Income Distribution from NIHR CRN Industry Portfolio Studies NIHR Clinical Research Network Coordinating Centre

Income Distribution from NIHR CRN Industry Portfolio Studies NIHR Clinical Research Network Coordinating Centre NIHR CRN Industry Team Version 1.0 April 2011

DOCUMENT CONTROL This is a NIHR Clinical Research Controlled document. On receipt of a new version, please destroy all previous versions. Document owner: Christopher Burdette, Industry Costing and Contracts Manager, NIHR Clinical Research Network Version: 1.0 Circulation: NIHR Clinical Research Networks Date Circulated: 1 April 2011 Action Required: Please cascade this guidance as appropriate within your network and local research community. 1

CONTENTS: 1. EXECUTIVE SUMMARY 3 2. INTRODUCTION 5 3. BACKGROUND 5 4. INDUSTRY COSTING TEMPLATE 6 5. INDUSTRY COSTING TEMPLATE ELEMENTS 7 6. KEY PRINCIPLES EXEMPLIFIED IN THE OBSERVED GOOD PRACTICE FUNDING ARRANGEMENTS BETWEEN THE NIHR CRN AND NHS TRUSTS 9 7. THE NIHR CRN PROPOSED INCOME DISTRIBUTION MODEL 10 8. CASE STUDIES AND INCOME DISTRIBUTION BY STAKEHOLDER 13 9. CONCLUSIONS Frequently asked questions Contact information 20 20 23 2

1. EXECUTIVE SUMMARY 1.1 The purpose of this document is to inform stakeholders within NHS Trusts and the National Institute for Health Research (NIHR) Clinical Research Networks in England of the income made available via industry-sponsored contract trials and uses case studies to illustrate good practice for local sites incentivising their research community participating in such commercial research. 1.2 The NIHR CRN has developed and taken forward a set of initiatives to improve and build efficiencies into a health research system which yields real benefits for the NHS, its patients, industry and investigators. Ensuring the success of these initiatives will be dependent on consistent, fair and balanced funding arrangements between stakeholders. The money generated from industry-sponsored studies is a valuable source of income for NHS Trusts. It can be used to encourage key stakeholders to develop capacity for new research within the Trust. 1.3 Several examples of good practice income distribution between NHS Trusts and the NIHR CRN are described here. The principles which underpin each example are that: a. Departments and individuals are recognised for their contribution to commercial NIHR CRN portfolio studies run within Trusts and are incentivised fairly. b. All costs incurred by the NHS, and where relevant, Universities are fully recovered. c. Commercial research continues to afford investigators and Trusts the opportunity to fund additional research related activities; funding arrangements between stakeholders should be cognisant and pragmatic in managing this important benefit of commercial research. d. Income from commercial research can be distributed and carried over in line with the finance control procedures of individual Trusts and in accordance with the research priorities agreed between research departments, service support departments, individual investigators and senior Trust management. e. NHS Trusts include the NIHR Local Research Networks in their consultations when: i. Managing current Network supported research resources; ii. Assessing local research needs across the whole spectrum of activities and departments which may require Network support; iii. Setting research priorities across the Trust; iv. Planning for the future of research locally and how this can be supported by the Networks; v. Growing research capacity for the long-term to meet national research ambitions. f. Overly onerous itemisation and invoicing of study costs at any level are avoided 1.4 The model proposed in section six has been developed and refined from the observed good practice occurring within the NIHR CRN and the NHS. It is offered to prompt local discussions and consideration of local current and long-term commercial funding flow decisions, especially in the absence of an agreed income management structure to support investigators, NHS service support departments and NIHR CRN research infrastructure. It 3

has particular relevance when NIHR Local Research Network funded research staff are actively involved in the delivery of commercial research, but no arrangements are in place to recover Network staff costs with the NHS member organisation. 4

