Three Challenges to CRO Success

June 1, 2002
Judith A. Nicholas, PhD

Judith A. Nicholas, PhD, is president of discovery and preclinical development

,
R. Ian Lennox

R. Ian Lennox is president and CEO of drug discovery and development sector for MDS Inc.

,
Douglas J. Squires, PhD

Douglas J. Squires, PhD is president and CEO for MDS Pharma Services.

Pharmaceutical Executive

Pharmaceutical Executive, Pharmaceutical Executive-06-01-2002,

The last few years have seen tremendous consolidation in both the pharmaceutical and contract research industries. The impact among pharma companies has created a heightened demand for productivity. Consequently, contract research organizations (CROs) have struggled to find their footing in a business where the number of customers has shrunk and the demand for speed and cost-effectiveness has risen. Delivering service excellence when customers' names and addresses are changing regularly is a challenge, resulting in disrupted continuity, broken lines of communication, and policies and relationships thrown into disarray.

The last few years have seen tremendous consolidation in both the pharmaceutical and contract research industries. The impact among pharma companies has created a heightened demand for productivity. Consequently, contract research organizations (CROs) have struggled to find their footing in a business where the number of customers has shrunk and the demand for speed and cost-effectiveness has risen. Delivering service excellence when customers' names and addresses are changing regularly is a challenge, resulting in disrupted continuity, broken lines of communication, and policies and relationships thrown into disarray.

Yet, under those circumstances, CROs can play a crucial role as providers of innovative drug discovery and development solutions.

This article presents the three challenges facing CROs-improving productivity, applying ingenuity, and delivering service excellence-and suggests ways they can more effectively serve the rapidly increasing needs of the drug discovery and development industry. If successful, the rewards-for CROs and even more so for the pharma industry-are boundless.

Where CROs Are Now

Outsourcing has grown dramatically-by nearly 70 percent since 1997, according to the Centre for Research Medicines International. Despite that, CROs have often failed to establish themselves as trustworthy and reliable partners with their customers. At the highest levels, those relationships remain tenuous. Cost regularly drives purchasing, and the overwhelming trend has been for pharma companies to assign CROs single projects rather than integrated programs that include multiple components of a compound's development cycle.

Short-term relationships are inherently transactional. In that capacity, CROs are merely vendors, and their customers cannot take advantage of the knowledge and experience those organizations have to offer. To the CRO, the benefit of a long-standing partnership is obvious: enhanced stability in an industry fraught with upheavals.

The benefits to the pharma industry are just as appealing. Such relationships, particularly in the context of disorder created by recent mergers, have the potential to shorten drug development timelines, improve compound quality, and increase cost-effectiveness-seductive promises in an age of unprecedented competition to find blockbuster drugs.

According to R&D Directions Pipeline 2000, to maintain their current growth in future years, pharma companies will have to quadruple productivity. That growth potential exists. A recent article in Scrip notes that the number of fundamentally different biological molecules discovered in the next century is expected to increase tenfold-but pharma companies will need help to exploit that potential.

The irony of the current merger trend is that, after consolidation, productivity expectations increase, but productivity itself may not. In fact, in the inevitable disruption that follows, pharma companies often see a downturn in output. Although consolidation often reduces costs, pharma companies still face the need to grow pipelines at an extraordinary rate to fulfill revenue demands.

Pharma industry behavior, such as the co-evolution trend, testifies to the demand for new solutions. Large companies such as GlaxoSmithKline have found that spinning off smaller therapeutic-category-based groups may increase productivity. Such groups are πorganized like biotech companies and focus on a narrow aspect of drug development. In many cases, those groups operate without the infrastructure of a large pharma company, using outside resources such as CROs instead. Big Pharma itself has realized what smaller companies already know: massive scale is not, in and of itself, the secret to accelerated drug development.

With such an emphasis on productivity, companies are pressed to perform research tasks more reliably, with greater accuracy, and at a higher speed. In many cases, that means turning to an outside resource. But only the CROs that master the following keys to success will transform those opportunities into meaningful partnerships.

Improve Productivity

Among the many ways CROs can help increase productivity, the greatest potential lies in the application of their scientific expertise. Pharma companies possess indisputable expertise in a variety of areas, but they cannot span the entire spectrum of drug discovery and development. A CRO's scientific acumen can offer a unique perspective as a consultant focused on providing specific solutions. This is most important at the earliest levels of research.

A multinational company asked a leading CRO for a pharmacology profiling proposal. The pharma company has recently reorganized into several "centers of excellence" to focus on drug development aimed at specific therapeutic targets. After examining its current assay list, the CRO offered specific suggestions for reworking the list and rethinking the company's pressure point data set. The CRO's focused pharmacology expertise was recognized as highly valuable; the project assigned to them and the client company revised its assay list according to the suggestions.

State of the Industry

Many CROs have the capability to run a specific list of assays. In the previous scenario, it is the CRO's consultative capabilities-the scientific knowledge, the ability to identify the customer's unique needs, and the ability to offer an outside perspective-that are invaluable.

