Amgen's FSP Model & RBM: Doing it Right?

April 16, 2014
Moe Alsumidaie
Applied Clinical Trials

While at the 2014 Partnerships in Clinical Trials Conference, Adrian Otte, VP of Global Development Operations at Amgen, spoke about how Amgen's Risk-Based Monitoring and FSP models impacted business outcomes.

While at the 2014 Partnerships in Clinical Trials Conference, Adrian Otte, VP of Global Development Operations at Amgen, spoke about how Amgen’s Risk-Based Monitoring (RBM) and FSP models impacted business outcomes.  Many biopharmaceutical enterprises are trying to determine the best business infrastructures to implement Risk-Based Monitoring (RBM) in order to focus on enhancing operational efficiency, and improve quality outcomes.  Amgen has been implementing the Functional Service Provider (FSP) model for quite some time, and sources suggest that Amgen has been able to save costs through this business model.  This article will go over Amgen’s FSP model, financially evaluate Amgen’s operational efficiency, and discuss how this model may affect the CRO industry.

Is The FSP Model RBM-Ready?

One of the most efficient and successful ways in executing RBM involves internalizing centralized monitoring activities, and outsourcing on-site monitoring (see this article for details).  Amgen’s FSP model utilizes the ‘Hub and Spoke’ structure by establishing internal Amgen ‘hubs’ to oversee clinical trial activities, and ‘spokes,’ typically outsourced to a CRO, to execute groundwork activities, such as on-site monitoring [1]. 

Amgen’s FSP model closely resembles successful RBM business infrastructures, as Amgen is employing centralized medical data and trend reviewers to uncover signals and triggers for on-site monitoring visits on lower risk categories.  However, it is apparent that Amgen is following patchwork that other biopharmaceutical enterprises have implemented by employing numerous personnel (rather than one) to execute centralized monitoring, a rare skill set that is highly desired in this industry.

Is Amgen Actualizing Financial Efficiency in RBM?

Amgen is implementing this model on 13 studies, with 3,505 study sites, and over 22,000 subjects, according to Adrian Otte.  We evaluated Amgen’s activities financially to uncover whether Amgen’s models are impacting operational efficiency.  Figures 1, 2 & 3 delineate Amgen’s ROA & ROI and cash flow per share ratios on an annual basis [2].

Figure 1 illustrates that Amgen’s ROA figures have declined overtime, which suggests that the enterprise is utilizing its assets less effectively to generate a profit.  Moreover, Figure 2 demonstrates that Amgen’s Operating ROI figures have diminished.  However, Figure 3 delineates that Amgen’s cash flow per share has increased, which indicates that Amgen can use more cash towards R&D investments.

So, why do Figures 1 & 2 contradict the notion that Amgen is improving operational productivity through its FSP RBM model? Several possibilities include the fact that Amgen’s bountiful R&D pipeline of products are moving into later phase trials [3] (increasing R&D costs), recent acquisitions, and Amgen hasn’t yet rolled out RBM on all of its trials.  However, the most important facet involves the fact that monitoring represents a fraction of overall R&D costs.  How much capital per year can Amgen save on RBM?  If Amgen is able to reduce monitoring costs by 25%, Amgen can save less than $90 million/year, which represents a 2% reduction in total R&D costs [4, 5]*.

So what is a good measure for RBM outcomes?  While cost savings is important, the impact that RBM has on data quality is a more important outcomes measure.

How Will the FSP Model Impact the CRO Industry?

If Amgen is able to realize cost savings and data quality improvements in its FSP model, it is likely and eventual that other large biopharmaceutical enterprises will follow suit in mimicking Amgen’s RBM infrastructures.  What will this mean for CROs?  Potential threats include the risk that large biopharmaceutical enterprises will in-source an array of supplemental services (such as medical review, biostatistical analysis, protocol development), and continue to outsource on-site monitoring and project management, but, at reduced capacities (since on-site monitoring visits are expected to be reduced).  For CROs, this can impact revenue.  Nonetheless, CROs are starting to create additional revenue sources from implementing IT solutions that support RBM.

Is Amgen Doing it Right?

It appears that Amgen has positioned its business infrastructures for successful RBM, however, financial data indicates that RBM has a minimal impact on overall R&D cost savings.  Scalability and the learning curve will demonstrate overall efficiency outcomes in the long run.  Additionally, improvements in subject enrollment activities, and efficient protocol design will result in noticeable clinical trial and operational cost savings.

* Assumes that clinical trials represent 40% of total R&D costs [4], and monitoring represents 22.1% of clinical trial budgets [5].