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

  1. 1. 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 Click to edit Master title style CLINIPACE WORLDWIDE David Hinds, MBA Global Project Director CLINIPACE WORLDWIDE
  2. 2. Technology-Amplified CRO Frictionless Services Project Management Site Selection and Global Study Feasibility Click to edit Master title style 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 SafetyRIGHT-SIZEDTM CLINICAL RESEARCH SERVICES www.clinipace.com
  3. 3. Let’s get on the same page Variable Billing Fixed-Price Click to edit Master title style Hourly Functional Unit- Value-Based Billing Outsourcing Based Click to edit Master title styleRIGHT-SIZEDTM CLINICAL RESEARCH SERVICES www.clinipace.com
  4. 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 Click to edit Master title style 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 volumeRIGHT-SIZEDTM CLINICAL RESEARCH SERVICES www.clinipace.com
  5. 5. Variable billing is killing drug development, because it Misaligns interests of the CRO and client… By not sharing project risk with the client Click to edit Master title style 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 differentiateRIGHT-SIZEDTM CLINICAL RESEARCH SERVICES www.clinipace.com
  6. 6. 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 feesRIGHT-SIZEDTM CLINICAL RESEARCH SERVICES www.clinipace.com
  7. 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 4. Click to edit Master title style It lends itself to tedious work 5. It doesnt stop scope creep 6. It encourages an adversarial relationship Click to edit Master title styleRIGHT-SIZEDTM CLINICAL RESEARCH SERVICES www.clinipace.com
  8. 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 Click to edit Master title style 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=3931RIGHT-SIZEDTM CLINICAL RESEARCH SERVICES www.clinipace.com
  9. 9. WHAT ARE Sponsors are Click to edit Master title style SPONSORS buying results and BUYING? value, not time, work, Click to edit Master title style or effort.RIGHT-SIZEDTM CLINICAL RESEARCH SERVICES www.clinipace.com
  10. 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 Click to edit Master title style 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.RIGHT-SIZEDTM CLINICAL RESEARCH SERVICES www.clinipace.com
  11. 11. Common resistances to value- based pricingSponsor CRO  Different definitions of value  Little control over  Perception of risk outcomes Click to edit Master title style  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 projectsRIGHT-SIZEDTM CLINICAL RESEARCH SERVICES www.clinipace.com
  12. 12. A better model Sponsor/CRO first defines scope of value and performance metrics Sponsor/CRO then determines scope of work Click to edit Master title style 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 creationRIGHT-SIZEDTM CLINICAL RESEARCH SERVICES www.clinipace.com
  13. 13. Activity-led billing Service  Cost  Billing  Value  Sponsor Click to edit Master title style Sponsor  Value  Price  Cost  Service Click to edit Master title style Value-led pricingRIGHT-SIZEDTM CLINICAL RESEARCH SERVICES www.clinipace.com
  14. 14. The Value-Oriented CRO Strategy Delivery Click to edit Master title style Technology Click to edit Master title style Metrics ValueRIGHT-SIZEDTM CLINICAL RESEARCH SERVICES www.clinipace.com
  15. 15. Foundations of value pricing Focuses on value and effectiveness, not time and labor Places more importance on results instead of Click to edit Master title style 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 CRORIGHT-SIZEDTM CLINICAL RESEARCH SERVICES www.clinipace.com
  16. 16. The CRO of the Past Activity-Based Profit Capacity Efficiency Price Click to edit Master title style Intellectual Value-Based Value Effectiveness Capital edit Master title style Click to Price The CRO of the futureRIGHT-SIZEDTM CLINICAL RESEARCH SERVICES www.clinipace.com
  17. 17. In summary… Variable Fixed Hourly Functional Unit- Value-Based Billing Outsourcing Based  Functionally-  Input-  Output-Contract Focus  Task-oriented oriented oriented oriented Click to edit Master title styleBilling Unit  Actual Hours in arrears  FTE-based  Actual Units Milestones /  Planned Units  Highly  Slightly  Highly  Fixed /Monthly charges variable variable variable smoothed Click to edit Master title style  Estimated  Resources x  EstimatedUpper limit driver  Fixed Price Hours Duration Units or Fixed  “Cookie-  Complex,  Balance sheetBest for….  Consulting cutter” shared risk mgmt projects projects RIGHT-SIZEDTM CLINICAL RESEARCH SERVICES www.clinipace.com
  18. 18. Q&A Mark Shapiro mshapiro@clinipace.com Click to edit Master title style David Hinds dhinds@clinipace.com Click to edit Master title styleRIGHT-SIZEDTM CLINICAL RESEARCH SERVICES www.clinipace.com

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