The strategic partnership in life science outsourcing

Drug development company reliance on the outsourcing of clinical research activities continues to rise sharply.  

A number of factors have contributed to this growing dependence on CROs and CDMOs. At a time when global clinical trial volume and scope is increasing, drug developers face significant capacity constraints. The number of projects in worldwide development has grown 6% annually since 2002, yet many major pharmaceutical and biotechnology companies have not increased their internal clinical research headcount. These capacity constraints are only expected to worsen: Since 2007, many biopharmaceutical companies -- including Schering-Plough, Astra-Zeneca, Pfizer and Merck -- have announced plans to downsize and consolidate their operations in response to difficult market conditions. Companies are turning to outsourcing for flexible capacity to better manage peaks and valleys in development activity. 

 

The dramatic proliferation of small and mid-sized companies now conducting clinical research programs has also driven outsourcing growth. An estimated 1,800 companies worldwide are actively conducting at least one clinical trial, a 65% increase over the number of companies doing so five years ago. Smaller companies -- many of them biotechnology firms -- typically outsource a much higher percentage of their total clinical research budgets for expertise that falls outside their core capabilities.

 

Improvement in development performance is another outsourcing growth driver. Many biopharmaceutical companies are learning that CROs and CDMOs can provide speed advantages, at comparable quality, when they are used effectively.  

For example, compared to low CRO or CDMO usage projects, those with high CRO or CDMO usage: 

• Showed a median of 78 days, compared to 98 days, from protocol readiness to First Patient, First Visit (FPFV).

• Reached study data availability from protocol readiness in 196 days, compared to 231 days.

• Moved from protocol readiness to Last Patient, First Visit (LPFV) in 294 days, compared to 308 days.

• Required an average of 42 days to move from Last Patient, Last Visit (LPLV) to database lock, compared to 56 days.

Achieving More

Facing a difficult global operating environment, biopharmaceutical companies are looking to consistently increase CRO or CDMO efficiency and performance.  

Traditionally, biopharmaceutical companies have outsourced on an ad hoc, per project basis, driven by insufficient internal personnel capacity to perform a given task or function. Under transactional relationships, biopharmaceutical companies typically interact with a large number of service providers, both full-service and niche. Additionally, sponsors contract full-time staff to supplement internal capacity.    

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Biopharmaceutical companies typically solicit three to five bids and select the lowest bid-provider. In many instances, biopharmaceutical companies have established preferred provider lists in order to expedite selection and contracting and to secure more favorable services pricing.    

 
Typically in transactional relationships, once CROs or CDMOs are selected, sponsors tend to micro-manage the relationship in order to ensure communication and coordination with the project team, as well as adherence to the biopharmaceutical companies' own standard operating procedures.  

 
Biopharmaceutical companies most often turn to transactional outsourcing relationships once the development plan and protocol are completed. Companies tended to use transactional outsourcing for site selection and management, study monitoring, data management and some medical writing. Quality Assurance and regulatory affairs tasks were typically handled by internal staff and contract full-time-equivalent (FTE) staff.

 
More recently, a number of drug development companies (e.g., Wyeth, Amgen) have supported broad functional outsourcing. These relationships give almost all responsibility for an entire function to a single CRO or CDMO. Still, the outsourced function must be integrated with the rest of the biopharmaceutical companies' development activity, including other functional tasks outsourced to full and niche-service providers. For this reason, full functional outsourcing appears to be an interim step in the direction of more strategic outsourcing.

Strategic Partnerships

There are biopharmaceutical companies that are pioneering truly strategic partnership-based outsourcing relationships.

Additionally, a few biopharmaceutical companies are now making plans to implement structures and policies to support strategic partnerships.

 

Strategic partnerships begin with an in-depth assessment of the biopharmaceutical company's core competencies. What are the functions that are performed best in house? And what are those that can be best undertaken by a CRO or CDMO that has greater expertise and higher levels of efficiency? This is an important first step, as most experienced CROs and CDMOs have managed a much higher volume of activity in many areas of clinical research than their sponsor partners. 

In a strategic relationship, the goal is to build a team of complementary competencies to take full advantage of the expertise and operating efficiency that each party brings to the table. Under strategic partnerships, biopharmaceutical companies look to retain senior-level expertise, but they reduce the number of internal staff involved in those functions deemed most suitable for outsourcing. As a result, strategic partnerships offer biopharmaceutical companies an opportunity to better leverage internal operating resources and to streamline select functional areas.

 

The identification and selection of partner providers is a key relationship success factor. Success depends on a variety of criteria, including CRO or CDMO company expertise, capacity, positioning, and culture. Once a biopharmaceutical company has selected a partner CRO o CDMO and has determined the scope of work to be done, the companies together create a senior-level committee. Executives on the committee, from the biopharmaceutical company and CRO or CDMO companies, meet periodically (e.g., once or twice annually) to review the portfolio of projects on which they will partner. From the outset of the relationship, there is a shift from capacity-based outsourcing to competency-based outsourcing: from project outsourcing to portfolio outsourcing.

Governance in strategic partnerships is a shared responsibility. The biopharmaceutical company and the CRO or CDMO rely on a set of Coordination Operating Procedures (COPs) to ensure that each party's own respective SOPs is consistent, integrated and compatible. When there are conflicts to resolve, they are addressed by the senior level committee. This approach affords the CRO or CDMO greater autonomy to leverage its expertise, operating practices and efficiencies.

 

Under strategic partner-based relationships, the biopharmaceutical company devotes little time managing and coordinating a disparate collection of specialty and full-service CROs. The sponsor's time is therefore optimized and can be focused on the overall performance of the partner provider and its managed network of contractors.   

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Nearly all functional tasks can be outsourced in strategic partner-based relationships, like protocol development, site selection and management, study monitoring, data management, medical writing, Quality Assurance, and some regulatory affairs tasks.  

Benefits and Risks of Strategic Partnerships

Clinical projects managed under strategic partnerships hold promise in delivering higher levels of performance and efficiency than heretofore achieved by transactional, project-based outsourcing. Although these relationships will not result in lowest-bid providers, the long-term efficiencies, minimization of out-of-scope costs, and performance improvements theoretically surpass short-term cost savings. Given autonomy, trust, and proactive use of their competencies and expertise, it is likely that strategic CRO or CDMO partners will develop greater value, and will be more effectively leveraged, than transactional CRO or CDMO partners.

 
Given the large number of full-service CROs or CDMOs operating worldwide, it is likely that biopharmaceutical companies will find sufficient strategic partners. Additionally, as the outsourcing market migrates to more strategic relationships, entrepreneurial CROs or CDMOs will no doubt find new ways to ensure that biopharmaceutical companies are satisfied with the teams provided.  

One particular risk that must be mitigated in strategic partnerships is the unlikely event of a relationship termination. Given the time-consuming care that must be taken to select the right partner provider, a termination will no doubt be highly disruptive. For this reason biopharmaceutical companies should plan to establish several strategic partnerships, and perhaps take initial steps to keep one in the back pocket should a replacement be needed.  

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As strategic partnerships become more commonplace, the outsourcing landscape for niche and small CROs or CDMOs will likely change. In this case, smaller, niche CROs or CDMOs will continue to have an important role to play. However, they will need to form tighter relationships with major CROs or CDMOs that have been engaged as partner providers. These CROs or CDMOs will act as lead contractors, managing a fragmented group of service providers.

In the current drug development environment, it is essential that biopharmaceutical companies achieve higher levels of performance and efficiency. The profound transition from transactional, project-driven capacity-based outsourcing to strategic, portfolio-driven, competency-based partnerships promises to help sponsors meet that challenge.    

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