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Pharm Exec spoke with Skalicky about new ways that life sciences companies are engaging with outsourcing.
Eversana’s president and chief revenue officer, Greg Skalicky, spoke with Pharm Exec about trends that he’s seeing in the industry and its relationship with outsourcing.
Greg Skalicky: I’ve been in the industry since ’95. In the mid 90s, pieces of things were outsourced on the clinical side. A clinically outsourced program, compared to a commercially outsourced program, is different but similar in structure. Clinical research associates (CRAs) are very similar to pharmaceutical sales staff in commercial. What we saw back in the ‘90s was that if you spoke to a large company about outsourcing a clinical study report or statistical analysis plan, they could never give up project or site management. They’d want to keep those things in house.
We felt that we could build something from an operational perspective that could supersede that way product launches are done and have it as a single operating unit where you can take a product, drop into an ecosystem that will provide complete commercial support. It’s almost a replication for how it’s done in clinical where CROs are used by large pharma, along with how the small- and mid-tier players conduct clinical programs.
Skalicky: From an evolution standpoint, the benefit from a cost perspective was so great to outsourcing from a full service perspective that it completely tipped and the industry went down that road. The parallels that I see here is that if you look at how commercialization is done, definitionally, when a company says, “we’re commercializing on our own,” that means that they’re hiring a field team of sales reps. There is the agency, the marketing component, the channel, the distribution component, the patient services hub, the call center component, MIPB (the pharmacovigilance/safety piece) the pricing component, all of those pieces would be outsourced to different vendors. You then have a product that you’re going to market with and your operating model essentially consists of a field team and eight vendors. What will happen when you launch is that there will be unforeseen hurdles and things that happen where you need to be very agile in how you adjust to them. Imagine having nine different PNLs in an operating model and trying to make changes that can dramatically affect one of the other pieces and you need to align these pieces. It’s very daunting.
Skalicky: Those silos are a big gap. I watched clinical move to a full-service approach, and I see all of those same parallels in the commercial side of the business. The reason for that is because large pharma was built to support blockbuster products. Peak sales per asset in the past ten years have gone from 800 million to 400 million. Also, 60% of RND is in oncology and many of these are in third, fourth-, or fifth-line therapies or immunotherapies. Those are very surgical commercialization approaches; the swim lanes are very narrow. You must have a very streamlined and effective strategic operation to deal with that.
Skalicky: If you look at small- and mid-tier companies, they are essentially developing one asset that they spend 10 years and probably billions of dollars developing. Then they reach a stage of going to market or licensing out the product. The economics associated with licensing are that they would retain about 20% of the value that they create, pharma would take about 80%. Working with a CRO could help them retain 95% of that value. For first time companies, trying to hire all of the vendors necessary to launch the products has such a high level of complexity that is beyond daunting.
There are about 40-45 FDA approvals each year, with a similar number of clinical response letter administered. If a company receives a CRL, that means they are delayed about 12-18 months from their original launch window. If they have hired staff, they will have to terminate 90% of their employee base the next day. The trends in large pharma are very specific. Companies with large employee costs are discovering that this is an unsustainable dynamic as they look at the pipeline, what’s coming through, and can they retain such a cost structure. We’re seeing a downsizing happening and companies are assessing what they’re going to do from a structural perspective.
Skalicky: The trend seems to be that companies are seeing a benefit in streamlining and using fewer vendors. We’re seeing pharma shift the same way it did in clinical because the cost pressures are there. Due to changing market conditions, companies that relied on one large product may now have to focus on many smaller products to build up the same value. Companies are finding the biggest challenge in finding ways to invest internally to make this possible. Seven out of ten launches do not meet expectations. It’s a problem, but it isn’t an accident. The number of first time launchers has increased by about three times over the past ten years. Their rate of success in year one is even worse than that.