Pharma R&D Moves Offshore
A.T. Kearney’s Pharmaceutical R&D
Location Attractiveness Index
University of Chicago Graduate School of Business
Bio-Pharma Alumni Organization
October 2006
A.T. Kearney’s Pharma R&D off-shoring research has generated
extensive interest in the media
Bio-Pharmaceutical
R&D Statistical
Sourcebook
2006/2007
A Publication of the TIMES OF INDIA Group
Clinical Trial Offshoring
2
Executive Summary
 Although Pharmaceuticals is a global industry, clinical studies are largely conducted in the U.S.
and Western Europe driven by relevant expertise and intellectual property protection
considerations
 In the last two years, companies have increasingly turned to offshore locations to supplement their
primary clinical trials, with the goal of increasing speed to market and the benefit of lower costs
 To provide a systematic framework for evaluating geographical options for offshoring clinical trials,
A.T. Kearney developed a structured country attractiveness index
 We evaluated15 representative countries – the outcome: China ranked the highest overall,
followed by India and Russia
 The fact-based approach to the index provides insight into the future direction of clinical trials and
specifically the attractiveness of locations based on structured criteria
 The index should be considered a tool to support decision making in offshoring decisions and is
flexible to be customized based on corporate priorities
 Country attractiveness doesn’t suggest a narrow focus, but rather should be leveraged as a basis
for diversifying clinical trial activities
 Risks clearly exist in any offshoring of clinical trials, requiring careful planning and management in
trial design and execution
Clinical Trial Offshoring
3
The pharmaceutical industry has historically lagged other industries in
off-shoring
Offshore Industry Lifecycle Curve – Pharmaceutical vs. Other Industries
Stage 1
Capacity
Augmentation
Stage 2
Proof of Concept
Stage 3
Value
Realization
Consumer
Products & Retail
P&G, Nestlé
Utilities
Southern
Company
AEP
Stage 4
Strategic
Supplier
Management
Stage 5
Global Operating
Model
Automotive
Ford
Financial Institutions
GE, Citi,
Amex, HSBC
Pharmaceuticals
Other
However, the pace of off-shoring within the pharmaceutical industry
has intensified over the last 1 – 2 years
Source: A.T. Kearney analysis
Clinical Trial Offshoring
4
Stages of a
Drug’s Life
Cycle
R&D, particularly clinical trials, is better suited to off-shoring when
compared to other parts of the pharmaceutical value chain
Post Approval
Trials and Drug
Sales
Clinical Trials
and Lifecycle
Management
New Compound
Discovery
FDA Approval
Sub Activities
Early Exploratory
Late Exploratory
Discovery
Pre-Clinical
Evaluation
Comments
• New
molecules are
discovered
here
• Molecules are
formulated as
drugs tested
on animals for
efficacy and
safety as part
of pre-clinical
development
and
evaluation
Phase
Comments
I
Testing an experimental drug or
treatment in a small group of people
(20-80) for the first time to evaluate its
safety, determine a safe dosage range,
and identify side effects
II
The experimental study drug or
treatment is given to a larger group of
people (100-300) to see if it is effective
and to further evaluate its safety
III
Phase
IV
Comments
Post marketing studies delineate
additional information including the
drug's risks, benefits, and optimal use
The experimental study drug or
treatment is given to large groups of
people (1,000-3,000) to confirm its
effectiveness, monitor side effects,
compare it to commonly used
treatments, and collect information that
will allow the experimental drug or
treatment to be used safely
Clinical trials for a drug can cost up to $1 Billion and can take as
many as 14 years to complete
Clinical Trial Offshoring
5
Top pharmaceutical companies are increasingly conducting clinical
studies outside the US and in offshore locations
Number of studies by top 12 Pharma companies1
Pharma companyranked by total # of
studies
Total # of
studies
Studies
with
location in
the US
Top 12 Pharma companies as a percentage of total
industry studies
Studies with
location
outside the
US
BMS
186
180
87
GSK
173
142
90
Roche
148
129
70
Pfizer
147
129
67
Novartis
139
119
37
Eli Lilly
131
105
72
Abbott
67
60
29
Astra Zeneca
56
49
19
Johnson & Johnson
48
41
24
Schering-Plough
44
40
27
Wyeth-Ayerst
35
29
13
Aventis
27
23
9
1,201
1,046
544
Total
Notes:
Source:
Number of studies
sponsored by
industry
Number of studies
conducted by Top
12 Pharma
Percentage of
studies conducted
by Top 12 Pharma
2910
1201
41%
Number of studies
sponsored by
industry with
location outside
the US
Number of studies
with location
outside the US
sponsored by Top
12 Pharma
companies
Percentage of
studies with location
outside the US by
Top 12 Pharma
companies
1125
544
48%
48% of trials
conducted by
Top 12 Pharma
have locations
outside the US
(1)The top 12 companies account for only 2% of all pharma companies. Posting on the site clinicaltrials.gov is voluntary but increasingly popular.
