Outsourcing has played an important role in drug development for more than 30 years. But arguably, that role has been largely
reactive to sponsor needs and direction. New outsourcing relationships are a potential game-changer: leading CROs are now
positioned to play an unprecedented new role in proactively and aggressively transforming clinical research.
Kenneth A. Getz
Here's how: strategic and integrated partnerships are facilitating the rapid transfer of operating and resource risk from
pharmaceutical companies to CROs. To successfully manage these highly valued relationships, leading contract service providers
are taking on substantially more fixed costs, assuming more autonomy and accountability, and investing in the adoption of
innovative practices and solutions at levels that far surpass those typically made by their counterpart, risk-averse sponsor
Nearly all large sponsor companies—major and many mid-sized pharmaceutical and biotechnology companies—have actively embraced
the use of integrated relationships where entire functions or portions of a portfolio are managed more autonomously by select
preferred providers under long-term alliance arrangements. Sponsors hope to not only access dedicated global capacity, talent,
and experience more efficiently, but also to secure cost savings through reduced start-up and guaranteed portfolio activity.
The largest CROs are uniquely positioned to provide the breadth and depth of capacity that sponsor portfolios require. These
CROs have been the primary beneficiaries of integrated and strategic partnerships. A recent study conducted by CenterWatch
found that for leading CRO companies, the majority of their revenue comes from strategic, integrated relationships. Among
the top 10 largest CROs, 71% of their reported revenue comes from functional service and integrated alliances, and 29% from
transactional relationships. In contrast, the majority (60%) of revenue for niche and mid-size CROs comes from transactional
service relationships. Smaller pharmaceutical and biotechnology companies continue to primarily use transactional relationship
outsourcing —often under preferred arrangements—to augment capacity for a specific project-related task.
Greater autonomy in managing large and highly valued integrated partnerships is but one aspect of operating and resource risk
transferred to CROs. Customization is also driving up risk since no two partnerships are identical. One sponsor's integrated
alliance is not the same as another. Every sponsor wants to establish relationships that uniquely suit their culture, operating
style, strategy, systems, practices, and management models. Each and every sponsor wants to match its internal teams with
the best team that the contract service partner can offer. Customization cannot be scaled. It demands greater CRO infrastructure
and management, erodes the CRO's ability to operate efficiently, and squeezes CRO company profitability.