A shake-up is occurring in the clinical outsourcing market. Pharmaceutical and biotechnology companies are reexamining the ways that they work with contract research organizations (CROs) and other outsourcing providers as they seek to increase efficiencies in the coming years. In a recent study, Industry Developments & Models: Clinical Outsourc-ing Sponsors Forcing Market Change, Life Science Insights examined the varying models espoused by two market leaders, Wyeth and Pfizer, both of which have embarked on major efforts to analyze their clinical operations and decide which processes should be outsourced to best-of-breed providers, and which should be performed in-house. We also highlighted the outsourcing preferences of a variety of pharmaceutical and biotechnology organizations based upon recent surveys we conducted. Our key findings included the following:
• The approaches adopted by Wyeth and Pfizer are fundamentally different. Wyeth has chosen to employ integrated management of trial monitoring, project management, and data management processes with other outsourcing providers instead of CROs, while Pfizer has elected to complement existing resources through a functional service model, providing knowledge of processes, templates, and access to internal Pfizer systems to a select few CROs to execute on these and other noncore research functions. We believe neither approach is superior to the other but that sponsors will procure services from a combination of vendors that makes the most sense for their businesses.
• Many sponsors are moving away from comprehensive, full-service contracts with CROs in favor of a best-of-breed, selective outsourcing approach enabling professional staffing organizations and business process outsourcing companies to gain a larger share of the clinical outsourcing market in the near term.
• The shift toward a selective outsourcing approach represents a call to action for CROs. In the next several years, sponsors will reevaluate their mix of service providers, and we believe CROs will be selected based on their leadership in distinct therapeutic, service, and technology categories. Now is the time for CROs to consolidate their capabilities and fill gaps in categories where they are best-of-class, as well as to divest themselves of categories where they are not soon to be leaders.
• The provisioning of clinical data management services will increasingly move to India to take advantage of its low-cost, skilled labor force. In addition, outsourcers will continue to ramp up and more aggressively market their clinical development domain expertise.
Pharmaceutical and biotechnology companies are increasingly calling on a wider variety of service providers to prepare bids for outsourcing preclinical and clinical research processes. Some, such as Wyeth and Pfizer, recently declared that they seek a revised mix of providers because they are not getting what they want out of large full-service-contract CRO engagements. Although they won’t completely divest themselves of CROs, they expect to dramatically decrease the amount of full-service contracts awarded to CROs and to phase out some existing contracts when they expire. This new approach marks the next evolution of the contract research market. CROs have transformed from small providers of niche services 25 years ago to large, end-to-end drug development organizations today. But indications that customers are backing away from megacontracts with CROs in favor of a selective sourcing approach are a call to action for the monolithic CROs to reexamine their business models to meeting changing market needs.
We believe outsourcing providers will be selected based on their leadership in distinct service and technology categories along the clinical outsourcing services continuum, including the following:
• Strategy Consulting
• Product Development Consulting
• Study Design
• Implementation
• Data Management
• Biostatistics
Implicit in this selection is that the provider of product development, study design, and implementation services is best-of-breed in the area of therapeutic expertise that the sponsor requires.
Both Pfizer and Wyeth have embarked on significant efforts to analyze their clinical operations and decide which processes should be outsourced to best-of-breed providers, and which should be performed in-house. Although the companies seek similar results—to reduce time spent conducting clinical trials, improve quality of research, and reduce the cost of conducting clinical trials—their approaches are quite different.
As we outline the approaches of these two industry leaders, it remains to be seen if the long-term results that these companies seek will be achieved, but it is safe to say that it will take time, money, and innovative thinking to pull it off.
In 2000, Wyeth Research engaged Accenture to reengineer its research and development (R&D) processes. Results were impressive: Wyeth’s discovery sites became aligned toward shared R&D goals, and Wyeth reported a 400% increase in drug discovery productivity during a three-year period.
With the success of this first reengineering project, Wyeth forged ahead with Accenture to redesign processes for conducting clinical trials. Again, Wyeth saw significant gains as a result: clinical staff were realigned, new protocol templates and reporting formats were created, and cycle time for Phase I clinical trials were decreased from 12–18 months to six months.
In April 2003, Wyeth tapped Accenture again for an even more ambitious project. This time the companies entered into a 10-year risk/reward-sharing contract that many in the pharmaceutical and outsourcing industries deemed precarious and unattainable. The engagement marked a dramatic turning point in the clinical outsourcing market because, instead of keeping data management in-house or contracting with a CRO with data management expertise, Wyeth chose a specialist in business transformation to reengineer and manage global clinical data management (CDM) operations.
Specifically, the goal of the Wyeth-Accenture engagement is to improve clinical trial productivity in Wyeth’s Phase II and III trials. Central to the engagement is a contractual commitment to delivering key metrics such as reducing the cycle time between last patient, last visit, and database lock by 80% and reducing contracted costs by more than 30%. To accomplish this goal, Accenture acquired Wyeth’s clinical data management staff, put in visible metrics via monthly reports, and established strong, visible leadership for the life cycle of the project.