The data represent a snapshot in time and covers almost 600 companies worldwide
Clinicaltrials.gov (as of 08/26/05) and A.T. Kearney analysis; excludes studies where locations were not provided
Clinical Trial Offshoring
6
Most major pharma companies are pro-actively off-shoring clinical
trials to attractive, low-cost destinations
Number of active clinical trial studies sponsored by Top 12 Pharma outside the US (March 2006, Feb. 2007)
300
288 294
(2)
279
250
199
200
180
182
161
169
148
150
135
124
100
81
77
69
50
23
26
12
16
Biogen
Am gen
0
Eli Lilly
Novartis
Mar-06
Notes:
Source:
GSK
Merck
BMS
Sanofi Aventis
Pfizer
Feb-07
(1) Posting on the site clinicaltrials.gov is voluntary but increasingly popular. The data represent a snapshot in time
(2) Total number of studies is less than the sum over all countries due to the use of multiple locations for most trials
Clinicaltrials.gov (as of March 2006, February 2007) and A.T. Kearney analysis; excludes studies where locations were not provided
Clinical Trial Offshoring
7
Off-shore clinical trial activity has increased by ~20% in just the past
year
Number of active clinical trial studies
sponsored by Top 12 Pharma outside the US
150
137
124
119
20% increase in offshoring activity in ~ 1 year
109
101
100
93
88
84
80
73
68
65
69
54
63
56
49
50
5254
51
49
41
36
29
28
39
36
26
37
26
35
29
34
27
32
28
29
28
28
18
25
25
23
24
23
19
20
24
18
18
8
12
Mar-06
Notes:
Source:
Costa Rica
Philippines
Colombia
Ukraine
Croatia
Bulgaria
New Zealand
Malaysia
Thailand
Hong Kong
Peru
Singapore
Romania
China
Turkey
Chile
Japan
Israel
Taiwan
South Africa
South Korea
Brazil
Argentina
Russia
Mexico
Australia
0
Feb-07
(1) Posting on the site clinicaltrials.gov is voluntary but increasingly popular. The data represent a snapshot in time
(2) Total number of studies is less than the sum over all countries due to the use of multiple locations for most trials
Clinicaltrials.gov, A.T. Kearney analysis; excludes studies where locations were not provided
Clinical Trial Offshoring
8
A higher percentage of Phase 3 clinical trials are conducted offshore
relative to other phases
Percentage and Number of Studies in US and Offshore
Locations – by Phase
606
1549
1299
Observations
284
100%
• Phase 3 studies are more likely to have
locations outside the US:
80%
– Patient populations required are large
807
60%
– Investigator grants and patient
compensation is a large part of trial
cost, making certain offshore locations
attractive
200
1142
531
40%
38%
30%
26%
20%
492
12%
407
84
75
0%
Phase 1
Phase 2
Phase 3
Phase 4
• Phase 1 studies have comparatively fewer
offshore locations:
– Ethical considerations as this phase
determines safety of the trial drug
– Focus on healthy volunteers vs. specific
patient profile
• Phase 4 studies are increasingly including
locations/ data from patients in countries
outside the US once the drug is on the market
Studies with location in US only
Studies with location outside US
Source: Clinicaltrials.gov ( as of 8/10/05) and A.T. Kearney analysis
Clinical Trial Offshoring
9
Speed to market and reduced costs have been cited as primary
reasons for offshoring clinical trials
Short Term Offshoring Goals –
Supplement U.S. and Western
European Trials
 Offshore trials can “rescue” a
U.S. trial that is lagging due to
slow patient recruitment
 Companies have used offshore
trials for parallel development
tracks when FDA concerns
caused delays in the U.S.
Long Term Offshoring Goals –
Reduce Costs, Gain InCountry Experience, Develop
New Markets
Selection of Offshoring
Location
?
• Full disclosure with the
offshore country’s regulatory
authorities is needed to avert
ethical concerns
 Introduction of vaccines in
developing countries prior to
introduction in U.S. has been
shown to be successful
 Many low-cost countries are
improving their regulatory
conditions and level of clinical
trials expertise
 Pharma companies are
positioning themselves to gain
operating experience in these
countries, where per patient
costs can be as low as one
third of the U.S. costs
 Several low-cost countries,
including India and China are
attractive as potential new
markets for innovative drugs
A structured and fact-based approach to identifying country attractive for
clinical trials is an important component of any offshoring strategy
Source: Global clinical trial conference discussions and and A.T. Kearney analysis
Clinical Trial Offshoring 10
A.T. Kearney developed an index to assess the attractiveness of
countries for conducting clinical trials
Country Attractiveness Index Criteria and Weighting
Patient Pool (30%)
 Size and availability of suitable
patient pool
Regulatory Conditions
(20%)
Cost Efficiency (20%)
 Cost efficiency of labor
 Cost efficiency of facilities and
travel
 Food and Drug Administration
visibility
 Country’s regulatory laws
 Strength of intellectual
protection
Relevant Expertise (15%)
 Number of clinical research
organizations
 Number of clinical trials
 Size and availability of labor force
with relevant skills
Infrastructure and
Environment (15%)




Protection of intellectual property
