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European Pharmaceutical Contractor

Double Impact

With the demands of global biopharmaceutical companies having reached unprecedented levels, the importance of truly evolving the working relationship between sponsors and contract research organisations (CROs), while shedding reliance on traditional and often limited outsourcing models, has never been greater. For those CROs positioned to advance such a movement, the planning around portfolio growth and business expansion must now involve increasing the number of strategic-oriented engagements with sponsors.

Integrated Arrangement

The forging of strategic partnerships – usually described as integrated, long-term relationships on services across the entire drug development spectrum – has been popular in the lexicon of clinical outsourcing for several years, as alternatives to transactional, study-specific arrangements. However, some of these alliances, when closely examined, are no different than traditional industry models (for example, bidding between a shortlist of suppliers on individual projects as they arise).

It is critical, therefore, that strategic relationships today foster new models in which sponsors and CROs act as true partners, with shared goals and shared risks to form alliance partnerships. These dynamics allow the engagement to be based on a commitment of resources over a number of projects ahead of time, thereby providing significant advantages in resource planning and budgeting, as well as creative thinking around clinical trial design and protocol development.

Effectively launching, implementing and managing these large-scale partnerships, however, comes with many challenges. They require sponsor and CRO teams dedicated to upfront planning, and committed to establishing the metrics and organisational governance necessary to create transparent lines of communication. These measures – along with other factors such as shared vision, aligned culture and joint accountability – though often overlooked, are vital components of successful relationships, and key differentiators that separate true partnerships from other outsourcing models.

New Thinking


The need for more genuine strategic relationships is evident when examining the continued market pressures in the biopharma industry. These include rising R&D costs, diminishing drug pipelines, recent and looming patent expirations on top-selling products, and increased regulatory-approval hurdles. The costs of conducting clinical trials reportedly rose 60 per cent between 2008 and 2013 (1). In addition, between 2012 and 2018, more than $290 billion of prescription drug sales will be at risk of losing patent protection (2).

Given these challenges, the long-term success of sponsors will depend on their ability to embrace more efficient R&D models, a new report by the Tufts Center for the Study of Drug Development finds. The study notes that there is growing activity around knowledge sharing and resource leveraging through such avenues as strategic alliances, collaborative partnerships and multi-company consortia (3).

Though the challenges for biopharma continue to evolve, their paths have been well-documented for several years. It appears that a shift in thinking is taking place, focused on using new outsourcing models to help change these dynamics for the better.

Recognising the inefficiencies in current outsourcing models, an increasing number of sponsors have adopted, or plan to adopt, some form of strategic outsourcing as part of their overall R&D strategy. A recent industry survey of biopharma executives found that 85 per cent of the respondents who were engaged in strategic partnerships believe that these arrangements were beneficial for their relationships with CROs. They pointed to resulting advantages such as reduced oversight, lower fixed costs and access to capabilities not available internally (4).

Strategic Improvement

For sponsors, there are transactional cost savings associated with strategic relationships. By not having to initiate an ongoing bidding process on a projectby- project basis, sponsors can better target the resources that are familiar with their organisation, thus reaping the potential financial benefits of a longerterm outsourcing deal.

Evidence in CRO circles has also pointed to an industry shift from contractual trial-by-trial arrangements towards long-term strategic alliances, particularly between larger biopharma and clinical service providers. Analysts attribute the activity partly to increased outsourcing penetration and market share gains for top-tier CROs (5).

CROs entering strategic relationships are typically prepared for lower profit margins at the outset, in exchange for a larger commitment of work and greater involvement in potential milestone-based gains. In addition, due to the lengthy time periods of these deals, CROs can choose to invest in infrastructure that may not be billable, but can, nevertheless, help to build the foundation for a successful relationship that would not be considered in a one-off transaction. With predictable revenue and the ability to plan for inevitable changes in R&D portfolios (for example, drugs that get dropped or fail in testing), CROs in strategic alliances may be on more stable financial footing and, therefore, better able to manage any changes effectively.

