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CRN East Midlands Commercial Contract Research Income Guidance



This document provides guidance for the distribution of income generated through the conduct of NIHR CRN Portfolio commercial-contract clinical research within NHS Organisations and applies to all CRN Partner Organisations conducting NIHR CRN commercial research in the East Midlands. 

Income from industry-sponsored research on the NIHR CRN Portfolio has historically been managed in a wide variety of ways.  While this document does not provide prescriptive guidance on how income should be distributed, it is expected that appropriate local systems are in place to allow funding to flow from NIHR CRN Portfolio commercial research to support investigator incentives and to grow the research capacity and infrastructure. The money generated from industry sponsored studies is a valuable source of income for NHS Organisations. This income can be used to encourage key research stakeholders to develop capacity for new commercial, collaborative and/or non-commercial research within the NHS Organisation and support future income generation.


This document has evolved from being a Standard Operating Procedure in v1.2  (Standard Operating Procedure and Guidance CRN Portfolio Commercial Contract Research Income v.1.2  September 2021) to a guidance document in v1.3 (CRN Portfolio Commercial Contract Research Income Guidance v.1.3  January 2023).  V1.3 has been updated to reflect the latest national guidance from the NIHR CRN Coordinating Centre. It recommends key principles and good practice for the distribution of income from industry sponsored studies and aims to ensure that systems to manage and distribute commercial income work towards and achieve the strategic research priorities outlined by the Department of Health and Social Care. 


In respect of commercial contract research, in line with the ‘Attributing the cost of health and social care Research & Development (AcoRD)’ guidance, the NHS (meaning NHS Trusts and other providers of NHS services) is required to recover from industry (meaning the commercial Sponsor) all costs of the research study over and above the standard NHS Treatment Cost.  This is set out in the LCRN Minimum Financial Controls.

The Income Distribution model described in this guidance document is based on the NIHR CRN interactive Costing Tool cost methodology.  As part of the NHS England Standard Contract with NHS providers, the National Directive on Commercial Contract Research Studies sets out the requirements providers need to adhere to for commercial contract research, which includes the mandated use of the standard costing methodology (the NIHR interactive Costing Tool) from 1 October 2018.  Since its launch in 2018, the interactive Costing Tool has provided companies and NHS Organisations with a single consistent approach to calculating commercial trial costs which is both clear and transparent for negotiating and establishing a price for research within the NHS. 

From 1 October 2022, and as part of the new National Contract Review Process (NCVR),  eligible new commercial research proposals will undergo a study resource review by the lead site. NCVR is a standardised, national approach to costing for commercial contract research. In England, NCVR is being delivered by NHS England in partnership with the National Institute for Health and Care Research (NIHR), the Health Research Authority (HRA) and the Department for Health and Social Care (DHSC). Eligible studies are all those commercial studies which will be conducted in acute, specialist and mental health trusts in England and counterparts in the devolved administrations, with the exception of phase I – IIa and advanced therapy medicinal product (ATMP) studies. Primary Care settings are not included at this stage.

NIHR Industry Costing Template/Interactive Costing Tool (ICT)

The  web-based interactive Costing Tool (iCT) provides a clear standard methodology to calculate consistent and transparent prices for the resource associated with delivering each commercial contract study to support both the Life-Sciences Industry and the NHS to help minimise set-up time related to cost agreement.

The methodology identifies Agenda for Change rates for specific bands of NHS staff time representing the direct costs. Any indirect costs (including overheads) are covered by the indirect cost and capacity building elements. Prices for investigations and costs for departments supporting research are also included. These values are all localised with the National Tariff Market Forces Factor (MFF) for the NHS Organisation in which the research takes place. This document outlines good practice for appropriate funding flow of these elements to participating departments and supports the establishment of suitable local arrangements. Further information and support regarding the interactive Costing Tool and the development of its cost structure and values are available on the NIHR website

The elements that make up the ICT are detailed below:

Direct costs- NHS Staff Time:

The fee the sponsor pays to cover the cost of the research team’s involvement. National hourly rates are calculated for the agreed NHS staff bands using the highest salary in the relevant Agenda for Change band which are adjusted to incorporate the NHS employer contributions for National Insurance and Pension. This is a standardised representation of the direct cost to an employing NHS organisation and is used to calculate the template values for all procedures or tasks that are related to staff time.

