John R. Vogel

Demand for contract clinical research services continues to grow rapidly and underscores the integral role that outsourcing plays in drug development. Additionally, usage of full-service and niche-services contract research organizations (CROs) is evolving as sponsors react to changing portfolio requirements, operating needs, and global economic conditions.

This year, biopharmaceutical companies are expected to spend in excess of $10 billion (US) worldwide on contract clinical service providers—net of pass through costs such as central lab fees and investigator grants. Annual growth in spending on CRO services—13.4% since 2001—has well outpaced the 9.1% annual growth rate in total global development spending during that period.

A number of factors are driving the growth in outsourcing: Global clinical trial volume and scope is increasing while drug developers face significant capacity constraints. The number of projects in worldwide development has grown 6% annually since 2002, yet many major pharmaceutical and biotechnology companies have not increased their internal clinical research headcount. These capacity constraints are expected to worsen as sponsors reduce and consolidate their R&D infrastructure in response to a global economic downturn.

Between 2000 and 2008, the proliferation of small and mid-sized companies conducting clinical research programs also stimulated demand for outsourcing. Smaller companies, many of them biotechnology firms, outsource a higher relative proportion of their total clinical research portfolio in order to obtain expertise that falls outside their core capabilities. This year, however, facing tight access to capital, many smaller companies have been forced to downsize and divest their development operations resulting in a strong reduction in their demand for outsourcing. 

CRO contribution to development performance has also helped stimulate demand. Many sponsor companies have found that CROs can provide faster cycle times at comparable quality, when they are used effectively. These findings were confirmed in a study conducted by the Tufts Center for the Study of Drug Development in 2006.

As global economic conditions continue to challenge the drug development enterprise, a rising number of sponsors—large, medium, and small—are looking for new ways to better leverage the performance of their CRO partners while addressing intensifying capacity, quality and cycle time requirements.

With this as a backdrop, and as a follow-up to CRO usage surveys that we have conducted in collaboration with 

 during the past decade, we conducted a new survey among biopharmaceutical companies to understand how their outsourcing practices and partnerships continue to evolve. It is our hope that the results will inform drug developers and service providers alike about how CROs are being used and the future direction of sponsor–CRO collaborations.

A 32-item survey was emailed to a targeted subgroup of subscribers to 

—biopharmaceutical (i.e., pharmaceutical and biotechnology) companies—during February and March 2009. In total, 392 individuals responded to the questionnaire.

Fifty-two percent of respondents described their primary job function as middle management/operational. Senior management accounted for 29%, and the remaining 19% chose "other." Female (52%) and male (48%) respondents were nearly equally represented, and two-thirds of the respondents were between the ages of 30 and 49.

Overall, respondents reported a high level of experience in clinical research. Fifty-five percent of respondents have three or more years of experience in drug development. Most respondents (83%) reported being directly involved in outsourcing. The majority (70%) said they were involved in managing sponsor-provider relationships; 61% report they are responsible for selecting providers and 55% for deciding whether to outsource a study, function or specific activity.

Respondents represented a cross-section of small, medium, and large pharmaceutical, specialty pharmaceutical, biologics, and medical device companies. The proportion of respondents from smaller companies (<$100 million annual R&D spending) in the 2009 survey was greater than the proportion in our 2005 survey, where small, medium, and large companies were equally represented.

In the present survey, smaller companies comprised nearly half of the respondents (56%). One-out-of five responses came from large (>$500 million) sponsors and one-out-of-four from mid-size sponsors.

The majority of respondents were from the United States (65%), with one-third based in the Northeast (36%), and one-fourth based in each southern region: the Southeast (24%) and Southwest (24%). Western Europe accounted for (16%).  Fewer respondents were from Central/Eastern Europe (9%), Canada (3%), and Asia (4%).

Similar to the results of our 2005 survey, sponsors continue to outsource a wide variety of functions in 2009, from design through site selection, study conduct through medical writing. Activities most often outsourced include data collection/study monitoring (81% report "very often" or "occasionally"); data management (75%); preparing and collecting site documents (73%); patient recruitment assistance (71%); and electronic data capture (71%) [see Table 1].

