March 2013
A CenterWatch Publication
Volume 20, Issue 03
Sites rate the best sponsors 2013
Largest survey response
ever puts Biogen Idec,
Forest Labs, Bayer at top
By Karyn Korieth and Annick Anderson
A
new CenterWatch survey has found
sponsors have done a good job maintaining, but not improving, the quality
of their relationships with investigative sites
during the past two years.
Interestingly, as sponsors increasingly
adopt integrated and strategic alliances
with CROs, sites reported their relationships
with sponsors are less effective in several
key areas.
More than 75% of sites worldwide rated
the overall quality of their working relationships with the average sponsor as “excellent”
or “good.” But as sponsors hand over an increasing amount of study conduct to CROs
and have less direct contact with sites, investigators expressed frustration—both through
the survey and in interviews—with not hav-
Sponsors receiving top relationship ratings from their sites
Average percent of
sites rating ‘Excellent’
across all attributes
Total number of attributes
for which sponsor was
ranked among the top 3/
percent of all attributes
51.4%
27/82%
Forest Labs
51.4%
23/70%
Bayer
49.7%
25/76%
Novo Nordisk
47.8%
11/33%
Takeda
47.5%
13/39%
Boehringer-Ingelheim
46.7%
8/24%
Gilead
46.4%
10/30%
Daiichi Sankyo
45.9%
6/18%
Roche
45.0%
2/6%
Top sponsors out of 22
unique companies rated
Biogen Idec
Source: CenterWatch 2013 Global Survey of 2,032 Investigative Sites
ing enough access to sponsor staff when issues
escalate and need to be resolved.
Sites gave sponsors poorer marks this year
in areas increasingly outsourced to CROs, including managing study monitoring support
and prompt payment of grants. In addition,
sponsors received fewer excellent marks for
effectively working with CROs and maintain-
ing open communication with sites, falling
by 13% and 10.5%, respectively, during the past
two years.
In the survey—the largest CenterWatch has
conducted to measure the quality of working relationships between sponsors and sites
around the world—three companies emerged
see Relationship Quality on page 9
As CRO industry turns 30, a look back at modest beginnings
Phenomenal growth,
strategic partnering
highlight evolution of CROs
By Daphne Butas
S
ome of the most well-known CROs—including Chiltern, Quintiles and Parexel—are marking their 30th anniversaries,
highlighting the once uncertain road CROs
traveled as they evolved from being a market
trend to an integral piece of the drug development landscape.
The early years
In the early 1980s, the drug world was
not thinking about outsourcing. The pharmaceutical arena was busy growing in response
to the health issues of the decade and conducting groundbreaking research, but was
plagued by secrecy, disorganization and a lack
of transparency.
“Our veterans will tell you that back then, it
may have taken six months to enter and analyze clinical data once the last patient in a trial
was seen, and that was the norm,” said Phil
Bridges, director of corporate communications for Quintiles.
Globalization of clinical trials and innovative ideas for expansion were not even on
pharma companies’ radars, because the industry was “disorganized,” according to Josef
von Rickenbach, Parexel’s founder, CEO and
chairman. There were no standard regulations for clinical trials, so doctors wrote each
protocol and tried new operating procedures
with each trial.
Senior-level executives of large pharmas
© Copyright 2013. CenterWatch. Duplication or sharing of this publication is strictly prohibited.
see CROs: 30 years on page 14
IndustryNews
CROs: 30 years
30 years of expanding services and outsourcing models
continued from page 1
were unaware of what was happening in
R&D, and the privacy stigma attached to
the industry made transparency of any kind
completely nonexistent. Bridges said industry veterans have told him they remember
when there was so much research going on,
with no systems or standards in place, that
“many pharma companies had reams of
data sitting on the shelves, waiting for an
analysis to be complete.”
Jamie Macdonald, CEO of INC Research,
said that in the 1980s, CROs were all about
covering the gaps in capacity. “At that time,
they were not yet equipped to partner with
biopharmaceutical organizations on a global scale to support their drug development
efforts,” he said.
The turning point: 1982, not only because
now-major CROs including Quintiles and
Parexel were established, but also because
no one knew what might happen to this nascent industry.
