Clinical Trial Outsourcing Report

By Steven Aldrich, Kalorama Information | March 7, 2012

Where are the opportunities in the $36.6 billion market for outsourcing clinical trials?

The preclinical patient recruitment and trials that precede a new drug launch can be expensive in terms of costs and time, thus it is not surprising that branded manufacturers would seek the assistance of a contract research organization for an increasingly large share of the process. Preclinical testing can take an average of 6.5 years to complete, with only five in 5,000 compounds moving onto clinical (human) testing; of those five, only one will get approved for sale. The clinical stage is the most time consuming, beginning with a small group of roughly 20 people (Phase I) to test side effects with increasing doses and ending with larger trials of about 5,000 people (Phase III) to test efficacy. Pharma companies may opt for an additional trial (Phase IV) after a drug is approved and marketed to provide additional safety and efficacy details, enrolling several hundred or several thousand volunteers. Throughout each trial a plethora of regulations is imposed by the FDA, increasing the amount of time needed to reach approval.

It quickly becomes apparent how the cost of clinical trials can add up, as well as how difficult it can be to find volunteers without a monetary incentive; developing and producing drugs requires a vast amount of resources. Since pharmaceutical companies need to drive down nearly $1.3 billion in costs and reduce a 15-year timeframe for bringing a drug to market, outsourcing clinical trials to a number of specialized Contract Research Organizations (CROs) that have expertise and efficiency, has become a viable option. In recent years, lowering costs has not been the only driver for CRO projects, as branded manufacturers are simply finding that CROs also can deliver value-added expertise in various aspects of the clinical trial process.

Recruiting Solutions, Cost Reduction Drive Outsourcing Market

Recruiting issues have long plagued drug developers' efforts in clinical trials, with delays incurring huge costs and the loss of potential sales. According to Applied Clinical Trials, 86% of trials experience delays, and Centerwatch reports that 81% of these delays are one to six months in length, while another 5% are even longer. Delays are often caused by a lack of volunteers. Potential recruits may not be aware that trial opportunities are available, and they may not have time to participate; those that do have time may not be near a central facility where they can participate in a trial. There are more subtle factors as well, such as the fear of being treated like "guinea pigs." Additionally, once volunteers are gathered, an extensive process of informed consent to ensure volunteer compliance piles on even more time and costs.

Rising drug development costs are driving the industry to find ways to reduce costs in order to maintain profitable margins. Outsourcing clinical trials allows developers to redirect the cost of personnel and facilities to other internal areas and endeavors. In addition to saving costs on planned projects, the ability to shift clinical trial work to a CRO allows companies to maintain a robust pipeline that would not be feasible with in-house resources. Absent the outsourcing option, the only choice for many companies would be to reduce product offerings and jeopardize future market share.

Fig. 1: Portion of Global R&D Expenditures Outsourced: 2003-2010 by percent

Pharma manufacturers perform best when their focus is on making drugs, targeting customers for them, and beating the competition for sales. The expertise in the complex regulatory environment and the specialized recruitment offered by CROs has created efficiency for the industry, alleviating drug development companies from painstaking clinical trials in order to focus on drug production and marketing. The move towards outsourcing has reduced the in-house costs of drug development procedures from 74% to 62% between 2003 and 2010. 

Kalorama Information reports that the portion of drug development research (clinical trial) outsourced to CROs reached $36.6 billion in 2011, up 6.6% annually from $31.8 billion in 2009, and this market is projected to grow to $60.8 billion by 2016. Growth in R&D expenditures for Phase I trials began to outpace the growth in Phase II/III expenditures beginning in 2003 (with the fastest growth occurring between 2003 and 2006), driven by the effort to eliminate drug candidates at an earlier, less costly stage of development. At present, the testing phase that is quickly evolving into the ‘up and coming’ opportunity for CROs is in post-approval, or Phase IIIb/IV.

Post-Clinical Trials: Opportunity for CROs

CROs can also make post-approval studies a reality for many branded manufacturers. Upon FDA approval, the drive for post-clinical trials is often lost and dedicated departments are overloaded with a high volume pipeline for trials in Phases I-III. Developers are beginning to outsource these post-approval trials, which require a larger pool of individuals in an already challenging area of recruitment. This is a strong indicator that CROs have become trustworthy and the industry will begin to push more high-stakes trials onto them. 

Post-clinical Phase IIIb/IV trials are intended to satisfy regulatory commitments and extend knowledge about efficacy, safety and effectiveness within actual use, but also serve as a powerful tool for companies to distribute their drugs more broadly and for longer periods. Additionally, companies conducting Phase IV trials are seeking to establish effectiveness in order to outshine competitors. 

There are approximately 129,085 trials registered on ClinicalTrials.gov being carried out in 70,000 sites worldwide, and approximately 6.6% of these are in Phase III. The most advantageous areas for outsourcing clinical trials are the BRIC countries, with emerging areas including Eastern Europe and Latin America.

Who is Increasing R&D Budgets?

Between 2007 and 2008 there was an 11% increase in the number of companies with active projects, while 2009-2010 saw a 10% increase, rounding off with 2,207 companies. Increased competition is driving market leaders to expand R&D budgets, adding more new molecular entities to the pipeline and producing more market-ready drugs.

Fig. 2: R&D Budget of Leading Pharmaceutical Developers,  2010 vs. 2009

Merck leads with the largest amount of money invested in R&D, with a $10.9 billion budget in 2010, an 84.7% increase over 2009, while the runner-up, Roche, raised its budget by 5.5%, topping off at $9.6 billion in 2010. Other market leaders that increased R&D budgets in 2010 include Novo Nordisk, AZ, Eli Lilly, GSK, Bayer, Abbot, Novartis, Takeda, Boehringer Ingelheim, Amgen, Pfizer, Astellas, and Daiichi Sankyo. 

Cancer is the leading research priority, with at least 2,608 anti-cancer compounds worldwide in all stages of development in March 2010. Other top R&D categories are addressing cardiovascular, genitourinary, neurological, anti-infective, alimentary/metabolic, immunological and musculoskeletal ailments. 

The increase in R&D budgets echoes a growing market for CROs and signals vast opportunities for outsourcing clinical trials. It is becoming the norm for drug developers to outsource at least some of their clinical trials and historical analysis reveals an average 2% climb in outsourcing every year.  

Steven Aldrich is a marketing associate at Kalorama Information. He can be reached at press@kaloramainformation.com. This article derives from Kalorama Information's report Outsourcing in Drug Development: The Contract Research (Clinical Trials) Market, which focuses on the market for contract research organizations and clinical trial outsourcing. The report is available at www.kaloramainformation.com. All figures courtesy of Kalorama Information.