Ideally, strategic relationships allow the sponsor and CRO to focus on continuous improvement and joint-process development – concepts that lend themselves well to cross-functional collaboration in many clinical study tasks. They have also helped evolve relationships to include shared functions in areas traditionally considered core competencies within the sponsor, such as early-stage development, particularly around the design of clinical trial protocols and the selection of sites and investigators. These arrangements enable increased collaboration on the overall development of certain compounds and, thus, more shared accountability from the CRO.

More Refinement

Despite the value proposition of strategic relationships, the need for these types of models to be more consistently applied in the drug development arena is critical. While few would argue the merits of developing and maintaining collaborative partnerships in clinical research, the parties involved must be honest in assessing whether respective infrastructure and capabilities are strong enough to sustain the relationship over time.

The sheer size and scale of these deals requires an equally broad evaluation of the prospective partners and their potential alignment of knowledge and resources. For example, CROs pursuing alliance partnerships should possess strategic expertise in pipeline management, registration strategies, compliance, due diligence and other important aspects of the drug development and commercialisation continuum.

In addition, sponsors have historically selected their CRO partners based largely on the providers’ experience in one given therapeutic area or particular project type. When exploring strategic alliances, it is important that biopharma choose CROs with capability and support that spans multiple therapeutic areas and project functions.

Compatibility

All sponsors approach strategic partnerships slightly differently, driven by their respective cultures and overall philosophies on outsourcing. Nevertheless, each company pursuing these engagements must first determine if the CRO is a natural fit with their organisation, particularly in terms of expertise and vision on drug development approaches in shared areas of interest. If the parties are deemed compatible, then it is crucial that the CRO partner is flexible in identifying the right roles to support the relationship through the deployment of its own specialised alliance management function – one equipped with the necessary tools to advance the engagement.

When deployed appropriately, the alliance manager is an essential leader in this effort, driving successful delivery of the sponsor portfolio and advancing the relationship. This is a relatively new and evolving role for CROs, and a key position that spans all disciplines and areas of outsourced work. The prospect of managing multiple projects with one sponsor requires the CRO to carefully consider several key factors. Those include questions surrounding how the resource planning will be performed, ways in which as many staff as possible can be dedicated to the engagement, and how to bring focus to the alliance partner that is unique compared to other customer arrangements.

Properly assessing such factors during the planning stage can help facilitate a successful launch of a strategic alliance. From there, however, several challenges remain in the implementation of these relationships. One is ensuring that both partners are committed upfront to investing the time and resources necessary to establish an optimum framework for success. If a solid foundation is not in place during the implementation – built around the use of metrics to drive delivery, not just track results – it becomes harder to demonstrate the partnership’s success within the sponsor.

In addition, biopharma should be mindful of the complexities involved with transitioning from existing outsourcing models, such as preferred providerships, to formal strategic alliances. Being able to manage change effectively is critical to this process, as are efforts to overcome resistance to change – a response long associated with the industry. Doing so requires a distinctly different skillset around alliance management and CRO oversight than what has historically been used in clinical outsourcing, where individual project approaches were the standard. It also emphasises the need for establishing open and honest two-way communication from the beginning.

Organisational Structure

Essential to the ongoing management of strategic relationships is ensuring that the appropriate organisational structure is in place to drive the partnership. Strong and equal leadership on the sponsor and CRO sides is crucial to that mission. A shared plan around structure and related commitment requirements should be created at the highest level and designed to best optimise the operational teams at the respective organisations. In portfolio-based partnerships, CRO teams often feel like an integral part of the sponsor’s delivery unit. This helps increase the stability of staff, as individuals feel in many ways like an extension of the sponsor.

The establishment of operational governance at each tier of clinical trial delivery is also integral to the success of strategic partnerships. These tiers include the project, compound and portfolio levels. Specific functions within these areas are important in driving and ensuring consistency across all projects, whether related to financial, operational or process delivery.

In addition, because biopharmas and CROs are typically structured by therapeutic area – where teams operate somewhat independently and have different roles and functions – it is critical, when building relationships, that robust management and oversight is applied in a standard fashion across the diverse aspects of the business. To that end, individuals placed in various influential roles governing the partnership need to be uniquely skilled in managing the tools and process involved.