2. INTRODUCTION 2.1 The National Institute for Health Research Clinical Research Networks 1 (NIHR CRN) supports the fair and balanced distribution of income from NIHR CRN portfolio commercial research and were possible believes in the principle of providing incentives. 2.2 The purpose of this document is to inform stakeholders within NHS Trusts and the Networks of the NIHR CRN in England of the income made available through the Industry Costing Template and uses case studies to illustrate good practice for incentivising stakeholders participating in commercial research. 2.3 The Department of Health considers the support and delivery of industry-funded and sponsored research to be a priority. To support that priority, it is crucial that all stakeholders are incentivised to participate in industry-sponsored research. The need for incentivisation is reflected in the good practice laid out in this document. 2.4 NHS Trusts, NIHR Local Research Networks and Investigators have historically managed the income from industry-sponsored research in a wide variety of ways. This document does not provide prescriptive guidance on how income should be distributed, however, it is expected that appropriate local systems are in place to allow funding flow from commercial research to support investigator incentivisation and the local infrastructure provided by the NIHR LRNs. Good practice is shared with an aim to support and foster local discussions between NIHR Local Research Networks and NHS Trusts. The goal is to develop effective local solutions for managing the income brought into the Trust from NIHR CRN commercial studies, especially in the absence of any structured arrangements or a need for improved incentivisation to participate in commercial research. 2.5 This good practice guidance applies to NHS Trusts providing acute, mental health and tertiary services. It does not apply to NHS Primary Care Trusts. Separate good practice guidance will be produced alongside the Primary Care Industry Costing Template in 2011. 2.6 This document is published with an opportunity for ongoing review and appraisal. A formal review will be conducted after 12 months of consultation in use, following release of this good practice guidance. 3. BACKGROUND 3.1 The Department of Health considers the delivery of industry-funded and sponsored research a priority. To recognise the importance of this sector to the continued success of the UK clinical research system, the NIHR CRN has developed operations and objectives specifically to empower a culture of effective and efficient commercial research within the NHS. This priority and its unique recognition within the NIHR CRN stems from the importance and numerous benefits of commercial research to the NHS and the UK health research system. These benefits include: 1 Specifically, Comprehensive Local Research Networks and Topic Local Research Networks 5

Wealth generation for the UK economy Income generation for NHS Trusts Access to novel compounds, new practices and procedures Access to large-scale international clinical trials Access to well-managed and monitored clinical trials for investigators and patients 3.2 Commercial life science research commitments in the UK have declined in recent years following the growth and development of clinical research industries within Asia and Eastern Europe. In the context of globally competitive clinical research, the UK tends to be more expensive than other countries in Europe and Asia for conducting industry sponsored studies. This can be partially attributed to the recognised higher cost of living in the UK, however, this does not account for the widely varying cost of conducting a study throughout the UK and the inconsistent and non-transparent methods used by NHS Trusts and Foundation Trusts to calculate commercial prices. 3.3 The price variability, especially for multi-centre studies, linked with inconsistent and unreliable delivery of patients and their data, is identified by industry as a significant factor in explaining why the UK is not seen as a cost-effective place to conduct later phase clinical trials. 3.4 As a remedy to these issues, the NIHR CRN released the Industry Costing Template in May 2008. This research pricing tool has provided companies and NHS Trusts with a clear and transparent method in negotiating and establishing a price for secondary care research within the NHS. 4. THE INDUSTRY COSTING TEMPLATE 4.1 The Industry Costing Template forms the basis of the costing process that has been developed on behalf of the NIHR, and addresses a specific recommendation made in the Cooksey Report, which highlighted the need for a transparent and consistent national costing system. Although developed primarily for the facilitation of studies managed via the NIHR Clinical Research Networks, the methodology is also freely available to companies and NHS Trusts intending to run trials outside of the Networks. The NIHR CRN Industry Costing process: Provides a clear methodology to calculate consistent and transparent prices associated with industry-sponsored studies to support industry, the NHS and the NIHR Networks Ensures all NHS Trusts are fully reimbursed for any activities associated with industry studies, in accordance with the requirements of the NHS Finance Manual Identifies standard rates for staff time, overheads, capacity building, investigations and costs for departments supporting research, which are acceptable to all parties 6

Speeds up the negotiation process for costing and is one of several tools being introduced to speed up trial initiation and ensure the Networks provide a value for money environment for trials Provides clear guidance for Industry and the public sector Is implemented through the NIHR Clinical Research Networks for all relevant studies 4.2 The NIHR Industry Costing Template provides a standard tool to calculate the prices associated with individual industry-sponsored studies. The activities documented in the protocol are entered by the company into the template. The template automatically calculates the full costs of the study unique to the study site (i.e., the cost to the NHS inclusive of direct costs and overheads). Additionally, the template generates the total price to be charged to the company (comprising the full cost plus a capacity building element and a local cost adjustment for each Trust). 4.3 The individual costing elements of the Industry Costing Template are described in full in its support and guidance document, Costing Industry Sponsored Research through the NIHR Networks. 5. INDUSTRY COSTING TEMPLATE ELEMENTS 5.1 There are several elements of the Industry Costing Template: Per Patient Budget, Pharmacy costs, R&D and Other trial related costs. Additional information can be found at http://www.crncc.nihr.ac.uk/index/industry/costing.html. Per Patient Budget 5.2 The per patient budget is calculated by adding the following elements together: Staff costs: NHS direct costs + 70% overhead + 20% capacity building Investigation costs: NHS direct costs for investigations 2 + 20% capacity building Overheads 5.3 In the Industry Costing Template a standard overhead rate of 70% is added only to the staff costs of the study. This includes the overheads payable to the Trust for indirect costs (e.g., heating, lighting, building maintenance, security, finance, general admin, human resources, corporate management and all other resources which allow the organisation to function). 5.4 The 70% overhead rate used within the Industry Costing Template broadly captures the immediate management costs incurred by organisations in delivering a service and also provides for a high-level, corporate overhead associated with the efficient management of an 2 Already inclusive of the Trust s operating overhead. 7

