Study reveals how sponsors rate their own outsourcing abilities compared to other companies.
The use of CROs, an expanding multibillion dollar business, is expected to continue its growth in the coming years.1 And since overall R&D costs and productivity represent one of the most pressing issues industry leaders face today,2 outsourcing will almost certainly continue to play a major role in drug development.
(PHOTOGRAPHY: STEPHEN E. MUNZ ILLUSTRATION: PAUL A. BELCI)
The University of the Sciences in Philadelphia (USP) and TTC, llc are conducting a multiyear research program on the factors associated with improving the speed and cost effectiveness of clinical studies, including the role of outsourcing.
Our research study includes a Web-based survey of sponsor pharmaceutical companies and CROs in a range of areas, from how CROs are used to the process of selecting and managing a CRO. Other papers in this project have addressed a number of these CRO-related topics.1,3
In this study, participants identified two related, yet distinct, outsourcing management areas: selecting a CRO and managing a CRO.
We found that a company that considers itself as performing well in managing a CRO tends to believe that it is good in the previous step of selecting a CRO. Similarly, companies skilled at CRO selection also consider themselves to be especially competent in the management processes that lead up to selecting a CRO, such as using a common bid grid. However, the reverse does not hold true. Respondents in companies that consider themselves effective in selecting CROs do not necessarily assert that they are adept at the subsequent step of managing a CRO.
Managing outsourcing involves many areas and processes. This study examined four key outsourcing-related activities: annual budgeting, the use of bid-grids, CRO selection, and the management of outsourced projects.
The annual budget sets the operational parameters for almost every organization. Tracking and understanding operational variances from budgeted numbers is a demanding task, both for those who collect the numbers and for those who make decisions based upon those numbers.
Yet few sponsor company participants in this study thought their ability to budget annually for outsourced studies was more effective than their counterparts' in other companies. But even fewer considered their company less effective than competitors in the budgeting process (see Figure 1).
As one senior outsourcing manager put it: "Budgeting is something we need to get right, but often do not. Many times, though, it is really because the scope of the project changed, and no company will ever be able to anticipate all the changes. We could still do a better job of budgeting...particularly because no one likes having to go back for more money."
There is a large variation in the way study participants evaluated their company's ability to select CROs, a greater variation than we found in their responses to the use of budget and bid grids. Although most participants felt that their company was similar to others in its ability to select a CRO, a third of those surveyed thought their company was better than other companies in selecting a CRO. At the other end of the spectrum, fewer than one in 10 considered their company to be ineffective in selecting a CRO.
Apparently, the ability to effectively select a CRO is not concentrated in any particular pharma company, whether large or small, or limited to a particular geographic area.
In addition, companies who consider CRO selection a competitive strength do not outsource an appreciably greater percentage of clinical development work. Moreover, these companies use CROs in much the same way: as preferred providers, full service providers, functional providers, single area outsourcing, or insourcing (see Table 1).
Areas of Outsourcing
Both sponsor company and CRO participants evaluated the importance of the set criteria many pharma companies use in selecting a CRO. Generally, while all participants strongly agreed on the selection criteria, some thought particular criteria were more important, while a smaller number of respondents cited very specific criteria as being most important.
CRO selection criteria deemed most important were: the team's general sense they can work with the CRO, and a project management team devoted to the study. The criteria judged least important included: CRO invoicing/billing processes, and being one of the largest 20 CROs.
Overall, companies that consider themselves better at selecting CROs generally use the same selection criteria as companies who do not consider themselves as adept at it. Still, depending on the type of company surveyed, there were important differences for a few of the selection criteria.
For example, larger sponsor companies emphasize a CRO's size and geographic capabilities more than smaller companies. American pharmaceuticals value the mechanics of issue identification and resolution more than their European counterparts. Examples of these mechanics include a CRO's willingness to accept penalty clauses for poor performance, and an established process within a CRO to bring project problems to the attention of senior CRO managers.
American participants were also likely to stress the detailed operational components of the CRO's approach. A case in point is the project execution plan the CRO presents in the bidding process, including items such as resources, country, and site selection.
Respondents located in Europe, or from smaller companies, felt they were somewhat or clearly better than other companies in managing CROs. More Europeans than Americans (52% vs 31%) believed their company was better than others in managing CROs. Smaller pharmaceutical company respondents were more likely than survey participants from the largest 20 companies (54% vs 40%) to think they were better than others in managing CROs (see Figure 2).
