According to a new report conducted by GBI Research, the CRO industry grew 12% from 2009 to 2010, with market revenues estimated at $21.4 billion. Additionally, the global R&D outsourcing market in 2010 represented 25% of the total pharmaceutical R&D expenditure. This is estimated to grow 5% annually, reaching 37% of the total R&D expenditure by 2018.
Also, a recent CenterWatch study benchmarking global investigative site workload, staffing and financial performance, found that the typical investigative site saw growth in clinical trial activity and patient volume, as well as improved cash flow, with a 9.4% average operating margin. Financial results for top public CROs from the latest fiscal quarters support these findings, with revenues up 7% for Covance, 10% for ICON, 18% for PAREXEL.
We’ve seen the privatization of several major CROs the past couple of years. PPD is the latest CRO to join the ranks of private companies such as Quintiles, PRA, and more recently through consolidation, Kendle (acquired by INC Research), Pharmanet/i3 (acquired by inVentiv Health), and Theorem Clinical Research, (formerly Omnicare, acquired by Nautic Partners, LLC). So what are some of the advantages and disadvantages of private versus public?
“During this time of technological, economic and regulatory change, we see a role for private CROs that have an entrepreneurial approach, scalable capabilities and financial backing to invest for the future,” said Daniel Chapple, executive vice president and chief commercial officer at Quanticate. “Private CROs are often more adaptive; the impact of investment generally involves a small number of highly involved directors rather than a large number of anonymous shareholders, therefore risk can be more quickly identified and decisions made. By having such vested interests in the success of their companies, the directors and executive managers of private companies are well positioned to become the pioneers of the industry. Although large, public CROs are likely to take longer to make decisions, once committed, they can often surpass their entrepreneurial counterparts through size, capability and investment. We therefore see a role for both types of organizations.”
CRO service trends continue around biosimilars, adaptive trials, and generating value from data. Technological advances continue to represent vast opportunities for drug development efforts. Clinical trial data is being extracted, streamlined, and utilized in ways it never has been before, providing immediate access to key information, and helping to eliminate drug failures early on.
Across the board, CROs are seeing surges in late phase and outcomes research, as well as Phase I studies. There is also increased sponsor demand for adaptive trial designs and biosimilar services. According to Jamie Macdonald, chief operating officer at INC Research, “Phase III trials continue to be an area of significant opportunity for larger CROs. In addition, we are experiencing an increase in post-approval projects as regulatory scrutiny has increased in that area. We find that we are also engaging with more customers for Phase I activities, as the outcomes and decisions from early development activity are becoming increasingly critical for the remaining development stages.”
Simon Britton, senior vice president of Global Clinical Operations at ICON Clinical Research, concurred, “We are seeing increasing sponsor demand for late phase clinical and outcomes research. The increasing requirement for long-term safety and effectiveness of data collection during the peri-approval and post-marketing periods has created a demand to design global studies to collect the right kind of data while providing cost-effective strategies and utilizing appropriate methodologies for analysis and reporting.”
Drawing from their clinical trial experience, CROs have developed their services to advance drug development programs using unique trial designs and statistics. According to Henrietta Ukwu, M.D., senior vice president, global regulatory affairs at PPD, “We are seeing strong client demand for adaptive trials because this methodology allows for smaller, faster trials while ensuring scientific rigor and integrity of results. Adaptive approaches can also enable larger and longer studies, for example, by combining and streamlining research that would otherwise be conducted as two separate trials.” The FDA’s draft guidance on adaptive clinical trials from February 2010 supported their use, noting that they may increase the probability of success on a study objective and provide better understanding of the treatment effect.
According to Mr. Chapple at Quanticate, “We are finding that there is a lot of interest in statistical methods to optimize trial design. While there is strong demand for adaptive designs, we are seeing increasing interest in Bayesian design approaches. We are also seeing that the ability to get more out of the data is becoming a key requirement, whether it is the standardization and visualization of multi-study data or the ability to analyze patient data to maximize product potential.”
“We have also seen increased interest in the use of adaptive trial designs to make programs faster and more efficient, and there has been a lot of interest lately in risk-based monitoring to reduce costs,” said Bill Sietsema, Ph.D., vice president of Global Regulatory Consulting and Submissions at INC Research. “In addition to the increased demand for cloning of marketing authorization applications, there has been a flurry of activity to support biosimilars, fueled by the recently released guidance documents from FDA.”
The CRO industry has been experiencing a surge in biosimilar services, and with the recently issued FDA draft guidance, this is expected to grow. “The guidance will have significant impact on biopharma companies and the CRO industry because it covers a wide range of areas such as CMC, regulatory and clinical — all of which are important to biosimilar development,” said Dr. Ukwu at PPD.
