the utilization of one healthcare service (such as an enhanced method of screening
patients instead of using multiple ones) so that costs are minimized and there is
simultaneous greater benefit to the recipients of the healthcare services in the clinical
trial while taking out unnecessary costs. In addition, the concept of equity should
congruently be applied with the concept of efficiency since equity pertains to the fact
that healthcare be delivered in a way that is just, and equal to all parties involved, which
is particularly important in a clinical trial when multiple ethical guidelines have to be
followed in the just and equal treatment for trial subjects as well as for the integrity of
future data that is obtained from them. (Phillips, 2005).
Costs are a major issue and have a big impact in clinical trials and they require
special strategies in counteracting the problems that may arise from them throughout
the course of a clinical trial. “This concept is fundamental within economics. Because
resources are scarce, choices have to be made between competing claims on the

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resources.” (Phillips, 2005). The main focus in dealing with the issue of costs is
identifying costs which are not consequential to the purpose, organization/structure, and
mission of a clinical trial which can be thus reduced without any significant harm. This
will in turn result in left over profits that may be better invested into further research as
well as the successful conduction of clinical trial. Thus, it is important to differentiate into
the different types of costs that may be apparent in identifying which ones can be cut
down the most without negatively impacting the clinical trial in comparison to other
costs. Different costs may include intangible costs (costs that can be only measured
through experience i.e. things that cannot be physically measured such as the
process/quality of healthcare delivery, etc.), tangible costs (costs that can be physically
measured such as healthcare equipment used), direct costs (costs related directly to
healthcare services such as the purchase of pharmaceuticals), indirect costs (those that
are unrelated to healthcare such as costs due to reduced work, absenteeism, trial
subject dropouts, etc.), fixed costs (those costs that do not change and are constant no
matter what circumstances or how healthcare is delivered which includes rent, electric
costs, and other property costs for conducting a clinical trial, etc.), and variable costs
(costs that vary according to the healthcare that is delivered which may include costs for
screening patients in a clinical trial study). (Phillips, 2005). In identifying which costs
should be reduced, those that do not have to do with the type of healthcare delivered
should be focused on cutting down the most since these would not hinder the quality
and success of the clinical trial which depends on the healthcare that is delivered (i.e.
screening of patients for adverse events). Thus, indirect costs should be cut down the
most since cutting down these costs will actually benefit the clinical trial as well (such as

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preventing absenteeism, preventing the reduction of working staff, and preventing
clinical trial subjects from dropping out since this requires extra cost and expense as
well as time to find new suitable recruits). Second would be to cut fixed costs as well
since these would be constant regardless of the quality of healthcare of clinical trial that
is conducted, and this may include finding a property that is the least expensive in
conducting a clinical trial and also cutting down utility bills associated with this as well).
Intangible costs will be the most difficult to identify regardless so these costs should not
be the focus of reduction since they could also impact the delivery of healthcare
(particularly patient care and trial subject recruitment pertaining to clinical trials) as well
as variable costs which also vary according to the quality of healthcare delivered.
“Although the intangibles cause the biggest headache in terms of measurement and
valuation…These are the things that can be identified by their very nature but have to
be experienced to be measured and valued.” (Phillips, 2005). Thus, reducing these
types of costs have the potential of producing less quality healthcare delivery and in the
realm of clinical research this could mean less quality of patient care and the screening
of trial subjects. This can lead to poor data results or inaccurate results from patient
data from things like the misreporting or inaccuracy of adverse events which can greatly
hinder the chance of the ultimate success of the clinical trial.
The human capital approach can be beneficial in the measurement of costs
associated with reducing or controlling indirect costs such as those related to
productivity. “The human capital approach considers the value of a potentially lost
production resulting from a disease in terms of absenteeism, reduced productivity.”
(Phillips, 2005). Thus, after measuring indirect costs using the human capital approach,