The European sense of being better at managing CROs may come from how they view CROs in total, and how their views differ from the American perception of CROs.
For example, European participants are less severe in the evaluation of CROs on a series of operating dimensions (see sidebar). They were more likely to give CROs the benefit of the doubt in a range of areas such as communication problems, motives, and commitment to quality work.
Operating Dimensions used to Evaluate CROs
Americans and participants from larger companies were more likely to question CROs than were Europeans and respondents from smaller sponsor companies. Americans, especially in larger companies, often thought that the CRO would be more focused on getting the next project than performing well on the current project.
Americans were also less likely to concede that the sponsor may often be the source of the communication problems on an outsourced project. And Americans were more prone to think it is more expensive to do work with a CRO than to perform the same work internally.
Pharma company participants in this study report that, on average, their companies spend 27% of total CRO expenses on overseeing CRO projects. And there is no statistically significant difference between the better and poorer managers of outsourced work in the amount they spend on oversight.
Nor are the companies who consider themselves better at managing CROs more likely to use fixed price contracts; they used fixed priced arrangements for 39% of their CRO contracts compared to 38% for the other companies.
Similarly, there are no significant differences in the average amount of final budget variance due to scope changes (14% and 16%), or variance due to factors outside of changes in scope (12% and 11%).
Companies that consider themselves better at selecting CROs also view themselves as better at major activities immediately prior to the final selection of a CRO.
These companies are better at annual outsourced budgeting and use a better bid grid. They also use CROs with some slight variations: They make greater use of insourcing and draw less on full service providers.
Study participants from clinical operations and contract management/finance rated their companies slightly higher on selecting CROs than did individuals from other corporate areas. This is likely due to the fact that they are more directly involved in areas related to selecting a CRO, such as using bid grids and annual outsourcing budgeting. However, in the final model a respondent's functional area was not significant.
Survey & Statistics Methodology
Respondents who consider their companies to be better at managing CROs are more likely to come from smaller pharmaceutical companies, be located in Europe, and perceive themselves as better at selecting CROs. Additionally, they see their use of preferred providers declining over time.
Both groups—those who do and do not think they are better at managing CROs—share similar attitudes about how CROs operate and how the sponsor company should interact with the CRO. These shared attitudes include:
However, the self-identified "better managers" of CROs tend to take a broader view of communication problems in outsourced projects. These better performers are more willing to acknowledge that communication problems are likely to originate with the sponsor company. Companies that are better at managing CROs also think they are better at selecting a CRO. But they do not necessarily think they are better at budgeting or using better-quality bid grids.
Project managers and individuals in clinical operations are more positive in their views of how their companies manage CROs. But, once again, functional area did not appear as a statistically significant variable.
Clearly, individuals may think their company is particularly good at the steps involved in outsourcing, but generally respondents—regardless of their functional area—identified two key decision loci: CRO selection and CRO management.
Every company must critically evaluate itself on the individual dimensions it considers critical in managing outsourcing and develop steps to bring its actual practice into line with expectations. This process can include tools and information to better manage budgeting, the RFP process, and bid grids, and to better select and manage CROs.
The survey demonstrates that two distinct management areas exist: CRO selection and CRO management. This is not especially surprising. What is noteworthy is that companies that consider themselves good at managing CROs often think they are good at selecting CROs, although the reverse does not hold true. And for companies good at managing CROs, the link back to budgeting may not necessarily be strong. Good budgeting is associated with good CRO selection but not always with good CRO management.
The study concludes that most individuals in pharmaceutical companies do not generally think their companies are better than others in three key outsourcing components: budgeting, selecting, and managing CROs. But depending on the specific functional area, people in some companies do think they are superior.
Harold E. Glass,* PhD, is professor of Health Policy at the University of the Sciences in Philadelphia and is managing director at TTC, llc, email: email@example.com. Daniel P. Beaudry, MBA, is associate director of business development at TTC, llc, 4548 Market Street Suite M-20, Philadelphia, PA 19139.
*To whom all correspondence should be addressed.
1. H. Glass and D. Beaudry, "The Key Factors in CRO Selection," Applied Clinical Trials. April 2008, 52-60.
2. H. Glass and L. Poli, "Connecting the Dots," Pharmaceutical Executive, January 2007, 56-58.
3. H. Glass, "Outlook for Outsourcing," Good Clinical Practice Journal, 21-24, (November 2007).