Dr. Sietsema noted, “Design of development programs for biosimilars and conduct of subsequent clinical trials for biosimilars has been a hotbed of activity during the last year. We believe this will present many opportunities within the CRO industry as customers look for the most efficient ways possible to get their biosimilars products to market.”
CROs are now serving in more collaborative roles with their sponsors, whether it’s sharing risk or in consultative positions, helping pharma and biopharma clients think through the drug development process to achieve the best possible outcomes. Strategic relationships continue to evolve, overcoming past obstacles, and creating new opportunities.
Managing relationships often present the greatest challenge among complex CRO/sponsor partnerships. Defining the terms of a relationship early on so that each party stands to benefit is essential for CROs. What may have been a stumbling block in the past has paved the way for successful partnerships through clarification of roles and expectations.
According to Tim Dietlin, vice president of Alliance Development at INC Research, “Obstacles have largely been around defining a strategic partnership and commitment to that partnership once defined. As the word ‘partnership’ became prevalent in the industry, many started to label pricing arrangements, such as preferred providerships, as partnerships, and expected commitment from CROs that was not reciprocated. As the difference between ‘partnership’ and ‘preferred provider’ has become clear, sponsors and CROs in partnership models have been able to focus on mutual investment and collaboration to strengthen ties between partners and drive long-term efficiencies that reduce overall costs and overhead.”
“Looking to the future, as with any successful relationship, the hard work comes after a partnership is established. Many partnerships created in the last few years are just reaching the stage where they are driving benefit for the sponsor and CRO. Longer term, I see much greater emphasis on process and systems integration among sponsor/CRO partners, creating ongoing efficiencies as well as increased barriers to entry for competitors and smaller CROs,” Mr. Dietlin added.
With great opportunity to develop and market new therapies, comes even greater risk. Innovative partnering models have alleviated some of the burden borne by sponsors. When it comes to risk-sharing partnership models, the consensus among top CROs is that they are alive and well. “We are seeing a slight increase in risk-sharing and we would like to increase it further on the right products where we have expertise and feel comfortable sharing that risk,” said Paula Brown Stafford, president of Clinical Development at Quintiles. “Sharing risk involves conducting the proper due diligence. In fact, Quintiles’ new CEO, Tom Pike, served as chief risk officer at Accenture as part of his work there. We’re looking forward to having him bring new ideas around methodology and models to manage risk with our customers.”
Mr. Dietlin at INC Research added, “We’re not seeing a decline in adoption of risk-sharing models, but we are seeing a more realistic adoption. Many sponsors and CROs have had a difficult time coming to agreement on the amount of risk to share and how to share it. Risk-sharing models that enable the CRO to share in a reasonable level of risk, while also being rewarded if expectations are exceeded, are getting done and working well to the benefit of both sponsor and CRO alike.”
“For Covance, a relationship that rises to the level of strategic partnership is long-range and dedicated to drug development, said Richard Cimino, executive vice president and group president of Clinical Development Services at Covance. “True partnerships in our portfolio take a path beginning with cultural alignment and understanding each other’s expectations to ensure agreement on processes and metrics, and then developing into a sensible governance model to guide the relationship strategically and operationally. These steps help build long-term, trust-based relationships at multiple levels across the two organizations. The relationships we have today are very successful, and we see them continuing to grow as well as spawn new relationships.”
Emerging Markets Update
Emerging markets have become integral to the greater adoption of outsourcing. Having CRO partners in key locations certainly helps reduce cost at the sponsor level. That said, it’s critical to ensure that the operational structure keeps costs down while taking into account oversight, communication and quality control at both the CRO and sponsor side. Additionally, regulatory hurdles continue to challenge what are otherwise bustling markets. These range from the clinical trial approval process to requirements for marketing applications, as well as logistics and transportation, and handling of biologic materials.
So, which emerging markets continue to demonstrate the greatest opportunities for drug development? Which have stagnated or declined? This varies among CROs. Ms. Stafford at Quintiles noted, “We’re not seeing the growth in Latin America that we would have expected when juxtaposed with the overall economic growth in Brazil and the number of patients available there. However, recent regulatory changes in Brazil have made conditions friendlier to fostering start-ups more quickly than in the past.”
“We see the greatest opportunities in a group of emerging markets we describe not as the BRIC nations, but what we call ‘BRAMET’ (Brazil, Russia, Africa, Middle East and Turkey) and Asia. We haven’t backed off on any of those within emerging markets. That said, the most pronounced growth in India, for example, took place from 2005 to 2010. We believe we now have a critical mass there, so we don’t really expect to see the same growth rates as in the past. Yet, we still expect very strong growth in the region,” added Ms. Stafford.