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it can be better known how or how much to reduce costs that are indirect (such as how
much costs result from absenteeism versus other indirect costs and how much they can
be reduced for a big enough impact in reduction overall). Fixed costs can be controlled
by using different third party vendors in some aspects of healthcare delivery and clinical
trials. This can include looking for locations for a clinical trial that costs the least (such
as outsourcing to different locations or properties that are a lot less expensive and
cutting down miscellaneous costs such as utilities that can be overlooked). Even though
variable costs do have to do with healthcare delivery, and these can impact the quality
of healthcare, they can also be reduced to some extent if they are reduced carefully so
that the end result of healthcare delivery is the same. For instance, in controlling a
variable cost associated with purchasing pharmaceuticals for a clinical trial to be given
to a patient/trial subject, choosing the generic version instead of the brand medication
can greatly reduce costs in this area, but assurance and caution should be given in
purchasing generics that have been FDA approved to be the same generic as the brand
in order to not result in worst healthcare delivery and data that can jeopardize the
integrity and future success of the clinical trial (as well as potentially dangerous adverse
events to the trial subject). The same can be said regarding the purchase of healthcare
equipment in the clinical trial process and evaluation and screening clinical trial
subjects. Costs can be saved by purchasing healthcare equipment overseas or from
cheaper vendors, but care must be taken regardless to ensure that the healthcare
equipment is held to essentially the same standards as those in the United States.
Cost-effectiveness analysis and cost-minimization analysis comes into play in
reducing costs while maintaining and increasing efficiency in the delivery of healthcare.

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(Phillips, 2005). “When survival is the key measure of the outcome, cost-effectiveness
would assess the cost per life year gained from each of the alternatives with the lowest
cost-effectiveness ratio indicating the best course of action…when the outcomes
generated by the alternatives are equal, it is possible to use cost-minimisation analysis,
where the choice of the best alternative is made purely on the base of cost.” (Phillips,
2005). This is included in the economic evaluation process which is also essential in
deciding to take on a clinical trial that would be cost-effective in the long, or whether to
stop or continue one that is already in progress. Economic evaluation and cost-effective
analysis/cost-minimisation analysis determines whether undertaking a new clinical trial
will lead to the approval of a treatment that is at least as good as those already on the
market. “For an economic evaluation accompanying a clinical equivalence or
noninferiority trial it is important to decide before the start of the study on the
appropriate research question. In many cases the objective of the economic evaluation
will be to show equivalence or noninferiority of the cost-effectiveness of the treatments.”
(Bosmans, 2008). This is especially important since most conditions nowadays already
have a drug approved for it, so most likely, a new clinical trial will be seeking to prove a
treatment for a particular condition that already has one, for a condition for which there
are already multiple treatments for anyway, or the development of generic
pharmaceuticals which have to be just as good as ones already on the market. Thus,
the economic evaluation process will evaluate how many risks are involved in
developing a particular drug or treatment, how successful it will be compared to ones
already available, and if ultimately the treatment will give more benefits than costs in the
long run. “For many diseases effective treatments already exist. In these cases the

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research question of a study investigating these different treatment options may not be
which treatment option is the superior one, but whether the different options are
approximately equal to each other. Thus, the effectiveness of a new treatment may be
established by showing that the new treatment is as effective as (i.e., equivalent to) or
at least as effective as (i.e., noninferior to) the old treatment that was already shown to
be effective, while having advantages like less side effects or an easier dose regimen
for example.” (Bosmans, 2008). Thus, using these analysis processes and economic
evaluation as a whole, finding out that a clinical trial has a great number of costs
associated with it and/or is not as great as those treatments that are already on the
market can save much time, effort, and money in not undertaking or continuing one in
the beginning. Besides important decisions such as which type of clinical trial to
undertake, economic evaluation and cost-effectiveness analysis can certainly be used
in evaluating the potential for the success and long-term financial health/profits from the
development of generic drugs because the economic evaluation process already is
used to determine whether a healthcare treatment will be as good or better than ones
already on the market, so this can be used to predict if generics will be at least as
successful compared to existing bioequivalent brand name drugs already on the market
or even better. “Health economic evaluation determines the efficiency of a service or
activity by comparison with an alternative or alternatives…The relationship between the
review of clinical effectiveness and review of cost-effectiveness must be readily
apparent.” (Phillips, 2005). This means that in the economic evaluation process, if the
cost of the generic would outweigh the potential profits that come with having to attach a
lower price to that generic, then the process of developing that generic pharmaceutical

