STRATEGIC OUTSOURCING
either the formal or the tacit knowledge • Endo Pharmaceuticals has hired a single
that would enable staff on both sides to provider to manage all of its clinical trials.
Box 2: Types of clinical outsourcing
collaborate as seamlessly and efficiently According to the firm’s senior vice-
• Out-tasking: Hiring providers to deal with
as if they were members of the same
president for research and development,
discrete activities within a single clinical trial
organisation (the hallmark of successful
Roland Gerritsen van der Hoop, the
(eg, patient recruitment or data management);
outsourcing arrangements in other
arrangement will allow Endo to “reduce
• Functional outsourcing: Hiring a provider to
industries). Even when sponsors have
planning and start-up time” by “providing
perform a specific activity for all (or a large
worked closely with key CRO partners
dedicated resources that [will be] more
subset of) clinical trials; and
on a large number of trials, the CRO
efficient… and Endo-aligned”.
12
• Programmatic outsourcing: Hiring a provider to
teams typically vary greatly project to
manage a wide range of activities for all (or a
The above examples of companies
project. The use of customer-dedicated
large sub-set of) clinical trials from initiation
embracing a more expansive and strategic
staff is still extremely rare in the pharma
through to completion.
approach to outsourcing clinical R&D, and early
industry. Given the nature of clinical
data on results, indicate what is almost certain
even the most diversif_i ed pharma company.
development, a complex set of activities
to become the dominant paradigm in the
Today, the outsourcing of clinical trials is heavily
that depend significantly on the quality of
pharma industry over the next 3-5 years. Those
concentrated within a small number of f_i rms –
collaboration (communication, problem-
companies that act quickly and aggressively to
the top 10 CROs perform 80% of outsourced
solving, etc) among team members, the
negotiate such agreements with CROs will be
clinical development work, and the top 20
current model of trial-by-trial staffing is
rewarded with more favourable pricing and
perform more than 90%.
13
There will always be
highly problematic.
terms. More importantly, those companies that
a need for niche providers with deep expertise
In addition, pharma companies continue
invest in building the capabilities to effectively in highly specialised f_i elds, but this is no reason
to retain large clinical development staffs.
manage such complex business relationships not to move toward more comprehensive,
The aggressive shedding of assets common
will achieve step-change reductions in cost long-term, mutually committed outsourcing
to outsourcing in other industries, typically
and improvements in cycle time. Those that relationships with one or a few CRO partners.
involving the re-badging of employees (transfer
do not will be plagued by the challenges that Increasingly, IT outsourcing and BPO
of customer staff to suppliers) is virtually
often aff_l ict outsourcing arrangements in arrangements in other industries involve long-
unheard of in pharma. Sponsors pay for CROs
other industries. term contracts with a handful of outsourcing
to conduct a majority of clinical research and
providers – each awarded a major area of
development activities, and then, all too often,
“The most eff_i cient way to functional responsibility. Governance structures
they pay again for their own staff to micro- produce anything is to bring
are designed to minimise (but not eliminate –
manage CROs. In doing so, sponsors do not
since doing so would be impossible) overlaps
together under one management
in accountability, while also facilitating seamless
reduce risk so much as they introduce yet
another layer of complexity, ineff_i ciency and
as many as possible of the
collaboration among providers in service of
customer needs. Additional specialised services
hence cost.
activities needed to turn out
are contracted separately by a retained
Supplier management costs remain
the product.” team within the customer that manages the
extremely high in the pharma industry –
over 20% of R&D outsourcing spend vs
Peter Drucker, pioneering
outsourcing provider relationships, or by
the 4-7% recommended by outsourcing
management theorist
empowering primary providers to sub-contract
with niche suppliers for specif_i c services – as is
advisory f_i rm EquaTerra.
8-9
Consistent with
common in the aerospace industry.
the pharma industry’s outsourcing model,
barriers to outsourcing
supplier management is essentially redundant
Pharma executives worry about losing
Despite the success a number of pharma
project management, as opposed to strategic
control of proprietary knowledge, and about
companies have realised as they move toward
governance and management of productive
the f_i nancial, regulatory, and reputational risks
comprehensive outsourcing arrangements,
business relationships with key suppliers.
of allowing a third party to own the process
many executives worry about the downsides.
Over the past few years, leading pharma
for clinical R&D. Such concern is by no means
By looking at the experiences of organisations
companies have begun to move in the
unwarranted. Hardly a day goes by without
in other industries, however, pharma companies
direction of comprehensive, programmatic
announcement of a major outsourcing deal
can avoid the very real pitfalls of programmatic
that is being renegotiated or terminated
outsourcing (see Box 2), and have begun to outsourcing, and apply proven practices to
due to customer dissatisfaction. However,
realise signif_i cant benef_i ts, as illustrated by the maximise success.One of the reasons many
research indicates that up to 70% of such
following examples: companies choose to outsource tasks and
failures can be attributed to a few key areas:
• Wyeth estimates that its more strategic projects is to gain access to expertise in
lack of supplier clarity about a customer’s
approach to outsourcing clinical particular therapeutic areas or specif_i c phases
expectations, contracts that set up a time-bomb
development (in which the company has of the clinical development process. This gives
of divergence in the interests of customer and
outsourced trial monitoring, project rise to the question: is there any single CRO,
outsourcing provider, poor governance, poor
management and data management to or even a small number of suppliers, able to
communication, and lack of trust.
14
The good
Accenture) has increased average overall effectively meet all the requirements of a major
news is that while these challenges are not easy
R&D productivity by 300-500% over the pharma company’s clinical trials? Probably
to overcome, they are tractable.
past seven years;
10
not, or at least not today. But as sponsors
Learning from the pitfalls of functional
• Procter & Gamble has made long-term communicate a desire to enter fewer and
outsourcing in other industries, pharma
commitments to outsource pieces of its broader-spectrum outsourcing relationships,
sponsors should:
clinical trial function to a set of three the marketplace will inevitably respond, and
providers and, according to Dave CROs will (continue to) invest in building more • Avoid the temptation to commoditise
Webber, the company’s European comprehensive capabilities. suppliers and their services. Apples to
outsourcing manager, they “expect real Moreover, if properly designed and managed, apples comparisons are certainly easier
benefits [from] what other industries a stable network of relationships with a to conduct, but they rarely produce
have been doing for a while”;
11
handful of suppliers could meet the needs of the best outcome. Different suppliers
102
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