Is electronic data capture (EDC) a commodity? Is it a matter of “anybody can do it, let’s just find the cheapest supplier”? Or is EDC more akin to spine surgery, with different levels of expertise producing divergent outcomes? That debate has been simmering in the industry for a decade, and is unlikely to subside soon.

Now a technology vendor is trying to reframe the discussion in a constructive way. He’s asking: How vigorously should sponsors of clinical trials thrash their technology partners? How many times should sponsors rough up their vendors? Are there ways to contain costs and project scope? Those questions are at the heart of a new white paper by Jeff Green, president and CEO of DataTrak, an Ohio EDC firm.

Green seems to have grown weary of explaining his business model (or the general EDC business model) to contract officers at customers sponsoring trials. As this interview illustrates, he’s previously run trials himself and worked in academia. He’s seen it all.

Green is not saying all negotiating and horse-trading should stop. He is saying that it can reach a level that is not healthy for any of the participants. As EDC begins to be considered for a majority of clinical trials, he says, it’s time to have a more substantive discussion about prices that offer predictable budgeting to sponsors and allow the vendor community to survive.

All too often, Green says, he has already given his best price early in the negotiations with a prospective new customer. Perhaps such a price was given to the customer’s data management executives. Then the paperwork is turned over to the customer’s contract officers. That’s when things get ugly.

“There is a lot of education that has to be done,” he says. “It’s not just find a vendor and beat the hell out of them. Two years later, you’ve exposed your data management staff to a failing business model.”

In the white paper, Green recounts several EDC vendors that offered their wares on an “all you can eat” basis. In each case, an upfront fee allowed unlimited use of the technology. None are still in business. In one arrangement, Green recalls, a $7 million advance payment to a fledgling EDC company may have appeared to have been a bargain for the sponsor—and a windfall for the technology provider. Actually, Green says, the opposite was true.

“It was actually a set up for an ultimate disaster, a waste of productive time and an unacceptable level of risk on both sides of the equation,” Green writes in the white paper. “A bad deal is worse than no deal at all…. The pharmaceutical company overwhelmed the technology provider’s capabilities with a magnitude of clinical trials and service expectations that could not be fulfilled based on what could be supported from a single $7 million commitment.”

Green thinks that a dialogue about pricing needs to mature in the same way that the software has improved. “You wouldn’t believe some of the mundane discussions we have with contract officers,” he says. In some cases, they relentlessly dispute individual FedEx invoices.

Green speculates that sponsors of clinical trials simply may view technology suppliers as so many contract research organizations (CRO), which are bit like oranges. From the perspective of many pharmaceutical companies, the more you squeeze a CRO, the more juice you have to drink. Green believes technology companies merit different treatment. He believes that misunderstandings about the technology underpinning clinical trials is hurting the industry.

And those contract officers? He doesn’t think they serve their own companies, much less the industry. Says Green, “They approach it as their mission to beat down the price even further. They don’t understand the history of this business. They don’t understand that arbitrary flat-license deals to close a deal don’t work. It wastes a tremendous amount of time and goodwill.”

So, ever helpful, Green has set out a few alternatives for future pricing schemes. It’s unclear whether any other technology suppliers in clinical trials would agree, or whether they have their own analysis. For better or worse, Green has retained a brash entrepreneurial persona at a time when some competitors have elected to adopt the cautious, conservative mannerisms of the customers they serve.

Green has decided to go public over the perceived excessive cost of EDC. He says some sponsors want both a cheap, flat-rate contract and the ability to expand the scope of a project to any degree.

Says Green: “I’m happy to fix my prices if you’ll fix your scope. They say, ‘give me a fixed price per patient or per study.’ We say, ‘we’ll do that, but can you limit your scope?’ They say no. That’s why a fixed price won’t work.” He sighs. By his estimate, technology to manage clinical data in a modern manner may be worth $60-100 million to the companies purchasing it. He’s in no mood to give it away.

In the white paper, Green cannot resist pointing out that device, biotech and drug companies sell their own products at considerable markups. But these same companies have difficulty comprehending a similar pricing plan for technology.

In a transactional world, Green says, it might make sense to arrange flat monthly fees for clinical trials, regardless of whether a study was on hold, delayed, or running full steam. Such an arrangement would limit his upside, and save considerable sums for sponsors. But he does not expect the idea to take the industry by storm. “Traditional contract officers would probably have a fit,” he writes in the white paper.

So the real question for Green is not “does EDC cost too much?” It’s not even “when will sponsors know what EDC is really worth?” Instead, Green seems to be saying, the best question is: how can sponsors and vendors structure mutually satisfactory deals?  That’s worth pondering no matter how you feel about Green or his company.

One key to the pricing issue, he says, is scope creep. The original needs of the customer are guaranteed to expand after a contract is signed. Almost all trials have dynamic technology and setup needs, and yet sponsors expect static pricing. Green says: “Our average contract value increases 30 percent from the time we sign the contract until the time the clinical trial is over.” In one case in his white paper, the value of a DataTrak contract for 16 EDC trials doubled over the life of the deal.

Green’s paper is an attempt to present the vendor perspective in a thoughtful manner. It will not persuade every reader. It will foster a more adult discussion between sponsors of trials and technology companies.

One vision of the future in which technology costs could be held in check, Green notes, would have the sponsors assuming responsibility for electronic case report form design, testing and validation; for technical project management; for e-clinical data management and reporting; and for training of investigative site personnel.

That vision is fascinating, and further blurs the line between technology companies and CROs. Adroit providers of technologies and services understand this and are now adjusting their strategies accordingly. Once the dust settles, it may not be possible for any company in the industry to disdain either technology or service.

How’s business at DataTrak in general?

Good, says Green. The company absorbed a promising EDC rival, ClickFind. Its technology is now preferred by 80 percent of customers. ClickFind has also supplied executives who now run Green’s development and marketing efforts.

The ClickFind acquisition, Green says, has changed his company’s profile for some prospective customers, especially large pharmas. In his usual fashion, Green refers cryptically to unnamed companies that have just signed large deals. “The large North American client and the people standardizing on us never would have done so with [our previous] EDC product. We are viewed much differently by the multi-billion dollar clients. They are viewing us as an information platform for expansion.”

For those who want to read Green’s white paper themselves, click on the link below “Enterprise Business Models.”

Yahoo! has financial data on the publicly traded DataTrak, which the stock market values at $54 million. There will be about $18 million in revenue at DataTrak during the last twelve months, and Yahoo! calculates the Ohio company’s profit margin at 5.4 percent. For the sake of comparison, Phase Forward’s market capitalization was $463 million on a recent afternoon, with $99 million in revenues during the past twelve months and a profit margin of 4.7 percent.