Reducing Financial Holdbacks
Holdbacks are very common in purchasing agreements. They are usually a portion of money that is not paid at the end of term, typically held by a third party to secure a future obligation of conducting business again. When discussing holdbacks in clinical research, CROs are usually the third party and payments are usually held until the study has completely closed out. This means all Electronic Data Capture (EDC) information has been closed by the PI, IRB closeout letter has been submitted, etc.
For our clients, payment terms are based on what we negotiated on behalf of the site. You can usually find your payment terms within the CTA under the exhibits which reference the patient budget or in the beginning under payment terms. We always strive for sites to receive monthly or at the latest bi-monthly payments.
At the start of the negotiation process our goal is to ask for no holdbacks to be applied. In the event a Sponsor mandates it, we request it be reduced to the lowest common denominator. We typically start at 5% and negotiate to no higher than 10%. Holdback is an archaic system which was instituted during a time when eCRFs had to be visibly verified and double-checked by a CRA from paper source documents located at the site. Portions of payments would not be issued until the completion of a study to hold sites accountable for completing all data entry (query free and electronically signed) in a timely fashion. Based on the change in modern day technology and where the industry is currently heading, this is an outdated practice and one that we encourage all sites to steer clear of agreeing to for all future studies.
To learn more about how to better negotiate your study budgets with sponsors, listen to our webinar Your Annual Finance Physical – Our Prescription for Maximizing Your Revenue