What to Examine in the Strategic Partnership

April 1, 2010

Applied Clinical Trials Supplements

Supplements-04-01-2010, Volume 0, Issue 0

Communication, metrics, and technology integration are just some areas to address.

The biopharmaceutical industry has been relatively slow to embrace the advantages of long-term strategic partnerships that have benefited many other industries. Until recently, the majority of relationships between biopharmaceutical companies and CROs or other service providers were based on more traditional, project-by-project outsourcing models. For the most part, however, these transaction-based approaches have reached the limit of their capacity to reduce costs and increase operational efficiency.

Facing intense competitive and financial pressures to accelerate product development while continuing to cut costs, many biopharmaceutical companies are moving beyond such narrowly focused relationships and exploring new types of strategic partnerships designed to deliver a much higher level of benefits throughout the product development lifecycle. This next partnership stage typically involves longer-term relationships with a small number of service partners that focus on the areas of product development where the most valuable improvements can be achieved: project oversight cost reductions and time savings.

Leveraging partnerships that are more strategic allows biopharmaceutical companies to greatly increase efficiency by focusing their internal resources on the highest priorities—such as discovery research and product marketing—while relying on their partners for a broad array of specialized knowledge and infrastructure, such as in-depth therapeutic-area expertise, clinical trial experience, global patient and investigator resources, and regulatory knowledge. By understanding and embracing this new paradigm of strategic partnerships, biopharmaceutical companies can maximize their investments, accelerate product development, and gain a competitive edge at a time when even a small advantage can deliver significant marketplace dividends.

Teaming up

Under the functional service partnership model, a biopharmaceutical company contracts with a service provider to deliver specific functions, such as data management, biostatistics, study monitoring, or regulatory affairs. Functional service partnerships go beyond the typical outsourcing relationship, with the partners usually establishing closer ties to improve efficiency and communications. This approach has a proven track record of reducing costs—especially if the services can be provided in lower-cost regions of the world. However, there are oversight and management costs associated with tying together the various functional components into an efficient process that are often not well captured or understood by sponsors or CROs.

The preferred partner model is currently the most popular partnership approach, under which a biopharmaceutical company preselects a limited number of partners to utilize for its outsourcing projects. Preferred partner arrangements often include lower pre-established rates among the qualified providers, so the cost reductions are built in and the proposal and contract management process is faster and simpler.

While these two types of partnerships are important aspects of the evolving CRO/sponsor relationship, the more traditional variants of these partnerships do not fully address the two areas of greatest value for sponsors: reduced oversight and time savings. Both of these models can require significant management oversight by the biopharmaceutical company to monitor contract and quality performance. More important, the more traditional incarnations of these models do not involve the level of investment that would optimize the relationship for improving speed and innovation at the strategic level of product development—the area where the vast majority of partnership cost savings are available.

Strategic partnerships

Achieving those savings requires a new partnership paradigm that requires deeper and more complex relationships between a biopharmaceutical company and a small number of partners, usually no more than two or three. Under such a strategic development partnership, a CRO would typically provide a broad array of services encompassing multiple therapeutic areas, business functions, geographies, and compounds over a period of years. While these relationships offer savings from lower contracted rates and a streamlined contracting process, the benefits of a strategic development partnership go much further.

The strategic development partnership model reduces internal sponsor oversight requirements because oversight is built into the contract through agreed-upon quality specifications, project metrics, and close communication between the partners. In addition, there is usually a substantial up-front investment in mutual processes, defined inputs and outputs, and technology support that reduces oversight from the sponsor. These partnerships also increase efficiency through consolidation of activities, because a strong, long-term commitment between the partners allows efficiencies to increase and accrue over time. The most significant savings from a strategic development relationship result from reductions in development times driven by investments in processes, data assets, integration between the various functional areas, and templates that enable much of the "churn" in a typical relationship to be eliminated. Creation of case report form (CRF) libraries, study start-up regulatory document templates, data transfer specifications, and investigator contracts with deep back-up language are examples of investments that can dramatically reduce the time required to execute clinical studies.

Strategic partnerships also enable sponsors and CROs to go well beyond the typical arm's length relationship for a study, so they can begin to share data and experiences that support the creation of sophisticated operational plans based on the combined expertise of the two organizations.

Even modest time savings during product development can significantly reduce a sponsor's development costs. For a critical path study, it is conservatively estimated that each one-day reduction in study time saves a sponsor more than $1 million. Over the course of multiple studies, a major biopharmaceutical company could cut development costs by tens of millions of dollars annually—at a time when such savings are absolutely vital for continued success in the highly competitive pharmaceutical marketplace.

