How to Make the Marriage Work
Having decided to move to a more strategic partnership, how can you do it smoothly and successfully? The execs we interviewed
generally agreed on the following five tips:
1 Make a total commitment to the transition Sponsors too often ignore the importance of—or discount the difficulty of—such a sustained company-wide shift. If parts of
the organization are allowed to maintain "pet" providers, or insist on keeping a competitive environment, the transition is
almost certain to fail. At minimum, a three-year commitment is typically required to make the transition, ride out bumps,
and create a stable environment.
2 Determine which parts of drug development must be retained internally An unbiased evaluation of core capabilities typically reveals that many tasks can be fully outsourced. (For a phase-by-phase
breakdown, see "R&D Outsourcing Continuum," page 66.) For instance, sponsors often view their interface with regulatory agencies
as too critical to be handled externally. However, their regulatory affairs groups often handle such routine agency filings
as annual reports, requiring additional staff. Moreover, most sponsors fail to meet all annual report deadlines, since that
work tends to take a back seat to NDA filings and other essentials. Outsourcing the less significant tasks can reduce internal
workload and increase on-time performance in areas like annual report submittals.
3 Define the partnership Topping the list of core elements are goals, duration, service levels of both parties (such as staff availability, turnover,
cycle times, and quality), workload, funding, transition of work from the sponsor (and its many vendors) to the partner, governance,
information sharing, and problem resolution (for both project and relationship issues). It is critical that an agreement be
designed based on a vision of shared success rather than on factors that might result in penalties or a breakup. For example,
a failed enrollment campaign must be viewed not as the CRO's failure, but as a mutual mistake to be corrected. In this way,
the partnership can improve both organizations through better planning, information sharing, and problem solving.
4 Select the right partner Companies should typically identify more than one CRO that shares your stated vision and supports the anticipated pipeline.
Instead of using the typical competitive Request for Proposal process, evaluate and compare each potential partner's business
philosophy and day-to-day practices.
5 Build a strong relationship with the CRO partner An investment of both time and commitment by both parties is essential to making good on a shared vision.
Making the move from a multi-contractor approach to a more limited number of outsourcing partners can be done in two different
ways: Ask a single partner CRO to manage all the various vendors now under contract, or consolidate the various vendor tasks
into a few long term CRO contracts.
The first approach, which is tantamount to simply "outsourcing the outsourcing function," is quicker and creates minimal disturbance.
The partner takes over management of the existing patchwork of vendors and contracts going forward. No economies or efficiencies
are gained, but you are now relieved of a non-core task and its incumbents hassles.
The second approach is slower but ultimately more valuable. For instance, as clinical studies finish, the follow-on studies
are transferred to the strategic partner—as are other clincal-study functions as contracts with existing vendors terminate.
All of this is done in a phased way to minimize disruptions in portfolio activity and avoid overload.
While the advantages of partnership relationships are still only theories, the test cases are too few and too new for proof
of concept. And some disadvantages were voiced by our interviewees. Several sponsors, particularly small and mid-sized companies,
expressed concern that "as a small company, we won't get the best CRO staff. They [CROs] allocate resources based on availability
and the promise of future business. Small companies can't hold up to the larger companies."
Yet given the large and growing number of full-service CROs worldwide, and the competitive nature of the business, it is likely
that you will find a sufficient number of CROs willing to become strategic partners. Also, as the outsourcing market migrates
to more strategic relationships, entrepreneurial CROs will likely find new ways to ensure a sponsor's teams satisfaction.
Sponsors have also expressed concern that high levels of CRO staff turnover will prevent companies from realizing the maximum
benefits of strategic partnerships. Those sponsors already engaged in partnership relationships are quick to respond that
they themselves have comparable, if not higher turnover, and that their partnerships typically offer good stability and continuity.
One risk that must be mitigated is a relationship termination. Given the time-consuming care that must be given to a collaboration's
successful delivery on pipeline commitments, any breakup is disruptive and costly. For this reason, you should plan your partnerships
carefully and commit for the long term. However, it may also be prudent to establish multiple strategic partnerships to guard
against the loss of a single partner.
During the next several years, most outsourcing biopharmas anticipate gradually establishing partnerships for select new programs
while also maintaining transactional relationships to support the existing portfolio. As a result, the landscape for niche
and small CROs will no doubt change. Given the growing volume of global clinical trials, these companies will continue to
have an important role to play. But they may need to form tighter relationships with major CROs that have been engaged as
partner providers. The major CROs can act as lead contractors, managing a larger group of individual service providers. This
model is similar to that of the "prime contractor" used by the US government.
The current drug development environment, with tougher capacity constraints and rising global activity, necessitates that
sponsors achieve higher levels of performance and efficiency. Strategic partner-based outsourcing relationships hold promise
in helping you meet that challenge through a competency-based team approach to managing development portfolio demands.
Kenneth Getz, MBA, is a senior research fellow, and Rachael Zuckerman, a research analyst, at the Tufts Center for the Study of Drug Development, in Boston. David Zuckerman is president of Customized Improvement Strategies LLC, in St. Louis, and author of "Pharmaceutical Metrics" (Gower Press,
2006). Charles Piper, PhD, is president of CEP Consulting, in Chicago.