Despite the skepticism with which the Wyeth-Accenture deal was originally met, Wyeth’s Clinical Operations group has again reported positive results. In April 2005, Wyeth announced that the number of IND applications has increased, cycle times have been reduced, and both Wyeth and Accenture are benefiting financially from performance metrics being on or close to plan.
Life Science Insights interviewed executives within Wyeth’s clinical operations group in April and May 2005 and learned more about Wyeth’s research process outsourcing strategy. According to Wyeth, working with a specialist in business transformation and data management such as Accenture, as opposed to a CRO, enables the clinical team to deliver better quality, speed, and productivity. Further, Wyeth representatives said that Accenture’s access to technical expertise and infrastructure, ability to manage transactional volume, and economical offshore resources surpass the capabilities that CROs offer today.
In part because of the success of the Accenture relationship, Wyeth recently forged another pivotal outsourcing partnership. This time the relationship is with Research Pharmaceu-tical Services (RPS) to redesign Wyeth’s internal Field Operations organization. RPS calls itself the “the industry’s first pharmaceutical resource organization (PRO),” which means it combines CRO expertise in running clinical trials with specialized staffing engines. Wyeth’s management agrees with RPS that it offers cost savings and efficiencies unavailable in traditional CRO models. In fact, Wyeth Research’s vice president of Clinical Operations announced at April 2005’s Partnerships with CROs and Other Outsourcing Providers conference that its relationship with RPS will enable Wyeth to “decrease dependency” on CROs.
Wyeth expects to save millions of dollars by pursuing this path away from outsourcing to CROs. In the first year alone, the initiative changes Wyeth’s outsourcing model from 80% use of CROs to 20%. In years to come, Wyeth expects to dramatically shift the outsourcing paradigm. Cost savings from the initiative will be rolled back into development and pipeline growth.
Wyeth says it chose RPS because of its complementary clinical operations expertise, global reach, and focus on contractual commitments that foster process improvement and shared organizational goals. The Wyeth-RPS relationship will initially consist of the following components:
• Monitoring of clinical trials in North America and Latin America
• Performance and accountability reporting
• Project management
• Infrastructure support
• Creating consistencies with U.S., Canadian, and Latin American teams
• Integrated operations and management
For the initiative to be fully implemented, internal change at Wyeth was necessary to create a more efficient, standardized monitoring organization. The relationship required a redesign of Wyeth’s internal field Americas Research Operations (ARO) organization, which is Wyeth’s monitoring organization in Canada, the U.S., and Latin America.
We believe the Wyeth-RPS and Wyeth-Accenture partnerships represent the next evolution of the clinical outsourcing market. Pfizer’s outsourcing strategy also points to the changes occurring in the market.
In the second half of 2003, Pfizer’s contracts and outsourcing group began to scale back from taking a full-service outsourcing approach and instead implemented a functional service provider (FSP) approach. Pfizer chose this alternative to reduce the cost of clinical operations and to find the right outsourcing vendor to fit specific clinical, data management, and biostatistical reporting functional needs, building more strategic and effective outsourcing relationships. To accomplish this goal, Pfizer evaluated a select few vendors and worked with subject-matter experts within the company to develop an effective operating model for working with FSPs. The outcome of this effort was that Pfizer entered into multiyear preferred-provider relationships in North America and Europe with nine providers, including Kforce Clinical Research Staffing, a division of Kforce Inc., and Kendle.
Kforce, which specializes in permanent and contract staffing, as well as outsourcing alternative solutions such as the functional outsourcing model implemented by Pfizer, has forged a strong relationship with Pfizer, including serving as the primary provider of contract monitors for the past seven years. The company now acts as Pfizer’s exclusive provider of clinical research monitoring across North America. In addition to staffing, Kforce Clinical Staffing provides a full range of clinical research monitoring services for Phase I–IV clinical trials, including outsourced regional monitoring, clinical project management, and regional program development. The firm has been focused on clinical research staffing since 1988 and, in fact, initiated the industry’s first functional outsourcing relationship in December 1999 with a major biopharmaceutical company.
Kendle, a global CRO, has also created a strong association with Pfizer and is charged with providing data management services. Kforce and Kendle teams are tightly integrated with Pfizer functional lines and teams, are regarded as strategic business partners, and use Pfizer’s systems/processes and SOPs.
The benefit of the FSP model, according to Pfizer, is that it offers the company access to narrowly focused expertise from the outsourcing vendor at a much lower overall cost. By not trying to provide a broad range of services to customers, the vendor has the opportunity to drive competitive advantage faster and more reliably. Pfizer believes the stronger the relationship with its strategic functional services providers, the greater its return on outsourcing investments will be.
Some additional highlights of the Pfizer Functional Service Model are as follows:
• Building strategic relationships with a few to allow for leverage of scale while retaining flexibility and ensuring the right amount of competition.
• Seamless boundaries aligning with functions/countries, with a focus on standardized execution using Pfizer SOPs, systems, and processes, which reduce the need for additional, costly project management.
• Provides ability to harness the cost advantages of work performed in low-cost countries without committing to one provider.
• Streamlined contracting and improved resource forecasting.
