Outsourcing in the pharmaceutical industry has traditionally implied converting the fixed costs of resources and infrastructure assigned to execute development activities, into variable costs. It involved paying a sub-contractor to perform these activities, mostly on an ad hoc basis. Such sub-contractors were either contract research organizations (CROs) or contract manufacturing organizations (CMOs). During the process, pharmaceutical companies, however, have always strived to retain the intellectual property associated with in-house product development. Most surveys conducted to-date continue to show that in the main, R&D and clinical development capacity shortfalls remain the principal motivation for outsourcing. Outsourcing is still largely conducted as a means by which the number of desired projects may continue to be carried out, without additional investment in in-house R&D, clinical development staff or infrastructure. Interestingly, 100 per cent of pharmaceutical industry respondents considered outsourcing important and 71 per cent stated that outsourcing will gain in importance in the next three years, a clear confirmation that the outsourcing process is maturing. However, cost, a fear of lack of quality and performance issues are still the main concerns with outsourcing. Most pharmaceutical companies, irrespective of size, do not have a robust, strategically focused, outsourcing strategy. Portfolio management and headcount freezes continue to provide the rationale for outsourcing, sourced and fulfilled, mostly in an ad hoc manner. Outsourcing continues to be viewed as an execution solution when the internal organisation cannot resource the study or project or when affiliates consider it of less importance for local business purposes. Outsourcing strategies can take different forms and shapes. The starting point, however, is the fundamental decision about whether to insource or outsource. The success or failure of an outsourcing activity is not solely dependent on the criteria used to make the outsourcing decision. Processes and systems are needed to manage the relationship and control the outsourced activities. Contracts, communication channels and performance monitoring seem to be the most important management mechanisms for both tactical outsourcing and PPA environments. The contract provides the opportunity for pharma and CRO to agree on how a range of issues will be managed before the work passes to the outsourcer. Typically, a contract will specify the obligations that each party has to the other. The most important contractual elements can be broadly divided up into terms and conditions, scope of work and financials. An important aspect of effective relationship management is the establishment of a ‘protocol’ for communication between the parties. While ideally relationships need to develop between pharma and CROs at many levels, to avoid a myriad of communication channels leading to confusion, there needs initially to be a single point of contact and usually that will be the two project managers or staff with a similar assignment. In addition, there is a relationship between the outsourcing department and the contracts and/or business development department or staff with that responsibility. A process of conflict resolution should also be agreed, involving senior management from both pharma and CRO. Usually PPAs foresee the establishment of a relationship management model consisting of a series of committees with memberships from pharma and the CRO. These usually include a governance or steering committee and an operations committee. The governance/steering committee is usually responsible for strategic direction and executive oversight of the pharma–CRO relationship. Apart from setting strategic direction, it ensures optimal resource planning and high-level issue resolution. It usually meets quarterly initially and thereafter, as required. The operational committee forms the core of the PPA relationship management. It ensures setting of operational standards and appropriate resource management across projects, and issue resolution. Initially it meets monthly and thereafter quarterly. The project teams are responsible for project planning and execution, and these meet on an ongoing basis.
Monitoring of performance of tasks, project or function being outsourced as well as of the relationship throughout the contract is desirable and can be achieved through the use of performance metrics and benchmarks which focus on areas of delivery responsiveness, service quality, cost and customer satisfaction. These scorecards should be simple so that the effort required for data collection is not too cumbersome and to ensure their continued use. These metrics are primarily aimed at measuring CRO performance, but it would also be useful to measure pharma performance. This requires a significant level of trust as CRO staff may be reluctant to provide honest feedback if this would jeopardise the prospect of repeat business. The performance metrics and time of measurements should be defined in the contract or greed shortly after initiation of the project so that expectations are clear and understood. One area that is usually overlooked is the internal cost of managing outsourcing, particularly the internal costs associated with CRO selection, relationship management and project management. These incremental costs have been estimated to be 12–16 per cent of the CRO contracted value, but in reality will be closer to 25–30 per cent. It is not an exception for pharma to use more than 100 service providers for their R&D activities and it is clear that the incremental cost is directly related to the number of providers. Furthermore, another, often hidden, internal cost is that incurred due to the need to establish contact with investigators and key opinion leaders (KOLs) other than as part of the clinical development process. During clinical development, there is usually regular contact between pharma staff, KOLs and investigators. Pharma staff will regularly consult KOLs for advice on trial results and to give presentations at conferences deemed important for medical marketing purposes. These activities should continue during outsourcing, but will in most cases require pharma resources.
