A while back, we ran an article about Joseph Anderson, principal associate at Waife & Associates. He is advocating a new approach to how change orders are handled.

Change orders, of course, are ubiquitous invoices for unplanned aspects of a clinical trial. Clinical research is inherently unpredictable. Sponsors frequently decide to change course. Service providers must respond to such changes without being penalized by the financial impact of the new direction.

And as a few publicly traded contract research organizations (CRO) have stated in their financial statements, change orders can represent a massive source of revenue. So much so that CROs can anticipate change orders and underbid on their proposals to handle some trials. It's axiomatic that phasing out change orders could send a tremor or two through the financial foundation of the CRO industry.

Surprise Me

Anderson, to be fair, is viewing the change order almost as a therapist, seeing it as a source of tension and discomfort. The idea at the Waife consultancy is to have something called "unit-based" pricing. Anderson doesn't claim to have invented that; he would guess that other industries have tried it already. "This is not new," he says. "This is not rocket science."

When a trial must go in a new direction, as longtime readers know, a service provider will traditionally submit a supplemental bill for unanticipated items. The bill might be $120,000 or $12 million. Depending on the amount of bureaucracy at the CRO, remaining work on the trial might or might not continue during haggling over the change order, adding tension to the mix.

As Anderson points out, the process of proposing the change order, revising the change order and approving the change order can take time and many rounds of discussion. The existing change order process generates no direct revenue for the CRO and no visible clinical activity for the sponsor. "This is a non-value added process," Anderson notes. "The work still needs to be done. We still have not addressed the needs of the sponsor."

At a time when clinical outsourcing is reshaping the life sciences, Anderson and his boss, the bemused and philosophical Ron Waife, view repairing the change order paradigm as a systemic, core problem to solve to permit clinical research to advance efficiently.

Fostering Predictability

Anderson says unit-based pricing would offer a detailed road map for most of the standard, eminently predictable events in the industry—and, not incidentally, the cost of each event. CROs have copious amounts of data about what happens during trials, he says, and large CROs have even more extensive records. Anderson emphasizes that he's not pushing for a particular price for any service or deliverable. Rather, he believes that both sides should agree on a list of sums for potential new directions prior to the trial's start.

The Waife group has already been experimenting with the approach in consultations with sponsors. "We are doing this. We are doing this right now," Anderson says. "This is a method of communicating what services should be provided, and how much they should cost."

Avoiding Frustration

There is no misty-eyed romanticism at the Waife headquarters, which has long been trying to help sponsors select and implement technology in clinical trials. There are no utopian assumptions about unicorns and rainbows, about trials that unfold like Bach cantatas, with exactly the right note sung at the right moment in the original musical score. Rather, Anderson is assuming that trials will always have unpredictable aspects, the financial aspects of which can be anticipated.

"All the change orders will still be there," Anderson says. "We are still going to add sites. We are going to add electronic case report forms (eCRFs); but when it comes time to do this, there is an agreed upon methodology. We can create a taxonomy of this that is sufficient to function in a real clinical trial. That's what we've done."

"We are always trying to find a way to make people's processes work better," he continues. His methodology does include a more granular discussion of what generally happens in many trials and what each new item will cost. When both sides of the negotiation grasp that, he says, a palpable sense of relief enters the room, as a source of tension has been removed for sponsor and CRO alike.

Preventive Maintenance

The main problem cited by many sponsors, he reports, is not merely the existence or magnitude of a change order. What perturbs the people footing the bill is the surprise, uncertainty and delay surrounding a change order.

Needless to say, dozens of open change orders on a single big trial can seriously impede its completion. With the Waife approach, a sponsor orders up the needed new services at pre-agreed prices, and that simple act can radically clarify the new contractual and operational obligations on both sides. This would appear to be a new, faster way for sponsors and CROs to work together.

Anderson believes his approach could begin the process of repairing tense or damaged CRO/sponsor relationships. "They have to deal with fluctuations in the relationships when sponsors get unhappy," he says. "We're not introducing risk to either party. We're proposing a model that is a much better model."

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