Health-care infrastructure
Country infrastructure
Country risk factors
Clinical Trial Offshoring 11
Our research indicates that China and India are the most attractive
offshore locations to perform clinical trials outside the US
Overall Country Attractiveness Index1
6.10
China
India
5.58
Russia
5.55
5.26
Brazil
Czech Republic
5.00
UK
5.00
4.90
Argentina
Poland
4.84
Hungary
4.81
4.69
Germany
4.56
South Africa
4.46
Taiwan
Israel
4.28
Singapore
4.27
3.86
Ireland
6.88
USA
Patient Pool
Note:
Cost Efficiency
Regulatory Conditions
Relevant Expertise
Infrastructure/Environment
Total Score
(1) Higher scores indicate higher level of attractiveness
(2) The set of 15 countries analyzed has been selected based on size, diversity, and geographical distribution, and is not meant to
be comprehensive across all potential locations for offshoring
Clinical Trial Offshoring 12
Large patient pools, availability of relevant expertise, and lower costs
make China and India attractive
Country Attractiveness Components – Patient Pool, Relative Expertise and Cost Efficiency
Large
Relative Cost Efficiency1
China
India
Increasing bubble size
indicates greater cost
efficiencies
Brazil
Patient Pool
Russia
Czech Republic
USA
Argentina
Poland
Taiwan
United Kingdom
Germany
Israel
Ireland
Singapore
Hungary (hidden)
South Africa
Small
Low
Relevant Expertise
High
Sources: World Bank 2003, World Development Indicators database 2003 and A.T. Kearney analysis
Clinical Trial Offshoring 13
Improvements in regulatory conditions and the infrastructure of
emerging markets will drive the pace of change of offshoring
Country Attractiveness Components – Regulatory Conditions, Infrastructure/Environment and
Patient Pool
Available patient pool – size of
bubble is proportional to the size of
the available patient pool
Favorable
Regulatory Conditions
USA
UK
Poland
Germany
South Africa
Russia
Czech Republic
Singapore
Israel
Argentina
India
Ireland
Brazil
Taiwan
Hungary
China
Unfavorable
Unfavorable
Source:
Infrastructure and environment
Favorable
A.T. Kearney analysis
Clinical Trial Offshoring 14
Patient Pool: The large populations of China and India provide the
greatest potential for patient recruitment
Urban Population1 (millions)
China
India
Brazil
Russia
Germany
UK
Taiwan
Argentina
South Africa
Poland
Czech Republic
Hungary
Israel
Singapore
Ireland
Overall Patient Pool Score3
298
6.56
Brazil
73
53
48
33
26
24
6.13
Russia
8
7
6
4
2
233
Treatment Naïve Population Score2
Russia
India
China
Brazil
Poland
Hungary
Argentina
Czech Republic
Taiwan
South Africa
Israel
Ireland
Singapore
UK
Germany
1
1
USA
1
Source:
8.04
India
147
105
USA
Notes:
9.94
China
350
5
5
5
5
4
4
4
4
3
3
3
2
2
Argentina
4.38
Poland
4.24
Hungary
3.98
Czech Republic
3.97
Taiwan
3.96
South Africa
3.34
Israel
3.33
Germany
3.14
UK
2.81
Singapore
2.69
Ireland
2.66
USA
5.64
Urban Population Score
Professional Delivery Score
Treatment Naïve Population Score
(1) Urban population is capped at 350 million due to limited benefit from extremely large populations
(2) Higher scores indicate more treatment naïve populations
(3) Higher scores denote large available patient pools; urban population weighted 55%, professional deliveries weighted 20%, treatment naïve populations
weighted 25%
World Bank 2003; UNICEF WDI Database; A.T. Kearney analysis
Clinical Trial Offshoring 15
Cost: Russia has the lowest overall cost structure followed by
Argentina, China and India
Cost of Labor1 (Indexed to US=1)
Russia
Argentina
China
India
Brazil
Czech Republic
Hungary
Poland
Taiw an
Israel
UK
South Africa
Ireland
Singapore
Germany
Overall Indexed Costs3
Overall Country Average
Russia
Clinical Professional Average
Argentina
China
India
1
1.5
2
Facilities Rental and CRO Cost Perspective2
South Africa
Argentina
Poland
Czech Republic
Brazil
China
Hungary
Israel
Singapore
India
Taiw an
Russia
Germany
Ireland
UK
0.61
Poland
Israel
Taiwan
South Africa
UK
0.77
0.86
0.90
0.99
1.09
1.19
1.25
Ireland
1.58
Germany
USA
0
Source:
0.68
Singapore
USA
Notes:
0.56
Czech Republic
Facilities Rental
CRO Cost Perspective
0.52
0.61
Hungary
0.5
0.48
Brazil
USA
0
0.40
0.5
1
1.5
2
2.5
Labor Cost
1.00
Facilities and Travel Cost
CRO Cost Perspective
(1) Clinical professional average includes physicians weighted 47%, nurses weighted 29%, and statistical mathematician weighted 24%
(2) Facilities rental and CRO cost perspective are indexed to US = 1.0
(3) Higher scores denote higher cost; labor index weighted 80%, facilities and travel index weighted 10%, CRO cost perspective weighted 10%. This metric
is converted to a cost efficiency metric when incorporating into the overall country attractiveness index
Clinical Trial Offshoring 16
SalaryExpert.com; WDI Database; Economist Intelligence Unit; CBRE Global Markets Rent 2005; A.T. Kearney analysis
Regulatory Conditions: Central/ Eastern European countries are
attractive for regulatory conditions, while India and China are lagging
FDA Visibility1
UK
Germany
South Africa
Russia
Argentina
Poland
Brazil
Czech Republic
Hungary
Israel
China
India
Singapore
Taiw an
Ireland
Overall Regulatory Conditions Score1,3