Niche clinical development providers are CROs that provide either a limited number of clinical development services in a limited geographic area or a broad range of activities in a very restricted geography. A survey on quality found that small- and medium-sized CROs were more responsive, more accessible and less bureaucratic than larger CROs. It has therefore been argued that the model of CROs that encompasses a broad range of services and a global footprint can readily be challenged by networks of niche and small-sized CROs with high quality of service and constant innovative operations working within a smaller infrastructure base. Reference is made to other industries, where such a network of suppliers is very common if not the rule. In these industries, organizations surround themselves with a network of specialized best-in- class providers. Cost savings are significant and similar degrees of increases in quality and throughput are observed. These networks are led by effective and innovative project management and use effective communications technologies. It is also argued that small CROs have the ability to attract and recruit good staff from large CROs, and leverage technology faster. They are therefore well placed to create a varied, multi-tasking environment in which to gain expertise and accumulate experience. Such a prospect is a considerable attraction to many CRO staff in this increasingly knowledge-based industry. Nevertheless, quantifying the cost of CRO management is a thorny subject within the industry. Indeed, a whole employee sector has been created to manage CROs – contracts, outsourcing and procurement personnel – not to mention duplication within clinical development personnel. A few brave souls have articulated that the CRO management cost is probably within 15–30 per cent of the costs for an average phase II–III study, but whatever the true cost, it is clear that the need for supervision at this level flies in the face of the principle of partnership and trust, pre-requisites of strategic outsourcing designed to impart a profound effect upon the success of an organisation. Outsourcing is now an established part of the drug development process. It has evolved from being used to manage fluctuating capacity needs to its rightful place as part of a company’s strategy for addressing their drug development needs. Strategic outsourcing, however, still remains a concept for the pharma industry. While CROs are stepping up to fulfil the demands of this very specific and special role, the industry has yet to fully embrace its potential benefits. To do so will require pharma companies to ruthlessly evaluate their core and non-core business, accepting that outsourcing can and should be leveraged to be their unforeseen competitive asset. The CRO industry will need to drive this acceptance of its strategic role, accepting risk and trusting in the long-term benefits that can be enjoyed as the pharma sector slowly adopts strategic outsourcing as a central component of a competitive drug development strategy Due to increasingly restrictive regulatory requirements, the processes of drug development and obtaining drug approvals have become more lengthy and complex during the past ten years. In order to meet the needs for higher productivity, quality outcome and shortening of timelines, outsourcing to contract research organisations (CROs) is today an important element of most sponsor drug development strategies. Sponsors adopt varying strategies when deciding which types of activities to outsource in order to meet their specific requirements. Their needs may include anything from short- term usage of a few CRO resources to long- term ‘strategic outsourcing’ as described in more detail in . As complexity of clinical drug development increases and demands for compliance grow, so the time, efforts and skills required to select the best CRO for any type of work becomes increasingly more critical in the outsourcing process. From a compliance perspective, it is important to have internal procedures to ensure that the selection criteria are documented together with the evaluation of CROs against these criteria and to demonstrate that the CRO was appropriate to deliver the services outsourced. The processes described in here will focus on the selection of CROs in tactical and study-specific outsourcing, that is, from the point where the decision to outsource a well-defined set of tasks has been made to the point where suitable CROs have been identified from a larger pool of candidate CROs. The following points need to be considered in the process of selecting candidate CROs, and will be dealt with in detail here:
- Defining the tasks to be outsourced, timeline for the selection process, and the team to conduct the CRO selection
- Specifying the CRO capabilities that are critical for performing the tasks
- Identifying CROs that possess such capabilities
- Preparing and submitting Request for Information (RFIs) to short-listed candidates and analyzing responses
- Retrieving further information
- Final selection of CROs to receive the Request for Proposal (RFP)
