With CROs, Decide What You Can Actually Manage
By Dan Schell, Chief Editor, Clinical Leader
Peter Fredette and I spent the first 10 minutes of our interview talking about music.
We’re both musicians, and although we had never spoken before, that discovery sent us down a rabbit hole before I finally remembered I was supposed to be interviewing him about CROs. As it turned out, the detour probably helped. Once we got around to clinical trials, the conversation felt less like an interview and more like two people pulling apart an industry model that has changed dramatically even over the last decade.
Our conversation moved from site relationships into CRO economics, FSPs, outsourcing, insourcing, and fractional resources. Somewhere along the way, I started thinking less about how a small biotech should choose a CRO and more about a question that probably needs to come first: how much of the traditional CRO model does a small biotech actually need, and what kind of relationship is it actually prepared to manage in order to get it?
When Efficiency And Billability Collide
Fredette has watched the CRO model evolve from inside it, and one of his strongest opinions concerns something remarkably simple. “Billability is the enemy of efficiency,” he told me. Traditional CRO economics, Fredette explained, have been built around what can be billed to a sponsor: a certain number of FTEs, performing certain tasks, for a certain amount of time. At enormous global CROs, those individual units become part of a financial infrastructure spanning thousands of employees and multiple countries.
He compared it to hiring someone to paint your house by the hour. There isn’t much financial incentive to finish faster. “As that grows to the ICON level or to the IQVIA level, and now you’re doing this for 40,000 employees across 25, 30 different countries, you can imagine the scope of that,” he said.
His criticism of billability makes sense, although I wouldn’t equate a billable model with inefficiency. Large CROs became large for a reason, and scale can offer sponsors capabilities they would struggle to reproduce internally. For example, Fredette pointed to FSPs. A CRO with an established infrastructure for recruiting and training CRAs might assemble 60 or 70 people for a sponsor far faster than the sponsor could build that capability itself. Established teams, systems, vendor relationships, and master agreements can also eliminate an enormous amount of repetitive work.
The tension appears when greater efficiency reduces the amount of work that can be billed. As Fredette put it, “We can become more efficient and make less money? Ha! What company wants to celebrate that?”
Small Biotech Has Some Ownership Here
Obviously, the economics look different for small biotech companies because they don’t have the outsourcing leverage of large pharma. Fredette described the biotech environment as the “wild, wild west,” populated by companies that sometimes are little more than “three people, a drug, and a dream.” They may have no operations SOPs, preferred vendors, FSP contracts, or internal site-relationship expertise. It’s easy to blame the CRO when things go wrong in those relationships, but sponsors bring their own level of operational maturity into the partnership, too, and I don’t think the CRO is always the fair target. An immature protocol, unrealistic enrollment assumptions, poorly defined responsibilities, or insufficient internal oversight can turn even a well-written CRO proposal into something very different six months later.
Fredette’s comments added another dimension to a discussion we’ll be having on November 18, when our Clinical Leader Live panel brings together experts to talk about how small biotechs can better engage with CROs — the RFP process, outsourcing decisions, change orders, unexpected costs, and what smaller sponsors can do to get more value from those relationships. Yes, small biotechs should expect transparency and predictability from CRO partners. But sponsors also need to understand what they’re buying, why they’re buying it, and who inside their organization is capable of managing it.
Rising costs are making those decisions more important. Fredette sees sponsors examining the traditional CRO bundle more closely and separating services that don’t necessarily need to reside with one provider. Some capabilities can remain inside the company. Specialized or fractional experts can handle others. Technology may eliminate certain activities altogether. “Many of these smaller companies are saying things such as, ‘How can I start shaving costs, because I don’t have $50 billion?’” Fredette said.
Unbundling certainly has appeal for biotechs that can’t afford to pay for capabilities they don’t need. The part that concerns me is what happens afterward. Someone still has to put all those pieces back together. Some people would probably argue that’s exactly what fractional experts and better technology are for — that the coordination burden shrinks along with the bundle. I’m not sure I buy that. A biotech could pull six functions out of a full-service CRO contract and suddenly find itself managing six vendor relationships, six contracts, six sets of deliverables, and six interfaces. Saving money on individual services doesn’t accomplish much when the sponsor lacks the expertise or bandwidth to oversee them, and that’s the part of the unbundling conversation that gets overlooked most often.
Decide What Kind Of Partner You Can Manage
One thing I liked about my conversation with Fredette is that he didn’t point the finger at CROs as being “the problem.” As we all know, ClinOps is messy. The industry has layered new processes, technologies, specialists, vendors, networks, and business models on top of one another for decades. CROs have moved closer to sites. Site networks have centralized regulatory, contracting, budgeting, and data functions that once looked much more like CRO activities. “And now you have CROs that are evolving into sites and sites that are evolving into CROs,” Fredette added. “These days, it’s often hard to tell who does what.”
I think that complexity makes the CRO decision more consequential for a small biotech. Before an RFP goes out, the sponsor needs some clarity about the organization it wants to be during the trial. What expertise belongs internally? Where does the company need scale? Which relationships does it want to own? How many external partners can its team realistically oversee? Those answers should shape the RFP rather than emerge after the contract has been signed.
Small biotechs need CROs that understand their financial constraints, communicate clearly, and don’t treat a change order as the answer to every operational surprise. But that’s only half of the equation Fredette described. A CRO can’t compensate indefinitely for a biotech that doesn’t understand its own needs or lacks the people to oversee the model it selected — which means the sponsor has to be honest with itself about what it’s actually capable of running, not just what it wants to pay for.
So before asking, “Which CRO should we hire?” I think there’s a more fundamental question small biotechs should be asking themselves — the same one that kept surfacing throughout my conversation with Fredette:
“What kind of CRO relationship are we actually prepared to manage?”