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International Clinical Trials

Risky Business

The clinical outsourcing world has always moved in cycles. Drug development companies – particularly the bigger players – shift from building large internal teams, to blending insourced staff with permanent teams, onto outsourcing projects or programmes, passing through functional outsourcing and arriving at strategic partnerships – before starting the whole process again.

This evolution of the outsourcing model is driven by various factors, including the economic climate, customer satisfaction at a specific point in the cycle, the desire for new management teams to try a new approach, and the direction in which CROs want to develop.

Even a cursory glance at industry press reveals that, in recent years, the sector has shifted towards the strategic partnership end of the model – prompted by the tough economic climate and associated desire for savings, coupled with the consolidation of the top end of the CRO market. As a result, big CROs increasingly now need large contracts to satisfy sustainability, growth and, ultimately, their shareholders.

CROs and their customers need to be aware of the risks from the strategic partnership approach. On the CRO side, we have already seen evidence of shareholder dissatisfaction where predicted revenues from a partner do not meet market expectation. CROs cannot rely on only one or two partnerships because this makes them vulnerable; the problem is that, once parties agree multiple partnerships, individual sponsors need to ask: is my relationship still ‘strategic’?

This issue is set to become more important as fewer large CROs service more partnerships, in tandem with an increasing burden of shareholder expectation due to more of them becoming public companies. It is a model that looks vulnerable in the medium to long term.

Risk Mitigation

Strong businesses are continually assessing risk, and preparing mitigations and contingencies to counter potential problems before they happen. Sponsors need to take the risk assessment phase of any negotiation to enter into a strategic partnership very seriously.

The sheer volume of work from each partnership can create capacity issues for a CRO when adding another major strategic customer. In terms of mitigation, sponsors should consider their portfolio. It may be prudent to collaborate based on product, rather than going all-in with one CRO. In addition, it may be sensible to retain an element of functional outsourcing for certain processes.

By adopting a more bespoke approach, sponsors can mitigate risks in terms of delays to programmes, capacity issues, or a major change within a sole provider – for example, wholesale overhaul of a senior management team.

Effective Relationship

Signing up to a five-year partnership will underline that the parties are committing to a much longer relationship. All the clinical trials that commence during that time, and especially in the latter years, extend the agreement to a much longer period. But in an industry with a relatively high turnover of staff, there is some risk that the CRO evaluated at the time of signing the deal may be quite a different one by the end of the term.

Pricing of services – particularly technology-related services – within the industry may reduce over time, so being locked into the same pricing for five years could turn out to be quite unattractive. A prudent approach might be to ensure that the partnership agreement is not exclusive and makes provision for interim review and termination.

There is, of course, the view of 'better the devil you know'. The relationships that develop in a partnership arrangement can often facilitate a collaborative way of working through the problems that inevitably arise. But, although this approach has its merits, it eliminates the chance of finding alternatives that are genuinely better for the sponsor. For example, there may be a definite need to rescue a study where patient recruitment has been too slow and shows little sign of picking up, or capacity is not meeting demand; or there may be better technology, better pricing or more attentive customer service available elsewhere.

Attentive Service

At the root of all strategic partnerships is the intention to have a consistent team, retain knowledge, create efficiencies and work on a volume basis in order to facilitate lower costs for the sponsor and greater profit for the CRO. However, is it right to assume that this can only be achieved by a sponsor outsourcing everything to just one or two large CROs?

Functional outsourcing of individual disciplines like statistical programming, monitoring or data management has been shown to produce some significant savings. Furthermore, smaller specialist CROs can be more attentive in delivering these services. Sponsors can also consider the concept of centralising services for a single drug or device which, even when outsourced to a small CRO, can achieve the same benefits. Keeping the data with one specialist provider, for a series of studies related to the one product, can ensure consistency of team and file formats, as well as reuse of work. This facilitates the use of specialist clinical teams from different companies, without ending up with distributed, inconsistent data.

Performance and Procurement

There may be a risk in telling a CRO that it is now the preferred partner for the next five years, since this can reduce the pressure to perform. The counter-argument is that a challenging service-level agreement can be put in place at the outset, but human nature being what it is, there could be a tendency to put greater effort into impressing customers that could go elsewhere at the end of the first study.

One of the key attractions of a strategic partnership is the time saved at the procurement stage – a reduced number of vendors equals fewer proposals to review, no bid defence process, fewer master service agreements (MSAs) to arrange, no negotiation. Of course, the work of the outsourcing team remains in so far as each study still needs to be scoped and quoted. However, by not including others in the bid process, the sponsor may be missing out on finding a team that is immediately available and the best vendor from a therapeutic, capability, technology, pricing or customer service perspective. So it could be argued that procurement loses its value through strategic partnerships by ceasing to seek the optimum solution in an ever-changing market.

Sustainable Model

Vendor selection does not have to be a painful process. A well-designed, comprehensive request for proposal (RFP) can streamline the vendor selection process. It should allow easy comparison of vendor bids that can be taken into account alongside the sponsor’s impression of the CRO team.

CROs and sponsors could also avoid those lengthy delays from legal departments if the industry worked together to develop a standard RFP, MSA, comprehensive development agreement and task order. The Pharmaceutical Contract Management Group, which has over 100 members in 11 countries, is already discussing it – so perhaps the notion is not so far from being a reality.

If history is to repeat itself, the industry will see a move away from strategic partnerships, towards building up internal teams and a mixed model. This will depend on the progress of any global economic recovery, and the ability of CROs to deliver to both their customers and shareholders.

It may benefit sponsors and CROs alike to take a step back and look at the outsourcing models and, rather than react to the wrong drivers, work to build sustainable, practical and efficient models in terms of R&D. That way, we may be able to avoid another trip around the outsourcing cycle and push the industry forward – something patients will certainly thank us for.

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Over the past 25 years, Chris Hamilton has worked in the pharma, CRO and publishing sectors. He is currently Global Head of Business Development and Marketing with CROS NT, a leading clinical data services company that provides data management, statistical and medical writing services, along with a range of technologies. Chris works in a consultative manner with sponsors that seek more strategic outsourcing practices. He holds a BA from Trinity College Dublin and a Diploma in Strategic Planning and Change Management from the Irish Management Institute.
Chris Hamilton
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