A Review Of Sourcing Approaches Within Clinical Development – Part 3

By Daniel Chapple, Executive VP and Chief Commercial Officer, Quanticate

In parts 1 and 2 of this column I discussed four sourcing approaches: in-house support, contractors, competitive bidding outsourcing, and the functional service provision. Each one has benefits and drawback, depending on the situation. In this final segment I would like to consider the centralized service provision and full-service divisional strategic support models, as well as using locations to optimize cost.

Centralized Service Provision (CSP)

Supporting at a functional level does have the potential to have partners supporting different service areas working in silos.  There are efficiencies when looking at the task level to have, for instance, the same company supporting specific tasks in statistics and medical writing rather than two vendors doing both.  Likewise, having the same company providing project management and monitoring services and another offering data centralization, statistics and programming can be beneficial particularly if a technology solution can help to bring it all together to enable a pharmaceutical company to get more out of its data or make trials more cost effective and efficient.  A centralized service provision approach therefore has the benefits of a traditional FSP approach coupled with the added efficiencies seen in a full service approach, but with minimized risk and greater access to expertise and flexibility.

The disadvantages are similar to that seen within a functional partnership, although the cross-function efficiency loss can be mitigated.

Full-Service Divisional Strategic Support

A number of larger pharmaceutical companies have moved away from a functional approach and have looked to large full service CROs to provide all services.  In some cases, this has progressed to the point where a product is handed to the CRO and the pharmaceutical company has a completely hands-off approach to its development.  The objective of such an approach is that efficiencies can be seen across the development which can then ensure that the development is efficient and cost effective.  The introduction of various penalties and bonuses can also be used to ensure timelines and key milestones are met.  A risk-based approach can also make CROs more accountable for the resulting data and to ensuring that decisions are more effective.  There are also benefits related to minimized oversight and the amount of time available by both companies to ensure an effective and optimal partnership.

The challenge to utilizing such an approach is primarily the reliance on a very small number of CROs (sometimes only one) and that the expertise and capabilities in specific service areas may not be as consistently strong across the CRO.  Since over 90% of the time and budget relates to the clinical operations aspect, the primary selection of a full-service CRO is based around capabilities in clinical operations. 

As a data-focused CRO, we are often seeing gaps in certain service areas such as statistics and programming and we find that we are being contracted to support the full-service CRO behind the scenes.  Whilst this minimizes the interactions that a pharmaceutical company has with its primary CRO, it does mean that the pharmaceutical company may not be seeing all the benefits of forming a functional partnership and they are more removed from decisions and opportunities to improve and expand the partnership.

Utilization of locations that optimize cost

In addition to the sourcing strategy employed, costs can be significantly saved if lower cost locations are utilized.  There has been much discussion in regards to the use of lower cost locations, particularly in Asia, South America, Africa and Eastern Europe.  There are clear cost advantages from FTE salary and officer overhead perspectives.  Whether the use of lower cost regions are utilized in-house or via a CRO depends to a certain degree on size, investment availability, knowledge of the local regions, experience utilizing lower cost locations and whether there is an inclination to oversee and put in place processes to use these regions.   Some companies have decided to open large captive centers in locations such as India to provide not just resources involved in tasks such as data management, programming and pharmacovigilance, but also those involved in functions such as finance.

In terms of clinical development, the determination of location of where staff is based is also something that different companies have differing views on, but the utilization of staff based in locations such as India, Poland, Russia and China does enable a reduction of cost using staff that has the experience to undertake specific tasks.

Larger CROs and all BPO-type companies now have capabilities in lower cost regions and there is an attraction for pharmaceutical companies deciding to reduce costs by moving to lower cost regions to utilize the longer term expertise of CROs and BPO companies. 

Having the right levels of quality control and oversight, whilst ensuring quality, timeliness and effective communications are all key to ensuring the cost benefit of lower cost staff is not out-weighed by oversight in higher cost locations at both the vendor and sponsor companies.  As this model as progressed and quality has been demonstrated, the use of lower cost locations has become more popular.  The key longer term issue is whether the cost differential with remain as inflation in many of these lower cost locations is rising much faster than in more developed locations.  It is therefore important to put in place a sustainable approach and a forward-thinking strategy.

Conclusion

In conclusion, there are a number of ways to ensure that a cost efficient approach is put into place to ensure an optimal solution to support clinical development.  As a data-focused CRO, Quanticate are more biased in terms of sourcing strategy, but our belief is that there are a lot of advantages to the functional (FSP) and centralized (CSP) service provision approaches.  These approaches offer a cost effective solution that remains flexible and enables access to expertise.  Additionally, CROs are well placed to maximize the use of lower cost locations and can spread the growth across customers.  This minimizes risk and enables a longer term and more sustained approach to continually evolving the model. 

The role of a CRO is continually evolving but we believe that close integration between CROs and pharmaceutical companies offers many advantages.  This can result in reduced overall cost and increased flexibility through greater access to global locations, efficient technologies and expertise.  The key is to select a CRO that has the experience and culture to develop strong and focused partnerships that enables the development of an optimal solution that best meets their needs of all involved.