In the past, industry emphasis was on speed and expense, and perhaps less on scientific relevance. But, today's pharma companies realize that the ability to hasten a compound through preclinical stages only to have it fail later does not improve productivity. A CRO that develops scientific solutions to improve lead optimization through better screening is vastly more valuable than a group with a prepackaged assay list and a low price.

CROs are unique in that they have seen and solved an enormous variety of challenges. What distinguishes a preferred partner from an average CRO is how well they've learned from their experience. A knowledge-based CRO can apply valuable intellectual resources to a wide scope of issues, making it a powerful ally.

Apply Ingenuity

The evolution of drug development has sped up in recent years. For CROs to play a valuable role, they must be ready with strategies to help their customers adapt to, and profit from, the changes. That includes exploring ways to realign business models with industry shifts. The new paradigm demands a higher level of creativity but offers greater benefits for both CROs and customers.

One example is risk-sharing agreements, which illustrate ingenuity in two ways:

First, they represent a fundamental shift in how drugs develop and are arguably one of the most significant trends in drug development today.

Second, each agreement is unique, demanding a level of creativity unusual for this industry. At a basic level the differences are obvious-large pharma companies are looking for agreements different from biotech firms-but within those categories (even within the same companies) are individual philosophies, requirements, and objectives. Risk-sharing agreements rarely begin with a detailed proposal. Only through a dialogue is it possible to discern what the critical needs are: the customer's concerns, their strengths and weaknesses, and the CRO's capabilities. Those plans evolve over time-requiring creativity, responsiveness, and resourcefulness.

In one hypothetical scenario, a large pharmaceutical company has always performed its Phase I studies in-house, because control over its product is of concern. But it is running at only 20 percent capacity. With no sign that it will increase, wild inefficiencies result. Now, imagine a CRO with vast resources in Phase I studies, even a global network of clinics. The potential for an alliance is there. Yet, it's unclear how it will materialize.

In that situation, it would be rare if every pertinent issue came to light in an initial discussion. Yet, a series of discussions may eventually reveal the company's management philosophy, fears, and concerns.

Not all CROs are involved in those types of strategic relationships. They require an uncommon scope of vision as well as significant commitments of time and energy. But vision and creativity alone cannot ensure a successful partnership. A CRO must have additional qualities to create the bedrock for those agreements.

Stability is essential. Without continuity of staff and management, long-term relationships are immediately at risk. There is no evidence that the current trend of mergers and acquisitions-among both pharma companies and CROs-will abate any time soon, nor is there any way to entirely alleviate anxiety regarding the future. In this instance, the structure of the contract can help. Building in clearly defined milestones, as well as contingency provisions, can help to reduce fears of uncertainty.

Although the complexities of risk sharing are considerable, its value has been established. Customers benefit from minimized risk and the ability to focus on their core competencies, knowing that a partner-with an added financial incentive-is making sure their drug development processes move forward with exceptional efficiency. Such agreements may be the best strategies pharma companies can use to overcome today's challenges.

Deliver Service Excellence

Simply performing a task more effectively is not enough. CROs must prove their value and deliver outstanding service. Many CROs struggle to move beyond "a la carte" selection of their services to establish long-term relationships based on providing their customers with solutions. Their level of commitment to service cannot help but play a part in the transition. Yet many CROs are not as customer-focused as they should be.

When evaluating a CRO, one factor has immense impact: the organization's ability to perceive its customers individually, beyond identifiers such as big pharma, generic, and biotech. Even the most elaborate processes and fail-safe measures are useless if the company or the CRO is unresponsive to change and unable to facilitate unique needs. Without a customized approach, strong customer relationships are impossible.

Customer service affects every aspect of the CRO's business. It may be expressed by customizing the format of a data report or through solving problems before the customer is aware they exist. At the end of the day, CROs don't sell data or technology-they sell knowledge. Customers count on CROs to generate information, then assemble, analyze, and return it to them in an easily understood format-quickly and consistently. Every process, every person should work smoothly toward that end, even if individual staff members never meet customers face to face.

A CRO should be able to demonstrate its commitment to service excellence across all divisions. One way to accomplish that is to invest both time and money in standardizing project management training. In addition, CROs need a clearly identified point person to ensure good communication, so there is always someone to call with questions or concerns.

Equally important is the organization's plan for accountability and responsiveness. Customer satisfaction surveys are valuable tools for promptly recognizing and resolving issues. But surveys should not simply accumulate information; they should also track staff response. Lastly, CROs need to determine a time frame for action.

Responsiveness, reliability, and accountability define the depth of a commitment to service excellence. Without those, a CRO cannot hope to retain its business, and a pharma company shouldn't consider partnering with them.

Ability Equals Opportunity

The drug discovery and development industry faces formidable challenges, but the opportunities are there for those with the tools to exploit them. How significant a role CROs will play depends on their ability to prove their long-term worth by providing not just services but solutions.

Cheap, fast research is no longer enough. Tomorrow's CROs must be smarter, more creative, more responsive, and more flexible. The future of drug development demands it.

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