4.62
4.04
4.03
4.03
3.72
3.61
2.15
UK
6.23
5.51
Poland
5.28
4.77
Russia
0.40
0.40
0.40
0.40
0.40
0.40
Voluntary Action Score
No. of Inspections Score
8.67
USA
Germany
Singapore
UK
Israel
Ireland
Czech Republic
South Africa
Poland
Taiwan
Hungary
Russia
Brazil
Argentina
India
China
6.26
South Africa
1.15
1.15
Country Specific
Protection1
Germany
Laws1,2
and General IP
7.73
7.37
7.30
7.13
7.00
6.77
6.50
6.40
6.23
6.23
5.27
4.80
4.70
4.62
2.20
Country Specific Laws
IPR Protection
Singapore
4.58
Czech Republic
4.52
Israel
4.44
Ireland
4.36
Argentina
4.31
Hungary
4.20
3.90
Taiwan
Brazil
3.74
India
China
2.93
1.48
8.23
USA
FDA visibility
Country Specific Laws
7.93
USA
Notes:
(1) Higher scores indicate higher attractiveness
(2) Country specific laws include ease of shipping lab samples and regulatory approval times
(3) FDA visibility is weighted 40%, country specific laws are weighted 40%, and General IP protection is weighted 20%
Source:
FDA CDER; WEF Global Competitiveness Report; A.T. Kearney analysis
General IP Protection
Clinical Trial Offshoring 17
Relevant Expertise: China and Russia scored highest on relevant
skilled labor
Organizational Expertise and Experience1
Germany
UK
Poland
South Africa
Argentina
India
Hungary
Czech Republic
Israel
Taiwan
Russia
Singapore
China
Brazil
Ireland
Overall Relevant Expertise Score2
7.37
6.94
6.34
1.90
9.81
USA
Relevant Skilled Labor Pool
China
Russia
India
Germany
Brazil
UK
Poland
Hungary
Czech Republic
Israel
Ireland
South Africa
Singapore
Taiwan
Argentina
No. of doctors
No. of nurses
No. of scientific degrees
4.93
UK
4.35
Poland
4.22
Russia
4.09
India
3.45
South Africa
Argentina
3.19
Hungary
3.18
Czech Republic
3.12
Brazil
3.02
2.90
Taiwan
2.76
Singapore
2.64
Ireland
1.49
USA
0
Source:
5.32
China
Israel
USA
Notes:
5.68
Germany
5.20
4.83
4.61
4.60
4.53
4.24
4.07
4.05
3.86
CRO presence
3.78
Volume of clinical trials
3.71
500
1000
1500
2000
2500
3000
3500
Organization Expertise/Experience
8.47
Relevant Skilled Labor Pool
(1) Based on the market presence of the 12 largest clinical research organizations (weighted 50%) and amount of clinical trials conducted (weighted 50%)
(2) Higher scores denote greater availability of relevant expertise; organizational expertise and experience weighted 60%, relevant skilled labor pool weighted
40%
clinicaltrials.gov; Physician Index Annual; WHO/EIP/HRH; NSF; A.T. Kearney analysis
Clinical Trial Offshoring 18
Infrastructure / Environment: Ireland, UK, Germany and Singapore
provide the most attractive environment driven by strong IP protection
Pharma IP Protection and Market Access
Germany
South Africa
Singapore
Ireland
UK
Czech Republic
Taiwan
Hungary
Israel
Argentina
Brazil
China
India
Russia
Poland
10.0
10.0
10.0
10.0
10.0
6.7
6.7
6.7
3.3
3.3
3.3
0.0
0.0
0.0
0.0
10.0
Infrastructure Index (Healthcare and Country)1
USA
Notes:
Sources:
8.93
Singapore
8.48
UK
Germany
8.16
Ireland
8.10
6.95
Czech Republic
USA
Singapore
UK
Germany
Ireland
Israel
Czech Republic
Taiwan
Hungary
Poland
Argentina
Brazil
Russia
China
India
South Africa
Overall Infrastructure / Environmental Score2
7.87
7.52
7.34
7.07
6.89
6.52
6.23
5.78
5.73
4.98
4.97
4.97
3.86
3.83
Taiwan
6.50
Hungary
6.50
Country Score
7.71
5.50
Israel
4.81
Argentina
4.65
Brazil
Poland
4.20
China
3.63
India
3.53
Russia
3.49
USA
Healthcare Score
6.17
South Africa
8.48
Pharma IP Protection and Market Access
Healthcare Infrastructure
Country Infrastructure
Country Risk
(1) Healthcare criteria includes number of beds per 1000 people. Country infrastructure includes transportation, use of English and “personal contact” rank
(2) Higher scores denote increased attractiveness; IP weighted 30%, Country Infrastructure weighted 25% , country risk weighted 25%, healthcare infrastructure weighted 20%
World Bank; PhRMA and Office of US Trade Representative Special 301 Report; Economist Intelligence Unit; CIA World Factbook; TOEFL; A.T. Kearney
analysis
Clinical
Trial Offshoring 19
Agenda
 Current Situation
 Key Findings
 Overview of Top-Ranking Locations
 Offshoring Considerations
 Appendix
Clinical Trial Offshoring 20
China offers large patient pools, low costs and sufficient qualified
investigators, but a challenging regulatory environment
Current Situation
Country Attractiveness Scores –
China vs. Median
Trials / Regulatory
 24 trials conducted in China by Top 12 pharma in 2005; 31 in 2006
 1 FDA inspection 2000 – 2005
Patient Pool
 With the largest urban population in the world, China provides a
large pool of treatment compliant patients from multiethnic and
multiracial backgrounds
 Wide spectrum of disease types is represented
China
10
9.94
Median Score (Error Bars
indicate Min/Max Score)
8
7.38
6.34
5.91
6
6.10
5.31
4.87
4.48
3.98
4
3.32
2
3.63
1.48
0
Patient Pool
Cost Efficiency
Regulatory
Conditions
Relevant
Expertise
Infrastructure /
Environment
Total Score
Environmental Factors
 China’s attractiveness is challenged by:
 High country risk
 Lack of national infrastructure
 Limited enforcement of IP protection
 Bureaucracy and government regulations requiring trials to be
approved by the SDA, drug import license required for every
