Chapter 19Clinical Trials Clinical TrialsThe history

Chapter 19
Clinical Trials
Clinical Trials
“The history of the last 20 years is one of crises with drugs and
medical devices, many approved despite the objections of the
FDA’s own scientists.”
— Sidney M. Wolfe
Lecture Overview
Research and Development Investments Fund a Complex
Multistage Pathway
Clinical Trials of Generic Drugs
Health Risk Assessments
Expanded Access Protocols
Termination of Clinical Trials
Observational Studies
International Clinical Trials
Informed Consent in General
Transparency and Full Disclosure in Clinical Testing
Financial Conflicts of Interest
Commitment to the Life Sciences
Source: Hammaker, D. K., & Knadig, T. M. with Tomlinson,
S.J. (2017). Clinical trials. In Health care management and the
law: Principles and applications (pp. 389-412). (2nd Ed.)
Burlington, MA: Jones & Bartlett Learning.

Multistage Pathway
Some major expenses are research materials, advanced
computers, and other highly sophisticated machines that support
research activities, and salaries of scientists. Stage specific
activities include:
Drug discovery
Preclinical testing
Clinical trials
Approval by the FDA
Post marketing surveillance
Multistage Pathway
Drug Discovery:
While most compounds will never be approved for use, each one
is evaluated to determine its potential value compared to
existing therapies, complexity of large scale manufacturing, and
other factors.
Preclinical Testing:
Candidate drugs from the discovery stage receive 1 to 3 years of
extensive testing to assess safety and show biological activity
against a disease.
Chemical tests establish the purity, stability, and shelf life of a
compound.
Manufacturing tests determine mass production of the drug.
Pharmaceutical development studies explore dosing, packaging,
and formulation of the drug.
Research and Development Investments

Fund a Complex Multistage Pathway: Clinical Trials
For drugs in development, there are low odds of reaching the
market.
While Phase I, II, and III of studies are taking place, research
investigators are also conducting toxicity tests and other long-
term safety evaluations, evaluating dosage forms, planning for
mass production, designing packaging, and preparing the
extensive application required for FDA approval.
One out of five drugs that enter clinical testing is never
approved by the FDA:
20% of the drugs that enter Phase I are approved to enter Phase
II
30% of the drugs that enter Phase II are approved to enter Phase
III
60% of the drugs that enter Phase III are approved for a new
drug application
80% of the new drug applications are approved by the FDA for
market entry
Multistage Pathway
Approval by the U.S. Food and Drug Administration
According to the FDA, the documentation required in a new
drug application is supposed to tell the whole story of a drug,
including what happened during the clinical trial tests, what the
ingredients of the drug are, results of the preclinical animal
studies, how the drug behaves in the human body, and how the
drug is manufactured, processed, and packaged.

Post Marketing Surveillance
Firms are meant to continue to monitor all approved drugs for
long-term safety and regularly report results to the FDA.
It is important to note that clinical trials cannot always detect
risks that are:
Relatively rare
Have long latency periods
Affect vulnerable populations
Clinical Trials of Generic Drugs
Distinction Between Bioequivalent and Biotherapeutic
Generic versions of branded drugs need not demonstrate their
scientific merits by controlled human clinical trials or other
testing the brand name pharmaceutical firms conducted.
By definition, generics may be up to 45% less or 25% more
efficacious than branded drugs, yet still meet the legal
definition of being bioequivalent.
Generics are not required to provide independent proof of their
safety or efficacy to be labeled bioequivalent.
Distinction Between Branded Generics and Generics
The pharmaceutical industry also markets authorized branded
generics, which are branded drugs that have lost their patent
status but are labeled and marketed as generics.
Both empirical and theoretical studies evince that generic entry
is inversely related to price: More generics = lower prices.
Health Risk Assessments

