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Big Pharma has increasingly turned to strategic outsourcing models to realize their own enterprise-wide strategic goals. Small- and medium-sized companies need to follow suit.
The pharmaceutical outsourcing industry has experienced a shift from the more traditional outsourcing models to strategic partnerships. Large pharmaceutical companies are looking to contract research organizations (CROs) to provide cost efficiencies and productivity in clinical development and are rewarding their CROs with broader and longer-term contractual agreements. Single study outsourcing models have evolved into more in-depth relationships between sponsors and CROs, reducing set-up costs and creating business alignment, long-term efficiencies and performance improvements.
In recent years, the largest pharmaceutical organizations are increasingly using strategic outsourcing models to take full advantage of their CRO's core competencies and realize their own enterprise-wide strategic goals. Small- and medium-sized pharmaceutical and biotechnology companies have not yet leveraged this strategy on a broad scale, and as a result, represent an area for growth in the outsourcing arena. In many ways their objectives are the same as those of large pharmaceutical companies: to access the CRO's best team and obtain high quality deliverables in a timely manner, competitive pricing, and efficiencies of scale.
The Transactional Outsourcing Model
The transactional or tactical outsourcing model emerged in the 1970s, when pharmaceutical companies began to outsource their clinical trials to private companies that had been established to provide drug development services to pharmaceutical companies. However, these collaborations between sponsors and CROs primarily focused on the development of an individual drug, and did not take on a more collaborative and dynamic format with aligned business objectives and long-term strategies.
The transactional outsourcing model allowed pharmaceutical companies to access additional development capacity and expertise without adding fixed costs to their infrastructure. However, it did not leverage the efficiencies of longer term relationships for budget-minded pharmaceutical and biotechnology companies.
The Strategic Outsourcing Model
Facing patent expirations and potential earnings compression, pharmaceutical companies have been revamping their innovation process and pursuing new strategies to improve drug development efficiencies. This has resulted in increasing reliance on CROs as a means of improving productivity, addressing clinical trial challenges and lowering fixed costs. The strategic outsourcing model provided a viable approach to collaborative drug development by aligning objectives and business processes of the sponsor and CRO. Biotechnology and smaller pharmaceutical companies with well developed pipelines are also well positioned to take advantage of the strategic outsourcing approach.
Cultural alignment also plays an important role in the success of a strategic partnership. Sponsors should focus on partnering with a CRO that can support program-size growth, has a global footprint, uses compatible technology infrastructures, can develop close, strong relationships with its clients, and is willing to address governance, problem solving and issue resolution in an efficient, transparent way. Ultimately, this will allow for the sponsor/CRO partnership to be built around close communication and strategic development.
In specific therapeutic areas, access to well qualified investigators, and thereby patients, can play an incredibly important role in the selection of a CRO for a strategic partnership. When a CRO has established close relationships with individual study sites and fostered a collaborative, performance oriented framework, enhanced productivity can result, shortening timelines.
Since the strategic outsourcing model was first introduced, it has been debated whether small pharmaceutical and biotechnology companies are automatically disadvantaged. This does not have to be the case if smaller sponsors employ the same techniques and approaches when working in partnership with CROs. In fact, the advantages of close, collaborative and efficient relationships with their CRO can expedite their drug development programs and provide the most efficient use of resources.
Advantages to Sponsors
Sponsors can enjoy a number of significant benefits when implementing the strategic outsourcing model.
CROs offer dedicated personnel with specialist knowledge in a specific therapeutic area or program type, such as pediatric indications, as well as provide local expertise access to investigators. In addition, sponsors can reduce their fixed cost base and flexibly respond to changes on resource requirements for clinical services in a variety of markets.
The strategic outsourcing model can also help sponsors penetrate new markets. If pharmaceutical and biotechnology companies have not managed to expand into all emerging markets, by partnering with CROs that have made significant investments in Asia Pacific and Latin America, sponsors can greatly leverage the CRO's local resources and expertise. Strategic outsourcing services can range from custom application development, clinical process outsourcing, full service studies or turnkey data management centers. These platforms and infrastructure can be established at the beginning of each strategic partnership, resulting in considerable time and cost savings as additional implementation time and resources will not be required with subsequent studies.
To ensure customer satisfaction, many CROs hire an external firm to conduct independent and comprehensive surveys at the midpoint and end of each study. This practice offers sponsors confidence that the services provided by the CRO are of optimal quality, while also enabling timely response to any problems that may occur in the process. Combined with an established governance structure, these quality processes result in time savings for the sponsor, allowing them to dedicate time to building more robust pipelines. Additionally, sponsors are able to adapt flexibly to business changes and respond quickly to competition.
Advantages to CROs
CROs can also benefit from the close relationships that strategic partnerships with sponsors provide. CRO team members have the opportunity to work closely with senior staff in a consultative manner and encourage timely and effective action in response to the needs and strategy of the clinical development programs. In addition, through these close relationships, CROs are able to clearly understand the goals of the entire drug development pipeline and build successful strategies to support their clients.
Increased visibility into their strategic partners' pipeline also allows CROs to plan appropriately for the best-suited therapeutic and regional resources for the clinical development program. Standardised processes are developed that govern the relationship, enable a more productive relationship and reduce the up-front business development expense that would have been required in the transactional model.
The advent of strategic partnerships has significant advantages for both sponsors and CROs. Their success however, lies not in their formation, but in partnering with a CRO that has the appropriate resources, expertise and global reach to provide the best cultural and operational advantages to the sponsor. Both groups will benefit from shared objectives and approaches to target the most efficient program execution and the partnership governance will ensure that the program's studies meet both the sponsor's and CROs mutual objectives.