shipment
Expected Future Trends
 Government initiatives have helped to improve GCP in China with
the establishment of GCP centers to provide training to
investigators and staff
Key Takeaways
 While patient pool and cost factors are attractive, cultural, regulatory, and
infrastructure concerns must be adequately addressed for trials to be
conducted successfully in China
 High enrollment rates can balance against the lengthy 9-12 month
domestic trial approval process
 Language can be a hurdle – data is often recorded in Chinese and
must be translated before it can be used
 China’s attractiveness as growing drug market is also a
consideration in conducting clinical trials in China
Sources: ClinicalTrials.gov (August 2005, March 2006); CenterWatch July 2002, FDA
Clinical Trial Offshoring 21
China: Attractiveness for Clinical Trials - Summary
 Strengths
• Large Patient Pools and Relatively Easy Access
– Patient treatment of major diseases centralized to major hospitals making patient access easier
– Large patient populations
• Availability of Relevant Expertise
– Availability of co-operative doctor networks throughout the country
– Chinese CRAs are physicians from the institutions with clinical trial experience and have attended
some international clinical trial training
– Real understanding of the science tends to result in fewer queries per trial
– Most major pharmacos have already set up captive R&D centers in China
• Expected to be 4th largest commercial market globally in the next 5 years
 Areas for development
• Regulatory environment
– Study startup tends to take 6-9 months, making early phase trials less attractive
– SDA committed to making regulatory changes
• Lack of national infrastructure
• Limited enforcement of IP protection
• Bureaucracy and government regulations requiring trials to be approved by the SDA, drug import license
required for every shipment
Clinical Trial Offshoring 22
With large patient pools and a low cost structure, India’s attractiveness
is likely to increase with expected regulatory improvements
Current Situation
Country Attractiveness Scores –
India vs. Median
 26 trials conducted by Top 12 pharma in 2005; 40 in 2006
 No FDA inspections 2000 – 2005
 Clinical research is considered high quality – trial data has been
accepted at major conferences and journals
 India has already been established as a popular manufacturing
destination – pharma executives are familiar with the business
environment
India
10
Median Score (Error Bars
indicate Min/Max Score)
8.04
8
7.18
6.34
5.91
6
5.58
4.48
3.98
4
2.93
4.09
3.32
3.53
2
0
Patient Pool
Cost Efficiency
Regulatory
Conditions
Expected Future Trends
4.87
Relevant
Expertise
Infrastructure /
Environment
Total Score
 Recently adopted laws will increase IP protection
 Legislative changes in Q1 2005 now allow India to participate in
simultaneous international Phase 2 and 3 trials. It is also probable
that the government will allow Phase I tests in the near future (for
drugs that did not originate in India)
 Strong overall economic growth will lead to improvements in
general and healthcare infrastructure
 The CRO supply base is likely to increase as pharmas continue to
increase manufacturing and testing in India
Key Takeaways
 While patient pool and cost factors are attractive, regulatory, IP, and
infrastructure concerns must be adequately addressed
 IP protection of trial data is a concern that should be monitored for
compliance with new laws
 Mandatory toxicology tests after Phase 2 completion requires 6 month
delay before start of Phase 3
Source: PharmaHandbook 2005
 Coordination with local physicians and hospitals is mandatory
 The practical approach in India is to target large cities and conduct
clinical trials in large hospitals
 India’s attractiveness as growing drug market with expanding
private health insurance is also a consideration in conducting
clinical trials in India
Clinical Trial Offshoring 23
Russia achieved strong scores on multiple criteria with the exception
of environment
Current Situation
Country Attractiveness Scores –
Russia vs. Median
Russia
10
Median Score (Error Bars
indicate Min/Max Score)
8.02
8
6.13
6.34
5.91
6
5.55
4.77
4.48
3.98
4
4.87
4.22
3.32
3.49
2
Trials / Regulatory
 5 trials conducted by Top 12 pharma in 2005; 80 in 2006
 12 FDA inspections 2000 – 2005
Patient Pool
 Medical care is centralized – patients with similar symptoms are
treated in the same ward, allowing for ease of patient recruitment
(i.e., 2,400 patients recruited in 2 weeks for phase 3 trial of
hypertension drug)
 Russia has a large population that are treatment naïve and whose
diseases are at advanced stages
 Lack of quality medical care has led to eagerness among patients
to sign up for clinical trials and to comply with trial protocols
Environment
 Russia imposes a clinical trials tax
 IP concerns have placed Russia on the US’s priority ‘watch list’
0
Patient Pool
Cost Efficiency
Regulatory
Conditions
Relevant
Expertise
Infrastructure /
Environment
Total Score
Expected Future Trends