Needless to say, sponsors need to be able to clearly define the detailed scope of work and quality standards expected in order to ensure that any selected CRO performs accordingly. This needs careful planning, with appropriately experienced people in the outsourcing team. Internal budgets should be defined and, last but not the least, a process of defining responsibilities, timelines, expectations and milestones should be established as early as possible. Even though this step in the process is critical for successful outsourcing, it is often given a low priority or even ignored for various reasons such as late decisions to outsource or shortened timelines in the study conduct and completion. From the very beginning, identifying the right people to be involved in the selection process is crucial for defining the tasks to be outsourced, evaluating options and finally in making the right decisions. The size and composition of the people in the outsourcing team may vary, depending on what types of activities are to be outsourced, and at which level the sponsor will be managing and overseeing the CRO, once the activities are conducted. Outsourcing an entire function, such as the data management function of an entire organisation, or a full study, from protocol design through to clinical study report, takes a higher level of commitment and time for the outsourcing team than if outsourcing is limited to single services for a study, such as performing biometrics for a single study only. The level of sponsor involvement in the entire outsourcing process tends to be higher for larger pharmaceutical companies with a well-defined CRO management group and clinical research resources compared to smaller biotech companies, for example with more limited resources. The latter is more likely to depend on the CRO’s capabilities, locations and scientific or technical expertise, whereas a larger organisation would usually have its own experienced resources and locations involved. For both small and large teams, the appropriate level of expertise should be considered as part of the core team or their skills called upon when required. Skills to consider in an outsourcing team include: Setting the timelines of the selection process will again vary depending on the project critical path, scope of the outsourcing activities and when the activities should be initiated at the selected CRO. As a guideline, the timelines of the following elements should as a minimum be clearly understood and agreed by the sponsor team during the start-up phase of the outsourcing initiative:
- Study outline available
- Definitions of scope of work for the CRO
- CRO capability requirements
- Identification of potential candidates
- Initial preselecting of candidates
- Submission of RFI (where appropriate)
- Submission of RFP
- Collection and evaluation of proposals
- Meetings with and/or visits to final short-listed two to three CRO candidates, often termed ‘bid-defence’ meetings)
- Final selection of CRO
- Meeting with CRO defining and confirming details of scope of work, timelines and so on
- Negotiations of prices, legal terms, and so on – depending on the importance of price, this step may come before the final selection of CROs
- Contract approved and work orders/specifications work sheets signed off.
The starting point is ideally when the scope of work, objectives, expectations, timelines, geographical locations and so on, are defined. However, this is not always possible and as a minimum the sponsor should have an outline scope and objectives for the project in order to understand the CRO capabilities they will be looking for. The next step is to prepare the CRO capabilities checklist. This is usually prepared by the contracts manager, outsourcing team or project manager. The checklist could as a minimum include:
- study requirements and thereby the service capabilities required: for example full service, biometrics, monitoring only;
- geographies required
- experience and capabilities needed, both in terms of personnel and therapeutic area;
- approach and need of project management;
- ability to meet specific project objectives.
In addition, the effort taken to prepare response, communication and adherence to the timelines should be considered. The next stage of the process is to begin looking for the CROs which mostly closely match those requirements identified in the CRO capabilities checklist. A checklist should be completed for each CRO considered and particularly for those on the potential shortlist, and taken to the next stage. The above sources of identification should aim towards pre-selecting the most suitable number of candidates that appear to have the right capabilities. The number of candidates would for one company be five to ten – for another the list of candidates could be much smaller. The next stage in the CRO selection process in some companies is to send out a Request for Information (RFI). However, in other sponsor companies the next step is to send out a Request for Proposal (RFP) The nature of this request and accompanying documentation varies between companies, and may depend on company policy, the service required (for example much more detailed information than is included below would be requested as part of the process for selection of a preferred provider where the risk is greater), size and scale of project, time available to the selection team, and so on. For example, company procedure may not require that a confidentiality agreement is in place beforehand, as minimal information regarding the study will be provided at this stage. Alternatively, some companies may prefer to put a confidentiality agreement in place prior to distribution of the RFI, in order that more specific information about the CRO’s experience in that particular therapeutic area can be obtained, and specific questions concerning the planned study can be addressed. By way of general guidance, the format of the RFI might contain some or all of the sections outlined below. The purpose and objective of the RFI would be defined, together with the timelines for completion, and details of whom to contact at the sponsor with questions. Alternatively, this information might be included in a covering letter/email. There are a number of considerations to be made as regards the CRO’s capabilities. One of the most important is whether CROs have the capacity to expand and contract with changing needs and whether they would be capable of taking on the specific project at the time required for the estimated duration.