Information on Post Phase I Clinical Trials
Congress expanded the requirements for all sponsors and
research investigators to share information about post Phase I
clinical trials, including selected aspects of trial results, on the
U.S. government website, ClinicalTrials.gov.
Balancing Risks and Benefits
Proper health risk assessment is critical for new drug product
treatments. Patients, physicians, and the FDA often weigh the
pros and cons of one treatment versus another.
An ongoing issue is whether the FDA should do more to ensure
the safety of new drug products and expose potential side
effects before a drug product comes into widespread use.
Expanded Access Protocols (1 of 2)
An investigational new drug application, or treatment protocol,
is a relatively unrestricted study intended to authorize shipment
of an unapproved drug product into interstate commerce.
Right to Life Saving Experimental Drugs: Abigail Alliance v.
Von Eschenbach
Issue: Does a fundamental right exist under the Fifth
Amendment (which contains the Due Process Clause) provide
terminally ill patients access to potentially lifesaving
experimental drugs?
Holding: No, terminally ill patients do not have a fundamental
right to access experimental drugs
Expanded Access Protocols (2 of 2)
Abigail Alliance: Two Tier Approval Proposal
Grants terminally ill patients who have exhausted all FDA

approved therapies the autonomy of selecting post Phase I
experimental medical products with their physicians.
Lifts the current prohibition of charging any price higher than
the cost for experimental products.
Balancing Patient Rights: Access versus Personal Autonomy
The right to personal autonomy affects individual interests in
obtaining investigational medical treatments and medical
products, while the right to access pertains to the public’s
interests in filtering safe and efficacious products through
clinical trials.
Termination of Clinical Trials (1 of 3)
Clinical trials usually get halted for one of two reasons:
New drug shows overwhelming promise and it would not be fair
to delay its release
Results suggest great risks
The medical products industry will likely avoid fiduciary status
and binding agreements with respect to clinical trial participants
by:
Designing sponsor protocols to comply with FDA regulations
Outsourcing clinical trial design and administration
Forgoing control over clinical studies
Monitoring Board Decisions
While each clinical trial is different, for many trials, monitoring
boards set numerical thresholds for bad outcomes before the
trial begins. When the thresholds are crossed, the trials are
stopped.

Relative Risks
Patients taking Lipitor plus in a Pfizer clinical trial were 60%
more likely to die. This statistic suggests why Pfizer might have
wanted to stop the trial. As in most clinical trials, the
difference between stopping and proceeding comes down to just
a few deaths.
Statistical Boundaries
When an imbalance in deaths crosses the statistical boundary set
before the trial begins, clinical trials are automatically halted.
This statistical boundary is not some arbitrary figure, but rather
a single number,
the p value, that is calculated as part of the trial protocol.
Statistical Significance
Thresholds are usually set at 0.05 for statistical significance.
Thresholds are set higher when there are frequent measurements
of p, to make sure that too much weight is not given to any
single reading.
Christine Freaney (CF) -
Observational Studies
Researchers found breakfast cereals eaten before conception
were the most significant food linked with baby boys.
Nature of Nontrivial Chance
Behind the cereal debate is the divide between statisticians and
epidemiologists about the nature of nontrivial chance in
observational studies where research investigators track clinical
trial participants’ habits and look for associations w ith their

health, but do not intervene
Validation
Some want a tougher standard of proof required for
investigators looking at large data sets
Bonferroni adjustment method: Requires multiplying the usual
mathematical formula by the number of variables; if 100 foods
are studied, the link must be 100 times as strong as usual to be
considered significant
International Clinical Trials (1 of 2)
Fifty Percent Cost Savings
Late stage clinical trials in lower income countries cost less
than half as much as they do in the United States and Europe
because of lower salaries for physicians and clinical research
personnel.
Patient recruitment is faster in countries such as India, China,
and in Eastern Europe, where:
Patients are more willing to enroll in studies because of lack of
alternative treatment options
Competition for patients is less intense
Clinical trial participants are far less likely to be taking other
medicines
Patient populations are larger
Good Clinical Practices
The FDA has adopted standards used by many countries and
organizations known as good clinical practices that encourage
postmarket drug access to be discussed during protocol design,
mandate that studies be reviewed by international ethics
committees, permit placebo controlled trials only under certain