 Drug companies are well established in Poland and the Czech
Republic – Russia and other eastern European countries are
increasingly attractive due to patient pool, lower costs, relevant skill
labor pool
Key Takeaways
 Russia is attractive for trials where recruitment of a large patient pool is
required in a short time frame
 Ethics of recruitment requires careful attention; physicians can make up to
10 times their salary through clinical trials potentially creating an incentive
to neglect to inform patients of risk factors
 Clear procedures for and close monitoring of patient recruitment is
necessary to ensure compliance with international ethical
standards
Sources: clinicaltrials.gov; Fortune, July 26, 2005, Special 301 Report of the Office of the US Trade Representative
Clinical Trial Offshoring 24
Brazil has a large patient pool and significant cost efficiencies, but lags
in the areas of regulatory and environment
Current Situation
Country Attractiveness Scores –
Brazil vs. Median
Brazil
10
Median Score (Error Bars
indicate Min/Max Score)
8
6.97
6.56
6.34
5.91
6
5.26
4.65
4.48
3.98
3.74
4
3.02
4.87
3.32
2
 94 trials conducted by Top 12 pharma in 2005, 73 in 2006
 5 FDA inspections 2000 – 2005
 Brazil is primarily attractive because of its large patient pool and
low costs
 ICH GCP has been implemented
 A substantial portion of Brazil’s population is ethnically close to US
and European population
 Clinical trial costs are about 70% of US costs
 Brazil is attractive for trials of drugs for the Japan market
 Japan is the second largest pharmaceutical market
 Brazil has the largest (1.1 million) ethnic Japanese population
outside of Japan
 Foreign trial results on ethnic Japanese are now accepted by
Japan authorities
0
Patient Pool
Cost Efficiency
Regulatory
Conditions
Relevant
Expertise
Infrastructure /
Environment
Total Score
Expected Future Trends
 Stem cell research has been legalized
Key Takeaways
 Brazil has had a long track record for clinical trials and remains attractive
based on the scoring across the criteria
 Clinical trials approval is traditionally slow
Source: clinicaltrials.gov
 There are strong IP protection laws; however, enforcement is
generally weak
Clinical Trial Offshoring 25
The Czech Republic’s attractiveness is based on its low cost structure
and favorable regulatory environment
Country Attractiveness Scores –
Czech Republic vs. Median
Current Situation
Czech Republic
10
Median Score (Error Bars
indicate Min/Max Score)
8
6.96
6.95
6.34
5.91
6
5.00 4.87
4.52 4.48
3.97 3.98
4
3.12 3.32
 44 trials conducted by Top 12 pharma in 2005, 85 in 2006
 2 FDA inspections 2000 – 2005
 Pharmas are already well established in the Czech Republic for
conducting clinical trials
 The Czech healthcare system operates at low cost
 Average Czech physicians’ monthly salary is $550
 Investigator fees and CRO/monitoring fees are approximately 5070% of U.S. amounts
2
Expected Future Trends
0
Patient Pool
Cost Efficiency
Regulatory
Conditions
Relevant
Expertise
Infrastructure /
Environment
Total Score
 The Czech Republic’s accession to EU membership will likely lead
to a narrowing of its cost advantage over time
Key Takeaways
 Although the available patient pool is not particularly high, the Czech
Republic has strong IP protection, low operating costs, and a strong
healthcare infrastructure
 The Czech Republic is ideal for companies beginning to offshore
clinical trials based on proximity to western Europe, relative
absence of cultural, regulatory, and environment barriers, and
tested/ track record in clinical trials
Source: clinicaltrials.gov, Pharma Handbook 2005, PhRMA Special 301 Report
Clinical Trial Offshoring 26
Agenda
 Current Situation
 Key Findings
 Overview of Top-Ranking Locations
 Offshoring Considerations
 Appendix
Clinical Trial Offshoring 27
Pharma companies must consider a variety of factors in developing
their clinical trial offshoring strategy
Key Considerations
• Consider the organizational, language-related and supply
chain implications of off-shoring trials
• Develop relationships with 3rd parties with local experience
(e.g. multinational/ local CROs)
• Develop detailed/ practical contingency plans
Assess
Operational
Implications
• Ethnicity may affect
trial results due to
metabolic and
genetic variations
• Reduce overall risk
by diversifying trial
locations over
multiple countries
Understand
Culture and
Ethnic
Differences
Development of
Off-Shoring
Criteria
Know the
Local
Regulatory
Environment
• The Food and Drug
Administration (FDA)
has guidelines for
clinical trials and relies
on pharmaceutical
companies to adhere to
Good Clinical Practice
(GCP)
• Keep a pulse on
regulatory environment
changes in attractive
off-shoring locations
Protect
Intellectual
Property
• Most developing countries have Intellectual Property infringement
issues, although the landscape is improving (e.g. India)
• Maintain a strong emphasis on due diligence and tight contracts
Clinical Trial Offshoring 28
Concerns often surface about offshoring clinical trials
Pharma Concerns
Intellectual Property Protection
• Data exclusivity may not be protected
