Considerations for Outsourcing

April 2, 2008

Applied Clinical Trials Supplements

Supplements-04-02-2008, Volume 0, Issue 0

The decision to outsource must also consider not so obvious issues that are as critical as cost.

Much of the common advicerelated to outsourcing of clinicalresearch focuses on theobvious issues-the relativecost of performing researchinternally versus turning all orpart of it over to a CRO, the impact of internal timeand resource constraints on time to market, theexperience of the CRO versus the CRO-hiringorganization within the target country, and thestrategic importance of the research. And whileobvious, these are in fact important issues that arecentral to the in-house versus outsource decision.

ILLUSTRATION: PAUL A. BELCI

But there are others that are not so obvious, yetno less critical. An objective evaluation of thecosts and risks associated with using a CROshould include consideration of questions like:

  • How well does the CRO represent your longterminterests?
  • Will using a CRO stunt your ability to doresearch in a given location?
  • Are you using CROs as strategic partners?

These longer-term, more strategic questionsare worth asking the next time you consider outsourcinga project (see Table 1).

Long-term interests?

The long-term need to preserve relationshipswith research sites and short-term needs for highqualityresearch today sometimes conflict withone another. Obviously, we need to ensure compliance with trial protocols, proper reporting ofdata, and so on, but how we accomplish thisdepends on a number of factors. One of those isthe extent to which we need to maintain goodrelations with a particular site.

CROs might sincerely desire to represent yourlong-term interests, but they are at a disadvantagein calibrating their response to research siteswhen problems arise for at least two reasons.First, they lack information about the strategicimportance of a particular researcher or researchsite from your perspective. They may know howeasy a researcher is to work with to get theresearch done, but other value the researchermight provide to you-as an opinion leader or collaboratoron future R&D, for example-are notnecessarily within their line of sight.

The second disadvantage CROs face is animplicit bias in the consequences they face. Theydon’t capture the long-term value that could bepreserved by taking a diplomatic approach withresearchers, but they may well lose your businessor lose money (depending on the structure of thecontract) if data must be thrown out or they fail todeliver the research on time.

In these circumstances, it’s easy to see whyCROs may take an authoritarian approach to dealingwith researchers. Their overriding need is toensure that the research is conducted accordingto the protocol they are contracted to execute. Astraightforward confrontation with the researchers is more likely to be in their interests than in yours, andif there is ambiguity regarding your desires, they will err onthe side of caution.

So how do you ensure that researchers are treated in away that aligns with your interests? You can, of course, keepthe work in-house, which ensures the greatest level of controlover relations with researchers. This puts maximumstrain on internal resources, but it may be the best option ifothers aren’t available.

Another potential option is to contractually specify thatthe CRO immediately report any problems with complianceto you, and that your people will resolve the situation. Thisrequires a resource commitment on your part, which may,depending on the complexity of the research and the size ofthe study, be significant, but will certainly be less than thatof performing all the work in-house. It requires a fair degreeof trust toward the CRO-they will have frequent interactionswith the researchers, and you want all of them toreflect well on your organization-but the CRO may earnthat level of trust over time.

If that trust exists, however, there may be an even morecost-effective option-choose a CRO that has shown sensitivityto these issues in the past and is willing to work with youin determining the proper approach to resolving lack-of-complianceissues. On the right project, and given a CRO with anestablished track record, this is an option worth pursuing.

Research capacity

CROs are commonly used toconduct research in countries inwhich the CRO hiring organizationhas little or no nativeexpertise. This allows the organizationto sidestep the needto develop the local regulatory,linguistic, and cultural expertiseneeded to perform the trialsitself. Many times this makes agreat deal of sense-time tomarket and the potential for catastrophicgaffes are both reducedgreatly.

But overreliance on the CROcan have an unwanted sideeffect: When you need to conductcritical research, the kindof research you would neverthink of outsourcing in its entiretyback home, you may haveno choice but to outsource andhope. This happens becauseyou never developed those internalcapacities that would allow you to do the work yourself. You never needed to. Allthe requisite competencies resided at the CRO.

And then the day comes when the requirements are morestringent-maybe there is a need for absolute confidentiality,or maybe you’re testing a new surgical device and needto ensure that it is used properly every time or patients willdie. Now you need to have people in whom you can place all your faith-your people-actively supervising the trial. Butyou don’t have anyone who can speak the language or writethe protocol to local standards or do any of the other thingsthat are required to carry out a trial in that location.