Indirect Costs: 

A standard rate of 70%, added only to the NHS staff time direct costs, provides a representative value for the indirect costs when conducting a commercial trial which are not already covered by the direct costs (i.e. the real cost of carrying out a research activity). These indirect costs include physical aspects such as heating, lighting, building maintenance, and security; as well as the support functions required to deliver a clinical trial such as finance, general administration, human resources, information systems and corporate management (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 the individuals and services involved in delivering research. This element has a direct impact on the sustainability of the individual research activity and the research environment as a whole.

Capacity Building:  

A capacity building rate of 20%, which is added to both direct staff time costs and investigations, should be considered as a ‘system optimisation’ which is designed to build sustainable research and innovation capacity to the benefit of all research partners. The successful utilisation of this element requires significant commitment and resources from all research partners.

This element is separate from the 70% indirect costs to enable it to be easily ring-fenced for maintaining, strengthening, and adapting and growing sustainable research capacity over the long-term. It is supported by the Health Service Guidelines (HSG) 97-32 ‘Responsibilities for meeting patient care costs associated with research and development in the NHS’, which acknowledges that NHS income derived from commercial contract studies is raised through NHS Income Generation powers for ‘improving the health service’.

Market Forces Factor: 

NHS England publishes a Market Forces Factor tariff  which provides an adjustment value to accommodate the unavoidable cost differences of providing healthcare across the country.  In the interactive Costing Tool it is applied to localise the national rates for the location in which the research is being conducted.

For funding flow, this factor should be applied to each element of the cost methodology to provide a true reflection of the cost for that location (e.g. NHS staff time including MFF; indirect costs including MFF; and Capacity Building including MFF). Ideally, this should not be treated as a separate element but an integral part of each cost component. 

Per Patient Costs (including additional itemised costs):

The ‘per patient budget’ and the ‘additional itemised cost’ sections (the latter being where trial related costs that may not directly correlate with patient numbers or visits are included) applies all these aspects to two different cost calculations:

Procedures costs =  NHS staff time (direct costs) + 70% indirect costs + 20% capacity building + MFF

Investigation costs = NHS direct costs for investigations¹ + 20% capacity building + MFF

¹Already inclusive of the NHS Organisation’s indirect costs and operating overhead

Pharmacy costs:

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 directly dependent on the number of patients.

Set-up and Other trial related costs: 

The pre-trial and ongoing related study costs are managed through the use of set-up management and close down fees and separate costs which are assigned to the relevant department. The interactive Costing Tool uses recommended fees based on national averages to provide a list of potentially applicable fees depending on the study requirements.


Feedback to date has shown an income distribution model is most effective when all income values are transparent to all departments involved through good local accounting allocations, clear distribution rule application and central Organisation oversight (such as by the R&D/I Department).

While income is distributed back to individual departments to support engagement in commercial research, the use of this income should be managed and monitored through spending plans which are reviewed and approved centrally by the Organisation. The elements outlined above, which relate to the way the budget for a commercial study is derived, are now considered with respect to income distribution, once received.

Distribution of Direct costs- NHS Staff Time:

Ideally these direct costs should be reimbursed to the department where the staff member is employed to compensate for the work performed. For commercial studies involving direct costs of University staff, an agreement should be in place between the relevant NHS Organisation and University to agree suitable distribution of the NHS Staff Time costs or the mechanism to be applied to accommodate alternative cost approaches, e.g. Application of Full Economic Costing (FEC), based on the NIHR CRN interactive Costing Tool (further information regarding the involvement of Universities in commercial).