Quintiles was founded as a biostatistics
consulting firm in 1982 by Dennis Gillings,
who had been consulting with pharmaceutical customers since 1974 as a professor at
the University of North Carolina, Chapel
Hill. Gillings wanted to focus on the core
competency as a provider of statistical and
management consulting services for drug
sponsors.
Parexel also was born from intention, not
from calculated planning or strategic expansion aimed at being anything more than
a cottage industry. Also founded in 1982,
von Rickenbach and organic chemist Anne
Sayigh started Parexel with the purpose of
helping foreign companies navigate the U.S
regulatory environment. “After about two
years, I was really starting to get worried
because I was not aware we had competitors,” von Rickenbach told CenterWatch in
an earlier interview. “It’s okay to march to
your own drummer. But if you are the only
marcher, it’s a little concerning.”
14
The CenterWatch Monthly | March 2013
Most commonly
outsourced services
Prevailing outsourcing
model used by sponsors
Late 1980s-1990s
Study monitoring
Statistical analysis
Dossier preparation
Data management
Transactional
2000s
Study monitoring
Statistical analysis
Medical writing
Data management
Site selection
Regulatory support
Transactional
Preferred provider
2010s
Study monitoring
Statistical analysis
Medical writing
Data management
Site selection and management
Patient recruitment
Regulatory support
Transactional
Preferred provider
Functional service provider
Multi-functional service provider
Integrated alliance
Embedded alliance
When laws passed in 1983 established
a legal system for generic drugs, dramatic
changes occurred in the pharmaceutical industry: competition came into play.
“Pharma needed additional resources to
manage more robust clinical trials,” said
Bridges, which is why Quintiles began its
global expansion, opening its first international office in 1987.
John R. Vogel, Ph.D, drug development
consultant, said, “prior to 1993 pharma did
little outsourcing to CROs because, by design, they did everything in-house and did
not need CROs.”
In the mid-to-late 1980s, the legal system
had established laws fueling the market for
generic drugs and, in turn, making clinical
trials and R&D more competitive. It was a
prime time for overseas expansion, said Vogel, because companies found “they could
enroll patients as quickly as expected and,
by moving abroad, CROs were able to find
larger pools of subjects for drug testing.
Also, in many cases patients were therapeutically naïve, which simplified the clinical
trial.”
As the 1980s drew to a close, a small force
of early CROs existed that—while most
thought would remain a cottage indus-
try—already were starting to show signs of
cleaning up the industry with system implementation, organization and greater transparency.
The 1990s: Building a better CRO
Thirty years ago, if a sponsor, doctor or
other industry expert were asked what the
CRO industry would look like in 2013, most
would not have predicted such explosive
growth.
“I always thought it would be a big opportunity,” said von Rickenbach. “But I could
not convince anybody. Absolutely nobody
believed it.”
Vogel said the tipping point that led to the
expansion of outsourcing was the Clinton
administration. Hillary Clinton was outspoken on the issues surrounding healthcare reform, and her eloquence and spot-on ability
to drill down on key issues made pharma
companies begin to take notice—and examine their options for maintaining the necessary resources while also cutting costs and
reducing overhead.
“CROs are effective at helping pharmaceutical companies manage the variability
of their business,” said Linda Drumright,
general manager, clinical trials optimiza- vices, but also resources on a global scale growth per year. Between 2003 and 2008,
tion solutions at IMS Health. Through the that could meet the needs of the growing the CRO industry had a great run, for a
provision of resources virtually on demand, industry.
number of reasons.
New approaches and systems were imple“CROs enable pharmaceutical companies to
First, CROs began to promote more sermented so that certain protocols and stan- vices. International studies came to the forepredictably deliver drugs to market.”
In addition to offering resources on de- dardization in clinical trials became the front of the drug industry, and biotech outmand for pharmas, CROs also were able to norm, not the exception. As trials became sourcing increased as well.
