Looking Back, Moving Forward: A CRO Retrospective

The idea for this ACT CRO Retrospective came from the first SoCRA meeting I attended in 2003, just as I took over the position of Editor-In-Chief. I had the good fortune to hear PRA International's President and CEO, Patrick K. Donnelly speak about the CRO industry, and I was inspired by what he had to say. The CRO industry has exploded over the last 12 years. It has endured growing pains and it continues to develop. Therefore what better time than now to hear from the thought leaders who have been involved in the transformation taking place.

I would like to thank the industry leaders who took the time away from their busy schedules to share their thoughts and insights. I enjoyed the opportunity to read their “grande mots.” They are a community of professionals who truly care about the work they do. -Toby Jane Hindin

Looking back, what makes the story of the clinical trials industry so interesting is its transformation over only a few decades. The CRO industry has seen an unprecedented growth rate in revenue. The future looks positive and the possibilities for expansion in the industry appear quite reachable as well as limitless. The industry's early development was as an offshoot of the pharmaceutical industry, and it can be traced back to the 1970s. At the 2003 SoCRA Annual Conference, Patrick K. Donnelly, President & CEO, PRA International spoke about the 1970s and 1980s as the "Formation Era." He explained that the "Formation Era" referred to a time when the industry was considered a relationship business. Many of the "new" outsourcers had relocated from the pharmaceutical companies. These outsourcers specialized in one particular area, stayed regional, and focused on clinical monitoring, data management or project coordination. Work was billed out as fee for service or time and materials. It was also a time when there was more than enough work to go around.

In the 1980s the pharmaceutical industry came under a great deal of scrutiny. The FDA was looking closely at clinical trials conducted by pharmaceutical manufacturers. And within a 10-year period, the FDA had incorporated the principles of the Belmont Report into the Code of Federal Regulations, passed the Orphan Drug Act, Safe Medical Devices Act, and became an agency of the Department of Health and Human Services, with a Commissioner of Food and Drugs appointed by the President. The regulatory atmosphere at that time was putting pressure on the pharmaceutical industry to outsource. "FDA is taking an increasingly skeptical and adversarial stance regarding clinical trials and studies submitted by pharmaceutical manufacturers-regardless of how they are conducted," wrote Frederick L. Olmstead (ACT , May 1992; see p. 20, this issue).

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The last part of the 20th century witnessed aggressive mergers and acquisitions among pharmaceutical companies as well as SMOs and CROs (Figure 1). Donnelly aptly named this time period the "Consolidation Era." In addition, biotechnology came into the forefront of the pharmaceutical industry, work was billed as fixed-price contracts, and trial management became a global issue. Pharmaceutical companies continuously increased spending in research and development (Figure 2). And Sponsors continued to increase outsourcing to SMOs and CROs (Figure 3). As Donnelly noted, CROs are no longer "a Ma and Pa Industry," and he has dubbed the 21st century the "Efficiency Era." Several of the keywords he identified with the "Efficiency Era" are: quality, consistency, emerging markets, regulatory harmonization, research partnerships, and human subject legislation.

As many CROs merged and grew larger, they became full-service global trial managers (Table 1). "Looking back over the past 12 years, we have seen tremendous maturation of the outsourcing process, the emergence of truly global service companies with a strong track record of continued process and technological innovation by the CRO industry," notes PharmaLinkFHI's Executive Vice President, Rich Shea.

PAREXEL's CEO, Joe von Rickenbach adds, "The CRO industry has advanced through global expansion, process improvement, and innovative technology. Increased efficiencies within clinical trials can be attributed to several factors. Tools for modeling and managing clinical trials have been developed and/or improved, thus accelerating patient enrollment. Additionally, project management solutions-better decision-making, leadership, and communication-provide significant client benefit."

While pharmaceutical and biotech R&D spending is surpassing $36 billion today, blockbuster drug development is leveling off. Over a 10-year period, from 1992 to 2002, the CRO market grew from a $1 billion to a $7 billion dollar industry, and in that same period of time the number of CROs earning over $100 million jumped from 2 to 13.

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The rate of growth in the CRO industry has substantially increased: Today there are over 1000 CROs worldwide. In 2003, the number of CROs in North America was about 270. CROs are moving in the direction of becoming either niche or large service providers

Along with an increase in growth, the CRO industry is faced with new challenges. As sponsors are consolidating they are looking for more efficiency and lower costs in the areas of technology, patient recruitment, and quality. "I do think there is more of a partnership attitude among sponsors as they realize they cannot get the job done on their own, and CROs have become more professional," observes Criterium Inc.'s President & Founder, John Hudak.

Perhaps this is one of the many reasons for the paradigm shift to partnering and risk - sharing strategies in the pharmaceutical and CRO worlds ( Figure 4 ).

President & CEO, ICON Clinical Research-US, Bill Taaffe notes that over "the past 10 years there has been an initiative to develop the CRO-sponsor relationship as a partnership. This has not happened and it is unlikely to do so in the near future. I think that both sides now agree that it is not practical to have a true partnership between a CRO and a pharma company. What we have seen is a maturing of the outsourcing process and there are signs at last that the relationships will be strategic."