Significant differences (p<.01) were observed between sponsors by size of R&D spending and frequency of outsourcing by function. Smaller companies are utilizing CROs at a higher level than their larger counterparts across nearly all activities and functions with few exceptions; larger sponsors appear to be outsourcing their site support needs at a higher relative level than their smaller peers. 

Compared to our 2005 survey results, sponsors appear to be scaling back on their use of CROs for upfront, project initiation activities including development planning and protocol design. Sponsors also appear to be scaling back on their use of CROs to provide investigative site support services (e.g., site selection, patient recruitment support, and contracting and budgeting with sites). 

We also observed a significant decline in reported use of CROs for data collection and study monitoring (81% in 2009 versus 89% in 2005). This is likely due to sponsors utilizing a variety of competing sources for CRA personnel including staffing agencies and independent contractors. 

Indeed, elsewhere in our survey, sponsors report that their use of independent contractors, sometimes referred to as insourcing, has increased dramatically during the past decade. And sponsors have a variety of options to choose from. Staffing agencies, some owned and operated by CROs, offer temporary personnel to fill the need for CRAs, data managers, statisticians, and other research professionals. 

Results from our survey indicate that insourcing is gaining popularity. Fifty-six percent of respondents expect to continue their use of independent contractors and an additional 30% plan to increase their use of this resource. A small minority of respondents (14%) said that they expect their level of insourcing to decrease. 

The use of study sites abroad has increased for a variety of reasons, including greater access to a high volume of treatment-naïve subjects and well-trained professionals, lower costs, and rising infrastructure levels in emerging markets. 

Respondents were asked to estimate what percentage of projects in 2009 will involve study sites abroad. Statistically significant (p<.001) differences were observed by level of R&D spending: Larger sponsors are more likely (p<.001) to use sites abroad. This may be due to the fact that smaller companies primarily conduct early stage (e.g., proof of concept) studies, which do not require large numbers of patients and are principally carried out in the United States. North America continues to be the most popular location for conducting clinical studies. Approximately half (49%) of respondents report that 41% or more of studies planned for 2009 will be conducted among investigative sites in North America. Western Europe was second most popular with 26% of respondents, followed by Eastern Europe with 18%. We observed a statistically significant (p<.05 or greater) effect of sponsor size on study placement. Smaller sponsors were less likely to use investigative sites in Eastern Europe, Asia, India, China, and Latin America. 

Results of our survey do not support reports and claims that Asia, India, and China will far surpass other global regions with regard to growth in clinical trial activity and outsourcing. In our survey, sponsors report that significantly less contracting was planned for Asia (10%), India (10%), China (6%), and Latin America (6%) in 2009. 

Survey respondents rely primarily on large global CROs to conduct studies abroad. More than two-thirds (69%) of the respondents said that they would contract fewer than 20% of study sites abroad to regional CROs. 

Similar to our 2005 survey, respondents to the 2009 survey indicate a high willingness to work with a mix of full-and niche-service providers to handle their portfolio needs. 

In our survey companies that are low outsourcers (less than 40% of their development budgets) tend to favor managing a broad mix of full-and niche-service providers. High outsourcers (greater than 60% of their overall development budgets) clearly favor working with full-service providers (p<.001). 

A majority of sponsors (61%) report that they use less than five CROs. The vast majority (88%) of sponsors use less than 10 CROs each year. Significant differences (p<.001) are observed when comparing sponsors by R&D spending levels. A much higher percentage of small sponsors (75%) and mid-sized sponsors (52%) tend to use fewer CROs, reflecting the more limited volume and requirements of their portfolios. Only one-third of large sponsors reports using less than five CROs annually (see Figure 1). 

Interestingly, mid-size and large sponsors are planning to consolidate the number of CROs that they use annually. A growing number of larger sponsors now recognize the challenges and inefficiencies inherent in managing a fragmented number of service providers. Consolidating this fragmentation and delegating more responsibility to fewer providers offers an opportunity to reduce operating inefficiency and cost. Smaller sponsors, on the other hand, plan to maintain the number of CROs that they use given their relatively low project volume and high demand for contract expertise and capacity. 