Jamie Macdonald, chief operating officer at INC Research, commented, “We don’t view some of these markets as emerging anymore; definitely growing, but no longer ‘emerging.’ INC Research recently reached a major milestone in Latin America, surpassing 500 employees in only 15 years, growing from a small data management and statistical analysis group into a full-service clinical development team. India is another example of a region that has been key for our customers’ overall drug development strategies.” INC Research has been operating in India since 2004.
“We also understand that Asia/Pacific as a whole is expected to become the largest pharmaceutical market within the next decade. The cost benefits of conducting clinical trials in various Asian countries are well known, as well as the future potential healthcare consumption of Asian patients. We are aggressively bolstering our local position and expertise to help our customers navigate the intricacies of clinical trials in this region,” remarked Mr. Macdonald.
While recent regulatory complexities have drawn concern in India and China, these markets are not to be underestimated. According to Mark Goldberg, chief operating officer of PAREXEL International, “Overall the investment in Asia continues to be robust with the exception of India, where there’s been some instability in the regulatory environment. Some of the rules and regulations that have been instituted have challenged the industry. Relatively long approval timelines in India are, in part, contributing to the trend toward fewer trials being conducted there currently, as compared to some other markets in Asia. However, India has experienced a change in its regulatory leadership and processes are being reworked.”
“China represents a huge opportunity, but also presents some challenges; for example, the government in China certifies every investigator site. Unless a site has been government certified, it can’t participate in clinical trials. The number of certified sites is probably in the neighborhood of 400 for the entire country at this point. This means that there can be significant competition for experienced sites. The Chinese regulatory process can be slow, sometimes making it difficult to include China in global programs. There is a need to develop a capable R&D workforce in China, where one never existed before,” Mr. Goldberg added.
Ironically, China, which had historically been considered an “easy” target for clinical trials, is increasing its regulations and making the trial review and approval process more formal, demanding and time-consuming for sponsors. According to Mr. Macdonald at INC Research, “Our local regulatory team is constantly monitoring the complex tier of policies and regulations by national, regional and local government authorities, along with import and export regulations and procedures in China.”
Mr. Britton at ICON Clinical Research, maintains, “Overall, the clinical trial environment in China has vastly improved over the last five years, due to significant efforts on the government’s part. The Chinese SFDA is very actively reforming the regulatory framework for conducting trials. While China may appear to have little advantage over other countries taking into account the regulatory approval timeline, it is a mandatory step if pharma and biotech organizations want to launch their products into the Chinese market, which is a market that no organization can afford to ignore.”
In addition to continued regulatory challenges associated with conducting trials in emerging markets, training investigators and managing costs represent added complexities. According to Ms. Stafford, “For Quintiles, one of the biggest challenges in emerging markets is the training of investigators in countries where clinical research has not been as common as in other regions. We have to provide more training to investigators in these regions and visit them more often than in other countries. Another challenge is making clinical trials friendlier for investigators and perspective investigators. Today, our industry is tapping into only 5% of physicians around the world to serve as investigators. For that other 95% of physicians, we must make it worth their while to get involved with this type of work,” said Ms. Stafford.
Mr. Macdonald at INC Research said, “Cost management around global operations is becoming a bigger issue. Questions are starting to be asked regarding the relative costs of conducting trials in different regions and in specific countries. Rising fees, entry costs and regulatory timelines in emerging regions may drive overall cost per patient up at the country level. Therefore, our customers are asking us to take greater responsibility for overseeing third-party vendor and pass-through costs not directly in our control. We have better resources to manage and track the total cost of development, such as clinical supplies, central lab and cold chain management logistics costs.” While the challenges in emerging markets are evident, they are not unexpected, and as far as CROs are concerned, the opportunities continue to outweigh any setbacks.
Economic and regulatory stresses endured by the pharma industry have compelled the need for improved processes and efficiencies. As the prevalence of technology continues to expand into various stages of drug development, data-driven intelligence tools are helping to facilitate a more adaptive operational approach to clinical trials.
Extracting value from data is the latest “e-imperative.” CROs are now investing in solutions to better understand and share their data. “We’re seeing analytics, the cloud, alerting, mobile devices, and data integration technologies becoming more important. In the next several years, the industry is going to see huge value gains from new technologies in areas such as risk-based monitoring, adaptive trials, and event alerting. These new technologies are going to facilitate advanced study designs and bottleneck-identification that wasn’t possible a decade ago,” said Rick Morrison, chief executive officer of Comprehend Systems.
The development of innovative data-driven intelligence tools is helping to facilitate a more adaptive operational approach to clinical trials. According to Mike Wilkinson, Ph.D., executive vice president and chief information officer at PPD, “e-Clinical technologies, such as EDC, ePRO, e-Source, and electronic health records hold a lot of potential to transform clinical research by providing early access to data and solving clinical development challenges. Operational approaches enabled by e-Clinical technology can be highly adaptive to the treatment effect or safety signals measured during the course of a trial. This enablement is only possible through process automation and access to real-time information that allows for data-driven decision making.”
