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In-depth survey reveals trends, outlooks, and future plans of both sponsors and service providers.
Each year, The Avoca Group polls industry executives and managers to understand trends in the outsourcing of clinical research by pharmaceutical companies and other sponsors. In 2009, Avoca explored the theme of efficiency in outsourcing relationships, posing questions about whether sponsors and providers were feeling increased pressure to become more efficient in their outsourcing relationships, how much efficiency they felt they needed to gain, and how this pressure would come to impact vendor selection priorities, outsourcing strategies, the need for measurement of vendor performance and relationship quality, and other aspects of outsourcing relationships.
When asked whether, between the present (early 2009) and 2014, respondents believed that their own companies (for sponsors) or their clients (for providers) would be under pressure to achieve a greater level of efficiency in their relationships with providers of clinical research services, there was overwhelming agreement that this would be the case: 96% of provider respondents and 92% of sponsor respondents responded affirmatively. When asked to explain these pressures, the most common response was that the current economic climate was forcing many sponsor companies to do more with less—less headcount and less budget. Increased requirements from regulatory authorities, upcoming and recent patent expirations, political pressures toward the reform of health care in the United States, and price containment for pharmaceutical products worldwide were also felt to play significant roles.
Respondents were asked how much room for improvement they believed their companies (for sponsors) or their customers (the "average sponsor," for providers) had with respect to the efficiency of their outsourcing activities (efficiency here was considered in terms of the internal resources required to manage outsourced projects effectively). The majority of respondents of both categories (83% for providers, 70% for sponsors) felt there was room for at least an 11% improvement in efficiency, and close to half (40% of provider respondents, 38% of sponsor respondents) felt there was room for at least a 26% improvement. The most common response was that it would theoretically be possible for sponsors to improve their efficiency by 11% to 25%.
In terms of the changes they anticipate making over the next five years to address the need for increased efficiency, sponsors reported first and foremost the need for better means of measurement of both the performance of their clinical service providers and the quality of the outsourcing relationships (see Figure 1). Also ranking highly were the need for improved ways of sharing this information internally, an increased emphasis on concentrating activities with preferred providers, and better delineation of expectations at the inception of projects.
Providers reported the intention to make changes of a similar nature (see Figure 2). Like sponsors, they reported planning to concentrate on deeper, longer-term relationships, with an increased focus on repeat customers. Also like sponsors, they planned to focus increasingly on efficient information sharing, measurement of performance, management of relationships, and delineation of expectations.
As just discussed, "better measurement of provider performance (use of KPIs or Key Performance Indicators)" was the number one response to how sponsors planned to achieve greater outsourcing efficiency in the future.
At the time of the survey, only 55% of the sponsor respondents' companies were using KPIs to measure the performance of their providers. Of these, few (37%) felt that their companies' KPIs provided an adequate reflection of the true performance of providers, and even fewer (33%) felt that their companies' KPIs took sufficiently into account the quality of deliverables, as well as the timing and quantity. Thus, a total of only 18% of sponsor respondents (33% of the 55%) felt that their companies were using sets of KPIs that were adequate to measure both the timing/quantity and the quality of their providers' deliverables. Providers in our survey were more likely to track their own performance with KPIs than were sponsors; 73% reported the use of such measures. Moreover, a greater fraction of provider respondents (58%) felt that their companies' KPIs adequately measured their true performance. Providers felt less positively about the KPIs used by their customers to measure their performance. Of the 68% of provider respondents that were aware of customers who had used KPIs to measure their performance, only 39% felt that the sponsors' KPIs provided an adequate reflection of their true performance. Only 17% of provider respondents felt that sponsors' KPIs took sufficiently into account the quality of deliverables, as well as the timing and quantity.
The minority of sponsors that used an adequate set of KPIs appeared to enjoy both enhanced satisfaction with the performance of their providers and enhanced outsourcing efficiency. Among sponsor respondents who reported using an adequate set of KPIs, 80% were satisfied with the work done for them by clinical service providers, and only 7% were dissatisfied. In contrast, among those who used an inadequate set of KPIs, only 54% were satisfied, and 27% were dissatisfied (p < .10). Similarly, among those who reported using an adequate set of KPIs, 53% stated that their companies were within 10% of optimal efficiency in terms of the level of internal resources required to manage outsourced projects, and only 20% stated that they were at least 50% away from optimal efficiency. In contrast, among those who used an inadequate set of KPIs, only 14% felt that they were within 10% of optimal efficiency, and 54% felt that they were off by 50% or more (p=.06).
