Progress and Potential: Evolution of the CRO Industry

The CRO industry is on a course for continued rapid growth with the rise of genetics and genomics, as well as the push toward partnering and more postapproval research.

There is no question that the Contract Research Organization (CRO) industry has grown up fast. Revenues of about $50 million in the late 1970s have advanced to about $10 billion this year alone. After years of growth rates as high as 50 percent, we have "stabilized" at a healthy rate of approximately 12 percent. Last year, R&D spending in the pharmaceutical industry grew at about 8.5 percent. So the size of the outsourcing market to CROs is continuing to rise. By any measure, we are a healthy, growing industry that has a significant role in the drug development process.

But we have a long way to go. Compare the size of our industry to the revenue generated by global prescription drugs sales, which is approaching $500 billion, according to the IMS World Review 2004. And while our industry now numbers over a thousand companies, only a relative few have true global capability.

We are maturing. The number of things we do well as an industry is getting larger. When the industry was young, the companies were small and could provide services in only a few niche areas. Today, a number of companies have reached the critical mass needed to fully develop a drug candidate and even to maximize its success after launch. Still, I believe the size of the industry we see today is only the healthy sapling of the well-developed oak we will see a decade from now. Our growth will be fed by several factors.

Room to grow
Genetics and genomics hold the promise of more selective medicines, which will have a dramatic effect on drug development and the CRO industry. Different drug responses are being linked more and more to genetic variation. Genetic profiling is expected to increase, which may lead to smaller, faster trials. Genetics and genomics will enable us to address more complex and chronic diseases. Historically, we have had about 400 disease targets. In the future, it could be as high as 4,000 ("Genomics Moves On," Ann Thayer, Chemical and Engineering News, October 14, 2002, pp. 25-36). With more targets and greater selectivity of medicines, the number of trials needed will greatly increase.

Postapproval research is expanding (annual growth of almost 15 percent in 2003 according to Goldman Sachs) because of its increasing importance to the prescription drug industry. Regulators are re-questing more postmarketing safety programs. Doctors and patients are asking for more information about safety and efficacy in the "real world," a world significantly different from the carefully controlled environment of Phase II and III studies. More information is needed about the effects of drugs in special populations, particularly children. And companies are looking for new indications as they seek to improve the return on their enormous investment in new chemical entities.

The need to reduce the cost of developing a drug, which is now estimated at more than $800 million, is pushing forward the use of the Internet and informatics. The Internet allows rapid collection, ready access and faster analysis of data while protecting the confidentiality of patient information. Although we have had to learn as we go, we are finding ways to adapt drug development processes to the eClinical world in a way that can save money as well as time. Informatics helps us identify the best areas for patient recruitment, and our data bases are expanding every day.

Today, CROs have global scale, broad expertise, technological skill and a strong track record. While all of these factors will feed the growth of our industry, the real key may be in building partnerships with our customers. Partnering will assume many different forms, but the time for partnering has come.

The promise of partnering
Partnering can help sponsor companies save time, increase productivity, and reduce financial risk, depending on the type of alliance. CROs have developed the capacity and expertise to take on an even larger portion of the drug development and commercialization processes. That enables sponsor companies-whether in pharma or biotech-to reduce or better manage costs, improve productivity, and maintain their focus on core capabilities.

In the next decade, I believe, we will realize the enormous opportunity for partnering. The pharma and biotech industries are building a potentially huge backlog of molecules for development. CROs will help move this backlog through the pipeline by helping to develop entire drug portfolios, perhaps even taking on portfolios as their own.

Because of rising development costs, biopharm companies have to become more productive. Partnering can increase efficiency, such as in the creation of infrastructure alliances, in which a partner assumes control of certain operations or facilities and absorbs employees. Partnerships in which risks are shared will be particularly helpful for smaller pharma and biotech companies, and for large pharma companies that have portfolios of new products moving to late development and launch.

Certainly, there are hazards ahead as well. With responsibility comes more accountability. When we share risks, we must realize that not all projects will meet their financial targets. Additionally, regulatory scrutiny is increasing, and with it the cost of development is likely to rise. Taking full advantage of technology to control costs will be even more important. We can best serve our industry and regulatory agencies by protecting the interests of the people who volunteer for our clinical trials, and by delivering high quality safety and efficacy information in a timely manner.

In 25 years, our industry has grown exponentially. We have expanded our capabilities, our capacity, and our expertise. We will continue to grow, becoming full partners in the process of creating better medicines to defeat more diseases.