Sharing Risk? No, Sharing Opportunity

In clinical drug research, time is of the essence. Not only are researchers, in many cases, trying to beat their competitors to market, their ability to conduct a timely clinical trial can be the difference between life and death for the target audience. The question is, then, how do you as a sponsor get your contract research organizations to feel the same sense of urgency? I offer two suggestions in Scrip,The CRO View: Sharing Opportunity Vs Risk In Drug Development.”

Re-frame “Risk” Into “Opportunity”

Risk-sharing agreements are common in this industry as a way to combat rising costs and manage project deadlines. However, since the last thing sponsors want to do is levy fines when their research partners stumble, the more correct term is “opportunity-sharing” agreements. Think of it as the ultimate win-win arrangement. Contract research organizations (CROs) receive a financial incentive for compliant or superior performance, and sponsors see the timely completion of the trial. Yes, there is a financial cost involved, but that pales in comparison to the amount of time and capital lost on non-compliance. However, it is not enough to simply throw money at a CRO; there has to be a little bit of understanding about incentives in the first place.

Think Incentives, Not Punishments

While many people understand the very nature of incentives to be a positive outcome in exchange for met targets, some struggle with the idea. Some sponsors have suggested penalties for not meeting their targets without having a corresponding reward. There seems to be a small group that still harbors the idea that someone shouldn’t need to be given an incentive to simply “do their job.” We have to remember that contract research is a notoriously transient business. Any bonuses that motivate our employees to stay with us to the end results in increased continuity all around. Increased continuity translates into savings as the trial proceeds without unnecessary delays.

Taking it a step further, any performance-based incentives offered to CROs have to be timely and rooted in factors they can control. You cannot offer a CRO a percentage of royalties or sales once the drug is approved. Ultimately, the timeline is far too long to affect performance. Likewise, you cannot incentivize CROs based on factors like customer delays or late reviews and approvals. Those factors are simply beyond anything they can affect. Ultimately, the most powerful incentive will be something that is immediate and performance-based.

What Really Works

Formulated from years of ad hoc incentive contracts, we’ve developed a proven, structured approach to offering incentives to sponsors. Ultimately, incentive payments are working to strengthen the partnership between sponsors and CROs, as long as it is done correctly.