Commercialization of an IRB

Workshop W870 IRB Best PracticesMAGI East 2016

Parker Nolen, MBA, CCRC, CIPDirector

Research Compliance & Regulatory AffairsCommunity Health Network

Identify Market Consolidation

Implications for the Local IRB

Understand Basic Concepts of Management Theory

Identify SWOT

Identify a Local IRB’s Built-in Advantages

Cost Analysis Case Study

Understand Net Present Value Concepts

Objectives

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I am from a

A. Hospital-based IRB

B. Medical Academic Center IRB

C. Commercial IRB

D. Sponsor

Polling Question

Then…

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Now…

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...Nearly 200 airports, most of them tiny and many in remote places, have lost air service entirely since 2008....Airlines have made a deliberate decision to forgo certain markets...Their new business model is leaving communities disenfranchised and disconnected from the global marketplace.

(Mouad, Jad. "Lost Jobs, Lost Flights." New York Times 09 July 2011)

Result of airline consolidation

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What do we do?

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2016

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20XX

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Implications for Local IRBs

• Will Local IRBs have relevance?• Will the field remain “Professional”?• Will we have access to Sponsored research?• Will our patients have access to novel points of care?

Yes! But…

Local IRBs must be strategic in their thinking and creative in approaching their operations and their cost/revenue analysis…

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• IRB consolidation will continue into “2nd Tier”

• SOME form of the Single IRB Review will survive from NPRM

• IRB Segment of will de-stabilize in 24-36 months• Institutionally-based IRBs will commercialize to ensure access

to sponsored research• New Revenue models will emerge• New Partnerships will emerge

• May be some interest from DOJ regarding anti-trust in the commercial IRB sector

Industry Forecast (Private Sector)

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SWOT Analysis

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• Figure out what your IRB wants to be• Porter’s Three Strategies

• Figure out how to do it• Strategy vs. Tactic

• Develop a relationship with Finance• Identify your Competitive Advantage• Calculate your Net Present Value (NPV)

Addressing the SWOT

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Porter’s Three Strategies

Cost Leadership Differentiation

Niche (Focus)

Stuck in the Middle

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• Know what your product costs!• How much does it cost to run a meeting?• How are our overhead costs allocated in the

organization?• Can they be shared across a wide population/large

number of regions or departments?• Develop a close relationship with Finance

Department

Quick note about Financials…

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Polling Question

I know how much it costs to run my IRB meeting.

A. Yes

B. No

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• It is exactly what it sounds like

• The low-cost leader in any market gains competitive advantage from being able to produce the product/service at the lowest cost.

• This is an easy strategy that can be leveraged by Local IRBs!

Cost Leadership

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• Allows companies to charge high process and focus on a volume that generates a better margin.

• This will incur additional costs in creating the competitive advantage.

• Example: Creating an oncology-only IRB

Differentiation

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• Identifiable and unique needs• Sufficient size

• Difficult, but doable!

Niche (Focus)

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• Identify capability in which your IRB excels.• Focus on opportunities in that area, letting others

go.• This capability is difficult for others to duplicate.

• Involves the skill and coordination of people across a variety of functional areas or processes used to deliver value to the customer.

Core Competency

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Strategy vs. Tactic

Strategy• Is the “What”• Defines goals• Larger plan made up of

several tactics

• Example:• Make our Local IRB

desirable for Sponsors to use by offering multi-site approvals

Tactic• Is the “How”• Specific actions• Implements the strategy

• Example:• Aligning with another

Local IRB through merger or reciprocal agreement

Put another way:

Source: http://www.uxmatters.com/mt/archives/2015/02/strategy-versus-tactics.php

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Polling Question

A capability in which you excel and is difficult for others to duplicate is a:

A. Cost Leadership Strategy

B. Tactic

C. Core Competency

D. Niche (focus) Strategy

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• How much does it cost to run a meeting?• How are our overhead costs allocated in the

organization?• Can they be shared across a wide region/number of

departments?• What are we doing that does not need to be done?

Things to Immediately Understand

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• Cost and Overhead Allocation• Work with Finance people to spread costs over

the entire institution/network as a shared service.• May not be possible, but if you are a multi-site IRB, it is

probable.• Not an easy argument – Be Prepared!

• Marginal Costs are Low• Allows for innovative pricing/revenue

management strategies.

Local IRB’s Built-in Advantages:

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• Scenario # 1 – Outsource ALL IRB functions

• Scenario #2 – Create a Revenue Stream/Cost Offset (Commercialize)

• Actual Bid Details:• $326,000 per year • $50,000 transfer cost (one-time charge)• Expedited/Exempt studies will be billed to the hospital,

with $0 revenue back to the hospital for industry trials• Steady state of 150 protocols

Cost Analysis Case Study

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NPV Definition and Formula

 “r” represents the rate of return.  It is determined by industry and usually ranges from 8% – 15%.

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• Bid Details:• $326,000 Annual

Operational Cost• $50,000 Transfer Cost• Expedited/Exempt

Studies billed to hospital• 1 FTE @ $50,000

Scenario #1 – Outsource Completely

Completely outsourcing would be an expense of $1.6M! And this does not include the additional $2M malpractice insurance required by the central IRB.

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Yearly Interst Rate 2.00%Cost of Investment ($710,048)

2015 Revenue $18,000 $7,500 $180,0002016 Revenue $30,000 $12,500 $300,0002017 Revenue $42,000 $17,500 $420,0002018 Revenue $69,000 $22,500 $540,000

NPV ($560,243) $766,693 $2,069,521

SoftwareLease Cost per month $626 Initial Review $1,000Annual Lease $30,048Salaries* $130,000 $520,000 Renewals $500Fringe $156,000 Supplies $1,000 $4,000 Amendments $250

Cost of Investment $710,048

Cost of Investment over 4 Year Period Fees

Assumptions:• 1 New Protocol per Month• $1000 - Initial Review• $500 - Renewals• $250 - Amendments• 0 Renewals Year 1• 2 Amendments per protocol

per year• 2 FTE @ $130,000• Software Lease

Scenario # 2 – Create a Revenue Stream

Keeping the IRB functions in-house and creating a revenue stream has AVOIDED an additional expense of $907,952 over the four-year period

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• Sponsor buy-in• Accreditation• 501(c)3 (non-profit) status justification• Benefit for the community• Not profit-driven – this is a cost-offset model

Obstacles

NOTE: Local IRBs are NOT sitting on a hidden Gold Mine…

You will be a revenue-positive cost-offset - ONLY

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2013

Snapshot

2016

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Conclusion

• Keep abreast of industry trends• Know your SWOT• Identify your Core Competencies• Identify your Competitive Advantages• Identify your costs/potential revenue• Build a relationship with Finance• Consider Alternative Models

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Contact Information

Parker Nolen, MBA, CCRC, CIPDirectorResearch Compliance and Regulatory Affairs

PNolen@eCommunity.com

(317) 355-5678