organisation or clinical site (e.g., corporate oversight offered by the CEO, the finance director, R&D director and others to ensure efficiency and cost savings within the organisation/unit). This includes the corporate responsibility to drive research and find efficiencies to incentivise individuals and services involved in research and delivering initiatives that find savings and efficiencies that deliver commercial research at the margins of planned services. The application of a 70% overhead was an attempt to both standardise terminology and to ensure that there was a mechanism within the Industry Costing Template to capture indirect costs with other utility and efficiency margins for the Trusts. 5.5 The distribution of the overhead element varies widely between Trusts. Some Trusts retain the full amount for their indirect costs, while other Trusts divide it between the Trust, the Investigator and the R&D Department and other stakeholders in varying proportions. This document sets out to outline good practice around appropriate funding flow to key stakeholders and prompt local discussions and arrangements. Capacity Building 5.6 A capacity building rate of 20% is added to both staff costs and investigations. It is intended that this element should be ring-fenced for building research capacity in the local research community, to ensure a greater volume of research can be delivered in the future. Pharmacy costs 5.7 Pharmacy costs are calculated separately and not included in the per patient budget. These costs reflect the work involved in the set-up, maintenance and close-down of the study for the pharmacy department, which is not wholly dependent on the number of patients or study design. R&D and Other trial related costs 5.8 The pre-trial and ongoing R&D related study costs are managed through the mixed use of set-up fees and separate costs, documented and paid upon completion or delivery. The Industry Costing Template uses a recommended R&D set-up fee based on the national average of fees charged. This R&D set-up fee covers pre-trial work; especially the costs incurred negotiating the study costs, finalising the contract and issuing NHS permission. The costs of meeting other trial related costs can be documented as needed and should be listed separately from the per patient budget amount within this section. 8

6. KEY PRINCIPLES EXEPLIFIED IN THE OBSERVED GOOD PRACTICE FUNDING ARRANGEMENTS BETWEEN THE NIHR CRN AND NHS TRUSTS: 6.1 In developing and maintaining funding flow arrangements between NHS Trusts and the NIHR CRN, several principles have emerged which exemplify good practice and work to reassure and incentivise all stakeholders in the local research community. 6.2 These key good practice principles are: a. That departments and individuals are recognised for their contribution to commercial NIHR CRN portfolio studies run within Trusts and are incentivised fairly. b. That all costs incurred by the NHS and where relevant Universities are fully recovered. c. That commercial research has always afforded investigators and Trusts with opportunities to fund additional research related activities; funding arrangements between stakeholders should be cognisant and pragmatic in managing this important benefit of commercial research. d. That income from commercial research can be distributed and carried over in line with the finance control procedures of individual Trusts and in accordance with the research priorities agreed between research departments, service support departments, individual investigators and senior Trust management. e. That NHS Trusts include the NIHR Local Research Networks in their consultations when: i. Managing current Network supported research resources; ii. Assessing local research needs across the whole spectrum of activities and departments which may require Network support; iii. Setting research priorities across the Trust; iv. Planning for the future of research locally and how this can be supported by the Networks; v. Growing research capacity in the long-term to meet national research ambitions. f. That overly onerous itemisation and invoicing of study costs at any level are avoided 6.3 These principles represent good practice supported by the NIHR CRN and are strongly encouraged as principles to work towards locally to ensure the long-term financial stability of clinical research infrastructure across England. These principles form the basis of the suggested model of good practice income distribution in section 7. 9

