Are Clinical Research Sites the Next Victim of COVID-19?

When the Department of Homeland Security released the Memorandum on Identification of Essential Critical Infrastructure Workers During COVID-19 Response, they highlighted the significance of the clinical research infrastructure as the very first item listed under Healthcare and Public Health: “workers who perform critical clinical research, development, and testing needed for COVID-19 response” (1). This was an essential step in informing state and local guidelines and has allowed those of us who operate research sites the permission to do so. After all, these sites are essential in delivering data for COVID-19 treatment, diagnosis, and prevention. The vaccine that is so desperately needed to address this virus will only come from the work of these sites. However, the clinical research site infrastructure is at significant risk, and it has to do with cash more than anything else.

A Fraction of Sites are Open

Clinical trial industry giant WCG is tracking over 1,000 clinical trial sites in 29 countries and reports that this week only 14% of research sites are open to enrollment, an 8% decrease since the last week (2). The principal threat to research sites is a lack of working capital or the cash needed to fund the complex operations of the site network. According to the Society for Clinical Research Sites (SCRS), 59% of sites surveyed last year reported three months or less of operating cash. In reality, the average is likely closer to 1-2 months for many sites, who likely also experienced lower revenue in the first quarter due to decreased screening and enrollment activity due to the Q4 holiday period.

A Broken Payment Structure

To understand why the outbreak uniquely impacts clinical trial sites, it is necessary to know how they are paid. The largest effect to financial stability of a research site is the lag time in compensation for study performance. Research sponsors and the contract research organizations (CROs) they hire to conduct studies prefer to issue payments for site activity quarterly, oftentimes AFTER on-site data monitoring occurs. Although contracts vary, this delay can result in payment for services rendered occurring many months post activity. This means the site must bear the burden of operational expenses until payment is received.

Additionally, most contracts include some form of withholding, which can be up to 20% of revenue. These funds are generally withheld to ensure the data is entered and all data queries are resolved. However, this tactic frequently pushes a large portion of revenue, which can represent the inherent margin of a clinical research firm, out many months post activity. Couple these unique situations together and most sites operate with a small amount of working capital in reserve. They essentially work paycheck to paycheck.

Calls for Sponsor Assistance

The gap between the expenses and revenue creates a unique problem for research sites who must bridge the gap—paying patients, physicians, and regular business expenses like payroll and rent long before they receive reimbursement for these activities. Conventional financial instruments like lines of credit or revolvers are inadequate to bridge this gap because they generally only consider accounts receivable that extend 180 days from the performance of those activities (when the invoice is generated) as a basis for what a site can borrow. Recognizing the liquidity crisis facing research sites, SCRS issued guidance for research sponsors to release withholding payments to sites in response to COVID-19 (3). So far, some Sponsors and CROs have voluntarily responded to that call, with more (approximately 10%) being receptive when sites proactively reach out.

What Happens when a Site Closes?

In addition to the job loss that comes with any small business closure, a research site closure creates a precarious situation for patients and for entire clinical trials. The Sponsors and the Contract Research Organizations (CROs) that conduct the clinical trial at the management level are faced with the decision to either transfer the patients to another research site (imagine doing this in an environment where only a fraction of sites are enrolling) or end the patient's participation in the study altogether, losing data that was expensive to obtain but more importantly will eventually slow the development and approval of new medical interventions. It also creates a clinical hazard in that patients, who are on investigational medication and must be monitored for adverse event, have to be contacted, monitored, and either transferred or discontinued in a way that protects their safety and the integrity of research data.

Needed Change

Research sites are not just an another category of small business—they are necessary to our society. That is apparent right now more than ever. To protect this infrastructure, financial institutions should treat sites in distress as a special category and understand the impact that conventional knee-jerk reactions like liquidation cause on the development of the COVID-19 vaccine and other critical therapies. It is also vital for Sponsors and CROs to continue what has been a productive dialogue around payment structures that take into consideration traditional financial instruments and the unique challenges of a small business in the current environment.

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