Better capture of relationship metrics (KRIs, or Key Relationship Indicators) was also one of the top three actions that sponsors reported intending to take in their quest to outsource more efficiently. At the time of the survey, only 26% of respondents reported use by their companies of a formal set of relationship metrics to evaluate their relationships with clinical service providers. Of this number, again only a minority (39%) felt that their companies' KRIs provided an accurate reflection of the actual quality of relationships with their providers. Somewhat more provider respondents (38%) reported use of KRIs by their companies, and nearly half of these (46%) felt that their companies' KRIs served their function adequately.
As was the case with KPIs, use of an adequate set of KRIs was associated with both greater satisfaction with the work done by clinical service providers and greater efficiency in the management of outsourced projects. Of respondents from companies that possessed adequate relationship measurement systems, 86% were satisfied with the work done for them by clinical service providers, and none were dissatisfied. In contrast, among those using inadequate or no relationship measurement systems, less than 70% were satisfied, and 20% were dissatisfied (p=0.2). More striking, of those using adequate relationship measurement systems, 71% felt that in terms of clinical outsourcing, their companies were operating within 10% of optimal efficiency; whereas, among those using inadequate or no relationship measurement systems, less than 15% felt that they were within 10% of optimal efficiency, and more than 40% felt that they were off by 26% or more (p < .01).
In keeping with their requirement for more efficient outsourcing, sponsors anticipated changing their priorities when it came to the evaluation of service providers (see Figures 3 and 4). When thinking about the future, a demonstrated ability to recruit an ample number of evaluable subjects remained the criterion thought by the greatest percentage of respondents (83%) to be very important. However, the performance management systems and metrics provided by CROs and other service providers were felt by an equal percentage of respondents (83%) to be very important, whereas in the recent past, only 44% of respondents felt this to be a very important criterion. Similarly, in thinking about the future, preferred provider and other loyalty advantages were thought by 78% of respondents to be very important, whereas over the last two years, only 49% felt these to be very important, and 14% felt them to be minimally important. In 2007-2008, innovative alliance models were thought by 43% of respondents to be minimally important; now and for the future, 55% of respondents felt these to be very important. Status reporting, senior management involvement, and other project management and relationship management tools have also greatly increased in importance.
When asked to describe the reasons for the changes, respondents described placing much greater importance now than in the past on the dedication and commitment shown by the provider organization to the success of the project. Anything that convincingly reflects this commitment (be it relationship management systems, senior management involvement, risk-sharing, etc.) may hold decisive importance in the selection of a clinical service provider.
In general, provider respondents correctly assessed the changing priorities of sponsors (data not shown). In the view of providers, access to ample numbers of evaluable patients will, in 2009 and beyond, still be considered very important by the greatest percentage of sponsors. Relative to reports from sponsors, providers appear to underestimate the future importance to sponsors of performance management systems, senior management involvement, preferred provider advantages, and innovative alliance models, and greatly underestimate the importance of formal relationship management programs. In contrast, providers overestimate the importance to sponsors of a broad scope of services.
It is believed by some that the incorporation of performance bonuses and/or penalties into clinical service contracts can motivate enhanced performance. In fact, more than a quarter of sponsor respondents reported (see Figure 1) the intention to incorporate such incentives into contracts as a means of enhancing their outsourcing efficiency. Nearly half of sponsor respondents felt that bonuses could enhance provider performance, but interestingly, only 31% of providers felt the same way. Slightly fewer sponsor respondents (40%) felt that the prospect of penalties could enhance provider performance, though the percentage of providers that believed in the efficacy of penalties was again 31%. Proponents of bonuses and penalties reported having had success when targeting rewards at individual CRO employees, and/or when targeting penalties at excessive staff turnover; some also stated that such structures help to keep sponsor staff on track, since CROs are less tolerant of delays on the sponsor side if their own revenue depends on adherence to the timelines. Opponents felt that bonus and penalty structures lead to compromises in quality and other "subjective" characteristics of deliverables, that they lead to arguments about who holds responsibility for missed targets, that they are ineffective given that CRO team members often aren't affected directly, and that they are superfluous given that CROs are highly motivated toward the reward of repeat business even in the absence of other contractual rewards.