7. PROPOSED DISTRIBUTION OF INCOME FROM NIHR CRN PORTFOLIO COMMERCIAL STUDIES: 7.1 The model proposed in this section has been developed and refined from good practice occurring between the NIHR CRN and the NHS. It is offered for consideration and to inform local current and long-term commercial funding flow decisions, especially in the absence of an agreed income management structure to support investigators, NHS service support departments and NIHR CRN research infrastructure. Additionally, this good practice model has particular relevance when NIHR Local Research Network funded research staff are actively involved in the delivery of commercial research, but no arrangements are in place to recover Network staff costs with the NHS member organisation. 7.2 The model below has three parts to guide discussions surrounding the recovery of costs and the distribution of income between the NIHR Clinical Research Networks and NHS Trusts. 7.3 Implementation of this model should first look to clarify the current income distribution arrangements of NIHR Local Research Networks to establish a common approach with NHS member organisations. If various models exist locally, the model proposed below can build and borrow from any currently successful and operational arrangements between the NIHR Local Research Networks and NHS member organisations. Part 1: 7.4 Recovery of NIHR CRN staff costs - a two tier approach: NIHR CRN Local Research Networks should aim to recover staff costs when NIHR CRN funded research staff are actively employed in the delivery of NIHR CRN commercial Portfolio research. The NIHR CRN proposes a two tiered approach in looking to recover these funds: 1. The costs associated with NIHR CRN staff working on the delivery of a study should be recovered where this money is whole and reportable within the Trust finance system. This should be considered on a study-by-study basis once monies have been recovered from the sponsor in proportion to the involvement of Network staff, the study s recruitment and the agreed financial arrangements for staff costs within the mcta. E.g.: if an NIHR CRN funded research nurse was extensively involved in study activities and the NHS Trust has recovered staff costs from the sponsor and these funds are documented within the Trust finance system, then the NIHR CRN should look to recover or offset future staff funding and allocations against this amount. 2. The capacity building income is paid to the Comprehensive Local Research Network by the NHS Trust as a surrogate for NIHR CRN Local Research Network funded staff costs employed in the delivery of the study. Then, if appropriate, passed through to the Topic Local Research Network that led the study and provided resource and support. 10

This income is in lieu of recovering direct staff costs and represents a more workable, immediate reimbursement system. Ideally, the NIHR Local Research Networks should aim to recover true Network staff costs, as such this tier is considered as a secondary option. However, given the scale and complexity of Local Research Network operations and the changing involvement of research staff on a study-bystudy basis, recovery of the 20% capacity building element to the CLRN is viewed as a plausible and manageable solution. NIHR Local Research Networks should view this money as the recovery of staff costs and ear mark this money for future staff resource funding and allocations. Part 2: 7.5 Distribution of the overhead element 70% added to NHS direct cost in the Industry Costing Template a. Half of the overhead element stays with the NHS Trust to cover indirect costs and cover any variability between the negotiated prices. Additionally, this percentage may be used to supplement or incentivise individual Trust departments, as per local agreements. Note: All direct staff costs and the cost of investigations are paid direct to the Trust as per the arrangements of the mcta. Where these costs are incurred by support departments or external providers, the costs should be paid or passed through as per local agreement. b. Half of the overhead element is designated for the Principal Investigator. This amount would be allocated to a commercial research cost centre or similar account in the Trust finance system, through which the Principal Investigator has a decision making capacity in the use of the funds in line with Trust practices and finance control procedures. 7.6 Good practice observed by the NIHR Networks showed that the overhead element was being split by Trusts and distributed to provide incentives for investigators and service support departments to participate in commercial research. This practice followed from recognition by Trust management that it had a responsibility to drive research and find efficiencies to incentivise people. The financial incentives are passed through to the PI through a supervised research fund and managed in line with Trust finance procedures. 7.7 The equal split approach illustrated in part 2 is based on currently observed good practice and should be considered as guidance when working towards a local arrangement. Different splits of the percentage may be used and agreed locally. These percentages should be developed and agreed based on the Trust s methods for recovering indirect costs and the degree of efficiencies and savings that are realised within overheads and made available to provide incentives. 11

Part 3: 7.8 Distribution and management of the capacity building element 20% within the Industry Costing Template 7.9 NIHR CRN Local Research Networks should be involved in the control and decision making process surrounding the use of the Capacity Building element. It is recommended that the Capacity Building element be under the control and management of the local CLRN Network Board (removing instances where this element has been used as a surrogate for Network staff costs). 7.10 The local CLRN Network Board is a collection of NHS organisations which have a vested interest in research. The CLRN Network Board works to achieve mutual benefits locally and is best placed to decide long-term research planning that Capacity Building funding is intended to address. The NIHR CRN recommends that the Network Board consult locally on how best to recover, manage and plan for the expenditure of the total Capacity Building amount generated locally. 7.11 Expenditure plans considered by the CLRN Network Boards can take any number of forms, at any number of different NHS operational levels. The Network Boards can consider an aggregate expenditure for large-scale, long-term resource and infrastructure projects (e.g., funding additional staff posts, building resource in research constrained departments or services, etc), small-scale department or unit specific plans as part of an open local competition/application process (e.g., development of training programmes, part funding of department specific research posts, reserved blocks of research time in departments and units, etc.) or a mix of both. The exact expenditure process should be developed and agreed locally by Network Board members to best achieve research capacity building. 7.12 In the event that consensus cannot be reached locally on the best use of Capacity Building money, than the money should remain with the Trust where the capacity building was generated AND if required, should be distributed back to the Trust service support departments and clinical units in the exact amounts that they generated. Considerations for implementing the proposed model 7.13 Each NIHR Local Research Network will need to consider and balance the knock for knock effects that changes in funding flow will have in adopting the proposed model. Within the NIHR (C)LRNs, local agreement and consensus should be made on issues of funding flow and budget obligations to ensure that changes are manageable and that the maximum benefit is derived from Network supported local infrastructure. 7.14 Where no Network resource has been used to carry out the study at a specific site, the Local Research Network should not expect to recover Network staff costs. 7.15 All three parts of the model are illustrated in the flow chart at the start of section 8 below. Case studies within section 8 demonstrate how under different study situations, the distribution and recovery of staff costs can be managed locally. 12

