Finance Q&A: Understanding Pass Through Fees
BTC Network’s Scott Palmese answers common questions regarding start-up fees, fair market value, monitor change fees and more.
Q: Many industry sponsors tell you that extra fees are a “cost of doing business.” How would you counter this?
A. It’s all about the justification! We get this all the time from sponsors, and we always make sure to provide reasoning for all of our requests. We provide justification for all pass-through fees and even break down some of the more common pass-through fees (such as start-up) even further so the sponsors understand how we are getting our proposed amounts. Sometimes we have had to get on the phone with sponsors to walk through our sites’ needs and start-up procedures in order to get approval on certain fees. When we add fees, we typically provide some language regarding the staff involved, estimated time spent and anticipated challenges to the site that we feel the additions will help alleviate
Q. Any advice on the monitor change fee? How do you justify it and how much would you usually ask for?
A.Typically we would classify monitor change fees (and not-for-cause audit fees, etc) as a conditional fees, so these fees are put into the budget only in the event that they are incurred. When explaining the fee to the sponsors, we let them know that if there is no monitor change, the fee would not be due. Typically we start at a fee of about $700 per occurrence and justify by explaining that the fee is going towards the numerous hours that the study coordinator must review with each new monitor. These conditional fees are not always approved, but it never hurts to try and it is always better to get them in your budget up front rather than asking for them later.
Q. What is the standard amount of time it should take to complete a budget? What is a good time range to provide to the sponsor when asked?
A. In our experience, it should typically take no longer than 2 weeks to completely finalize a contract and budget. When sponsors ask us for a time range, we always say less than 2 weeks. When a site is first provided with a budget proposal, you should immediately respond to the sponsor contact to give them a timeline for your first offer of no more than 72 hours (48 hours is better!). Remember that many sites take weeks to send back offers, and this is not good practice. The sponsors get very frustrated when sites take too long to review budgets and you will be less likely to get higher amounts if it takes you months to finalize. The only times it should take longer than 2 weeks are when the sponsor takes longer than normal to get back to you on an offer. Typically, budgets go back and forth an average of 3-4 times before we come to the final version. It’s also very important to remember that your interactions with the sponsor during budget negotiation leave just as much of an impression as your performance with enrollment, so don’t get off to a bad start by dragging out the budgeting process!
Q. How does fair market value come into play when negotiating budgets?
A. Fair market value is definitely a starting point when it comes to negotiation, however, lately we have seen that initial sponsor offers do not take into account all costs associated with each line item, including cost of the procedure, staff involved and time involved. As staff and time also incur expense, it is not unfair to increase the sponsors’ initial offers to pay for this, as well. This is necessary for sites to not operate at a loss. While some sponsors may argue that proposed amounts are above fair market value, it again comes down to justification – if you can justify your higher costs, you are more likely to receive higher amounts.
Originally featured on ForteResearch.com You may also be interested in: How to Successfully Negotiate Contracts & Budgets & Top 2 Hurdles Research Sites Face in Budget Negotiations
About BTC Network
BTC Network is North America’s leading clinical research group. Based just outside of Boston, Massachusetts, our network includes more than 50 multi-therapeutic sites. All BTC research sites collaborate with or are part of private practices, giving us access to over 100,000 patients.
Post by Scott Palmese -
Scott Palmese is Vice President of Site Network at BTC Network and has been in the research industry for close to 10 years. As a member of the leadership team at BTC Network, Scott oversees the daily operations of the company and provides guidance for the development of new processes and initiatives. Scott specializes in site operations, including business development, financial management, and patient recruitment and engagement.