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most likely should not be pursued. Thus, the cost minimization analysis process could
also be used in the development of generics since generics are already assumed to
have a lower price than brand name drugs already on the market and the reduction of
costs should be the bigger issue here thus far since profits will not be as large. “When
outcomes generated by the alternatives are equal, it is possible to use cost-minimisation
analysis, where the choice of the best alternative is made purely on the basis of cost.”
(Phillips, 2005).
Financial liability analysis is an overlooked process that can be largely beneficial
to a clinical trial or any healthcare operation. This process is similar to the economic
evaluation process, but focuses on which liabilities can appear in the future of the
clinical trial (rather than analyzing costs and benefits that comes with economic
evaluation). Financial liabilities are more disastrous than costs, and if neglected can do
great harm to the financial health of clinical trial if not adequately predicted or mitigated
using financial liability analysis. “Failure to conduct a financial liability analysis
associated with clinical trials exposes a hospital to significant risks…This analysis
is critical prior to signing a clinical trial agreement, developing a study budget, and
submitting claims for reimbursement to third-party payers. Failure to conduct an
appropriate financial liability analysis exposes an organization to significant
risks.” (Baio, 2006). Financial liabilities can include certain events such as potential
violations of laws relating to clinical trials and healthcare organizations in general, and
can result in heft fines (such as those in violation of FDA laws) as well as the adverse
treatment of trial subjects or negligent actions which also can result in potential lawsuits.
Thus, financial liability analysis should be part of the budgeting process in order to best

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organize resources to prevent or mitigate these liabilities from taking place. Mandatory
training of appropriate clinical research staff should also be done on financial liability
analysis so personnel can adequately prepare for, prevent, and respond to any potential
financial liabilities from occurring or getting worst. “Regardless of any operational
constraints or volume of research, providing for- mal training and education on
conducting a financial liability analysis is paramount.” (Baio, 2006). Financial
liabilities can also occur in the form of audits done by the United States Department of
Justice and this is particularly important since they are becoming even more forceful
regarding this issue in clinical trials. “The proper financial administration of clinical trials
is becoming a major priority and necessity for involved institutions. The Office of
Inspector General in the Department of Justice is sharpening its radar on this growing
field. Institutions involved in the conduct of a clinical trial need to become more
proactive in the financial management to successfully pass audits and improve financial
outcomes.” (Willenberg, 2004). Thus, training staff (particularly those in charge of
budgeting) in combating this issue and preventing an audit from taking place as well as
successfully responding to a potential audit should be paramount and resources should
be dedicated to combat this issue. This also should include the training and inurement
of accurate billing to third parties since this is one the major factors that lead to an audit.
(Willenberg, 2004).
In conclusion, the success of a clinical trial is closely related to economic and
financial issues and has to first start with the best method of funding to take place so
that funds are best allocated in ways to best counteract the issues presented with the
best strategies possible. Economic evaluation, cost-minimisation analysis, cost-utility

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analysis and financial liability analysis should definitely be part of the clinical trial
process just as anything else, which should not stop throughout the duration of the
clinical trial. Correct costs should be identified and dealt with in the best way possible
using these techniques so that the integrity and success of the clinical trial is not
jeopardized in the process.
References:
Baio, K. T., & Takamoto, R. (2006). The tip of the iceberg: Financial liability analysis and
clinical trials. Healthcare Financial Management, 60(6), 102-4, 106, 108. Retrieved from
http://search.proquest.com/docview/196375715?accountid=14872
Bosmans, J. E., de Bruijne, M. C., van Hout, H. J., Hermens, M. M., Adèr, H. J., & van
Tulder, M. W. (2008). Practical Guidelines for Economic Evaluations Alongside
Equivalence Trials. Value In Health (Wiley-Blackwell), 11(2), 251-258.
doi:10.1111/j.1524-4733.2007.00245.x
Phillips, C. J. (2005). Health economics: An introduction for health professionals.
Malden, MA: Blackwell Publishing.
Shaw, G. (2005). Tapping alternative sources: Funding beyond the NIH. Genomics &
Proteomics, 5(8), 12–18. Retrieved from
http://ezp.waldenulibrary.org/login?url=http://search.ebscohost.com/login.aspx?direct=tr
ue&db=a9h&AN=18418820&site=ehost-live&scope=site

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Willenberg, K. M. (2004). Managing Clinical Trials -- Frustration or Bliss?. Journal Of
Oncology Management, 13(6), 24-26
Warnock, N., & Lester, M. (2010). Financial Steps for Sites. Applied Clinical Trials, 20-
22.

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