There was a firm belief by the vast majority of both provider and sponsor respondents that sponsors can shorten development times and get products to market faster by forming the right relationships with CROs; 88% of provider respondents, and 86% of sponsor respondents affirmed this point of view. However, to date, only a minority (43%) of sponsor respondents reported that they had been successful in forming truly strategic relationships with clinical service providers (note that 12% reported that this was not part of their outsourcing strategy). In contrast, 73% of provider respondents stated that they had been successful in doing this.
Approximately one-third of sponsor respondents reported the intention to move toward an outsourcing model that involved more of a functional approach. Currently, 9% of sponsor respondents use a purely functional service outsourcing model, 11% use a purely full-service model, and 80% use a combination. Of those that use a combination, 20% use a functional outsourcing approach for more than 75% of their projects, and 42% use such an approach for 25% or fewer of their projects.
Use by sponsors of a primarily functional outsourcing model (at least 75% of trials outsourced functionally) was associated neither with greater satisfaction with CRO performance nor with greater efficiency in CRO management (in terms of internal resource requirements) than was use of a primarily full-service outsourcing model (at least 75% of trials outsourced using a full-service model). However, use of a combination strategy (between 26% and 74% of trials functionally outsourced) was associated with a substantially higher rate of dissatisfaction with CRO performance than was use of either model primarily (35% vs. 7% for functional outsourcing and 13% for full-service, p=.01). Use of a functional service outsourcing model appeared to lend itself more to the development and use of an adequate set of KPIs (p=.11 for comparison to use of a primarily full-service model; see Figure 5).
The results of this survey demonstrate widespread recognition of an urgent and enduring need for more efficient outsourcing practices within the pharmaceutical industry. Pressures driving this need include the current economic downturn (less available clinical development funds), reduced headcounts at sponsor organizations, and other regulatory and political developments. Feedback provided in this survey suggests that in response to the need for increased efficiency, both sponsors and clinical service providers intend to make wide-ranging changes in the way they conduct their outsourcing business.
Improved measurement of performance and relationship quality is high on the list of changes that companies expect to make in their management of providers, and the data obtained from sponsors who are currently using adequate measurement systems support the potential of investing in these tools. Nearly half of the sponsor respondents to this survey stated that their companies are currently not using such measures. Among those that are, most do not feel their measurement programs to be reliable or effective, suggesting that knowledge of best practices in measuring provider performance and relationship quality is not widespread within the industry. In general, providers appear to possess more effective measurement systems than do sponsors, perhaps explaining why sponsors consider such systems to be very important in their selection of providers.
Feedback regarding criteria for the selection of providers reflects a shift toward greater demands by sponsors overall, as well as specific desires for performance measurement and management systems, for demonstrated commitment on the part of the providers, and for reduced risk for the sponsor. The data further suggest that providers may not fully appreciate the current and future importance to sponsors of formal mechanisms for, and enhanced levels of, project and relationship oversight.
Many companies report considering changes to their overall outsourcing strategies, including increasing or decreasing the percentage of projects that will be outsourced through functional service providers, and changing the nature of contracts to include a greater sharing of risk and reward on the part of the providers. The trend toward a revisiting of outsourcing models and increased consolidation of relationships seen in this survey has also been reported in another recent survey.1 As reported by sponsor respondents, satisfaction with the work performed by service providers does not differ greatly between those who use primarily functional service outsourcing and those who use primarily full service outsourcing, but is notably worse among those who use a middle-of-the-road approach, supporting the potential benefit of a focused outsourcing strategy. On the other hand, based on their experiences, only minorities of respondents from each of sponsor and service provider companies feel that the inclusion of performance bonuses and/or penalties is an effective means of performance enhancement.
Finally, although a great majority of respondents feels that the right relationships between providers and sponsors can enhance the efficiency of clinical development activities substantially, a finding also supported by a study conducted by the Tufts Center for the Study of Drug Development,2 only a minority of sponsor respondents would consider their own companies to have been successful in forming such truly strategic relationships with clinical service providers.
1. K.A. Getz and J. Vogel, "Successful Outsourcing: Tracking Global CRO Usage," Applied Clinical Trials, June 2009.
2. K. Getz, "CRO Contribution to Drug development Substantial and Growing," The Impact Report. Tufts Center for the Study of Drug Development at Tufts University, 8 , 1-4 (2006).
Denise Calaprice-Whitty, PhD, is Executive Director, Survey Research and Relationship Management Programs, The Avoca Group, email: firstname.lastname@example.org.