“The notion at this point was how fast
bring some order and consistency to a pre- more consistent and efficient, people became
viously somewhat chaotic and disorganized less guarded about sharing information, and you could reach the peak of market sales,
industry. In the 1990s, CROs were able to scalability and transparency became more thereby maximizing profit over the product life cycle,” said Vogel. Drug companies
step in at a pivotal point and offer specific attainable.
often spent a fortune attemptresources and completion of
ing to get a drug to phase III
“projects” with “just-in-time
“CROs
realized
they
had
to
so it could be sent to the FDA
resources” to help satisfy the
for approval only to have their
explosion of compounds being
either develop the expertise and
hopes dashed, he explained,
tested and headcount shortages
capacity
to
perform
these
specialized
leaving them devoid of funds,
at sponsors.
resources and product.
This meant large pharmas
services, such as electronic data
CROs quickly embraced
no longer had to carry overcapture,
or
partner
with
niche
CROs
the idea that the faster a drug
head for resources that were
could get through the phases
not used consistently and inwho could provide them.”
of development and approval,
stead could outsource pieces
—John R. Vogel, Ph.D, drug development consultant
the faster sponsors would see
of the work puzzle as needed,
a return on investment. They
allowing them to focus more
As a result of CROs’ ideal timing in the were able to both establish an international
attention on filling and expanding their
pipelines through mergers and acquisitions. late 1990s, the industry saw 20% growth presence and embrace the technological ca“With a largely paper-based FDA, CROs each year between 1998 and 2002. For exam- pabilities for incoming trends such as elecemerged as key resources to shepherd spon- ple, PPD Pharmaco’s CRO/SMO stock prices tronic data capture (EDC).
“There has been an accelerated shift to
sors through the drug approval process,” saw 99% improvement from December 1997
($13.625) to December 1998 ($27.188).
clinical trial globalization and off-shoring
said Macdonald.
While the CROs of the 1980s really were
over the past 10 years,” said James D. Esinhart, Ph.D., CEO of Chiltern. “This trend
able only to be project-based, the CROs of
The early 2000s: The boom years
the 1990s rolled out a revamped, more cawill continue yet, at the same time, there are
pable and experienced offering, capable of
By 2003, M&A activity had slowed and compelling reasons to focus patient recruitoffering not only a higher quality set of ser- the top CROs were still tracking about 18% ment in established markets, partly due to
the fact that established markets are rapidly
evolving economically, demographically
High global demand for CRO services
and structurally.”
Global market size in U.S. billions
Vogel said, “CROs realized they had to
$26.9
either develop the expertise and capacity
to perform these specialized services, such
as electronic data capture, or partner with
$14.8
niche CROs who could provide them.”
$8.6
CROs expanded their capabilities and
$3.7
grew their repertoire of services, solidifying
$1.6
$0.7
their foothold as a key player in the industry.
1985
1990
1995
2000
2005
2010
Success with EDC led to opportunities in
Note: Includes non-clinical, clinical and central lab services
Source: CenterWatch
see CROs: 30 years on page 16
March 2013 | The CenterWatch Monthly
15
IndustryNews
CROs: 30 years
continued from page 15
patient recruitment, IRBs, central laboratories and study conduct abroad.
But the largest growth driver in contract
clinical outsourcing during the past decade
has been the establishment of more strategic,
integrated relationships including functional
and multifunctional service provider, integrated alliance and embedded partnerships
between CROs and sponsors. Some industry insiders consider 2005 a “tipping point,”
when sponsors embraced working with their
CRO partners under preferred provider arrangements with shared governance, systems
and processes.
Before 2000, said Vogel, the majority of
sponsor-CRO deals were transactional—the
sponsor contracted for a defined set of services in a single clinical trial or group of studies.
The advent of various partnership models
promised lower in-house costs, cheaper rates
and better quality.
“These partnership models ranged from
preferred providers (the sponsor pre-qualifies a list of CROs to which it contracts most
of its work in return for discounted rates),
risk-sharing (the CRO’s bonuses and penalties are based on mutual performance standards), alliances (the CRO derives part of its
fee from royalties on product sales) and integration (the sponsor and CRO create a jointly
Leading CROs
1995
owned entity),” Vogel explained.