In relation to the recovery of NIHR CRN funding, there is no expectation that CRN funding used to support posts involved in the delivery of commercial contract research will be reimbursed to the CRN budget directly. Instead it is the expectation that the cost recovery process sits within and is the responsibility of the CRN Partner organisation.

Should a member of the CRN East Midlands Direct Delivery Team (DDT) be deployed to work on a commercially funded study there will be a separate mechanism to manage this which is considered prior to the resource being placed, with reimbursement for the DDT staff time in commercial research to be discussed and agreed.  

Distribution of the 70% indirect cost:

The distribution of the indirect cost element varies between NHS Organisations: some retain the full amount to cover their indirect costs, while others divide it between the NHS Organisation, the Investigator/Research team and the R&D Department in varying proportions. Being open, realistic and accountable about indirect costs and their distribution builds a trusting and mutually beneficial relationship between research partners and requires strong managerial and financial systems to deliver. 

The NIHR CRN Income Distribution model recommended approach is:

  • 50% of the indirect cost element stays with the NHS Organisation to cover the indirect costs which enable the NHS Organisation to carry out the underlying operations of conducting research and contribute to any variability between the negotiated prices where required. Additionally, this percentage may be used to supplement or incentivise individual NHS Organisation departments, as per local agreements.

  • 50% of the indirect cost element is designated for the Principal Investigator and provides a method to incentivise participation in commercial research. This amount should be allocated to a commercial research cost centre or similar supervised research account within the NHS Organisation finance system, through which the Principal Investigator has a decision making capacity in the use of the funds in line with the NHS Organisation practices and finance control procedures.

The “equal split” approach is the recommended approach, however local arrangements may support different splits to be used and agreed locally to suit each NHS Organisation’s needs. These percentages should be developed and agreed based on the NHS Organisation’s methods for recovering indirect costs and the degree of efficiencies and savings that are realised to make available as incentives. The alternative split should be evidenced with supporting data from NIHR CRN Portfolio commercial studies to demonstrate the involvement or requirement for the proposed proportion of income. The implication of agreeing alternative approaches to the equal split recommended in this model should be considered for each NHS Organisation individually, e.g. the impact of reducing the percentage available to the Investigator and team. The following table shows examples of some alternative splits in use at NHS Organisations


Example 1

Example 2

Example 3

Example 4

Example 5

Example 6

50% to PI

65% to PI

70% to PI

75% to PI

36% to PI

80% to the department

25% to Clinical Division

20% to add to staff costs

30% to NHS Organisation

25% to NHS Organisation

32% to Clinical Division

20% to R&D

25% to R&D

15% to R&D


32% to R&D 


Distribution of the 20% Capacity Building:

It is recommended, by the NIHR CRN Coordinating Centre, that NHS Organisations involve the Local CRN in defining the application of this element and ensure consideration and inclusion of the wider research community needs and national research ambition. The intended use of the Capacity Building element within the NHS organisation should be clearly documented to support and evidence its reinvestment in research in line with the overarching intention to ‘improve the health service’.   

It is best practice for NHS Organisations to have some form of expenditure plan for the capacity building element with supporting accounting processes to manage and evidence the distribution.

For example, the expenditure plan may include:

  • 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)
  • 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, “buying-out” or reserving “blocks” of research time in departments and units)
  • A mixture of both.


University Staff

The NHS Organisation and the University should establish arrangements within their local Memorandum of Understanding or service level agreements to recover costs incurred through the involvement in commercial contract studies, which may also include honorary employment contracts where appropriate. Universities should not recover additional indirect costs to those in the interactive Costing Tool where the research is taking place on NHS premises, for example applying a University overhead value on top of the costing template total. Reconciling any discrepancies in staff time costs identified in the interactive Costing Tool, for example in line with Full Economic Costing, should be done in accordance with the local agreements referenced above between the NHS Organisation and the University. The University cost recovered should not exceed those agreed by the NHS Organisation with the Sponsor for the University staff.

