By Rob Wright, Chief Editor, Life Science Leader magazine
In May 2011, Pfizer announced it would reduce its clinical research functional service providers from 17 to 2. Initially, this 88% reduction seemed to contradict the trend of pharma and biopharma to increasingly outsource clinical research. That year, the global healthcare contract research outsourcing market was valued at $25.1 billion. By 2018, the market is forecast to reach $65 billion. How can the clinical research market be growing, when companies like Pfizer are employing fewer organizations? Simple. The move on the part of Pfizer is representative of the growing trend of strategic partnering — putting more of your research eggs into fewer CRO research baskets.
According to John Hubbard, senior VP and worldwide head of development operations for Pfizer, the move to partner with fewer CROs was intended to provide the company’s collaborators with a significant volume of work on which to focus their attention, thereby increasing their accountability and, hopefully, their productivity. “The industry as a whole had been very capital-intensive in terms of the amount of money spent versus each dollar received,” stated Hubbard. “We thought we should be able to get a higher efficiency against the amount of capital we spent.”
The pharmaceutical industry had one of its most productive years in 2012, with 39 FDA approvals. But the improved productivity came at a very high cost. Novartis for example, estimates the company’s R&D costs to average $3.9 billion per new drug, which is obviously not sustainable. Companies are seeking a variety of means with which to reduce costs, while increasing productivity. CROs are playing an ever-increasingly important role. But outsourcing your clinical research, and placing more projects with fewer providers, entail greater risk. To discuss that theme, Life Science Leader reached out to eight industry experts to gain their insights. Their expertise ranges from virtual biotech up to and including the largest pharmaceutical company in the world. Armed with their wisdom, you should be better equipped in developing CRO strategic partnerships — whereby the CRO functions as a true extension of your internal team. The panel includes Dr. Kenneth Burhop, chief scientific officer, Sangart; Carolyn Green, president and director, Atreaon; Jim Hauske, president and founder, Sensor Pharmaceuticals; John Hubbard, senior VP and worldwide head of development operations, Pfizer; Mitch Katz, executive director of medical research operations, Purdue Pharma; Mary Rose Keller, VP of clinical operations, Sangart; Thomas Wessel, M.D., Ph.D, consultant and former chief medical officer, Acorda Therapeutics, Inc.; and Leslie Williams, president, CEO, and founder, ImmusanT.
What Is The Biggest Negative Perception CROs Should Work To Overcome?
Carolyn Green, Atreaon: Smaller companies need to assure their clients that their facilities have a level of quality that ensures the work is well-controlled, repeatable, and documented in a sufficiently detailed and timely manner. This is necessary to overcome the perception that non-Good “X” Practice facilities, (i.e. GMP, GLP, GCP) are “free-for-alls” with little control and no layers of oversight. Take the time to explain what you do to ensure the quality of your work and the accuracy of your data. Large CROs need to overcome the perception held by small venture-backed firms that because we are small, and only have only a few projects, we might not get the same time and attention as larger firms with more projects. Large CROs need to demonstrate that the teams responsible for all the great data of the past are still around. Otherwise, you are wondering if you are getting new recruits who have never run a particular model before.
John Hubbard, Pfizer: All CROs should seek to understand their customer product portfolios, needs, and challenges. They need to move away from transactional selling of services to a more solution-based approach. Many CRO teams still ask the sponsor “tell me what you want” as opposed to providing options and alternatives to the challenges we face in managing our clinical development portfolios. CRO leadership needs to invest in the education of their teams regarding the changing philosophy of outsourcing, and what it means to the way they work and interface with sponsors. There is still a disconnect in all large CROs that creates unnecessary friction as teams learn to work together. Change management training needs to occur in the sponsor organizations as roles shift from being “doers” to subjectmatter experts, area leaders, and project managers. Encourage open communication, set clear expectations, and build trust within these virtual teams.
Mary Rose Keller, Sangart: Commodification of clinical research is not attractive to R&D colleagues. It suggests that success lies in faster and cheaper, not in better outcomes for patients or investors. Bid defense should be more about how the CRO approach will deliver quality data to define a clear outcome than reviewing hundreds of lines of cost detail. Metrics are important, but how they are achieved is more important. Keep the messages simple. If you can draw your study management organization on the back of a napkin in the lobby of the hotel, you can probably run my study.
Describe A Situation When You Wish You Had Outsourced Sooner And Why?
Green: I can share a time when I wish we had switched vendors sooner. We were working with a small non-GMP protein manufacturer to take a university manufacturing process from the first small-scale validation of the process through to making the first material. As the lots grew slightly larger, the material was tending to be more insoluble, and therefore, would require the expertise of a team with experience in removing proteins from inclusion bodies. The vendor didn’t have that expertise. A mistake can occur when work shifts and the focus moves outside the vendor’s level of expertise.