According to Mr. Chapple at Quanticate, the latest IT solutions fall into three main areas within the services they provide, data capture, storage, and visualization: “EDC is about to go through a new revolution due to the introduction and adoption of better technology using tablets combined with intuitive workflows and security. Intuitive user interfaces assist in the capture and increased accuracy of data. Instant data access for sponsors, CROs and investigators will bring about faster decisions.”
“Also, most companies are still using traditional methods to store data; however, looking at how other industries store their data is leading to the introduction of in-memory data storage to gain faster access to data and provide links between domains, information and knowledge created throughout the clinical trial process. This then powers the analytical, modeling and discovery of trends allowing for better science.”
Lastly, according to Mr. Chapple, “The ease and power of data visualization has been advancing significantly. The ability to look across and make sense of non-standardized data through visual techniques will enable sponsor companies to make faster, more cost efficient decisions.”
John Whitaker, Ph.D., vice president of Clinical Innovation at INC Research, added, “There are two areas that I see as significant leaps forward in technology for clinical trials, Targeted Source Document Verification (TSDV), and the increased use and development of analytics tools. In the past, most studies took the conservative approach of 100% data verification though on-site monitoring visits. However, based on recent guidance, regulatory authorities are now demonstrating a clear acceptance of justified alternative approaches including Targeted Source Document Verification (TSDV) or ‘risk-based monitoring.’ TSDV focuses monitoring on the most important data points and activities, improving efficiencies without compromising data quality.”
How do companies leverage new and existing technology to create efficiencies and improve quality? According to Ms. Stafford, “It’s all about the continuously updated aggregation of data to help make decisions in the clinical trials process, whether those decisions are in regard to patient safety, quality of data or study performance. You must be able to make decisions during the trial such as, ‘Do we need more sites? Do we need more patients?’ Quintiles is addressing these areas with a tool called Quintiles Infosario, which is vendor-neutral and integrates data from multiple sources to help users make faster, more informed decisions during clinical trials.”
Additionally, cloud-based technologies can be employed to extend and drive further process integration. According to Steve Heath, vice president of Channel Sales at Medidata, “Our approach has been to develop a cloud-based platform of tools built around a common product strategy and infrastructure that individually deliver efficiencies and data-driven insights for optimizing clinical trials, and that together enable comprehensive processes that bring additional efficiencies and enhanced decision making to customers. The aim is to enhance trials from start to finish—beginning with conceptualizing the clinical trial with protocol design, through execution and management of the clinical trial, to conclusion with actionable data.”
An underlying element of CRO/sponsor partnerships is technology, and it’s increasingly being leveraged to overcome hurdles and drive productivity. Dr. Wilkinson of PPD said, “Pharma companies are looking for every opportunity to drive efficiency, and e-Clinical technology can be the key differentiator that defines the value of a strategic partnership. For example, if a pharmaceutical company is focused on accelerating clinical trials, they might look to increase site months by leveraging a partner capable of deploying an e-Clinical technology that speeds the site approval and activation process. On the other hand, if a pharma company is focused on productivity and cost savings, they might look to automate lengthy and resource-intensive processes by leveraging an e-Clinical technology partner that enables risk-based monitoring and reduces CRA travel costs.”
According to Dr. Whitaker at INC Research, “New technologies provide a platform for driving innovation in long-term partnerships. In a strong, long-term relationship you have the opportunity and incentive to improve processes for the customer because the length of the relationship and flow of business offsets development costs. Transactional relationships rely more on off-the-shelf technologies, but a partnership allows for the time to customize solutions and develop the most efficient solutions for the long-term.”
“Technology is used to manage and improve strategic outsourcing partnerships in many ways,” noted Mark Weinstein, president and chief executive officer of BioClinica. “In the case of clinical studies, the examples range from the application of sophisticated simulation and forecasting tools in the planning stages, to systems that improve the execution of a trial by centralizing information in real time, to applications that unify clinical data more efficiently. Companies experienced with outsourcing have endured many inefficiencies resulting from inadequate or inconsistent application of technology and have begun to standardize both their technology choices to improve outcomes. This provides a ‘standard set’ of metrics to measure performance.”
New drug therapies are the result of applying the latest science, new technologies, and committed partnerships. Whether public or private, the CRO industry continues to offer invaluable services, aiding sponsors throughout the drug development process. Also, leveraging both new and existing technologies to create efficiencies and improve data quality has become fundamental in the industry. E-clinical solutions are at the forefront of all clinical trial operations and we can expect an even greater impact in the future.
Kristin Brooks is associate editor at Contract Pharma. She can be reached at firstname.lastname@example.org