More than four-out-of-10 large sponsors (42%) and 61% of mid-sized sponsors plan to use fewer than five CROs in 2009. This compares with 35% of large sponsors and 42% of mid-sized sponsors using five or fewer CROs in 2008.  These differences are significant at the p<.001 level. Approximately 70% of small sponsors report using fewer than five CROs annually. 

In 2009, sponsors report using a broad mix of relationship structures. Functional service provider arrangements are widely used by a reported 45% of all sponsors; just more than one-third of sponsors overall (36%) report using transactional relationships; and slightly less than one-quarter (19.7%) of sponsors report using alliance relationship structures. 

Significant differences (p<.05 level) in relationship structure use by annual R&D spending levels were observed. Smaller companies report a higher incidence of transactional relationship use and low relative alliance relationship use. Small sponsors typically support only one or a few projects in development where task-oriented outsourcing best meets their need for capacity and operating flexibility. In addition, those small companies receptive to entering alliances are reluctant to do so because they believe it will be difficult to compete for CRO partners when larger sponsors offer substantially higher contract spending levels. 

Mid-sized sponsors show the highest incidence (29%) of alliance relationship usage and the lowest comparative incidence of functional service provider (FSP) usage. This may reflect the more nimble ability of mid-sized companies to enter into partnerships supporting broad multifunctional outsourcing. In contrast, large companies have methodically selected individual functions to outsource to accommodate organizational reluctance and legacy processes and systems. Indeed, in our survey, large sponsors report very high relative incidence (50%) of FSP relationship usage and 20% incidence of alliance relationship use (see Figure 2). 

Overall, 57%–64% of sponsors expect their use of various relationship structures to remain the same in 2009. Slightly less than one-third of sponsors overall (30%) expect their use of FSP relationships to "Greatly" increase and to "Somewhat" increase in 2009; 22% and 26% expect their use of transactional and alliance relationships respectively to "Greatly" increase and to "Somewhat" increase. 

Significant differences (p<.05 level) in relationship structure use by annual R&D spending levels were again observed with regard to planned 2009 usage. 

Although mid-sized companies appear to have established more alliances in 2008—our survey results suggest that small and large company receptivity to forming alliance relationships has increased substantially. A high relative percentage (34%–38%) of small and large sponsors plan to increase "Greatly" and "Somewhat" their use of alliance relationships in 2009. This compares with only 18% of mid-sized sponsors that plan to increase their use of alliance relationships "Somewhat" and "Greatly" in 2009. 

A high relative percentage (34%–40%) of mid-sized and large sponsors plan to increase "Greatly" and "Somewhat" their use of FSP relationships. This compares with only 23% of small sponsors that plan to increase "Somewhat" and "Greatly" their use of FSP relationships in 2009. 

Approximately one-third of sponsors spent less than 20% of their development budgets on outsourcing; about 40% spent between 21% and 60% of their development budgets on outsourcing; and approximately one-fourth of sponsors spend the majority of their budget (61%+) on outsourcing.

Significant differences (p<.01) were observed when comparing sponsors by size of overall annual R&D spending. A higher percentage (83%) of large sponsor companies tend to spend more than 20% of their overall R&D budgets on outsourcing versus smaller sponsors (61%). This finding is consistent with other survey results suggesting that utilization of CROs is highest among the largest, globally positioned sponsors.

Planned spending levels in 2009 are modestly higher than actual spending levels in 2008. Sponsor companies report that they do not anticipate dramatic increases in spending for contract clinical services.

Articles

New survey captures sponsors changing global usage of, and relationships with, CRO partners.

Successful Outsourcing: Tracking Global CRO Usage

Following more than two decades of growing involvement in nearly all aspects of drug development, full-service and niche-services contract research organizations (CROs) have become a common and integral part of most sponsor companies' clinical research teams. From development planning through project implementation and dossier completion, total global spending on clinical CRO services has reached an estimated $8 billion, representing an average annual increase of 14.9% since 1985.

 At the Partnerships with CROs Conference in April 2005, a panel of industry analysts predicted that outsourcing to CROs will continue to grow at a rate of 10% or more each year.

As market conditions and the overall pharmaceutical industry operating environment change and evolve, sponsor reliance upon and usage of CRO partners has also changed. In 1992 and in 1995, we published articles in 

 that examined how sponsors use CROs and their opinions of CRO services.