Mitch Katz, Purdue Pharma L.P.: While implementing certain development plans, I have needed to work sequentially. If I had utilized outsourcing, much of the work could have been performed at the same time, thus resulting in the earlier (and potentially less stressful) completion of the entire project.
Keller: In a previous company, we needed to conduct a very simple classical Phase 3 study in a common condition. At the same time, we were going to start a new program with the same compound in a much more complex area. We assumed because the Phase 3 study was so straightforward, the team could manage both activities at the same time. It was foolish to think that any study is straightforward if people aren’t 100% focused on it. By the time we outsourced it, the study was classified by the lucky CRO that won the bid as a “rescue.”
Jim Hauske, Sensor Pharmaceuticals: I always wished I had outsourced sooner. If the program is successful, the success would have been seen at an earlier date, and this impacts IP protection. For those failed programs, outsourcing sooner will define the failure more quickly and ultimately save money. It will also focus your attention on the next program and, hopefully, a more successful program.
Thomas Wessel, M.D., Ph.D, Consultant: We attempted to recruit all patients for a small, special pharmacokinetic study at a single academic center. When it became clear that this center could not deliver the number of patients needed within a given timeframe, we decided to work with a CRO that had experience in this area and to search for other qualified centers. The process of identifying additional sites, negotiating contracts, and bringing other centers “online” would have better been performed by a CRO from the beginning.
Describe A Situation Where You Regretted Outsourcing Clinical Research And Why?
Green: The situations where we regretted working with a CRO typically have come when expectations were not set, or at least were not properly set, at the beginning of the relationship. Contract research labs would be wise not to overstate their capabilities just to get the contract. We prefer when a lab is up front with us about what they are good at, and what they prefer not to do. Conversely, we find it is helpful to set the vendor’s expectations on what we are looking for in terms of timing, communication. and written reporting. Our approach to outsourcing can be very hands-on and rather demanding of data, which is not easy for some CROs to deal with, especially if their internal processes are a one-size-fits-all approach.
Katz: I outsourced a very complicated project that required a great deal of training, hand-holding, and explanation. It might have been wiser to have insourced the project.
Keller: I selected a CRO that had a good reputation that I had used recently with a good outcome. I did not fully appreciate the CRO had made some significant internal organizational changes following a large acquisition, which changed the interface between sponsor and sites. As a result, we had many early misunderstandings on how to work together. When we finally determined we needed a reset meeting to revisit responsibilities and delegation of tasks, we came to the realization that the revised CRO working model no longer aligned with our needs or way of working with investigators. Failure to assess how the work will be done is every bit as important as assessing capability and experience.
Wessel: On one occasion, we were disappointed in CRO performance because the initially assigned (and highly competent) monitoring team was migrating to another project. Missteps like that can be prevented if recognized early and corrected through communication and collaborative problem solving.
When Do You Feel It Is Most Appropriate To Outsource Preclinical/ Clinical Research?
Dr. Kenneth Burhop, Sangart: When the study falls into the general category of “routine” (i.e. we do not want to hire and expend valuable internal expertise and money on conducting studies that are common, labor intensive, time consuming, and that require expensive instrumentation that is only utilized occasionally) and when studies require Good Laboratory Practice (GLP) conduct (i.e. it is too costly for us to get involved with all of the quality systems and operations and technical support required to conduct true GLP research). We do not want to have on staff dedicated pathologists, laboratory animal handlers, specialized clinical laboratory chemists, etc., and we can’t possibly afford the vivarium costs or equipment costs to conduct all research in-house.
Katz: When you have a small internal staff and there are restrictions to hiring more staff, when the CRO has particular expertise suited to the project, when the project is in an early stage, or when the CRO is a trusted partner.
Leslie Williams, ImmusanT: When there are noncritical aspects or “programmed” aspects of pre/clinical research. When the company lacks infrastructure and/or expertise, it is important to outsource. I am more apt to consider outsourcing if face-to-face meetings can be scheduled easily – thus “locality” of provider is a consideration.
What Metrics Do You Use To Determine If You Should Outsource Pre/Clinical Research?
Burhop: Our primary metrics are cost and need. It is relatively easy for us to determine if it makes financial sense for us to outsource (e.g. conduct parallel studies, conduct studies requiring a large number of resources like repeat-dose toxicity testing, and if it requires capabilities we don’t have in-house, such as animal handling capabilities for primates or unique and expensive laboratory equipment).
Hauske: Expense is usually the chief metric. However, on the clinical development side, experience dealing with the FDA (particularly in terms of the specific disease section, FDA expert, decision makers, key opinion leaders) is the determinant for my choice of clinical development partner. Unfortunately, in my experience, one pays a significant premium to access outsourcing providers with this sort of staff. Be willing to pay a premium since success in the clinic more than offsets budget overruns.
Wessel: It is important to accurately assess the sponsor’s capacity to initiate and sustain a given project over time. For this purpose, mapping out individual steps in project execution, assessing the needs for existing or future headcount, assigning accountability, and defining timelines are essential. In my experience, it is a great advantage to have a team member with project management and budgetary authority to monitor progress and change course quickly if necessary.
