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Clinical Finance: The Most Precious Of The Necessary Evils



November 27, 2018 | Clinical finance can sometimes be viewed as a necessary evil, says Chris Chan, Executive Director, R&D Finance, at Fibrogen. In fact, on at least one occasion, Chan was warned to keep his pesky budgets and numbers away from the “clinical” team.

It’s an approach that is tragically short-sighted, he says. The clinical trials environment is inherently complex, and effective clinical finance is a key component that can free up the clinical team’s time to focus on effectively conducting clinical trials. That doesn’t mean that clinical finance always presents perfect budgets or foolproof plans. But having a strong finance person on the team helps keep expectations reasonable and goals attainable.

On behalf of Clinical Informatics News, Kaitlin Kelleher spoke with Chan about how clinical finance can improve trial timelines, the challenges of adjusting the clinical team’s goals, and how the Lord of the Rings factors into it all.

Editor’s note: Kaitlin Kelleher, a Conference Producer at Cambridge Healthtech Institute, is planning a track dedicated to Clinical Trial Forecasting, Budgeting and Contracting at the upcoming Summit for Clinical Ops Executives, SCOPE, in Orlando, February 18-21. Chan will be speaking on the program.

Clinical Informatics News: Tell us how your role in clinical finance impacts the larger space of clinical research.

Christopher Chan: Rumor has it that doing clinical research/running clinical trials often costs lots of money.  As such, biopharmaceutical companies of superior wisdom hire Finance personnel with specific expertise in clinical and R&D finance.  These folks (also known by the synonym “precious numbers-crunching cherubs”) help Clinical teams generate complex budgets and forecasts, explain inevitable spending variances so common in the uncertain clinical trials environment, streamline time-consuming but necessary accounting/contractual/payment bureaucracy, and intelligently negotiate outsourcing contracts that cost more than many national GDPs.  Perhaps most importantly, an effective clinical finance person can significantly free up the Clinical team’s time to focus on what they do best: effectively conduct clinical trials.

What do you feel are the biggest challenges in budgeting and outsourcing for clinical trials?

Alas, the biggest challenges are the same today as they were in past decades and are centered on the inherent complexity and unpredictability of clinical trials, especially big global studies.  After over two decades of generating numerous clinical trials budgets for various-sized companies, I must grudgingly admit that whenever my initial budget efforts ultimately turned out accurate, the outcomes were more due to luck than my vast intellectual prowess. There are simply a vast number of variables that can significantly affect a clinical plan.  In addition, there is also an undeniable “optimism bias” when it comes to planning for clinical trials; for instance, we will definitely enroll X number of study sites and patients by this date and should budget accordingly.  It is challenging to persuade a study team toward an arguably more realistic budget, because you are in essence persuading the team that they will miss their goals.  Although there are ways to alleviate this dynamic, it continues to be a fundamental challenge.

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Of course, these same dynamics also lead to potential outsourcing issues and disagreements. For example, a CRO contract often assumes clinical milestone timelines that are quite idealistic.  When the inevitable change orders occur downstream, finger-pointing often occurs.  Sponsor: why are you asking for more money again? Didn’t you promise when you bid that your vast expertise would help us achieve these milestones? Isn’t that why we hired you?  CRO: most of the incremental costs are due to unforeseeable circumstances or to unplanned changes you specifically requested. We are capable and cuddly, but not clairvoyant! Ultimately, the challenges center on the fundamental unpredictability of trial activities, as well as disconnect in expectations between the parties.

What innovations (process, technology, other) in the clinical trial space are you most excited about? Why?

Although not quite at the promised land yet, I am excited to see that there are increasingly more system tools focused on clinical trials budgeting and expense efficiency that are being offered or in development.  For instance, one area that has been a tangible success in my opinion is on the site payment function.  There are excellent service providers out there offering very solid systems that track and pay investigator sites on sponsors’ behalf. Although many smaller biotechs still use more primitive Excel-based systems for this, I predict that there will be greater migration toward these site payment offerings going forward, especially as they become more widespread and costs go down.

As for the other areas such as budgeting/forecasting and financial accruals, I believe we are still in process of developing useful tools. In recent years, I’ve participated in focus groups for vendors attempting to develop feasible systems for clinical trials budgeting and accruals. By the end of these sessions—and to my hosts’ loathsome regret of my ever being born—I primarily succeeded in convincing them why their proposed systems wouldn’t work as opposed to providing tangible insight on how to make them work.  Again, the fundamental complexity and variability makes the endeavor a very challenging one.  Nevertheless, I do perceive that these holy grails are getting closer, and that is an exciting prospect.

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What is your advice or insights to those in clinical operations that aren’t familiar with clinical finance?

When you find a good Clinical Finance person, rejoice and cherish this person as Gollum would cherish the One Ring to rule all Rings. Okay, maybe not the most perfect analogy. Nevertheless, my point is that having a good clinical finance function will greatly increase the efficiency of your clinical operations efforts.  Budgeting/accounting/contracting and other money-related matters are inevitably part of the clinical world, and if these functions are not performed efficiently, they can significantly eat into vast amounts of your time and energy.  I recall joining one biotech company many years ago and meeting the Chief Medical Officer on my first day.  He shook my hand and said, “Hello, Chris.  First, I’d like to welcome you to the company.  Second, I have one important request for you: please stay the hell away from my clinical people. Do not talk to them or bother them in any way; they are trying to run clinical trials. If you need anything, you come to me and me only and I’ll try to help you.” I remember thinking, “Wow, my first day and he already despises me. It usually takes at least a week before I make someone despise me.”

I was not surprised to discover that up to that point, the team’s experiences with the finance department were quite negative with the team getting requests like, “Can you explain in detail why you spent $20 more than your budget?” Happily, I succeeded in convincing the CMO and the teams that I was focused on making their lives easier, and they eventually welcomed me as part of their team.  The point is that clinical finance should function and be seen as a welcome enhancement to clinical efforts, not an obstacle. If that is not the way it currently works in your company, pursuing an effort toward this end would be very worthwhile.  If your company is too small to have an individual clinical finance function, you can transform your existing finance and accounting personnel into such by educating them on all aspects of your clinical functions, as well as ensuring that clinical personnel achieve a firm understanding of financial requirements. This way, you can work together to establish an efficient and synergistic partnership.

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