 Now, a decade later, we have conducted another survey among biopharmaceutical companies to understand how outsourcing practices have further evolved and how they are becoming more efficient.  			

A 27-item survey was sent via e-mail to subscribers of 

. In total, 372 individuals responded to the questionnaire. Seventy-five percent of respondents described their primary job function as R&D project management or clinical project management. Overall, respondents reported a high level of experience in clinical research. Almost two-thirds (63%) of the respondents have three or more years of experience.  			

The respondents represented an excellent cross-section of small, medium, and large pharmaceutical, biopharmaceutical, biologics, and medical device companies. The proportion of responses from larger size sponsors (38% of total) was only slightly larger than that from mid-size (28%) and small-size sponsors (34%). What follows is a discussion of the survey results taken in aggregate across all company sizes. 

Average number of full- and niche-service providers utilized

The majority (82%) of respondents report that they worked with two or more full-service providers last year. They used a median of three different full-service CROs in 2004. A similar percentage, 81%, report that they worked with two or more niche-service CROs last year. On average, respondents worked with a median of 2.5 niche-service CROs in 2004. 			

Respondents expect minimal change in their usage of full-service and niche-service CROs in 2005. However they reported that the projected median number of different full-service CROs utilized would decline from three in 2004 to two in 2005. 

Our survey identified a high level of willingness among sponsors to supplant full-service CROs with niche-provider CROs. More than three out of four respondents (77%) report that they "often/occasionally" choose to use niche-service CROs 

 of full-service CROs. Only one out of eight respondents reported that they choose not to replace full-service CROs with smaller organizations offering partial services.  

For nearly a decade, sponsors have become more nimble and adept at mixing and matching CROs of varying sizes and service offerings. The results of this recent survey indicate growing willingness and confidence in using a portfolio of full and niche, global and local, contract service providers. 			

At this time, there is little observed differentiated usage of multinational and regional CROs abroad. The majority of respondents (66%) report contracting out two or more projects to multinational CROs in 2004. A similar percentage report outsourcing two or more projects in 2004 to regional CROs based abroad. Respondents contracted out an average of two projects to multinational CROs in 2004; slightly less, an average of 1.8 projects, were outsourced to regional CROs. 

Variance in the usage of regional CROs abroad is much higher than for multinational CROs. Interestingly, whereas expected 2005 usage of multinational CROs is consistent with 2004 levels, respondents expect a slight decline in the use of regional CROs abroad. This year, 59% of respondents expect regional CROs abroad to manage more than two projects, down from 66% in 2004. The variance among companies in the level of expected 2005 usage of regional CROs abroad has also widened.  

Planned use of CROs in various geographical areas is shown in Table 1. Most respondents expect CRO usage to increase or stay the same throughout most regions of the world during the next several years. Areas where the largest percentage of respondents expect their use of CROs to "increase" include Europe (47%); North America/U.S. (46%); and Central and Eastern Europe (36%). One out of 10 respondents expects decreasing use of CROs in several key regions: Latin America (9%); North America (9%); Europe (8%); and South Africa (8%).  

 Table 1. Planned use of CROs in geographical areas (percentage of respondents)			

It is encouraging to note that in the present survey, most sponsors believe that their outsourcing practices are more strategic in nature. Three out of four describe their use of CROs as deliberate and planned. Only 25% reported that they are frequently using CROs for "tactical" reasons (e.g., last minute decisions due to an unexpected shortfall in resources). 			

Respondents are evenly divided on their reported use of CROs for "functional" purposes. Half of the respondents (49%) report that their approach to outsourcing involves the transferring of a specific task across the majority of their projects. 

Table 2 shows the use of CROs for various activities. Activities most often outsourced include data collection/study monitoring (89% report "very often" or "occasionally"); preparing and collecting site documents (82%); patient recruitment assistance (82%); data management (77%); and investigative site selection (73%). Interestingly, compared to our 1994 survey results, sponsors appear to be scaling back somewhat in their reported use of CROs for traditional services, specifically monitoring and data management.  

