For clinical research sites, cashflow management is a critical part of the business. Unattractive payment terms and late payments have become an industry standard, which places a financial strain on sites. Many take solace in knowing that they will be paid eventually, but that’s not always the case.
I have firsthand experience with this scenario. But because of one simple step, I prevented a research site from getting burned by a sponsor as it went up in financial flames. In a moment, I’ll tell you what that step was.
Sites are fairly safe working with large sponsors but should proceed cautiously with small biotechs. They may run out of financial resources to cover the substantial expense associated with conducting a study.
Under most site contracts, CROs are not obligated to pay sites until they have been paid by the sponsor. So do not assume that working with a large CRO will insulate you from risk of non-payment. Though CROs will generally make an effort to get sites paid, they aren’t contractually obligated to do so.
An article in Centerwatch recently reported that several sites are having difficulty collecting payment for a trial being conducted on behalf of Logical Therapeutics, a biotech company developing an NSAID. This situation is increasingly common for sites.
In 2007, 15% of sites said they had to write off bad debt from a sponsor; by 2009, that had climbed to 21%. Those debts ranged from $3,000 to $151,000. “These are sites that average $1.6 million in revenue per year, with a 15% to 20% profit margin. They can’t afford this kind of write off,” said Pierre.
Because unattractive payment terms are common in the clinical research industry, this outstanding debt can represent months of hard work. In addition, the length between payments creates a situation in which sites are often last to be alerted to problems. However, sites that do have an early indication are in a much better position to collect payment. And that’s exactly what happened with one research site.
This site was working with a small biotech and had reason to believe that the biotech was on the verge of insolvency. The CRO certainly didn’t volunteer this information, so other sites were likely unaware. Because the site had an early indication of problems, it was able to negotiate full payment for completed work. So what worked as this site’s canary in the coal mine?
I was working with this site and had set up a Google Alert to monitor news about the sponsor. Through Google Alerts, I found news items describing problems with the sponsor’s financing and leadership. I alerted the owner of the research site, who shared my concerns, and he ultimately collected full payment before the sponsor folded.
I am a big believer in technology as a tool for business intelligence purposes. To quote a great philosopher named G.I. Joe, “knowing is half the battle.” In this particular instance, a simple Google Alert provided a site with the knowledge it needed to collect payment for months of hard work.
Google Alerts can be used for many purposes, and this is just one example of how they can prove invaluable. Ideally, you should use Google Alerts to monitor several aspects of your business. If you work for a site that does trials with small sponsors, at least use Google Alerts to monitor those sponsors.
What’s your site’s experience with collecting payment? Do you use Google Alerts for business intelligence purposes? Put your thoughts in the comments below.
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