8. CASE STUDIES AND INCOME DISTRIBUTION BREAKDOWN BY STAKEHOLDER NIHR CRN Proposed Income Distribution Model Staff Time* Direct Costs + Overhead + Capacity Building: Staff Costs Part 1: TIER 1: Direct Staff Costs retained by the Trust or dept MINUS any Network funded staff costs (these are held or delivered back to the appropriate local Network) Amount generated by the 70% Overhead Part 2: The 70% amount is divided: Half - goes to the Trust for Indirect Costs Half - goes to a research account with Principal Investigator responsibility 50% (½) + 50% (½) = 100% of the 70% Overhead Amount) Amount generated by the 20% Capacity Building Part 3: Capacity Building (20%) collected and held for local CLRN Network Board TIER 2: OR goes to the NIHR CLRN/Topic LRN as a surrogate for direct NIHR CRN staff costs Investigations Direct Costs + Capacity Building: Price within the Template retained by the Trust to cover costs incurred by service support depts Amount generated by the 20% Capacity Building Part 3 (cont. from above): Capacity Building (20%) collected and held for local CLRN Network Board TIER 2: OR goes to the NIHR CLRN/Topic LRN as a surrogate for direct NIHR CRN staff costs Pharmacy Costs Set-Up Fee, Pharmacy Staff Costs, etc.: Price within the template goes to the Trust (retained or passed through to Pharmacy as per Trust practice) R&D and Trial Administration Fees R&D Set-Up Fee, etc.: * All costs inclusive of Payment by Results Market Forces Factor for the Trust Price within the template goes to the Trust (retained or passed through to R&D Dept as per Trust practice) 13

Case Study 1 Fred Green is the Professor of Rheumatology at Northern University and also holds an honorary clinical contract as a Consultant Rheumatologist at Royal Hospital. He is the lead for the Musculoskeletal Priority Group at ABC CLRN. Professor Green is approached by Zen Pharmaceuticals to act as a Principal Investigator in a clinical trial of their new drug for rheumatoid arthritis. He thanks the company for their interest, and suggests that they approach the Industry Team at the NIHR CRN CC to pursue getting the study adopted onto the NIHR CRN Portfolio. The feasibility process is completed by the Industry Team and Zen Pharmaceuticals and the study is adopted onto the NIHR CRN Portfolio. A representative from Zen Pharmaceuticals downloads the Industry Costing Template from the NIHR CRN website and populates it, based on the activities listed in the study protocol, and submits this along with their other study materials. The CRA at Zen Pharmaceuticals contacts Professor Green to find out if he is still interested in participating. She visits his research team at Royal Hospital and confirms that they are able to recruit 5 patients to the study, and begins the process of gaining the required approvals through IRAS. Professor Green contacts the R&D office at Royal Hospital to let them know that he intends to take part in the study. Royal Hospital liaise and with Zen Pharmaceuticals to arrange a contract. The Industry Costing Template is sent to the R&D office at Royal Hospital, who discuss the activities with the research team to ensure that all the required activities are covered and appropriately costed. They ask the company to alter some of the times allowed for procedures. The costs for the study are agreed and then multiplied by the Trust s Payment by Results Market Forces Factor (PbR MFF) to account for local variations in costs. The total cost to Zen Pharmaceuticals of conducting this study at Royal Hospital is 47,760. Once all the approvals have been received and the contract signed, the R&D office gives permission for the study to take place, and ask the Finance Officer to set up a study account. The Trust send an invoice to Zen Pharmaceuticals for the R&D set up fee of 738. This is a short study, lasting only six months, and Royal Hospital have agreed to invoice for all the other study costs at the end of the study period. Professor Green and his team recruit all five patients. The Trust send an invoice to Zen Pharmaceuticals for 42,691. This is paid within 30 days. The Trust raises a separate invoice for Pharmacy in the amount of 4,331 for their study related work. The Royal Hospital and the local Network have implemented all elements of the NIHR CRN income distribution model. The study used a Network funded research nurse for the full duration of the study. The staff costs associated with this work has been deducted from the total staff costs of the study. This amount will be offset against future staff funding by the Trust on behalf the CLRN. The Capacity Building element has been collected and retained into an account pending the outcome of the local CLRN local Network Board s decisions from the award process. Distribution of the income received from this study can be seen in the flow diagram 1. 14

