Outsourcing of Contract Research Organizations

The success of a large pharmaceutical company depends upon internal factors drivers such as scientific competence in R&D, computer integrated manufacturing, and marketing medicines directly to consumers, to name a few. Dwindling drug discoveries necessitate research and development, innovation, and marketing of new pharma and biotech products in order to combat price fixing and cost escalations. External factors, such as patent expirations, heighten drug competition due to generic entrance into the market. Smaller product life spans, worldwide regulatory challenges, and the increasingly slim deadlines for clinical development have hiked up in-house R&D expenditure and affected productivity. These trends have driven pharmaceutical companies to outsource an increasing range of functions such as clinical services, data management, database development, and medical coding to Contract Research Organizations (CROs) as a means to control in-house R&D costs, expand capacities, and improve core skills.

A Contract research Organization/Clinical research organization is a company that provides a broad range of services to the Pharmaceutical and Biotechnology industries in the form of outsourced pharmaceutical research services. A CRO can conduct processes such as moving a new drug or device right from its conception to FDA marketing approval without the drug sponsor having to maintain a staff for these services. The total CRO market size was estimated at $20bn in 2008 and is expected to grow at an annual rate of 8.5% to reach $35bn through 2015. CROs provide drug developers with substantial global capacity and have now become critical contributors to clinical trial activity. Clinical trials conducted by CROs are completed up to 30% more quickly than those conducted in-house by pharma companies. The leading CROs (such as Quintiles, Charles River, IPRC, etc..) are commodity full service providers, acting as one-stop shops for all services, from preclinical through marketing; operating on a global scale. Hence pharmaceutical companies getting involved in strategic partnerships with CROs to gain a competitive edge in the global business environment.

Biopharma companies are increasingly turning to developing countries in Asia, Central and Eastern Europe and Latin America as sites for clinical trials. These activities are driven by large patient availability and fast patient enrollment, the ability to tackle diseases (such as malaria, leishmaniasis) that are rare in industrialized nations and large potential markets in these developing countries. In an interview with Gregg Sweet, VP of Strategy and Development at ICTS, he recounts a 500-patient Alzheimer’s trial in Eastern Europe that reached full enrollment within days, whereas the recruitment phase for the U.S. phase of the same trial lasted more than 18 months without reaching its enrollment goal. Additionally many physicians in these countries are trained in the Western countries and are highly knowledgeable. The costs for their services are lower than that of companies located within the U.S. and the major seven European markets. Developing countries see the CRO business as a unique opportunity to work with drugs that they would otherwise have no access to. They see trial participation as a unique way to bring Western medicine to their patients.

CROs in developing countries realise the potential of this business and it benefits to their economy , which is why they are actively advertising their services to the pharmaceutical/biotech sector.

Should pharma continue to outsource clinical services or should it shift to streamlining internal operations? Does quality suffer?