Table 2. Use of CROs for various activities (percentage of respondents)			

The present survey also suggests that sponsors are dramatically increasing their use of CROs to interface with and support investigative sites. Sponsors are also modestly increasing their use of CROs for development planning and protocol design. In 1994, for example, only 18% of companies used CROs for site selection; in the present survey 73% of the respondents report doing so. And in 1994, only 2% of sponsors reported that they rely on CROs to provide patient recruitment assistance. This compares with 82% of the respondents who report doing so in the present survey. Ten years ago, 6% of sponsor companies reported using CROs for development planning. In the present survey nearly half (49%) of the respondents report outsourcing their development planning activity. 

Asked if they are required to choose CROs from a preferred provider list or if they may make an argument to use someone not listed, slightly more than one-third of respondents (37%) report that they must choose from the preferred provider list. The practice of limiting choices to a preferred provider list appears to have softened slightly. In response to a similarly worded question in 1996 and 1998, 45% of respondents in each case reported that they were required to limit their CRO choices to those on the preferred provider list. 							

Selection criteria rated "highly important" in the present survey are: therapeutic area expertise (50%); strong reputation (50%); demonstrated ability to deliver patients (50%); responsive turnaround of proposal (44%); and significant cost advantage (42%). These criteria are very consistent with past surveys conducted among sponsor companies by CenterWatch, with a couple of notable exceptions. Whereas in 1996 nearly 20% of companies rated "size of CRO" as an important selection criteria, only 3% of respondents do so in the present survey. In 1996, 38% of companies rated "full range of services" as "highly important," compared with 29% of respondents who do so in the present survey. These latter two findings further support the notion that sponsors are confident in, and favoring, their ability to flexibly select and manage CROs of varying sizes and service offerings. 

The time required to negotiate the terms of the service agreement often creates a significant delay in project initiation. One suggested approach to saving time is to initiate work under a "letter of intent." This approach is usually discouraged by sponsor attorneys, as evidenced by less than one-third of respondents (23%) reporting that they frequently (>50% of the time last year) initiated projects under a letter of intent. Support for another approach, the "master service agreement," was only slightly better; 38% reported that they frequently used them.  			

Project kick-off meetings between sponsors and providers are becoming more common. However, the survey results suggest that the practice is not widespread. Only one-third of the respondents (36%) reported that they usually (more than 75% of the time) initiate projects with a formal kick-off meeting. Kick-off meeting activities rated "highly important" by the respondents were: review procedures (63%); clarify roles and responsibilities (62%); review protocol (60%); define communication pathways (56%); and agree on how issues will be resolved (50%). Despite the fact that sponsors often complain about CRO staff turnover, only 20% of the respondents rated "discuss how staff turnover will be managed" as a "highly important" item for the meeting agenda. 			

				Techniques rated "highly important" to ensure that the CRO meets the sponsor's expectations were joint periodic review of metrics (49%) and contract language (27%). Rewards and penalties were not rated highly (8% and 9%, respectively).

Respondents' feedback on the quality of full-service CROs is shown in Figure 1. Nearly half of the respondents (48%) reported that the overall quality of full-service CROs has stayed the same during the past two years. Improved performance was noted by 39% of the respondents, while only 13% indicated that overall CRO performance has worsened. These results suggest an improvement in the perception of CRO services, as compared with a 1998 survey by CenterWatch

 in which 40% of respondents reported that overall CRO performance had worsened.   

Figure 1. Quality of full-service CROs over the past two years (337 respondents).						

Equally good marks were reported for niche-service CROs (see Figure 2). Improved performance was noted by 47% of the respondents, and an additional 47% reported that overall quality of niche-service CROs has stayed the same during the past two years. Only 6% indicated that niche-service CRO performance had worsened.  

Figure 2. Quality of niche-service CROs over the past two years (335 respondents).			

Sponsors' efforts to control the costs of using CROs

Among respondents who could estimate the relative cost of using CROs, the prevailing view (66% of the respondents) was that CROs are more expensive than in-house resources. The category "26–50% more expensive" was most frequently cited (30% of the respondents). The vast majority of sponsors attempt to negotiate lower CRO fees, and "rate card" is the most frequently used technique (42% of the respondents). In addition to CRO fees, there is the in-house cost of managing the CRO. These costs are significant, as indicated by 61% of the respondents reporting that managing the CRO required more than 20% of the resources that would have been needed to conduct the study in-house. Despite the apparent concern of biopharmaceutical companies over CRO costs, 20% of the respondents could not estimate how CRO and in-house costs compare. Similarly, 22% of the respondents reported that they do not negotiate fees with CROs.  			