Case Study 1 Distribution of income Per patient budget* 8,100 Number of Patients x 5 = Total Patient Budget 42,691 + + 738 4,331 R&D Set-up Fee Pharmacy Costs* * Inclusive of Overheads, Capacity Building and PbR MFF Total Study Budget 47,760 47,760 Total Study Budget Distribution of income by stakeholder Pharmacy Costs* R&D Set-up Fee 42,691 Total Patient Budget 4,331 Pharmacy Costs* to the Royal Hospital s Pharmacy Department 738 R&D Set-Up Fees to the Royal Hospital s R&D Department 12,649 Investigations Amount generated by the 20% Capacity Building Staff Costs 30,042 Amount generated by the 70% Overheads Amount generated by the 20% Capacity Building 10,541 2,108 15,812 11,068 3,162 Price retained by the Royal Hospital Provided to Local NIHR CLRN Network Board Direct staff costs retained by the Royal Hospital Provided to Local NIHR CLRN Network Board 2,372 5,534 5,534 NIHR CRN funded research staff deducted from Staff Costs Offset against future funding 50% to a research account for which the Principal Investigator has responsibility 50% to the Royal Hospital for Indirect Costs Case Study 1 Summary: s As a % of the Overall Study Budget Royal Hospital (direct and indirect costs) 29,514.82 61.8% Royal Hospital R&D Department 737.87 1.5% Royal Hospital Pharmacy Department 4,331.02 9.1% Local NIHR CRN deducted staff costs (offset against future resource funding) 2,371.80 5.0% Research account with PI responsibility 5,534.04 11.6% Capacity Building - held for local Network Board 5,270.52 11.0% 47,760.06 100.0% 15

Case Study 2 Bob Brown is a Consultant in Dermatology at Lanchester Hospital. He is approached by the Go- Between Clinical Research Organisation, to see if he would be interested in acting as Principal Investigator in a trial of a new skin cream. The study has been adopted onto the NIHR CRN Portfolio. Dr Brown decides to take part in the study and agrees that he can recruit a minimum of 5 patients. Dr Brown contacts the R&D Department at Lanchester Hospital to let them know that he intends to take part in the study, and completes the SSI Form through IRAS. A representative from Go-Between CRO forwards a copy of the completed Costing Template and model Clinical Trial Agreement to Lanchester Hospital R&D Department. They liaise with the research team to ensure that all the research activities are covered and arrange to have the CTA signed. The per patient cost is 4,238, plus 2,034 for pharmacy costs. R&D approval has been given by the Trust. The Trust raises an invoice for Go-Between CRO in the amount of 797 for its set-up related worked. At the end of international recruitment for the study, Dr Brown has managed to recruit 5 patients. In total, the Trust invoices Go-Between CRO for 23,224. Given the size and complexity of the research work undertaken in the Midshire region, Lanchester Hosptial and Midshire CLRN have agreed to use the Tier 2 approach to manage Network study associated staff costs. Therefore the capacity building element will be locally invoiced to the CLRN. Distribution of the income received from this study can be seen in flow diagram 2. 16

Case Study 2 Distribution of income Per patient budget* 4,238 Number of Patients x 5 = Total Patient Budget 21,190 + + 797 2,033 R&D Set-up Fee Pharmacy Costs* * Inclusive of Overheads, Capacity Building and PbR MFF Total Study Budget 24,021 24,021 Total Study Budget Distribution of income by stakeholder Pharmacy Costs* R&D Set-up Fee 21,190 Total Patient Budget 2,033 Pharmacy Costs* to the Lanchester Hospital s Pharmacy Department 797 R&D Set-Up Fees to the Lanchester Hospital s R&D Department 8,203 Investigations Amount generated by the 20% Capacity Building Staff Costs 12,987 Amount generated by the 70% Overheads Amount generated by the 20% Capacity Building 6,836 1,367 6,836 4,785 1,367 Price retained by the Lanchester Hospital Midshire CLRN TIER 2 Approach Direct staff costs retained by the Lanchester Hospital Midshire CLRN TIER 2 Approach 2,392 2,392 50% to a research account for which the Principal Investigator has responsibility 50% to the Lanchester Hospital for Indirect Costs Case Study 2 Summary: s As a % of the Overall Study Budget Lanchester Hospital (direct and indirect costs) 16,063.23 66.9% Lanchester Hospital R&D Department 797.48 3.3% Lanchester Hospital Pharmacy Department 2,033.70 8.5% Research account with PI responsibility 2,392.43 10.0% Midshire CLRN (Capacity Building) 2,734.20 11.4% 24,021.04 100.0% 17

