Successful Outsourcing: Tracking the Evolving Use of Full-Service and Niche-Service CROs

Following more than two decades of growing involvement in nearly all aspects of drug development, full-service and niche-services contract research organizations (CROs) have become a common and integral part of most sponsor companies' clinical research teams. From development planning through project implementation and dossier completion, total global spending on clinical CRO services has reached an estimated $8 billion, representing an average annual increase of 14.9% since 1985.¹ At the Partnerships with CROs Conference in April 2005, a panel of industry analysts predicted that outsourcing to CROs will continue to grow at a rate of 10% or more each year.²

As market conditions and the overall pharmaceutical industry operating environment change and evolve, sponsor reliance upon and usage of CRO partners has also changed. In 1992 and in 1995, we published articles in Applied Clinical Trials that examined how sponsors use CROs and their opinions of CRO services.^3,4 Now, a decade later, we have conducted another survey among biopharmaceutical companies to understand how outsourcing practices have further evolved and how they are becoming more efficient.

Methodology

A 27-item survey was sent via e-mail to subscribers of

Applied Clinical Trials

. In total, 372 individuals responded to the questionnaire. Seventy-five percent of respondents described their primary job function as R&D project management or clinical project management. Overall, respondents reported a high level of experience in clinical research. Almost two-thirds (63%) of the respondents have three or more years of experience.

The respondents represented an excellent cross-section of small, medium, and large pharmaceutical, biopharmaceutical, biologics, and medical device companies. The proportion of responses from larger size sponsors (38% of total) was only slightly larger than that from mid-size (28%) and small-size sponsors (34%). What follows is a discussion of the survey results taken in aggregate across all company sizes.

Average number of full- and niche-service providers utilized

The majority (82%) of respondents report that they worked with two or more full-service providers last year. They used a median of three different full-service CROs in 2004. A similar percentage, 81%, report that they worked with two or more niche-service CROs last year. On average, respondents worked with a median of 2.5 niche-service CROs in 2004.

Respondents expect minimal change in their usage of full-service and niche-service CROs in 2005. However they reported that the projected median number of different full-service CROs utilized would decline from three in 2004 to two in 2005.

Our survey identified a high level of willingness among sponsors to supplant full-service CROs with niche-provider CROs. More than three out of four respondents (77%) report that they "often/occasionally" choose to use niche-service CROs instead of full-service CROs. Only one out of eight respondents reported that they choose not to replace full-service CROs with smaller organizations offering partial services.

Multinational provider use

For nearly a decade, sponsors have become more nimble and adept at mixing and matching CROs of varying sizes and service offerings. The results of this recent survey indicate growing willingness and confidence in using a portfolio of full and niche, global and local, contract service providers.

At this time, there is little observed differentiated usage of multinational and regional CROs abroad. The majority of respondents (66%) report contracting out two or more projects to multinational CROs in 2004. A similar percentage report outsourcing two or more projects in 2004 to regional CROs based abroad. Respondents contracted out an average of two projects to multinational CROs in 2004; slightly less, an average of 1.8 projects, were outsourced to regional CROs.

Variance in the usage of regional CROs abroad is much higher than for multinational CROs. Interestingly, whereas expected 2005 usage of multinational CROs is consistent with 2004 levels, respondents expect a slight decline in the use of regional CROs abroad. This year, 59% of respondents expect regional CROs abroad to manage more than two projects, down from 66% in 2004. The variance among companies in the level of expected 2005 usage of regional CROs abroad has also widened.

Planned use of CROs in various geographical areas is shown in Table 1. Most respondents expect CRO usage to increase or stay the same throughout most regions of the world during the next several years. Areas where the largest percentage of respondents expect their use of CROs to "increase" include Europe (47%); North America/U.S. (46%); and Central and Eastern Europe (36%). One out of 10 respondents expects decreasing use of CROs in several key regions: Latin America (9%); North America (9%); Europe (8%); and South Africa (8%).

Table 1. Planned use of CROs in geographical areas (percentage of respondents)

Frequency of CRO service use

It is encouraging to note that in the present survey, most sponsors believe that their outsourcing practices are more strategic in nature. Three out of four describe their use of CROs as deliberate and planned. Only 25% reported that they are frequently using CROs for "tactical" reasons (e.g., last minute decisions due to an unexpected shortfall in resources).

Respondents are evenly divided on their reported use of CROs for "functional" purposes. Half of the respondents (49%) report that their approach to outsourcing involves the transferring of a specific task across the majority of their projects.

