How To Improve Your Clinical Finance Function

By Chris Chan, vice president, financial planning & analysis, IGM Bioscience

In the finale of this three-part series on clinical finance, IGM Biosciences Vice President, Financial Planning & Analysis Chris Chan discusses how to leverage the role of clinical finance for clinical trial success. Part one — “Why Is Clinical Finance So Challenging?” — can be found here. Part two — “Why Is Clinical Finance So Important?” — is here.

“If you’re going hard enough left, you’ll find yourself turning right.” – Doc Hudson, “Cars”

Or, substance over form.

A common question is, “Where should we put clinical finance?” My answer, like Peter, Paul, and Mary’s, would be, “wherever the wind blows.” As mentioned previously, I began my clinical finance career on the clinical team because the CMO found interacting with finance too agonizing. A few years later due to company restructuring, I transitioned to the corporate accounting group. In both tenures, I was the same lovable cherub doing the same work and making the same contribution. In subsequent companies, I observed the clinical finance function residing under clinical, finance/FP&A, accounting, even project management. In one company, there was a clinical accounting group as part of the accounting department. After the group’s manager departed, the team was moved under me and FP&A. Once again, there is no change in work output or quality. In some instances, the responsibilities are divided among separate groups. For example, financial accruals and site payments processing would be under accounting, budgeting/forecasting under clinical, purchase orders under procurement, and so on. Because of the function’s chimeric cross-fertilizing nature, it fundamentally does not matter where it resides. The most important consideration is that the role players possess substantial knowledge across the different functions as well as the ability and patience to bridge them effectively.

“Gentlemen, you can’t fight in here. This is the War Room!” – President Merkin Muffley, “Dr. Strangelove”

Or, ensure clinical and finance harmony.

As previously demonstrated, is imperative that clinical and finance be peas in a pod, ebony and ivory on the piano keyboard, a Tom Hanks-Peter Scolari sitcom…you get the point. It is not uncommon for finance to be expected to “police” other departments. One of my previous CFOs, irritated over a big clinical budget variance, instructed me to, quote, “Stop being so nice and find out how they screwed up.” My response was: (a) I was equally responsible because the clinical team and I did the budget together; (b) Pursuing a more acrimonious relationship might win a short-term battle but lose the war; (c) I’m nice and sweet by nature; and (d) We collectively commit to improving the process as a team going forward. Obviously, positive relationships are important and desirable between any work teams. However, it is particularly essential to the clinical and finance partnership due to the sheer complexity, unpredictability, and voluminous variability of the clinical trials world.

It is important for finance to understand that financial numbers don’t drive clinical decisions but help support and augment those decisions. By the same token, clinical should understand that finance isn’t a barrier and good financial support enhances and accelerates their efforts. In sum, a harmonious symbiotic relationship is key to maximizing efficiency and results.

“One does not simply walk into Mordor.” – Boromir, “Lord of the Rings: The Fellowship of the Ring”

Or, always strive for the easiest path.

Like Sam and Frodo relentlessly making their way to Mount Doom, clinical finance should constantly strive to implement the most efficient and painless methodologies when it comes to clinical financial processes. The more burdensome the process, the greater the likelihood for bad data. A good illustration of this is the notoriously painful process of estimating actual expenses over the course of clinical trials, also known as financial accruals. Because there are no standard methodologies, accruing for the plethora of study expenses can be as painful or easy as one makes it. You can choose to proverbially count every grain of sand on the beach or use a streamlined way to make a reasonable estimate. So long as reasonable data can be achieved, imperfect yet sensible models are very acceptable. Some companies use models that require multiple clinical personnel spending many hours monthly to provide necessary input. Other companies use a simple straight-line accruals method that requires only minutes to complete. Quite often, despite the vast range of required effort, the results are not materially different.

Another way to make your clinical partners’ lives easier is to always try to create models that can utilize readily available data. For example, if the models’ required inputs are found in study summary reports that clinical teams already generate and circulate, then clinical only needs to add finance to their email distribution list. Additionally, finance-related “sausage making” duties should reside with finance personnel as much as possible. Because financial needs are typically not the highest priority for clinical teams, it is preferable for these processes to be owned and managed by finance folks who have more incentive and expertise. For example, in my experience it is always preferable for finance to own investigator site budgets and site visit calculations. These calculations do not require special clinical knowledge. Therefore, finance can be responsible for updating and owning the budget and accruals models, while clinical is responsible for providing finance with copies of executed site contracts and patient enrollment data. This maximizes the strengths and efficiencies of both teams.

In Conclusion

Having an effective clinical finance function is essential for any biopharmaceutical organization, and it is especially indispensable for clinical-stage biotechnology companies. While the organizational structure can be flexible, the most important attributes are that the clinical and finance functions work together harmoniously and synergistically and that each group is allowed to focus on their respective strengths and priorities. The payoff in improved company productivity, efficiency, and human happiness is considerable. Just like becoming a Jedi Knight, devoting time and attention to improving any biopharma company’s clinical finance operation is well worth the incremental effort.

About The Author:

Growing up, Chris Chan wanted to be Bruce Lee or a Jedi Knight. He wound up doing the next closest thing and became a biotech finance professional. Over a span of three decades (or approximately four times Al Capone’s total prison tenure), Chris has worked in biopharmaceutical companies of various shapes and sizes, primarily in the areas of corporate FP&A and clinical/R&D finance. He has given numerous conference presentations and written multiple articles on drug development budgeting, financial accruals, and outsourcing. He currently crunches numbers as the vice president of FP&A at IGM Biosciences. When he retires, he hopes to become Bruce Lee or a Jedi Knight.

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