While strategic development partnerships are usually associated with major biopharmaceutical companies, similarly beneficial relationships are possible between smaller, research-based biopharm companies and CROs. In this scenario, the relationship might cover a wide range of services, but focus on the development of just one or two compounds. A strategic partnership can be particularly valuable for small companies that lack the internal clinical or regulatory resources to move their products from the lab to the market. The partnership provides the expertise to compete with larger companies, or to provide the solid clinical data that is needed to sell or license a product to a larger company.

Achieving the benefits

While the savings from strategic development partnerships can be substantial, they are not automatic. The benefits of such a partnership can only be achieved if the partners can forge a mutually advantageous relationship that drives the savings. There are several proven success factors that should be incorporated into the relationship to help maximize the benefits for both parties:

  • Governance. A robust governance structure supports efficient decision-making, planning, and reporting. It also builds trust and reinforces the desired pathways to ensure that the partnership's goals are achieved as planned. Using three tiers of governance—executive level, operational level, and team level—provides a clear path for the escalation and resolution of issues, and helps ensure that the visibility of key issues is not obscured by day-to-day concerns.

  • Communication. Open communication and information transparency are essential to build and maintain trust in a strategic partnership. This begins with a well-defined scope of the partnership, with actions tied to specific benefits. A clear scope of work accelerates the achievement of partnership benefits and reduces the cost of managing the relationship. Identifying key points of sponsor/CRO contact throughout the relationship is another critical but often overlooked activity to build a successful partnership. Strong communication links are supported by a regular and sustained flow of information between peers at every level: within the project; between similar job functions at the sponsor and CRO; between therapeutic area experts; and between teams on a country-to-country basis. Dedicated relationship staff at the sponsor and the CRO helps both parties maintain their focus on the success of the partnership.

  • Metrics. A precise set of meaningful metrics is the best way to drive performance and produce the desired benefits of a partnership. These metrics should include shared measurements that are similar or identical at the sponsor and the CRO, including:

  • Operational metrics, such as timeliness, productivity, and quality measurements

  • Innovation metrics, such as process improvements and technology integration

  • Partnership metrics, such as new business gained and profitability across the portfolio

  • Metrics should also focus on targeted outcomes. Successful partnerships are based on achieving specific business results for each party over time. Partners should be constantly mindful of the overall goal of the relationship by focusing on strategic outcomes and the long-term value of the partnership, and not just on immediate tactical benefits.

  • Technology and infrastructure integration. Efficient data exchange is critical for a strategic development partnership. At its most basic level, integration begins with the sharing of metrics data and the reprogramming of firewalls and other technologies to remove data exchange barriers. Over time, strategic partners would be expected to establish links between key data systems, as well as purchase technologies that work in harmony. Eventually, a convergence of technologies might be expected, with both partners using the same systems, which would be closely linked to facilitate data sharing and joint decision making (based on access to the same information at the same time).

  • Process management. Effective partnerships implement standardized "best practices" and procedures that uniformly guide every activity and connect the partners at critical junctures to maximize the efficiency of the relationship. Harmonized processes allow the sponsor and the CRO to better understand the "rules of the road" and eliminate the need to reinvent standards for every project. At the same time, each party must remain flexible and allow the partnership to develop and evolve to accommodate unanticipated changes in the partnership and the marketplace.

Shared accountability is also a vital characteristic of successful strategic partnerships.

The benefits and risks of the partnership must be clearly understood at the beginning of the relationship, with the partners developing a comprehensive benefits proposition that covers costs, revenue, risks, and timing. Each party must be committed to sharing accountability for both the risks and rewards of the partnership.

Meeting the challenge

Given the unrelenting economic pressures on the industry, biopharmaceutical companies will continue to leverage strategic partnerships to reduce costs and speed up development. The importance of transaction-based outsourcing will continue to decrease, and relationships such as preferred provider partnerships will likely evolve into stronger strategic development partnerships in the years ahead as biopharmaceutical companies strive to gain a competitive advantage in a difficult marketplace. In addition, mixed partnership models that incorporate aspects of functional service provisioning, strategic development partnerships, and one-time transactional outsourcing for specialized needs are likely to evolve to achieve the best aspects of various types of partnering models.

To accommodate the evolving partnership requirements of sponsors, CROs must continue to expand and upgrade their service offerings. Greater size and global scope will be essential, as will depth of therapeutic expertise and technology resources. New development innovations will also be needed to accelerate time to market. Equally important, CROs must bolster their ability to be more self-directed so they can help their partners reduce oversight costs and build trust.

Although the future of the biopharmaceutical industry will remain challenging, the new paradigm of strategic partnerships offers viable, proven pathways to overcome the obstacles and achieve success despite the challenges.

Joshua Schultz is Corporate Vice President, Clinical Research Services, for Parexel International, 200 West Street, Waltham, MA 02451-1163, email: [email protected].

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