21st century challenges for CROs

Several themes that have emerged from recent conferences suggest that the challenges CROs will face are: quality, efficiency, the need for therapeutic expertise, the increase in the number of trials, difficulty in recruitment, the globalization of drug development, limitations on drug price increases, fewer blockbuster drugs, competition both within and outside the industry (witness the Wyeth and Accenture partnership), sponsors tightening budgets, the need for better sponsor-CRO communication, and the globalization of trials and EU regulations.

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Several thought leaders have expanded further upon the themes and challenges:

Relationships & collaborations

Essential Group Inc.'s Chairman, President & CEO, C. Lee Jones explains "The challenge to drug sponsors and CROs is to collaboratively embrace the reality of outsourcing, but in the context of creating value and creating new core competencies of relationship and outsourcing management."

Medifacts International's Senior Vice President, Sales & Marketing, Vincent Lagrotteria adds that an increase in CRO and sponsor partnerships will lead to more efficiency. "If relationships start out with clear definitions of roles and responsibilities, there is a greater chance of both parties succeeding." He emphasizes that "CROs and sponsors must act as one to achieve study goals and objectives-from communication, execution, timeliness, even corporate culture. We believe that an outcome of working smarter together will be a reduction in cycle times and rework for many clinical trial tasks."

Integrating information technology

The growing impact IT tools have on how CROs conduct business is a pervasive theme. "The increasing use of electronic information management systems is having a profound impact on the way clinical trials are managed," notes Brad Zaro, President & CEO, Clinimetrics Research Associates, Inc. He explains that EDC and CTMS tools "are adding to the speed, efficiency and economy" of clinical trials and he adds that "it is more expedient and cost effective to rely on outsourcing to provide support in these areas," since these tools require significant infrastructure and specialized skill sets.

"We hear much about the benefits of logistical tools such as EDC, about new scientific facilitators such as imaging, biomarkers, and proteomics and the benefits of intelligent and integrated program design. These are the drivers that can significantly improve the efficiency and value to the sponsors of drug development work," offers Alastair S. McEwan, President, Global Clinical, Inveresk.

Improving communication

Several thought leaders have suggested that challenges can arise from poor communication and coordination.

"There are persistent challenges between contract organizations and clients because of changes in personnel and reliability, long decision-making processes and timeliness, ambiguous instruction and utility of work, quality of work, and changes to projects and costs. Pharma companies have CRO or contract departments that further lengthen the process for proposals and contracts, which makes it more difficult to choose CROs and more expensive for CROs to stay the course," explains Criterium's John Hudak.

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Peter T. Kissinger, Chairman & CEO, Bioanalytical Systems, Inc., notes that "poor coordination with preclinical history and laboratory work and the slow coordination and analysis of data on the fly as the trial proceeds," can be an issue, especially in the early phases of the trial. He adds, "This reflects the 'silo' nature of big pharma and may be inevitable, but opportunities exist for faster decision-making and perhaps even a reduced number of study subjects. Adding more and more subjects...doesn't improve matters all that much when in the first year after approval 2 million scripts are written." He comments that "The management and reduction of data when we have no industry standards for IT...makes it very difficult to do things better in our chaotic system. Hospitals and clinics have no standard database for even weight, blood pressure, cholesterol. A global standard would help enormously. Ending Islamic terrorism will be easier. I do not have an acceptable solution."

Moving forward

It would be useful if we could look into a crystal ball and predict what challenges CROs will face and what future trends there may be.

ACT

doesn't have that type of crystal ball in place, so we asked many of the thought leaders in the industry to comment on what they see as challenges and future trends. There are some common themes that have surfaced in our survey.

"The CRO industry today is faced with many large full-service organizations providing global capabilities," notes Kendle International Inc.'s Chairman & CEO Candace Kendle. "Biopharmaceutical companies are beginning to turn their focus away from these larger, full-service providers and to look toward more flexible organizations that can deliver proactive and innovative clinical development and life cycle management solutions on a global basis." She adds, "as a result, medium-sized global CROs providing access to specialized expertise and expanded patient populations are experiencing significant growth and capturing market share."

"We see an increase in the need for CROs specializing in niche services...in addition to the ability and capability of managing complete drug development requirements," predicts Greg Holmes, Executive Vice President, SFBC International.

Stephen MacKenzie - Lawrie , Director , Sales & Marketing , Health Decisions , notes that sponsors " need to work with a CRO who not only offers global reach , but who can add value to this process and successfully integrate experienced people , with proven process and appropriate technology , that together can accelerate the drug development process and bring speed and efficiency to product development ."

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"The generic pharma market has always relied heavily on Phase I/Bioequivalence CROs for expertise," states Marc LeBel, CEO & President, SFBC Anapharm. He forsees the early drug development CRO "becoming a source that is sought after for its expertise" by the biotech, small and large pharma and specialty markets. He adds "this new paradigm will facilitate the establishment of real and durable partnerships between CROs and their clients."