– Advance knowledge of a trial’s progress will give competitors unfair market advantage
Regulatory Requirements
• Regulatory differences across countries may impact timing and cost of clinical trials
– E.g., drug import licenses required for each shipment, mandatory toxicology tests, language requirements for documents
FDA Acceptability
• FDA statements on clinical trials offshoring are considered guidelines; pharmas companies are cautious about
entering new countries
Cultural Differences
• Differences in the practice of medicine may impact trial results or affect trial execution
– Concurrent use of herbal medicines may potentially be unreported
– Use of physicians (but not nurses) in taking blood samples
• In countries where doctors are culturally authoritative, investigators avoid using consent forms, as patients
misunderstand the reason for them
Ethnicity
• Ethnicity may impact trial results due to different metabolic rates and other genetic effects
• FDA guidelines limit the percentage of a drug’s trials conducted in developing countries
Ethics
• Wide disparity between investigator fees and standard salaries could lead to unethical patient recruiting
– E.g., misleading patients about risk factors, enrolling patients that do not fit the trial parameters
• Investigators may under-report adverse reactions, believing they are doing sponsors a favor
Clinical Trial Offshoring 29
Many risk factors can be mitigated with careful planning and execution
Selected Risk Mitigation Strategies
Knowledge/ Information
• Monitor IP legislation and enforcement – do not rely on unsubstantiated information
• Leverage CROs to understand a target country’s customs, regulations, and medical practices before establishing
trials
Operational – Structure to Manage Risk
•
•
•
•
Start initially with a smaller trial(s) in entering a new country
Work with multinational and/ or established local CROs with hands-on in-country experience
Develop partnerships, while maintaining healthy competition among vendors
Develop detailed/ practical contingency plans
Ensure Adherence to Standards of Conduct and Trial Protocols – ‘Build Quality In’
• Conduct rigorous training and monitoring of new investigators, to ensure compliance with ethical standards and to
ensure quality of clinical trial
• Conduct audits to ensure compliance with standards (quality, ethical, etc.)
• Ensure incentive structure does not cause unanticipated behavior
• If using CROs, work with those that have strong IP policies and operating practices with investigators and patients
• Hold partners accountable for meeting appropriate FDA standards
Diversify
• Diversify portfolio of clinical trail geographies to balance patient pool opportunities, cost efficiencies, expertise, and
regulatory risk
• Design clinical trials to recognize ethnic diversity
• Ensure sufficient percentage of trials is conducted in other countries
• Set up trial parameters to include range of ethnicities consistent with FDA guidelines
• Ethnic diversity may be an asset if future plans involve sale within clinical trial country
Clinical Trial Offshoring 30
Agenda
 Current Situation
 Key Findings
 Overview of Top-Ranking Locations
 Offshoring Considerations
 Appendix
Clinical Trial Offshoring 31
Weighting of criteria reflects the relative importance in assessing
location attractiveness
Weights Assigned to Areas of Evaluation
Area of Evaluation/ Criteria
Weighting
Patient Base
30%
Cost Efficiency
20%
Regulatory Conditions
20%
Relevant Expertise
15%
Environment
15%
Weights can be tailored to specific offshoring needs
Clinical Trial Offshoring 32
Available patient base is evaluated by the size of the urban population
and the propensity to seek medical attention
Area of
Evaluation
Sub-Category
Size of Available
Patient Pool
Patient
Base
Note:
Sources:
Measurement
Relevance
Urban Population Size
Clinical trials conducted in urban
areas to facilitate patient recruitment
Percent of Urban Childbirths
Delivered by Physicians
Proxy for propensity of urban
population to seek medical attention
Treatment Naïve Population
Many clinical trials require that
patients have not had prior
treatments
Measurements are converted into a score (range 0-10), and their weighted average is used to arrive at the
composite score for the evaluation area
2003 World Bank Data; 2003 WDI Database
Clinical Trial Offshoring 33
Cost structure is assessed based on relevant labor and infrastructure
costs and investigator grants
Area of
Evaluation
Sub-Category
Cost of Labor
Cost
Efficiency
Infrastructure Costs
CRO Cost
Perspective
Note:
Sources:
Measurement
Relevance
Average Physician Salary
Investigator fees/grants represent a
significant portion of the total costs
of the trial
Average Nurse Salary (proxy for
clinical research assistant)
Clinical research assistants (CRAs)
monitor trial patients, collect data,
etc and represent a significant cost
of conducting clinical trials
Average Statistical Mathematician
Salary (proxy for data management
personnel)
Statisticians responsible for data
management, data analysis,
maintaining database, etc.