The outsourcing approaches of Pfizer and Wyeth differ but share a similar strategy of moving away from comprehensive contracts with CROs in favor of a selective outsourcing approach. And they are not alone in implementing this strategy shift.
In February and March of 2005, Life Science Insights embarked on several studies to identify possible trends related to the selection of contract research vendors as well as to document future outsourcing plans of pharmaceutical and biotechnology organizations. The companies we interviewed represented a cross section of small, midsize, and large pharmaceutical and biotechnology companies. Respondents were all from the clinical group, and the organizational level of responsibility included director-level management responsibilities, below director level, senior staff, and staff.
We found that, when faced with a plethora of CROs from which to choose, including full-service CROs (well established and offer a comprehensive spectrum of services and therapeutic capabilities) and niche, specialty players (with expertise in particular therapeutic areas and access to naive patient populations), sponsors chose particular CROs based on the area of need.
We also found that many sponsors have spent the last several years developing a shortlist of preferred vendors for various services on the clinical outsourcing services continuum. Lilly, for example, sends 80% of its projects to three companies, but still works with small, niche CROs for specific projects depending on therapeutic, patient enrollment, or technology needs.
Based on survey results and primary interviews, the criteria used in choosing preferred vendors and niche vendors typically include:
• Service orientation (quality, speed, flexibility, RFP response)
• Expertise (therapeutic, site management, project management, investigator depth)
• Reach (regional depth, technology breadth, investigator availability)
• Personnel (communication, skill levels, training)
• Financial (cost of services, risk sharing, financial stability)
• Infrastructure (application expertise, ECG core labs, collaborative tools/platforms, data management, imaging capabilities)
We found it very telling that most companies we surveyed expressed some level of dissatisfaction with their contract service providers, especially in terms of their reliability and their patient recruitment capabilities (see Figure 1). Customer service, ease of doing business, and compatibility also need improvement, but safety and speed were of less concern.
We expect Pharma–CRO engagement models to continue to evolve toward a best-of-breed, selective sourcing approach. Depending on the need of the sponsor, they will increasingly engage services from providers that offer a high level of
expertise in a narrow knowledge domain. As Pfizer and Wyeth have demonstrated, sponsors will procure services from a combination of vendors that makes the most sense for their business. We conclude the following will occur in the near term:
• CROs will reexamine their go-to-market strategies and group services into classes based on changing sponsor needs.
• Consulting and business process outsourcing relating to clinical development will increasingly be facilitated by vendors such as Accenture, CSC, IBM, Infosys, SAIC, and Tata Consultancy, which are experienced in evaluating the processes of clinical development organizations in order to drive operational improvements.
• The roles and capabilities of clinical staffing and project management firms will blur with those of CROs.
• Clinical operations executives will shift their focus toward managing multiple vendors.
• The provisioning of data management services will increasingly move to India to take advantage of its low-cost, skilled labor force. In addition, outsourcers will continue to ramp up and more aggressively market their clinical development domain expertise.
Recognize that the role of clinical operations managers will change – Depending on the outsourcing approach chosen, managers may concentrate more or less on administration and vendor management. In all cases, metrics should be set to lower administrative and management costs and ensure that vendors deliver on ease of management.
n=41, Source: Life Science Insights’ Leading Indicators in Life Science IT Spending Survey, 1Q05 |
Accept that no vendor can do it all – The capabilities needed are too broad and technology is changing too rapidly for one vendor to be best of breed across all clinical outsourcing activities.
Reevaluate your mix of service providers – We recommend that you strive to reduce the number of vendors within particular activity areas as you look beyond your current mix of providers.
Bulk up within categories where you are best of breed – Focus on a narrower range of services offerings, fill gaps with acquisitions or partnerships, and divest areas where you are not soon to be a leader.
Review the competitive landscape and pharmaceutical trend toward models such as Wyeth’s and Pfizer’s – Sponsors are changing their outsourcing strategies and moving away from traditional contract research outsourcing models. CROs are now faced with a smaller piece of the pie and must reexamine their business models and cost structures.
Focus on integration with other classes of services/ providers – In addition to therapeutic and service domain expertise, CROs must differentiate themselves from their competition through their technological expertise and access to the latest technologies. Develop and market alliances with CTMS and EDC vendors as well as experts in data integration and data management.
Get positioned to be a preferred provider with leading biopharmaceutical companies – Sponsors are narrowing the number of vendors they work with by creating shortlists of preferred providers. CROs should aggressively pursue strategic relationships in their areas of core competency so that they are considered during the bidding cycle.
Use marketing messages to reinforce your reliability, patient recruitment capabilities, customer service excellence, and ease of doing business – These were cited as the most important areas in which CROs need to improve. Life Science Insights believes that if CROs do not make some of these changes, they risk get leapfrogged by savvy competitors and will likely be shut out of opportunities to sustain business with sponsors in the near term.
Scott Lundstrom is vice president of research at Life Science Insights, an IDC company. He can be reached at slundstrom@idc.com. Details about this study can be found at http://www.lifescience-insights.com/LSI/research/cro.jsp.