circumstances, and require informed consent from all clinical
trial participants.
Inconsistent Oversight and Informed Consent
Research suggests oversight and adequate informed consent for
clinical trial participants in clinical trials is inconsistent in
resource limited countries.
While the medical products industry generally uses the same
protocol regardless of where its clinical trials occur,
international sites are not routinely monitored and not all
research investigators have experience conducting clinical
trials.
International Clinical Trials (2 of 2)
Informed Consent in General (1 of 7)
Informed consent:
Protects individual autonomy and the participant’s status as a
human being
Helps avoid charges of fraud or duress against clini cal trial sites
Encourages research investigators to carefully consider their
clinical decisions
Fosters rational decision making by the clinical trial
participants
Involves the public generally in medicine
Informed consent continued
Medical custom dictates that a reasonable physician should
disclose what would be reasonable under the circumstances,
including:
Diagnosis

Nature and purpose of the proposed treatment
Risks of the treatment
Legitimate treatment alternatives, including doing nothing
Federal regulations govern clinical research protocols and
define what information is required to obtain informed consent.
Placebos
Placebos may be used in order to test the rate of success.
Institutional review boards must continually review the research
and determine that: confidentiality is maintained, data collected
is monitored, informed consent was obtained, risks are
minimized and reasonable, selection of volunteer subjects is
equitable.
Declaration of Helsinki
The Declaration of Helsinki sets forth the international ethical
principles for medical research involving human subjects.
Research on human subjects who cannot give consent is only
permissible if the condition that prevents consent from being
given is what is being tested or researched
Battery Claims
If there was no consent given, clinical trial participants may
have a battery claim, which simply requires a showing that there
was unconsented contact.
Informed Consent Claims
If there was insufficient consent, clinical trial participants may
have an informed consent claim, which is pursued under a
theory of negligence.

Informed consent forms are not generally an important part in
the decisionmaking process because they are treated as a
formality.
Newborn Screening Programs
The Bearder v. State of Minnesota decision highlights the issues
of informed consent in the debates surrounding the genetic
privacy of newborn blood samples
Issue: Should states enhance protections for the genetic privacy
of newborn blood samples?
Holding: Yes, the genetic information contained in DNA brings
newborn blood samples falls within the protection of the genetic
privacy law
Emergency Research Rule
There has been a substantial increase in the use of the
Emergency Research Rule, with most of this increase related to
studies supported by the National Institutes of Health (NIH)
Currently, NIH is funding emergency research studies, which
consider consent waived after institutional review boards sign
off on each clinical trial, if:
A physician and an institutional review board agree that the life
of a patient is in danger
Proven treatments will not work
Clinical research is necessary to determine what intervention is
best
Research could not be done otherwise

Informed Consent and Participation of Children in Human
Subject Research
Children in general are considered vulnerable research subjects
Minors cannot provide informed consent because they are
considered incapacitated under the law, meaning that they lack
the ability to acquire the knowledge necessary to make a truly
informed, voluntary decision
Institutional review boards can approve pediatric research only
in three risk-benefit categories:
Greater than minimal risk but with a prospect of direct benefit
Minimal risk
Minor increase over minimal risk without a prospect of direct
benefit
Transparency and
Full Disclosure in Clinical Testing
Major shortcoming of the full disclosure requirement (also
referred to as the § 801 requirement) is that:
The results of older clinical trials of drugs that were approved
before the disclosure requirement became law in 2007 do not
need to be made public
Such drugs constitute the vast majority of the drugs currently
used by patients
Financial Conflicts of Interest
The increase in financial conflicts of interest is likely a result