Average Wages
Average wages account for
overhead labor costs and services,
such as administrative
Average Rental For Office Space
(proxy for lab space or office
space)
Cost of space for labs, office space,
etc.
Round Trip Airfare from London
and JFK to Largest City in Country
(weighted average)
Management of the trial will likely
involve some travel to/ from country
Relative Grant Levels Compared to
the US
Estimate of country variation in total
grant costs
Measurements converted to a score (0-10), weighted average applied to determine composite score for the evaluation area
Salaryexpert.com; WDI Database; Economist Intelligence Unit; CBRE Global Markets Rent; Expedia.com
Clinical Trial Offshoring 34
Regulatory conditions considers FDA visibility, in-country regulatory
conditions and level of IP protection
Area of
Evaluation
Sub-Category
FDA Acceptability
and Visibility
Regulatory
Conditions
Country Specific
Regulatory
Conditions
Intellectual Property
Protection
Measurement
Relevance
Number of Trials On the CDER
Clinical Investigator Inspection List
Number of inspections reflects the
FDA view of a country’s importance
in clinical trials
Percent of Trials Where Inspection
Resulted in Voluntary Action
Indicated (VAI)
Countries with higher success rates
with FDA inspections are more
attractive
Ease of Approval for Shipping
Laboratory Samples (Rating)
Restrictions on biological shipments
may extend lead time and delay
initiation of trial
Clinical Trials Regulatory Approval
Time (Estimated)
Regulatory approval time varies
significantly across countries and is
a potential bottleneck
EIU IPR Protection Index
Pharmas are concerned about
potential reverse engineering of trial
drugs
Note:
Measurements converted to a score (0-10), weighted average applied to determine composite score for the evaluation area
Sources: US FDA CDER Clinical Investigator Inspection List (1999-2004); US National Institutes of Health; Economist Intelligence Unit WEF Global Competition
Report; A.T. Kearney Research
Clinical Trial Offshoring 35
Relevant expertise is driven by CRO presence, the country’s clinical
trial experience and availability of the relevant skilled professionals
Area of
Evaluation
Relevant
Expertise
Sub-Category
Measurement
CRO Presence and
Clinical Trial
Experience
Percent of Top 12 CROs Present in
Country
Presence of top CROs indicates
the availability of the local supply
market
Number of Clinical Trials Voluntarily
Listed in ClinicalTrials.gov
Number of clinical trials is an
indicator for the level of experience
Number of Physicians
Used as proxy for the availability of
suitable physicians for clinical trials
Number of CRAs/Nurses
Used as proxy for the availability of
clinical research associates
Number of First Degrees in Math /
Computer Science / Engineering
Used as proxy for the availability of
statisticians
Availability of Talent Pool
Overall assessment of availability of
talent needed for conducting clinical
trials
Availability of
Relevant Skilled
Professionals
Relevance
Note:
Measurements converted to a score (0-10), weighted average applied to determine composite score for the evaluation area
Sources: ClinicalTrials.gov; Annual Physician Index; 2004 WHO / EIP / HRH; NSF
Clinical Trial Offshoring 36
Environment is evaluated based on IP protection, healthcare and
country infrastructure, and country risk
Area of
Evaluation
Sub-Category
Measurement
Relevance
Pharma Intellectual
Designation by USTR on Countries’
Property Protection and Adequacy and Effectiveness of IP
Market Access
Rights Protection
Countries that have good IP
protection are less likely to have theft
or misuse of clinical trial data and
materials
Healthcare
Under 5 mortality rate and adult (15- Mortality rate is proxy for the level of
Infrastructure
60) mortality rate
healthcare infrastructure
Country Overall
Overall Infrastructure Quality
Measures ease of conducting clinical
InfraTransportation Quality and Density of Road and Rail trials
structure
System
Language
TOEFL Score Average
Culture
"Personal Contact" Rank
Environment
Adaptability
Country Business
Overall Business Environment Rating General risk and costs of conducting
Risk
Environment FDI Confidence Index Rankings
business in the country regardless of
industry; import duty metric is specific
Political
Political Stability Rating
to pharmaceutical industry
Environment
Financial
Environment
Currency Fluctuations Relative to the
US Dollar
Tax Costs
Percent Duty on Drug Importation
Government
Support
Extent of Bureaucratic Red Tape
Note:
Measurements converted to a score (0-10), weighted average applied to determine composite score for the evaluation area
Sources:
PhRMA (http://www.phrma.org/international/) Special 301 Report; Office of the US Trade Representative Special 301 Annual Review (2005); World
Bank; World Development Indicators (2004); Global Competitiveness Report (2004-2005); CIA World Factbook (2004); Economist Intelligence Unit
(2004), Dorlong Kindersley Atlas; Educational Testing Service TOEFL Scores (2001-2002); A.T. Kearney Globalization Index (2005), USDA Trade
Information Center (1-800-USA-TRADE)
Clinical Trial Offshoring 37