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Outsourcing Relationships

Setting the Boundaries

How hands-off can – or should – the sponsor be when partnering with a CRO in a strategic outsourcing model was the topic of discussion at Partnerships in Clinical Trials,Vienna in November 2010, with relationship building being viewed as a crucial element for fostering long-term success

Often when answering the question of how hands-on a sponsor should be, one could simply say ‘it depends’.This article discusses some of the reasons why high levels of hands-on activity or micromanagement could either benefit or harm the sponsor/CRO relationship, and ultimately the course of the clinical trial.

Big Pharma or Small Biotech?

The first question to be answered is the type of sponsor involved in the relationship – a big pharma or a nimble biotech firm – as their needs will usually differ. Biotech companies who have limited experience in conducting clinical studies will need to be more selective in their choice of CRO. For example, one of their selection criteria may be to complement the expertise they possess internally with the services that can be provided by the CRO. If performed successfully, day-to-day interactions between the two companies become much more productive by efficiently making use of their available resources upfront.

Another factor that can greatly influence the level of hands-on activity by the sponsor is whether the clinical study is pivotal in terms of organisational success.The more crucial a study, the more attention it will be given by the sponsor study manager and their senior management team as there is a natural tendency to be more hands-on when managing a pivotal study.This inclination has been observed in both large pharma and small biotech companies, with much more frequency in the latter, given the limited pipeline and small number of studies that are typically managed by biotechs at any given time.

The classic outsourcing model between sponsor and CROs mainly hinges on building stronger working relationships, with the volume of work orders or the commitment of future work being the main drivers for building a long-term relationship. Consequently, a major paradigm shift in this outsourcing model would be needed for large CROs to better service biotechs, given the limited pipeline and increased funding risks that tend to characterise them.

Micromanagement Can Be Counterproductive

Micromanagement by a sponsor in a CRO relationship occurs most frequently at the study management level.When applied correctly it may be appropriate and even advantageous. In fact, the sponsor study manager may have legitimate reasons to embrace a micromanagement approach in certain situations. For example, the sponsor may possess significant experience as a CRO, which can be used to help navigate through a particular challenge that their CRO may encounter. Also, a more handson approach by a sponsor study manager can be beneficial in order to ensure that communication pathways are maintained between all parties in studies involving multiple CROs. Conversely, a very hands-on approach can be damaging and counterproductive, especially in a strategic outsourcing model. By definition, strategic relationships should involve a significant degree of trust. When a sponsor insists on a very hands-on approach at this level – by, for example, challenging a CRO at multiple decision points, no matter how significant – this tactic is likely to adversely affect the relationship.

It’s quite easy to misuse the highly hands-on approach, which has brought about the negative connotation of the term ‘micromanagement’.When overused, it can erode trust, result in inefficiencies in both organisations – including increased costs – and may unintentionally steer the overall outcome of a clinical study. One theoretical cause of an unintended outcome relates to the observer effect, where, in physics, the actual act of observing will change the outcome. For example, the act of checking the pressure on your tyre will release some air, which will result in a change of tyre pressure. Given the complexity of clinical trials, coupled with an unintended outcome by the sponsor, the consequences of misusing a micromanagement approach in these settings may be significant and irreversible.

The Influence of Personality Types and Corporate Culture

Before a decision is made on whether there is a need to micromanage from the client’s perspective, one must also consider the different personality types and experience levels of the individuals involved in the partnership. Beyond just the individual, however, personality types can in fact drive corporate culture, which in turn can influence how strategic outsourcing models are handled between a client and CRO. A very hands-on approach at the client outsourcing level is very costly for their staff and does not efficiently utilise the CRO’s expertise in the relationship. In addition, extreme micromanagement may distract the organisations away from their core competencies and deliverables, which ultimately would hurt the sponsor and CRO in the execution of their clinical studies.

The Factor of Timing in Four Phases

The concept of time is also a factor. More specifically, the specific phase of the sponsor/CRO relationship should help dictate the level of hands-on activity.The evolution of this relationship can be divided into four phases: entry, execution, commitment and control (see Figure 1).

The entry and execution phases introduce the first steps in the relationship between the CRO and the sponsor, in which the CRO works to establish trust by successfully executing a small number of trials, and then expanding its role over time.The level of hands-on management by the client is often quite variable in these initial stages.

With successful service level execution, the early phases can lead to the commitment phase, which is the peak of the relationship in terms of the sponsor’s hands-on stance. At this time, the sponsor and CRO are making a major investment in the relationship, as they secure specific documentation such as a master service agreement and programme charters, and define key performance indicators for the relationship. At the same time, they need to establish essential communication and escalation channels.

If the level of investment has been high and sponsor service level expectations have been fulfilled, the CRO and sponsor are more likely to be satisfied with each other in the fourth and final phase: control. By the time the fourth phase is achieved, the sponsor should be able to step back and act in a less hands-on manner, while relying more on control tools such as scheduled operational meetings, governance meetings and regular reviews of key performance indicators. Based on the feedback from these controls, the sponsor can adjust the level of hands-on activity if needed.

‘Voice of the Client’ in Action

More and more companies have introduced a dedicated alliance management function within their strategic outsourcing model.This works as the ‘voice of the client’ within the company and is typically introduced during the commitment phase.The responsibilities of this position include the development and implementation of global processes to ensure quality and consistency for all the studies the CRO manages for their clients.The alliance manager acts as the key contact between both organisations to ensure clear and concise communication, allowing for swift issue resolution and straightforward implementation of strategic decisions.When assigning an alliance manager during the commitment phase, one should take into account such considerations as personality types, experience and corporate culture, as it’s important to ensure the best fit across organisations.

If this model is chosen, it is also important to formally structure it within the organisation. Companies that use a dedicated alliance management function to coordinate their activities are about 70 per cent more successful than companies without one, according to a recent article by Dr Harbir Singh, management professor and leading researcher on strategic alliances at The University of Pennsylvania’s Wharton business school (1).

Future Trends

Big Pharma’s use of strategic outsourcing models continues to rise, with the most recent industry trends seeing a decrease in the number of preferred CRO vendors being chosen. Some would argue that this reliance on a smaller coterie of preferred CROs might be the result of trusting and effective relationships between sponsors and a select few CROs who have succeeded in implementing structure, processes and control mechanisms that govern their relations. Micromanagement would be unnecessary in this environment.

Overall, many factors may influence the level of hands-on management that a sponsor may need to exercise in working with a CRO in a strategic outsourcing model – time, experience, company culture and corporate needs. In the long run, investing the time and resources to understand the drivers of sponsor micromanagement will ultimately help the organisation to strengthen client relations and successfully execute clinical study management.

Reference

  1. Singh H, The Key to Successful Alliances: Developing Firm-Level Capability, Wharton@Work website, accessed 4 February 2011, http://executiveeducation.wharton.upenn.edu/wharton-at-work/1102/successfulalliances-1102.cfm?roie=0681&slx=eb1102

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Erasmo Messina is the Director of Alliance Management and Project Operations at Clearstone Central Laboratories. He has more than 10 years of experience in central lab operations and oversees Clearstone’s strategic alliances with some of the largest and most distinguished pharmaceutical companies in the world. Erasmo holds an MBA in Finance and Marketing from the York University Schulich School of Business, and an MSc in Pharmacology from the University of Toronto.
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