Sponsors and CROs have been busy identifying and placing people in oversight roles and alliance management positions that did not exist in the industry even three years ago. Due to the relative newness of alliance partnerships in the life sciences industry, finding qualified individuals for these roles can be challenging. Drawing from the experiences and lessons of other industries more advanced in outsourcing techniques, such as the automotive and software industries, could benefit these efforts moving forward.

Building Relationships

Managing the cultural component of strategic relationships is critical too. Sponsors and CROs have different cultures, so it becomes important to measure how effectively they are aligned. This can be accomplished through learnings from previous working relationships, or from a thorough evaluation process. The latter often leads to conversations focused on accountability and how much responsibility the CRO should hold relative to commitment, risk sharing and factors such as project bonuses or penalties.

It is crucial that such measures are clearly defined between the partners and that the engagement is founded on open communication and trust. Trust is built over time, but often biopharmas inherently distrust CROs to put their best interests first. In reality, however, many believe sponsors would benefit from trusting CROs more because they can provide a less biased perspective and potentially a more end-to-end view of a project (6). But without open communication and a willingness to trust each other from the outset, the ability to achieve success is significantly challenged.

There have been cases in the industry where a strategic relationship was formed, but turned out, in fact, not to be a true partnership and collaboration involving risk sharing. Instead, they evolved into a more transactionaltype relationship, but with risk transfer from the sponsor to the CRO. Avoiding such scenarios requires organisational governance committed to true partnership and risk sharing, where both parties are accountable for the upsides of clinical development programmes, as well as any potential downsides.

Alliances are the Future

While only a limited number of sponsor- CRO relationships have progressed to alliance status, companies are aware of the advantages of advancing traditional tactical-based relationships into more nimble strategic partnerships. Coupled with the continued rise in drug development demands for biopharmas, there is increasing recognition of the need to evolve these relationships in the hope of fully realising the true value of strategic outsourcing. CROs can do their part by structuring working relationships that drive benefits in quality, consistency, efficiency and a bottom line that far exceeds what is possible in traditional outsourcing models. Those CROs with established service expertise and global reach have begun actively creating leadership teams focused solely on structuring and managing alliance relationships.

The key to success, however, comes down to creating the right roles and right infrastructure to effectively support these large-scale partnerships through shared goals around commitment, transparency, governance and metrics. The benefits of close collaboration across project teams on both sides of the engagement can potentially be many, and allow for significantly improved application of best practices and first-hand experience at all levels of the partnership.

References
1. As early-stage clinical trial costs rise; late-stage costs level off, Reuters, 8th November 2013. Visit: www.reuters.com/article/2013/11/08/nc-cutting-edgeidusnbw085026a+ 100+bsw20131108
2. Responding to the patent cliff, Pharmaceutical Technology Europe, 1st July 2013. Visit: www.pharmtech.com/pharmtech/articlestandard/article/detail/817408
3. Drug company success depends on new development paradigms, Tufts Center for the Study of Drug Development, 7th January 2014. Visit: http://csdd.tufts.edu/news/complete_ story/pr_outlook_2014
4. Strategic partnerships are good for CRO engagement, finds Parexel, PharmaTimes, 23rd April 2013. Visit: www.pharmatimes.com/article/13-04-23/strategic_partnerships_ are_good_for_cro_engagement_finds_ parexel.aspx
5. Strengthening moats mean improving returns for CRO investors, Seeking Alpha, 31st December 2012. Visit: http://seekingalpha.com/article/1088091-strengthening-moats-mean-improvingreturns-for-cro-investors
6. A closer look at strategic alliances between drugmakers and CROs, Regulatory Focus, 16th April 2012. Visit: www.raps.org/focus-online/news/news-article-view/article/1282/a-closerlook- at-strategic-alliances-betweendrugmakers-and-cros.aspx


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Andrew Townshend is Vice President of Alliance Development at INC Research, where he is responsible for developing strategic accounts within the pharma and biotech industries. His focus is on developing novel and innovative engagement and alliance models. Prior to this, Andrew was Vice President and Worldwide Head of Outsourcing for Pfizer in New York.

Judy Swilley, PhD, is Executive Vice President and General Manager of INC Research’s Global Clinical Operations and Alliance Management. She has over 20 years of experience within CROs, including executive-level positions in strategic partnership development, global clinical operations, data operations, project operations, clinical monitoring, and staff training and development.
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