Clinical Research Facilities and resources

CRFs 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 should be agreed locally between the CRF and the R&D departments during set-up and should not impact on the Sponsor discussions.

Independent Sector Healthcare Providers

If any activity or review is led by an independent (non-NHS) organisation then the money should flow through to where the activity has occurred, this should not impact on the Sponsor discussions.


The funding for the investigations (e.g. scans, pathology tests etc.) should go directly to the appropriate support department to cover the actual costs.  In some cases these costs may go to a non-NHS provider.


It is important that CRN partner organisations have clearly documented processes for effective contract negotiation and subsequent trial management and income collection from commercial sponsors.  In line with good practice, it is recommended that partner organisations have in place processes and responsibilities for:  

  • Liaising with the Sponsor or Clinical Research Organisation regarding any new commercial trial proposal and subsequent negotiations
  • Quantification and agreement of the detailed work required to complete a commercial trial, including staff time, interventions and tests required
  • Obtaining agreement from relevant support departments such as R&D, pharmacy and pathology
  • Ensuring Principal Investigator oversight throughout the process
  • Obtaining R&D/I confirmation of capability and capacity (Post HRA Approval)
  • Obtaining financial approval prior to contract signature
  • Contract signature and record keeping
  • Invoicing and Credit Control
  • Monitoring and reporting activity
  • Income distribution in accordance with organisational policy
  • Contract Amendments

As part of the Partner Finance Health Checks that the CRN EM perform with Partner Organisations to review the financial procedures a request will be made for a copy of the commercial income policy (Appendix 1 extract), and assurance around this income


To ensure that the above expectations are met, CRN East Midlands has several processes in place, including financial monitoring, annual statements of expenditure and local finance health-checks. This is detailed further in the CRN East Midlands Standard Operating Procedure for the Monitoring of Partner organisations.

Each Partner Organisation has completed a health check questionnaire (Appendix 1) which sought to identify processes in place to manage commercially funded research.  Prior to the health check visit, evidence is requested to provide assurance that CRN funding is used according to the ACoRD principles and any commercial income is appropriately managed. During the health check visit, there is a discussion regarding commercial study income and how this is managed - this is documented in the feedback for the health check along with any recommendations.

Should any concerns be raised during a health check then this would be followed up to ensure that any actions or recommendations have been implemented until satisfied that contractual obligations are being adhered to.

Appendix 1


CRN East Midlands is contracted by the DHSC to undertake timely and accurate budgetary monitoring and reporting on funds paid directly to Partner Organisations. Additionally, CRN East Midlands is required to provide sufficient assurance that NIHR CRN funding is used only on eligible CRN activity, in accordance with DHSC funding agreement terms.  CRN East Midlands gains this assurance through a range of mechanisms of which the Financial Health Check visits to Partner Organisations is one. This Pre Visit Questionnaire forms the first stage of the Financial Health Check visits.

Please complete the questionnaire in the Partner Response section. Within the questionnaire we ask for evidence which can be provided to support various aspects of the financial health check.  In preparation for our visit could you pull together this evidence electronically into an evidence folder for us to review in advance of the visit and at the meeting.  We appreciate that not all evidence will be available electronically, e.g. access to electronic financial reporting systems etc. However if you could detail this we could discuss the best way to receive or understand your evidence during the review. Could we ask that your revised questionnaire and any evidence which can be compiled electronically can be made available to us for review two weeks prior to the visit.


Commercial Income


What is the current process by which the Partner Organisation ensures that industry sponsored contract research is conducted in accordance with NHS guidelines?


What is the value of commercial income received and how does the Partner Organisation ensure that all costs of  their research studies over and above the standard NHS Treatment Cost are recovered from the sponsor?


Has the Partner Organisations adopted income distribution models (e.g. based on the CRNCC guidance on Industry Income Distribution, or the guidance provided by the CRN)? If so, please can the model be briefly described?


Which staff deliver commercial trial activity in the organisation?