Fighting the last war: Why benchmarking clinical trial costs is failing Pharma

by Mike Soenen, ClearTrial LLC

There's a saying that generals are always "fighting the last war," applying tactics from previous engagements whether or not they fit the current situation. For many life sciences professionals charged with providing accurate estimates of clinical trial costs and resources, the last war is the heavy reliance on the traditional cost benchmarking methodology for study forecasting and budgeting.

In cost benchmarking, top-line cost data from previous, similar trials--pulled from an aggregated database of service provider contract prices--is assumed to represent a good basis for the costs of the current trial. 

Unfortunately, as sponsors redouble their efforts to find greater efficiencies throughout the clinical development process, cost benchmarking is failing the grade.

Cost benchmarking is a lagging indicator based on historical data, which means it cannot effectively incorporate such new study methodologies such as adaptive trials, the wide variations in outsourcing approaches and specialized service providers, and ongoing changes in clinical trial technologies and costs.

As an aggregate or top-down approach, cost benchmarking can't support the unique clinical development strategy and strengths of an organization--forcing seasoned clinical operations personnel to follow anonymous plans with unknown study objectives.

Most benchmarked cost data consists only of top-line or summary-level contract prices for outsourced studies, and therefore cannot be used to forecast a sponsor's internal costs or full-time equivalents (FTEs). Margins of error for trial costs and resources are compounded when benchmarking is applied to a program or portfolio. 

So where are the strategies and weapons to fight today's war on trial inefficiencies? Increasingly, life sciences companies are moving to a forecasting methodology widely used in industries where scrutiny on costs and demand for efficiency have long been the norm: activity-based costing.

Sometimes referred to as a bottom-up or project-management approach, activity-based costing begins by deriving the level of effort for a specific resource (person) to perform a given task (activity). The level of effort is calculated based on an algorithm that has been derived from deep experience and analysis of the cost and time drivers that affect each task. Algorithms can be updated at any time so that they are always current with evolving industry conditions.

When utilizing algorithms based on comprehensive, independent, and continuously updated clinical research, trial planners are able to quickly create accurate what-if scenarios at the study or portfolio level, assess the impact on cost, FTEs, and timelines, and choose the approach that best meets the organization's objectives.

The weapons are there. It's now up to the generals to take advantage of them.

Mike Soenen is CEO of ClearTrial

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