of the change in federal policy that was designed to expedite the
progress of research results from the laboratory to patients.
Concern mainly centers on financial conflicts of interest,
particularly regarding the relationship between academic and
industry interests.
Commitment to the Life Sciences
First and foremost, the health care industry and the government
must renew their commitment to science:
The ability to reach this goal depends heavily upon strict
adherence to scientifically motivated decision making
Scientists should be insulated from financial and political
pressures when making decisions about which medical
treatments and products warrant approval to enter the
marketplace and about which measures are appropriate when
addressing unforeseen risks to patients.
Chapter 15
Global Supply Chain Management
Global Supply Chain Management
“I cannot say whether things will get better if we change; what I
can say is they must change if they are to get better.”
— Georg Christoph Lichtenberg

Lecture Overview
Principles and Applications
Business Process Outsourcing
Offshoring of Health Care Outsourcing
Flattening of the U.S. Health Care System
Supplying Hospital Staff Versus Medical Expertise
Medical Products Outsourcing
Global Drug Manufacturing in China
Early-Stage Medical Products Research in India
Captives and Business Process Organizations
Hybrid Program Offices
Virtual Captives
Privacy Concerns
What Lies Ahead for Outsourcing
Source: Hammaker, D. K., & Knadig, T. M. with Tomlinson,
S.J. (2017). Processes for thinking about the U.S. health care
system. In Health care management and the law: Principles and
applications (pp. 295-312). (2nd Ed.) Burlington, MA: Jones &
Bartlett Learning.
Principles and Applications
Leveraging network connectivity (internet of things) is the next
frontier for the health care industry.
Efficient supply chains can create value for health care
providers by:
Cutting costs
Deploying new delivery system models
Offering new medical products and services
The Food and Drug Administration Safety and Innovation Act
of 2012 strengthens the Food and Drug Administration’s (FDA)
ability to safeguard and advance public health by enhancing the

safety of global supply chains.
Business Process Outsourcing (1 of 2)
Business process outsourcing, the use of outside vendors for the
performance of general administrative services, is a critical
issue for the health care industry, in:
Accounting
Claims processing
Customer relationship management
Finance
Human resources
Procurement
Business Process Outsourcing (2 of 2)
The need for outsourcing is intensifying as the demand to create
value in health care continues to multiply.
As discretionary patient spending expands due to the growth of
consumer-directed health care, the demands for cost-effective
care and medical products will only increase.
Outsourcing transfers responsibility for ongoing management
tasks and execution of business activities, processes, or
functional areas in order to improve efficiency and
performance.
Offshoring of Health Care Outsourcing
The following specialized medical services are outsourced and
sent offshore with growing frequency as hospitals and health

plans come under heightened pressure to cut costs and enhance
value:
Billing
Collation
Insurance claims processing
Technical information support
Transcription
X-ray analysis
As the cost of telecommunications time falls and cloud
technologies and robotic process automation expands, the
volume of medicine practiced in cyberspace is steadily
increasing.
Flattening of the U.S. Health
Care System (1 of 2)
It is possible to do business nearly instantaneously worldwide
with:
Connectivity
Globalization
Technology
The decision to outsource the function allows health care
providers to focus their resources on their core competencies,
which are:
Clinical care
Medical education
Research
Strategic treatment procedures

Flattening of the U.S. Health
Care System (2 of 2)
Most academic medical centers do not engage in business
functions unrelated to their core functions, such as:
Food services
Insurance claim processing
Maintenance
Patient billing
Security staffing
They focus instead on clinical care, medical education, and
research.
The outsourcing of American medical jobs will only surge with
technological innovations in the fields of telemedicine and
cybersurgery.
There are outsourcing specialists for almost every business
process who are better at providing the service for many health
care providers than any one provider on their own, for instance:
In health care systems integration, outside vendors can integrate
data standards for use in electronic medical records,
computerized provider order entry systems, and genetic
databases, within technical frameworks to clean and integrate
quality medical data.
Supplying Hospital Staff Versus
Medical Expertise (3 of 5)
Teleradiology
Statistics show radiological outsourcing growing with a
significant number of hospitals currently engaging in such a
practice.
Reliable estimates as to the size of this offshore market do not
exist since teleradiology is currently provided primarily by a