There are a number of key takeaways from our recent survey. Although sponsors still report mixed impressions about CRO service, quality, and costs, most sponsors are using CROs frequently for a wide variety of activities. Sponsors now believe their outsourcing practices are more strategic in nature, i.e., they are more deliberate, aimed at evaluating individual aspects of projects and trying to find the most cost-effective outside partners to carry out specific parts of the project.  			

Likewise, sponsors convey confidence and skill at playing the experienced general manager of a diverse, multivendor team involving both full- and niche-service providers. In order to achieve higher levels of quality and efficiency, sponsors are finding that they must proactively and flexibly manage teams comprised of internally and externally based resources. Global projects involving the utilization of local and international CROs in combination is yet another variation on the flexible outsourcing practices now utilized by sponsors.  

Sponsors report that the growth in their usage of traditional contract clinical services (e.g., monitoring, data management) is flat to slightly declining. Recognizing the opportunities to increase study conduct efficiency, sponsors are significantly increasing their use of CROs to interface with, and support, investigative sites. Sponsors are also modestly increasing their use of CROs for development planning and protocol design activities—early stage areas are typically left to in-house staff, but for which select CROs may now bring higher levels of expertise.  

Despite the time and budget constraints that usually occur at project initiation, some sponsors and CROs are conducting project kick-off meetings. Vogel

 recently noted that most outsourcing failures can be traced to differences in sponsor and CRO expectations. He described how the project kick-off meeting can be used to negotiate mutual understandings in six critical project governance areas: roles and responsibilities of sponsor and provider team members; succession planning at the sponsor and provider levels; communication and decision-making strategy; expectations and performance metrics; issue resolution process; and budget planning and management. Sponsors report that some of these governance topics are being addressed when project kick-off meetings are held. However, the evidence suggests that project kick-off meetings are not held for a majority of projects  

The evidence from this survey supports a continued role for outsourcing in clinical drug development as sponsor practices become more advanced and more efficient. Sponsors report significant improvement in the quality of services delivered by full-service and niche-service CROs. Sponsors also report that they are increasingly making strategic decisions on what activities to outsource and which type of CRO (full-service, niche-service, regional abroad) to contract with. The authors intend to follow up this survey with one directed to full-service CROs and niche-service CROs to gain their perspective on outsourcing practices and trends. 			

The authors wish to thank Toby Jane Hindin and Barbara Sefchick for their assistance in conducting this survey and analyzing the data. 			

1. J. Kreger, Investment Analyst Report, William Blair & Company, 2005. 			

2.  Wall Street Forecast and Analysis of Outsourcing Trends, 14th Annual Partnerships with CROs and Other Outsourcing Providers, April 6, 2005. 

3.  J. Vogel, "Achieving Results with Contract Research Organizations: Pharmaceutical Industry Views," 

4.  K. Getz and J. Vogel, "Achieving Results with CROs: Their Evolving Role in Clinical Development," 

5.  K. Getz and R. Whitaker, "The Booming CROs," 

6.  R. Whitaker, "The Evolving CRO Market," 

7.  J. Vogel, "Designing a Relationship Governance Plan at Project Kick-off Meetings," 

,* PhD, is a drug development consultant at John R. Vogel Associates, Inc., 328 Pualoa Nani Place, Wailea, HI 96753, (808) 875-6063, email: 

, MS, MBA, is a research fellow at the Tufts Center for the Study of Drug Development and the founder and Chairman of the recently established non-profit organization, the Center for Information and Study on Clinical Research Participation, both in Boston, MA (617) 590-4175, email: 

Following more than two decades of growing involvement in nearly all aspects of drug development, full-service and niche-services contract research organizations (CROs) have become a common and integral part of most sponsor companies' clinical research teams.

John R. Vogel

Articles

Successful Outsourcing: Tracking Global CRO Usage

Successful Outsourcing: Tracking the Evolving Use of Full-Service and Niche-Service CROs