Depending on the focus of the RFI (general or specific), the level of detail could be left open for the CRO to complete, or the sponsor could indicate the specific services of interest. Such capabilities may include, but are not limited to:
● adeptness at managing compounds across the drug development continuum
● technological and scientific leadership
● protocol development
● feasibility processes
● project management
● site selection, project set up and initiation, monitoring data management, statistics
● phase i capability
● pharmacokinetics and pharmacodynamics, and so on
● medical writing
● central laboratories, bioanalysis, and so on
● central electrocardiogran (ECG) services, interactive voice response systems (IVRS) and so on
It is extremely important to evaluate whether the CRO has the experience and expertise in the critical area of need. The information requested may be specific to a specific therapeutic area or indication, study design or investigational product (for example, intravenous, biologic, vaccine, and so on). Often the information provided by the CRO is extensive, so therefore it is beneficial to clearly specify the information required, such as type of experience (monitoring, project management, and so on) and in which particular region (Europe, the US and South America, and so on). It often serves useful to provide a table with headings to be completed so that the information is received back in a uniform format. Suggested headings include (for example, for a specific indication):
● phase of study
● number of centres and patients
● duration of recruitment
● recruitment rate per site or per country
● type of service, for example, monitoring, data management As quality is the critical component of all pharmaceutical R&D, it is important to understand the quality systems the CRO has in place, and whether the CRO demonstrates an understanding of, and compliance with, appropriate regulations globally. Some typical questions to be asked include:
- How does the CRO measure quality?
- What processes are in place to continually monitor quality?
- What is the size of the quality assurance (QA) department? Internal or contracted service?
- What internal QA procedures are in place, for example, is it usual for QA to audit studies independent of sponsor-CRO contract, as part of internal CRO quality control? Recent experience with regulatory inspections may also give an indication of operational quality and regulatory awareness.
If not already collected earlier in the pre-selection process, it may be useful to request references from other clients of the CRO. However, these references should be interpreted with care as CROs are unlikely to provide all but the best references, thus this may represent a biased source of information. The perception of individual CRO performance is often linked to an individual or team personnel experience. It is often worth trying to seek a wider perspective on potential partners. Hence, just because a CRO performed well for one client in a particular study, or on the other hand performed less well, does not mean that will be the case in the next study; different study designs, study teams (on both the CRO and sponsor side), regulatory climate and commercial pressures can impact on the performance and relationships of both sponsor and CRO.
Other points for consideration include but are not limited to:
● If specific projects are held in mind, whether or not the CRO (or their investigators) are working on conflicting studies
● Availability of key, experienced staff, for example, project manager
● For phase I studies, detailed information regarding facilities faculties should be collected, including number of beds, percentage occupancy, location, good manufacturing practice pharmacy, qualified person for packaging/labelling of investigational medicinal product (if required), laboratory facilities, specialist equipment, standard operating procedures (SOPs), and so on
● Methods of speeding up the recruitment process and risk management
● Flexibility and availability. Ultimately, the choice of CRO should not be down to the hard facts presented alone but
Towards the final stages of the CRO selection process the capabilities should be well stablished. For some sponsors or for complex projects with several parties needing to work together (sponsor, one or more CROs, external experts and central laboratories, for example) the interaction and direct communication with the CRO may play an essential role already in this phase of the selection. As sponsor and CRO over time must work together as a team, it is crucial that both parties feel comfortable working together and that processes, expectations and company cultures are well understood. This can be further assessed by:
● Inviting candidates to present their capabilities in person. This meeting also provides an opportunity for the sponsor and CRO teams to get a better understanding of the information provided in the RFI responses. It is often useful to ask the candidates to involve both business development staff and operational staff, specifically the project manager proposed for the project.
● Meeting the CROs in their own environment to inspect their facilities, meeting the staff and generally assess the suitability of placing the work. Using a CRA assessment checklist during such a visit will help the sponsor get the most out of the visits, and will also allow the sponsor to compare candidates objectively.
● Conduct pre-selection audits.
● Contact sponsor references following prior acceptance by the CRO.
● Request a review of CROs’ Contract and Work Order templates and/or provide sponsor templates to detect fundamental differences in contractual/legal mind-sets, which could lead to time-consuming negotiations or even jeopardising the relationship from the very beginning. Based on the above assessments, the sponsor should now have a solid foundation and be able to select three or four CRO candidates to go on to receive the detailed RFP