number of private firms that are not obligated to file public
reports.
Teleradiology is the largest component of international
telemedicine today in terms of complexity and cost.
The hospital no longer tells the physicians and technicians how
to analyze patient X-rays; now the hospital and outsourcing firm
agree on the outcomes of the analysis andthe hospital pays the
outsourcing firm depending on the number of X-rays analyzed.
Telecardiology, Teledermatology, Telepharmacy,
Telepathology, Telepsychiatry, Teledermatology,
telecardiology, telepathology, and telepsychiatry simply involve
videoconferencing
Telesurgery occurs either when a remotely located physician
provides video assistance to physicians performing a surgery or
when a physician uses a remote robotic arm during surgery.
Outsourcing Centers of Excellence
With health data concentrated into centers of excellence where
the best skill sets exist, the economies of scale would cause the
net unit cost for radiographic interpretation to fall below the
costs currently generated by radiologists interpreting films
under exclusive contracts in hospitals.
Centers of excellence could be located in U.S. health care
facilities where patient care is offered at an exemplary level on
a wide range of measures or in emerging economies in health

care facilities with exemplary patient care around the world.
Medical Products Outsourcing (1 of 2)
Nearly 80% of the active ingredients and almost 40% of the
finished drugs and medical devices used by U.S. consumers are
manufactured abroad.
In the majority of areas of medical products outsourcing, most
of the concerns boil down to audit of standardized procedures,
including:
Business data analytics, clinical trials, cost and price analyses,
early-stage drug development, enterprise resource planning
systems, environmental health and safety, manufacturing,
production planning, and quality assurance and quality
oversight.
FDA guidelines provide a system of business processes to
assure that the medical products produced by manufacturers
have what they are represented to possess in terms of:
Composition, identity, purity, quality, and strength
Medical Products Outsourcing (2 of 2)
Good manufacturing practice guidelines address operating
procedures and documentation requirements for:
Distribution, in-house testing, production and process controls,
qualifications of manufacturing personnel, raw materials quality
assurance, record-keeping of substances throughout the
manufacturing process, standards for cleanliness and safety, and
warehousing.
It is advantageous for producers of medical products to use
outside vendors for outsourced work.

Medical Products Outsourcing:
Risk Management of Outsourcing Relationships (1 of 2)
Firms incorporate detailed clauses into their outsourcing
contracts such as:
Clear deadlines
Database locks that prevent reopening the data after it is
finalized
Standards for accuracy.
Information transferred offshore is only protected insofar as the
terms of the outsourcing contract provide and as the destination
country permits.
Risk Management of Outsourcing Relationships (2 of 2)
In coming up with outsourcing contracts, firms take into
account:
Operational risks
Performance risks
All risks involved in U.S. provider outsourcing can be managed
through the right:
Acceptable service-level agreements
Outsourcing delivery model
Clear-cut price negotiation
Proper contractor selection
Protection of Tacit Knowledge

Concerns about the misuse of residual knowledge can be
mitigated by requiring outside vendors to be quarantined after
sensitive projects, meaning they cannot work with competitors
for a limited period of time.
Corporate epistemology (the branch of philosophy that explains
how a person gains and verifies knowledge) must be
documented before outsourcing can be successful.
The less tangible the work the more closely strategic activities
should be held and not outsourced.
Global Drug Manufacturing in China
The Chinese State Food and Drug Administration (Chinese State
FDA) works with its foreign regulatory counterparts to monitor
drug-ingredient production to ensure that raw materials are:
Clean
Consistent
Traceable
Safeguarding the legality, quality, and safety of active
pharmaceutical ingredients is the ultimate responsibility of the
global pharmaceutical and generic manufacturers and the
importing countries.
Early-Stage Medical Products Research in India: Patent
Protection & Ready Access to Clinical Trial Participants
Patent Protection
Earlier concerns about protection of intellectual property in
India diminished significantly after the Indian government
introduced patent legislation.
Ready Access to Clinical Trial Participants
Research indicates that conducting clinical trials in India can