Case Study 3 Dr Black is a consultant diabetologist working for Seaside Hospital NHS Trust. He is approached by Mega Devices to take part in a study to test their new blood glucose monitor. The study has been adopted onto the NIHR CRN portfolio. Dr Black discusses the study with his research team and agrees that they can recruit 35 patients. He contacts the Seaside Hospital R&D Department to let them know about the study and completes the SSI Form through IRAS. A representative from Mega Devices forwards the completed Costing Template and model Clinical Investigation Agreement to the R&D Department. They agree the costings and arrange for the mcia to be signed. Once R&D Approval has been given by Seaside Hospital, the Trust invoices Mega Devices for 707.15. At the end of the study, the research team have recruited all 35 patients. In total, Seaside Hospital invoices Mega Devices for 13,418. Seaside Hospital NHS Trust and the local Network have implemented all elements of the NIHR CRN income distribution model. The study used a Network funded research nurse for the full duration of the study. The staff costs associated with this work has been deducted from the total staff costs of the study. This amount will be offset against future staff funding by the Trust on behalf of the CLRN. The Capacity Building element has been collected and retained into an account pending the outcome of the local NIHR CLRN Network Board s decisions from the award process. Distribution of the income received from this study can be seen in flow diagram 3. 18

Case Study 3 Distribution of income Per patient budget* 383 Number of Patients x 35 = Total Patient Budget 13,418 + + 707 0 R&D Set-up Fee Pharmacy Costs* * Inclusive of Overheads, Capacity Building and PbR MFF Total Study Budget 14,125 14,125 Total Study Budget Distribution of income by stakeholder Pharmacy Costs* R&D Set-up Fee 13,418 Total Patient Budget 0 Pharmacy Costs* to the Seaside Hospital s Pharmacy Department 707 R&D Set-Up Fees to the Seaside Hospital s R&D Department 2,334 Investigations Amount generated by the 20% Capacity Building Staff Costs 11,085 Amount generated by the 70% Overheads Amount generated by the 20% Capacity Building 1,945 389 5,834 4,084 1,167 Price retained by the Seaside Hospital Provided to Local NIHR CLRN Network Board Direct staff costs retained by the Seaside Hospital Provided to Local NIHR CLRN Network Board 875 2,042 2,042 NIHR CRN funded research staff deducted from Staff Costs Offset against future funding 50% to a research account for which Principal Investigator has responsibility 50% to the Seaside Hospital for Indirect Costs Case Study 3 Summary: As a % of the Overall s Study Budget Seaside Hospital (direct and indirect costs) 8,945.55 63.3% Seaside Hospital R&D Department 707.15 5.0% Local NIHR CRN deducted staff costs 875.00 6.2% Research account with PI responsibility 2,041.90 14.5% Capacity Building - held for local Network Board 1,555.73 11.0% 14,125.33 100.0% 19

9. CONCLUSIONS: 9.1 The money generated from industry-sponsored studies is a valuable source of income for NHS Trusts. This income can be used to encourage key stakeholders to develop capacity for new research within the Trust and increase the volume and therefore future income generation. 9.2 It is important that investigators are incentivised to carry out commercial research, but this should not be to the detriment of the NHS Trust and NIHR Local Research Networks, who must be able to recover their costs. 9.3 This document suggests good practice for the distribution of income from industry-sponsored studies, and provides a basis for local discussion and agreement. This document and the guidance it provides are offered with an opportunity for future review and appraisal in one year s time. 9.4 The model proposed in this guidance is based on piloted cases. 9.5 The NIHR CRN wants to ensure that systems to manage and distribute commercial income work towards and achieve the strategic research priorities outlined by the local research community and the Department of Health. A critical part of achieving these objectives will be making sure that investigators and service support departments in the research system are sufficiently incentivised and reimbursed. FREQUENTLY ASKED QUESTIONS: Investigators normally look for a return of the per patient budget. Will they lose out under this model? The return that investigators will receive varies depending on the type of study, but is generally equivalent to between 10-15% of the per patient budget, as illustrated in the case studies. Overheads have always been for indirect costs. Why shouldn t the Trust keep all the money? The money that is received as an overhead from the Industry Costing Template captures the indirect costs incurred by the Trust and ensures a margin for flexible financial management. Best practice has shown that there is capacity in the overhead to incentivise investigators if the Trust retains the direct costs and delivers an efficient service. How do we implement this model? Local discussions should take place first between all NIHR Local Research Networks to compare and consider a common income distribution model to present to Trusts. Once a common single solution has been identified, the NIHR Local Networks, lead by the local CLRN should then consult with R&D departments, Trust management and investigators of each NHS member organisation to determine if this model can support or improve existing arrangements. The aim is to reach 20