Partnering, he said, had a favorable effect
on sponsor-CRO relationships, as sponsors
“began to question what is their own ‘core
competency’ (that which they do best) and
what can be done just as well by a CRO partner?” Some sponsors, he said, greatly downsized their internal departments in favor of
outsourcing specific activities, increasing the
volume and size of sponsor-CRO deals.
The late 2000s: Economic downturn
Since the global economic downturn in
late 2008, sponsors have reduced headcount
dramatically and divested underutilized
fixed costs (e.g., facilities). This operating
environment has accelerated sponsor demand for, and adoption of, more integrated
and strategic relationships, in which CROs
assume the operating and resource risk for
entire portions of a sponsor’s portfolio. Integrated and embedded alliances—when effective—appear to offer sponsors access to dedicated talent and capacity under substantially
lower costs.
“Over the last decade, the clinical outsourcing paradigm in the pharmaceutical
industry has shifted dramatically, from a traditional, capacity-based tactical outsourcing
model to more strategic, development-oriented partnerships,” said Samir Shah, EVP
of SD and R&D business operations for CRO
2011
Revenue in
U.S. millions
Corning
Quintiles
ABPI
Parexel
ClinTrials
IBAH
PPD
Phoenix International
Collaborative Clinical Research
$400
$156
$134
$59
$58
$42
$38
$32
$10
Revenue in
U.S. billions
Quintiles
Covance
PPD
Parexel
ICON
INC Research
PRA International
RPS
Medpace
$3.0
$1.9
$1.5
$1.2
$0.9
$0.6
$0.5
$0.3
$0.2
Source: CenterWatch research of financial analyst and company reports
16
The CenterWatch Monthly | March 2013
ReSearch Pharmaceutical Services (RPS).
“The two distinct alliance models that have
emerged are programmatic models and the
embedded model.”
In the programmatic alliance model, the
sponsor in a sense “stays out of the kitchen”
and receives the output/deliverables, Shah
explained, while in the embedded model,
overall strategy and direction are retained
by the sponsor, but overall responsibility for
execution and management of the pipeline
across critical but non-core activities resides
with the provider.
According to RPS, in 2008 the FSP model
evolved into the first embedded model. In
2009, when many large and mid-sized pharma were facing both pipeline and financial
pressures, the embedded model gained market momentum. The immediate effects were
“tremendous cost saving and flexibility to
pharma, and a new way for managing their
portfolio without losing strategic control,”
said Daniel Perlman, chairman and CEO of
RPS. “The long-term effects are sustaining
cost saving, while preserving quality operations through continual innovation of processes and systems.”
Most sponsors—particularly small biotech and pharma companies—continue to
use full-service and niche service providers
under transactional relationships. But the
adoption of integrated alliances (functions
managed wholly by external partners) and
embedded alliances (functions staffed internally by contract FTEs) has increased rapidly.
A recent study conducted by CenterWatch
found nearly 90% of the top 30 largest pharma companies have now entered into at least
one strategic alliance with a CRO, up from
63% four years ago.
Looking ahead
CROs will continue to outsource—it
is how they began and at the very core of
who they are. Experts see CROs expanding
their reach into other R&D domains—i.e.,
discovery, nonclinical, regulatory, commer-
Proportion of top 30 pharma companies in at least one
FSP/multi-FSP/integrated alliance
63%
47%
2004
87%
2008
2012
Source: CenterWatch
cial—in which the outsourcing practice is
less mature.
“We expect more innovative strategic
partnership models to become the standard,
as biopharmaceutical companies look for
partnership structures that consistently provide more long-term value,” said Macdonald
of INC Research. “The cost-cutting trend of
recent years will be replaced by more innovative approaches to bring new drugs to market
while still growing shareholder value.”
“The world has become smaller, where
both large and mid-sized global CROs all
have a place at the table,” said Esinhart of
Chiltern. “Today, service and relationship
continue to be key to a CRO’s success.”
According to Perlman, both the FSP model
and embedded solutions already have effected transformational change within the top 20
biopharma companies. “It remains unclear
how CROs will react to this model,” he said.
“Several have tried to ‘reinvent’ themselves
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March 2013 | The CenterWatch Monthly
17