Brad Zaro of Clinimetrics states that the growth of the industry " has been driven by expanding product pipelines , movement of more biotechnology companies into late - stage development , economic considerations , and an increasing need to move products towards the market more quickly within an increasingly complex regulatory environment ." He expects these market drivers " to continue for the foreseeable future ."

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Jules T. Mitchel, President, Target Health Inc. predicts that within the next three to five years Internet-based clinical trial (IBCTs) will have a major impact on the CRO business. "Already, those sponsors who use IBCTs no longer have the need for double key data entry and related services. The volume and scope of query resolutions, another cash cow, is also being dramatically reduced. Monitors are spending less time in the field with reduced travel budgets. Further into the future, when clinical research at the study sites becomes more and more a paperless function with direct data entry (eSource), source document verification will fall under validation and auditing, and monitoring as we know it will disappear. With appropriate controls to assure data accuracy, precision and quality, entering data will be like booking a hotel reservation."

Rich Shea, PhamaLinkFHI predicts "looking forward to the next 12 years, the stage is set for an evolutionary leap as drug developers require their outsourcing partners to bring greater efficiencies in the planning and management of their clinical programs." He adds, "The companies that will be successful over the next 12 years will be those service providers that re-engineer their operating model in a way that enables transparency between sponsor and service provider." He notes "In the world of 'integrated outsourcing' the lines between sponsors and service providers will become blurred and perhaps disappear altogether. Technology will facilitate but will not drive this evolution. It is the process changes that CROs must implement that will enable our industry to consistently deliver higher quality, greater efficiency, improved information sharing, and an outsourcing model truly based on collaboration."

Joseph L. Herring, President and COO, Covance Inc. cautions, "In today's ultra-demanding industry environment, CROs and biopharmaceutical companies face a critical choice...collaborate or stagnate. To continue to be successful, our clients must get medical innovations to market more quickly than ever before. I believe the winning formula for expediting drug development is for CROs and sponsors to work together in true strategic relationships. Given the many serious issues facing the pharmaceutical and biotech sector, collaboration is no longer a choice...it is a business imperative."

"The need for high-quality CRO services will continue to grow according to industry projections by 20% per year because of the increased drug company outsourcing. The reality is that drug companies cannot carry the large cost of clinical infrastructure to meet the full needs of an oscillating pipeline and declining earnings. This forces outsourcing to the forefront and demands two new competencies in R&D of outsourcing and relationship management if they are to succeed," offers C. Lee Jones, Essential Group, Inc.

Paragon Biomedical Inc.'s CEO & Cofounder, Nicholas R. Reed anticipates "the industry's need for quality CRO services to increase.... We also expect to see a continued growing demand for more integrated services, technologies and multinational activities.... At the same time we expect continued price pressures." He suggests that, "Past response to these pressures has squeezed the inefficiencies out of the successful CROs, therefore future efficiencies will probably be gained by those sponsors that build integrated, mutually accountable processes with service providers."

"We firmly believe that as imaging becomes more powerful it will play a greater role within clinical research," states Edward M. Aten, President & CEO, Certus International, Inc., and "we have already seen significant changes in the way clinical research is conducted utilizing imaging and imaging endpoints."

Quality, efficiency, niche or specialized providers, information technology, efficiency, improved communication between sponsor and provider, and new kinds of collaborations or partnerships seem to be the important issues that the CRO community will be dealing with in the coming years.

Some of this growth will occur naturally. As PAREXEL's Joe von Rickenbach suggests, "Perhaps the most important advance in the CRO industry emanates from longevity. As the CRO evolves, its experience over time and across geographies allows the organization to pass learned efficiencies on to clients, minimizing time, cost and risk."

ACT Survey

ACT

surveyed a number of CROs to find out some specific answers to questions about the present and predictions over the next five years.

Although the sample size was small, N=16, the respondents were an evenly divided cross section of Small, Small/Medium and Large CROs (Figure 5). All of the companies responded that they had grown over the last five years from 5% to 400% (Figure 6). This is reflective of what other sources have indicated with regard to the CRO industry. Projections for growth over the next five years appear to be extremely positive, with companies reporting projections of 5% to 500% (Figure 7). The respondents also noted that they are located globally, with Europe and the United States being primary areas (Figure 8). All respondents indicated that they were expert in all phases of clinical trials, however Phase I had the fewest amount of responses (Figure 9). Site selection, data collection, and data monitoring were indicated as the areas serviced the most in all phases of trials. The least serviced areas were metrics and pharmacoeconomics (Figure 10). Current clients were evenly divided among the pharmaceutical, biotech, and medical device industries (Figure 11). Six of the 16 respondents noted that they were niche providers and specialized in the following areas: Phase I/II trials, bioanalytical services, clinical imaging, devices, biotech, cardiovascular drugs and devices, ECG, Holter and ABPM monitoring, urology, gastroenterology, and women's health (Figure 12).