agreement on a single local model per NHS member organisation, which ensures the (C)LRNs are able to recover their Network funded staff costs and that the Capacity Building element has a planned system of management. Following local agreement, the key tenets of the model should then be translated into real financial accounting and allocation through the Trust s budget management, invoice and credit control system, with an agreed invoicing schedule to ensure straightforward management. For example, it may be agreed that Network staff costs and capacity building monies would be reconciled and invoiced on a 6 month or 12 month basis. Broadly, this guidance and the proposed model should be used to support open discussions between NHS management, service support departments, R&D Offices, NIHR Local Research Networks and investigators to recognise the contribution each stakeholder makes to the health research system. The principles identified in this guidance, combined with the transparency and consistency in commercial research costing that the Industry Costing Template has fostered, aim to improve research income management to the benefit of all stakeholders. Can our Trust change the distribution percentages? The distribution percentages utilised in this model can be changed to any equivalent of the 70% overhead that works for your local arrangement. The percentages presented in this model are based on currently observed good practice and should be considered as guidance when working towards a local arrangement. Does our Network have to recover the staff costs funding from the Trust? The NIHR CRN local networks are expected to account for the NIHR CRN funded staff costs utilised in local research. It is expected that NIHR CRN staff funding will be accounted for to ensure the maximum utility of NIHR funding to ensure that no double funding occurs and value for money spending initiatives. Commercial research benefits from the unique situation that sponsors are required to pay for the resource requirements of research that they initiate, this combined with the principle that the Industry Costing Template ensures full cost recovery for the NHS; it is therefore possible to recovery research monies where it is whole and recognisable within the Trust s accounting. The NIHR CRN should be upholding the highest standard of financial management in demonstrating good financial due diligence and responsibility for public sector derived monies. Accountability and management of NIHR CRN funded resource comes down to local agreement between NHS Trusts and NIHR (C)LRNs, especially in instances where this funding is not required to flow back on a per study or long-term basis (e.g., in certain instances where local arrangements may have been made and agreed that income is to pump prime research locally). 21

What about university staff working on studies? Universities should recover the costs of their staff through the arrangements outlined in their local Memorandum of Understanding or service level agreements with the NHS Trust. Universities should not recover additional indirect costs to those in the Industry Costing Template where the research is taking place on NHS premises. Reconciling any discrepancies in staff costs identified in the Industry Costing Template should be done in accordance with the local agreements between the Trust and the University. What if our study involves the facilities and resources of a CRF? Clinical Research Facilities and NIHR infrastructure are key assets in the clinical research environment. If any activity or review is led by the CRF then the money should flow through to these units and departments where and when the activity has occurred. This would be agreed locally between the CRF and the R&D departments during set-up. Do Trusts have to use the Industry Costing Template? Use of the Industry Costing Template is mandatory for NIHR CRN portfolio industry studies. Does accrual from industry-sponsored studies count towards Activity Based Funding? Accrual from industry-sponsored studies is not counted towards Activity Based Funding, as it is conducted on a full cost recovery basis, however, it does count towards the National Ambition and NIHR Clinical Research Network Performance Indicators. Is there an expectation that some of the money should go to the Network for their management under Feasibility and Adoption Process? Payment to the individual NIHR Network Coordinating Centres for their management of NIHR CRN Feasibility and Adoption Process is a separate consideration to the practices outlined in this document. The funding and long-term sustainability of the NIHR CRN Feasibility and Adoption Process is currently being developed and finalised between the Networks, the Department of Health and Industry. Any payment considerations will be addressed at a future date with additional guidance to the Networks and Industry. 22

CONTACT INFORMATION: For more information, advice or assistance on implementing this guidance, please contact: Industry Costing and Contracts Manager Email: crncc.industry@nihr.ac.uk NIHR Clinical Research Network Coordinating Centre Fairbairn House 71-75 Clarendon Road Leeds LS2 9PH www.crncc.nihr.ac.uk Fairbairn House 71-75 Clarendon Road Leeds LS2 9PH Tel: 0113 343 2314 Fax: 0113 343 2300 Web: www.crncc.nihr.ac.uk 23