lower early-stage drug discovery costs by $35 to $50 million
per new drug due to:
Rapid enrollment of participants in trials
Shortened enrollment timelines for clinical trials
Producer’s avoidance of fiduciary status with participants in
trials
Shifting of liability claims to the clinical research organizations
in India that are conducting the clinical trials
Early-Stage Medical Products Research in India: Avoidance of
Fiduciary Status & Wage Arbitrage of Educated Workforce
Avoidance Fiduciary Status
Producers of medical products can avoid fiduciary status and
some liability claims by designing protocols to comply with
FDA regulations and outsourcing their clinical research.
Wage Arbitrage of Educated Workforce
India has some 22 million university graduates, including 6
million science graduates, 1.2 million with engineering degrees,
and 600,000 physicians.
Captives and Business Process Organizations
Domestic captive centers are starting to move their information
extraction and reporting tasks offshore, which is made possible
by:
The convergence in health care computing platforms
The rapid advances in communications technology
Providers in the U.S. health care industry, as a result of the
increase in costs for providing accurate and timely personal
health information, will need to:
Hire more staff

Increase the expertise levels of existing staff
Hybrid Program Offices
Outside vendors have developed businesses for the delivery of
higher end health care services that are a hybrid between
captive organizations doing business in house and traditional
work outsourced by contractors.
Program offices are centralized centers that monitor, influence,
and control projects to make them more efficient.
With the development of health information technology,
program offices can work very closely with U.S. health care
providers to the point where the outsourcing firm’s employees
become almost like the U.S. provider’s employees.
Virtual Captives
Virtual captives are the latest outsourcing model to evolve in
the U.S. health care industry, and are like health care providers
having their own captive.
The captive obtains the following resources to do the work:
Human resources, management, and administration.
Virtual captives satisfy:
Cost benefits, obtaining the right skill sets, and protecting
intellectual property.
Virtual Captives: In-House Outsourcing and Reshoring Versus
Offshoring
A significant number of outsourced functions are actually

coming back to the United States.
Many health care providers are talking about in-house
outsourcing and reshoring as opposed to offshoring.
Health providers also want to participate in outsourcing
decisions as opposed to turning over their employees and asking
the outside vendors to do specific functions for them.
Virtual Captives: Management of Multiple Supply Chains
Health providers will go to multiple outside vendors to get their
non-core job functions done. Outside vendors must show good:
Business processes, which they already have
Domain expertise in the business functions in which they
participate
The U.S. health care industry is looking for ways outsourcing
can increase:
Their revenue or their patient base
The satisfaction of their customers, the patients
Privacy Concerns
Isolated data security and privacy violations have become high-
visibility issues disproportionate to the ground realities of
outside vendors.
The FDIC recommends that three general areas be considered
when outsourcing offshore:
Privacy risks in the offshore outsourcing firm’s country
Ongoing oversight of all third party contractors
Contract provisions that protect the privacy of patients and their
medical data

What Lies Ahead for Outsourcing?
Given the huge risks of failure for medical services and
products, health care providers must think about not only the
benefit of outsourcing for tomorrow but also about whether they
can sustain it.
Independent of the potential for system-wide efficiencies,
increased use of outside vendors could:
Create economies of scale
Improve access to care
Improve competition among providers
Reduce medical errors

Chapter 19Clinical Trials Clinical TrialsThe history

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Chapter 19Clinical Trials Clinical TrialsThe history