What Specific Advice Do You Have For Executives Involved In The Insourcing Versus Outsourcing Decision?
Burhop: The key to outsourcing preclinical studies is to conduct solid and extensive up-front research on each CRO under consideration for a particular study. Go with the company that genuinely cares about your product development and is willing to work with you as a partner versus just another customer bringing in money. Reputation and scientific expertise, combined with quality and timely output, are key. In the end, much of this is about establishing a relationship with a CRO and, in particular, with the study director assigned to your study. They have to be extensions of your internal team. Consider all of the trade-offs of cost relative to lost time, training of resources, ongoing need for special resources, talent, and ultimately the quality of the work.
Hubbard: We are moving into an era where “transactional” insourcing of personnel to support projects, or outsourcing of full programs to CROs needs to be part of a more integrated and overall drug development strategy. Fiscal pressure on both sponsors and CROs continues, while the need to improve quality and enhance delivery and competitiveness cause opposing pressures. The solution is to apply a more strategic approach. For example, specific technical, operational, or regional capabilities can be accessed using CROs without building internal infrastructure. This is highly useful when new product is acquired through licensing or via an acquisition, thus maintaining a high degree of flexibility for noncore areas. A more long-term perspective allows organizations to learn and grow together, significantly reducing the cost of sales and overhead within the sponsor organizations, improving staff utilization, and reducing operating expenses overall. It also provides a foundation for joint innovation which can be shared by both organizations. The solution needs to be fully accepted throughout the sponsor and CRO organizations, since it may create constraints on the number of providers to be utilized — virtually eliminating the traditional Request for Proposal, RFP, and Request for Information, RFI, processes.
Williams: It is vital to determine early on the critical proprietary aspects of the program and build those within your organization. Outsource only noncritical or “programmed” aspects of your program. Continually assess/reassess and determine what critical initiatives may need parallel tracks.
For additional executive level insights, please check out content at www.clinicalleader.com.
Big Pharma Sees Benefits To Outsourcing Pre/Clinical Research
According to John Hubbard, senior VP and worldwide head of development operations for Pfizer, there are a number of benefits to clinical outsourcing. “The primary advantage to outsourcing your clinical and preclinical work is the ability to convert your fixed to variable costs. The biopharmaceutical industry has a fairly high cost of capital due to significant fixed infrastructure costs. As the industry seeks to manage the revenue decline from the loss of exclusivity, many companies are closing R&D sites, desupporting legacy IT systems, and reducing geographic footprint.
“Whether you take a staff augmentation approach or utilize a strategic alliance model, outsourcing provides the biopharmaceutical company with flexibility and the ability to leverage infrastructure during this time of change. In addition, as many large biopharmaceutical companies are re-evaluating their geographic footprint for conducting clinical trials, CROs offer the ability to maintain a presence in-country using a more flexible model. In many cases, large global CROs have a more established presence in some countries, which allows the biopharmaceutical company to establish an above-country model to operate as a hub working with the CRO partners that have operations in those countries. Finally, some CROs offer specialized services that can’t or are not cost effective to replicate in a biopharmaceutical or biotech company. Some examples are rater training, interactive voice response services, and imaging services. As the industry becomes more virtual, the need to critically assess internal and external capabilities for cost effectiveness becomes a critical component of your overall development strategy.”
CRO Selection Is Personal, Not Just Business
“We must always keep in mind the people we choose to join our teams are the single most important reason we succeed or fail,” says Jim Hauske, president and founder of Sensor Pharmaceuticals. “Although this is true for all discovery and development programs whether insourced or outsourced, it’s particularly important to know the individuals in the company you select to place your outsourced program.” Hauske advises you to focus on developing deep, personal business relationships with the outsourced management team, as well as those members of the outsourced team actually performing the work. Here’s why.
“As a virtual company, it is actually relatively easy to assess companies and, most importantly, people with apparently appropriate experience to perform critical experiments,” affirms Hauske. During his 25 years of pharma “brick and mortar” experience, Hauske observed the Jack Welch (former CEO of GE) approach to management applied to R&D team performance assessments, whereby teams considered to be the trailing 10% were summarily fired every year. He asserts that these teams consisted of top talent, as well as poor performers, and both have found their way into CROs. “There are members of even the best drug discovery and drug development pharmaceutical organizations you would not trust to perform your critical experiments,” he says. “You must know the person who performs your experiment. It is no different from managing an insourced team. Take pains to assess true competency. Despite your best efforts, in some cases, a poor choice of service provider will be made. The best way to minimize such an undesirable result is to develop strong personal relationships with a number of individuals within the organization, especially those most responsible for creating the corporate culture. When something goes astray, and something always does, you need to have strong personal connections to expeditiously get things back on track without causing pain to those actually performing the work.”