Table 2 shows the use of CROs for various activities. Activities most often outsourced include data collection/study monitoring (89% report "very often" or "occasionally"); preparing and collecting site documents (82%); patient recruitment assistance (82%); data management (77%); and investigative site selection (73%). Interestingly, compared to our 1994 survey results, sponsors appear to be scaling back somewhat in their reported use of CROs for traditional services, specifically monitoring and data management.

Table 2. Use of CROs for various activities (percentage of respondents)

The present survey also suggests that sponsors are dramatically increasing their use of CROs to interface with and support investigative sites. Sponsors are also modestly increasing their use of CROs for development planning and protocol design. In 1994, for example, only 18% of companies used CROs for site selection; in the present survey 73% of the respondents report doing so. And in 1994, only 2% of sponsors reported that they rely on CROs to provide patient recruitment assistance. This compares with 82% of the respondents who report doing so in the present survey. Ten years ago, 6% of sponsor companies reported using CROs for development planning. In the present survey nearly half (49%) of the respondents report outsourcing their development planning activity.

CRO selection practices

Asked if they are required to choose CROs from a preferred provider list or if they may make an argument to use someone not listed, slightly more than one-third of respondents (37%) report that they must choose from the preferred provider list. The practice of limiting choices to a preferred provider list appears to have softened slightly. In response to a similarly worded question in 1996 and 1998, 45% of respondents in each case reported that they were required to limit their CRO choices to those on the preferred provider list.

Selection criteria rated "highly important" in the present survey are: therapeutic area expertise (50%); strong reputation (50%); demonstrated ability to deliver patients (50%); responsive turnaround of proposal (44%); and significant cost advantage (42%). These criteria are very consistent with past surveys conducted among sponsor companies by CenterWatch, with a couple of notable exceptions. Whereas in 1996 nearly 20% of companies rated "size of CRO" as an important selection criteria, only 3% of respondents do so in the present survey. In 1996, 38% of companies rated "full range of services" as "highly important," compared with 29% of respondents who do so in the present survey. These latter two findings further support the notion that sponsors are confident in, and favoring, their ability to flexibly select and manage CROs of varying sizes and service offerings.

Contracting with providers

The time required to negotiate the terms of the service agreement often creates a significant delay in project initiation. One suggested approach to saving time is to initiate work under a "letter of intent." This approach is usually discouraged by sponsor attorneys, as evidenced by less than one-third of respondents (23%) reporting that they frequently (>50% of the time last year) initiated projects under a letter of intent. Support for another approach, the "master service agreement," was only slightly better; 38% reported that they frequently used them.

Project governance

Project kick-off meetings between sponsors and providers are becoming more common. However, the survey results suggest that the practice is not widespread. Only one-third of the respondents (36%) reported that they usually (more than 75% of the time) initiate projects with a formal kick-off meeting. Kick-off meeting activities rated "highly important" by the respondents were: review procedures (63%); clarify roles and responsibilities (62%); review protocol (60%); define communication pathways (56%); and agree on how issues will be resolved (50%). Despite the fact that sponsors often complain about CRO staff turnover, only 20% of the respondents rated "discuss how staff turnover will be managed" as a "highly important" item for the meeting agenda.

Techniques rated "highly important" to ensure that the CRO meets the sponsor's expectations were joint periodic review of metrics (49%) and contract language (27%). Rewards and penalties were not rated highly (8% and 9%, respectively).

Quality of provider services

Respondents' feedback on the quality of full-service CROs is shown in Figure 1. Nearly half of the respondents (48%) reported that the overall quality of full-service CROs has stayed the same during the past two years. Improved performance was noted by 39% of the respondents, while only 13% indicated that overall CRO performance has worsened. These results suggest an improvement in the perception of CRO services, as compared with a 1998 survey by CenterWatch

⁶

in which 40% of respondents reported that overall CRO performance had worsened.

Figure 1. Quality of full-service CROs over the past two years (337 respondents).

Equally good marks were reported for niche-service CROs (see Figure 2). Improved performance was noted by 47% of the respondents, and an additional 47% reported that overall quality of niche-service CROs has stayed the same during the past two years. Only 6% indicated that niche-service CRO performance had worsened.

Figure 2. Quality of niche-service CROs over the past two years (335 respondents).