Avoiding this trap is deceptively simple. It’s clear that youneed to develop the internal competencies to conduct overseasresearch in all strategically important markets, but until you do,the short-run incentives will always push you toward outsourcing.It’s a diabolical trap, but there are at least three ways out.

First, you can acquire the needed resources in the targetcountry. Every country that is likely to be a strategicallyimportant market has a domestic medical products industry,and a well-chosen, well-managed acquisition can be the quickest way to bring the needed competencies into thecompany. The drawback to this approach is that you’ve effectivelyheaded down the path toward duplicating yourresources in every strategically important market. If youexpect these resources to be busy all the time, that’s great:congratulations on your perpetually full pipeline. If not, it’sunreasonably expensive.

The second option is to hire people who can work acrosscultures and locations, likely people from the market country,thus embedding cultural awareness and the ability toquickly adapt to the more specific requirements of the marketwithin the organization. This approach can work whenthe right people are available, but evaluation in hiring posesa difficult problem-you’re hiring people to get certain capabilitiesbecause you don’t have those capabilities within theorganization, so who is qualified to determine whether yourprospective employee has them?

You could hire only those who are demonstrably highlycapable, but while a lead researcher may be relatively easyto find, most of the positions you need to fill (CRA, for example)don’t lend themselves to publicly demonstrated competence. To get around this, you might "seed" your organizationwith competence-find one or two people who areclearly and demonstrably capable researchers in the targetcountry, and have those people evaluate and select the restof the team.

The shortfall of this approach is, again, that it tends to produceredundant teams in each strategic market, unless youare willing to hire people from the target market who canperform equally well in the home market-and are willing tolet some of your current people go because they lack theability to work across borders. This can be a difficult thing todo for reasons of morale and community relations. It alsomeans replacing people you know are competent with peopleyou only believe (that is, "hope") will be competent.That’s never an easy thing to do.

The final approach, then, is to train your own people towork across borders. Here, outsourcing of nonstrategic projectscan actually be a great boon. By negotiating the contractso that your own people are heavily involved in the project andwork closely with the CRO, your organization can rapidly pickup the nuances of the target culture, its clinical practices, andits regulatory quirks-and in a relatively safe setting. Lesssubtle aspects (such as language) can be learned directly.

This approach also has drawbacks. It takes more timethan other approaches, and there is no guarantee that yourpeople will be able to make the adaptation. It does, however,allow you to build a research capability that stretches acrossborders without creating massive redundancy and avoidsthe problem of replacing competent researchers with peoplewhose capabilities are more or less unknown.

Table 1. Longer-term strategic questions when outsourcing is a consideration. Source: Numerof & Associates, Inc.

Strategic partners or compensation?

Presumably, we would all say that CROs should (in theory)be used to leverage internal resources, allowing us to pushmore valuable products through the development pipelinemore quickly and not to make up for an inability to manageinternal resources. But we have noted a consistent pattern oftheir being used for the latter reason at least as much as forthe former. You can easily make a preliminary diagnosis ofthis problem because one of the most obvious signs that youare using CROs inappropriately is that you consistently usethem on an unplanned, emergency basis.

The "emergency" varies from case to case. Sometimes,there are late-stage changes to the design of a study, causingdelay or extra demand on resources and resulting inconflicts between two or more projects. Sometimesresource demands for a given trial are incorrectly forecasted.Sometimes a trial drags out. In every case, the commonsolution is the same: Outsource the next trial. Theresult is that the wrong projects get outsourced. Trials thatshould be performed in house because of their strategicimportance aren’t. Meanwhile, projects that could havebeen contracted out-allowing internal resources to bedevoted to more high-value, strategically critical projectsare performed internally-are too often not.

And, of course, sometimes this is unavoidable. Some latestagedesign changes must be made before moving forward,and sometimes forecasts are wrong despite the best data andmethodologies for producing forecasts from them. In caseslike these, outsourcing may be the best option in a universeof suboptimal ones.

But we are very skeptical that this accounts for most, or evena sizeable proportion of emergency outsourcing. Most companiescould prevent the majority of their resource conflicts, andthe consequent inappropriate use of CROs, by rationalizing theprocess of project prioritization, accurately predicting resourcedemands, and strategically prioritizing studies.

The considerations that go into using a CRO are not as simpleas costs, resources, strategic importance of the study. Theadditional considerations examined here are also important,and your decision-making process should incorporate them.

Rita E. Numerof

,* PhD, is president of Numerof & Associates,Inc., Four CityPlace Drive, Suite 430, St. Louis, MO 63141-7062, email:

info@nai-consulting.com

Mark Morgan, MS, is asenior business analyst at Numerof & Associates, Inc.

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