Make a Match

Apr 01, 2009

Eli Lilly's August 2008 announcement that it will transfer not only its clinical trial monitoring function to Quintiles, but also its early drug development facility to Covance, sent tremors through industry R&D. That transaction, and others like it, signals a profound shift in outsourcing practices. More and more drug companies—including Merck and Pfizer—are moving from "transactional" (capacity- and project-based) outsourcing to "functional" (competency- and portfolio-based) partnerships. One industry exec said, "The pharmaceutical industry has sailed right into a perfect storm that will likely increase its reliance on CROs [clinical research organizations]: an uncertain global economic and political environment, profitability and productivity pressures, tighter regulations, rising workload and tighter capacity."

The acute need to increase productivity while cutting costs is driving companies to better leverage performance and efficiency in their CRO relationships; higher levels of integration and standardization are key. Based on in-depth interviews with 10

mid-sized and large biopharmas, we analyzed both the advantages and the challenges of this industry-wide shift. Here, we offer management how-tos to support outsourcing relationships.

Playing the CRO Field

Traditionally, companies have outsourced their clinical research tasks on an ad hoc basis driven by insufficient internal capacity. (For more on the rapid growth of worldwide clinical trials, see the chart below right.) The sponsors profiled in this study by the Tufts Center for the Study of Drug Development (CSDD) reported that they generally use transactional outsourcing to perform circumscribed protocol tasks such as site selection and management, study monitoring, data management, and some medical writing. By contrast, quality assurance, biostatistics, and regulatory affairs are typically handled by internal staff.

Under such ad hoc arrangements, sponsors interact with a large number of providers: full-service and niche CROs, as well as functional contract services that provide statisticians, medical writers, and the like. Sponsors typically solicit three to five bids, and select the one with the lowest cost. This approach is primarily tactical, often last minute, and focuses only on the current "work package." Although cost control is a primary goal, the unpredictable nature of these projects often results in cost overruns. Sponsors tend to micromanage the relationship to ensure communication, and require the provider to use the sponsor's standard operating procedures (SOPs). Middle managers usually do the planning and problem solving. As such, most governance is reactive.

More recently, major drugmakers such as Amgen and Wyeth have begun outsourcing on a functional rather than transactional basis. These functional arrangements give almost all responsibility for a function to a single CRO. One pharma sponsor told us, "The primary purpose of these relationships is standardization—of processes, practices, and systems. They can reduce duplication and inefficiency by [removing] overhead expense." (Under the study's rules of confidentiality, all quotes are anonymous.)

CRO Development Speed and Quality
Still, the outsourced function must be integrated with the rest of the sponsor's development activity, circumscribing the CRO's involvement in long term planning. For this reason, fully functional outsourcing tends to be tactical—and of limited value.