Sponsors' efforts to control the costs of using CROs

Among respondents who could estimate the relative cost of using CROs, the prevailing view (66% of the respondents) was that CROs are more expensive than in-house resources. The category "26–50% more expensive" was most frequently cited (30% of the respondents). The vast majority of sponsors attempt to negotiate lower CRO fees, and "rate card" is the most frequently used technique (42% of the respondents). In addition to CRO fees, there is the in-house cost of managing the CRO. These costs are significant, as indicated by 61% of the respondents reporting that managing the CRO required more than 20% of the resources that would have been needed to conduct the study in-house. Despite the apparent concern of biopharmaceutical companies over CRO costs, 20% of the respondents could not estimate how CRO and in-house costs compare. Similarly, 22% of the respondents reported that they do not negotiate fees with CROs.

Discussion

There are a number of key takeaways from our recent survey. Although sponsors still report mixed impressions about CRO service, quality, and costs, most sponsors are using CROs frequently for a wide variety of activities. Sponsors now believe their outsourcing practices are more strategic in nature, i.e., they are more deliberate, aimed at evaluating individual aspects of projects and trying to find the most cost-effective outside partners to carry out specific parts of the project.

Likewise, sponsors convey confidence and skill at playing the experienced general manager of a diverse, multivendor team involving both full- and niche-service providers. In order to achieve higher levels of quality and efficiency, sponsors are finding that they must proactively and flexibly manage teams comprised of internally and externally based resources. Global projects involving the utilization of local and international CROs in combination is yet another variation on the flexible outsourcing practices now utilized by sponsors.

Sponsors report that the growth in their usage of traditional contract clinical services (e.g., monitoring, data management) is flat to slightly declining. Recognizing the opportunities to increase study conduct efficiency, sponsors are significantly increasing their use of CROs to interface with, and support, investigative sites. Sponsors are also modestly increasing their use of CROs for development planning and protocol design activities—early stage areas are typically left to in-house staff, but for which select CROs may now bring higher levels of expertise.

Despite the time and budget constraints that usually occur at project initiation, some sponsors and CROs are conducting project kick-off meetings. Vogel⁷ recently noted that most outsourcing failures can be traced to differences in sponsor and CRO expectations. He described how the project kick-off meeting can be used to negotiate mutual understandings in six critical project governance areas: roles and responsibilities of sponsor and provider team members; succession planning at the sponsor and provider levels; communication and decision-making strategy; expectations and performance metrics; issue resolution process; and budget planning and management. Sponsors report that some of these governance topics are being addressed when project kick-off meetings are held. However, the evidence suggests that project kick-off meetings are not held for a majority of projects

Conclusions

The evidence from this survey supports a continued role for outsourcing in clinical drug development as sponsor practices become more advanced and more efficient. Sponsors report significant improvement in the quality of services delivered by full-service and niche-service CROs. Sponsors also report that they are increasingly making strategic decisions on what activities to outsource and which type of CRO (full-service, niche-service, regional abroad) to contract with. The authors intend to follow up this survey with one directed to full-service CROs and niche-service CROs to gain their perspective on outsourcing practices and trends.

Acknowledgements

The authors wish to thank Toby Jane Hindin and Barbara Sefchick for their assistance in conducting this survey and analyzing the data.

References

1. J. Kreger, Investment Analyst Report, William Blair & Company, 2005.

2. Wall Street Forecast and Analysis of Outsourcing Trends, 14th Annual Partnerships with CROs and Other Outsourcing Providers, April 6, 2005.

3. J. Vogel, "Achieving Results with Contract Research Organizations: Pharmaceutical Industry Views," Applied Clinical Trials, 2 (1) 44–49 (January 1993).

4. K. Getz and J. Vogel, "Achieving Results with CROs: Their Evolving Role in Clinical Development," Applied Clinical Trials, 4 (4) 32–38 (April 1995).

5. K. Getz and R. Whitaker, "The Booming CROs," CenterWatch Monthly, 3 (2) 8–9 (1996).

6. R. Whitaker, "The Evolving CRO Market," CenterWatch Monthly, 5 (9) (1998).

7. J. Vogel, "Designing a Relationship Governance Plan at Project Kick-off Meetings," The Spilker Report, 6–7 (February 2004).

John R. Vogel,* PhD, is a drug development consultant at John R. Vogel Associates, Inc., 328 Pualoa Nani Place, Wailea, HI 96753, (808) 875-6063, email: john@jrvogel.com. Kenneth A. Getz, MS, MBA, is a research fellow at the Tufts Center for the Study of Drug Development and the founder and Chairman of the recently established non-profit organization, the Center for Information and Study on Clinical Research Participation, both in Boston, MA (617) 590-4175, email: kengetz@ciscrp.org.

*To whom all correspondence should be sent.