Clinical Researcher—April 2021 (Volume 35, Issue 3)

THE LEGAL LANDSCAPE

Robert King

 

Medical researchers are not supposed to be motivated by the prospect of profit, but we all have bills to pay. With billions of dollars riding on research, regulatory agencies guard against kickbacks camouflaged as legitimate compensation. To prevent abuse, site payments must not exceed “fair market value” (FMV).

However, no word in the English language is more open to interpretation than “fair.”

So how can a site get paid more, while staying in step with regulations?

The Lay of the Land

Typically, sponsors provide all sites with the same initial budget, but geography, the site’s business structure, and the site-specific target recruitment population can all impact costs. For example, Mississippi has the highest obesity levels in the United States, while Colorado has the lowest; this could raise recruitment costs for a diabetes study at a site in Boulder, as compared to a different site in Biloxi.

As a result, compensation that is completely acceptable for one site would present regulatory risks elsewhere. Sites that can present information that demonstrates justification for higher compensation will be better positioned in budget negotiations.

Building that case begins with understanding how sponsors and auditors conduct FMV reviews. Generally, their focus is not on the amount of the payment—though a “high” payment can result in heightened scrutiny—rather, they determine whether the process for reviewing budget demands was reasonable and whether, given the site’s specific characteristics, the payment amount was “fair” as determined by the process. Let’s look further into these concepts.

It’s a Beautiful Day in the Neighborhood (Fred Rogers)

Immediately upon receiving a protocol, each potential medical procedure should be identified. Any duty that is not compensated should be reviewed to determine whether it is appropriate to seek compensation.

The sponsor’s offer for each procedure can then be measured against subscription databases that document medical pricing. Be sure to look at geography when conducting this analysis. Regional pricing differences can be considerable. Also, do not be fooled into thinking that this only applies to high-priced locales like New York City. Data indicate that states you would not first suspect, such as Kansas and Nevada, often have above average pricing. Sites located in higher cost regions have a tremendous advantage in gaining budget concessions, even if a site’s own costs do not reflect higher regional averages.

Art is Making Something Out of Nothing, and Then Selling it (Frank Zappa)

Most universities place surcharges to recover indirect and overhead expenses on costs associated with research. A random search found surcharges at Duke, Penn State, and Tufts could rise above 60%. Meanwhile, San Jose State was a “bargain” at 46.5%.

These surcharges often apply not only to procedures mandated by the protocol, but also to pass-through expenses such as compensation paid to study subjects or travel costs. The surcharge in effect converts reimbursements into a new revenue stream.

In setting an appropriate surcharge, the site must weigh the risk of discouraging sponsors approaching them with offers of trial participation against the potential increase in profitability when they are selected. Once the site settles on an appropriate surcharge, it should create a formal policy to that effect. This policy should be approved by the highest echelon of the site’s leadership, and the site should then be prepared to quickly provide a copy of the policy to sponsors upon request.

Once the policy is in place, sites should treat the overhead rate as non-negotiable, since failing to treat the overhead rate as set in stone is out of step with most institutions and could be viewed as a red flag.

All Advocacy is, at its Core, an Exercise in Empathy (Samantha Power)

If you work at a study site, who are you to the sponsor? Before you answer, peel back the layers of the question. Who are you in the context of the study under negotiation? Is the principal investigator a thought leader in the field? Does the site have a good long-running relationship with the sponsor, or has your relationship been troubled? Specifically, has the sponsor been happy with your past recruitment efforts and the timeliness of data submissions?

The answers to these questions all contribute to how motivated a sponsor may be to initiate a site. By developing relationships with your opposites, you can obtain answers to these questions that will inform your strategies for budget negotiations.

To Know Your Enemy, You Must Become Your Enemy (Sun Tzu)

In budget negotiations, site leaders must think about FMV as a sponsor would.

Sponsors often view the issue of specific procedure pricing and the amount of the overhead charge as two separate and unrelated issues.

Is the overhead charge reasonable? Check.

Once a sponsor agrees to pay a demanded surcharge, they tend to not to think about it. As a result, the impact of overhead surcharges just might be ignored when a sponsor conducts an FMV analysis, and this may open the door to greater site compensation.

Here’s how it might play out. A sponsor offers $14 for a procedure. The site needs $17 to break even, which it requests. Following FMV review, the sponsor makes a “drop dead” offer of $15. The site now has four bad choices:

• take a loss on the procedure;
• walk away from the study;
• keep pushing for a higher price, which is unlikely to be successful; or
• attempt to get a higher price on other procedures to “subsidize” the loss.

However, if the sponsor had previously accepted a site overhead surcharge of 20%, then the sponsor’s $15 offer translates into a very satisfactory $18 fee.

The boost provided by the overhead surcharge will reduce the number of items that are in contention and make those that remain easier to resolve.

That Which Costs Little is Less Valued (Miguel Cervantes)

Sites must guard against losses when recruitment falls short. One way to mitigate this risk is to identify each department that is involved in the protocol and to review the Clinical Trial Agreement for uncompensated site duties. This identifies fees where the sponsor might be open to additional or upfront payments.

Since start-up fees will be paid regardless of whether recruiting goals are met, they are ideal for preventing losses when recruitment is subpar.

Some examples are:

• Pre-award services
• Pharmacy and radiology start-up fees
• Institutional review board fees

Charges for services rendered after the study’s completion may also be available, such as follow up phone calls and close out costs like the costs associated with audits and document storage fees.

We Know the Future Only by the Past We Project Into it (John Lewis Gaddis)

When there is a realistic chance that a site will participate in more studies with a particular sponsor, it would be helpful to develop a master site budget for such engagement. By reaching agreement on recurring costs and fees, negotiation times can be slashed. To ensure that the fees remain current, the agreement should include a clause that permits the site to periodically increase fees without mutual agreement, subject to reasonable limitations (e.g., annual price increases up to the rate of medical inflation upon notice to sponsor).

If a master site budget is not feasible, but the site has worked with the sponsor in the recent past, then before budget negotiations begin a review of the previously paid fees and costs should occur. Many such items are not protocol specific; using them as support for the agreement currently under discussion permits the site to avoid re-negotiating fees.

Conducting such a review prior to new budget negotiations also allows the site to identify those areas where its historic fees are no longer sufficient. Sites should anticipate that sponsors will have concerns in such circumstances and should be prepared to demonstrate why specific higher fees are now required. Otherwise, resistance may be expected.

Robert King (Robert.King@tpclinical.com) is an attorney with more than 20 years of healthcare experience and founder of TakePoint Clinical, a firm whose credo is that “Medical Research is too Important to Wait on Endless Negotiations.” A white paper providing step-by-step instructions on how to speed clinical negotiations is available for download at the firm’s website (www.tpclinical.com).