By Scott Vogelsberg  

August 29, 2012 | No matter what industry conferences you attend, it is seemingly impossible to avoid earnest discussion about the rising role of outsourcing in drug development. Indeed, even as R&D budgets continue to contract, R&D outsourcing continues to skyrocket. 

Kalorama Information found in its recent “Outsourcing in Drug Discovery” report that outsourced drug discovery climbed 15 percent from 2010-11, with the result being that a third of trials are now outsourced. While this increase has led to immense growth potential for some contract manufacturing organizations (CROs), it has also exposed some key issues that could impact the sustainability of outsourcing as a viable strategy in drug development. 

The Hurdles: Innovation, Quality and Pricing  

In some quarters, there are concerns that outsourcing could threaten innovation, since the fragmentation of the development process could compromise the evaluation and reassessment that can lead to breakthroughs. With third parties handling disparate aspects of development, opportunities for changes and innovation in midstream could be lost. 

There is also a growing sentiment that pharma has a long way to go to match the standards and quality that have become the norm in other industries. Difficulties in communication and developing a complete understanding of shared expectations can result in breakdowns in quality. 

From a pricing perspective, it could be seen as troubling that R&D budgets are not expanding as outsourcing is, which could inspire a need to raise prices to keep pace with expenditures. In addition, when vendor management for multiple vendors is factored in, outsourcing costs can escalate, threatening the return on investment that draw so many to outsourcing in the first place. 

Another perspective holds that outsourcing inherently draws development and innovation away from rare-disease research, with the outsourcing dynamic being more conducive to the development of me-too compounds. As a result, some observers have called for increased government involvement in the industry, citing the need to protect national and humanitarian needs created by rare diseases.  

Established vs. Emerging Markets  

While emerging markets have become a popular route for outsourcing ventures for cost reasons, it could be that the industry is shifting back toward a preference for established markets. The Nice Insight Pharmaceutical and Biotechnology Outsourcing survey polled 40,000 pharma and biotech executives recently and found that half of the Big Pharma executives that outsource indicated a preference for established markets in the US, Western Europe and Japan. 

Reasons cited for this preference include difficulties with communication, compliance, political instability and cultural differences. In combination, these factors could threaten efficiency and offset the advantages that are provided by affordable labor pools. 

When studies are outsourced to developing regions, it can become difficult to ensure the safety and efficacy of these trials due to poor infrastructure. That’s why some have called for enhanced monitoring and regulation of outsourcing in emerging markets—a development that diminishes return on investment in the short term while making outsourced operations in these areas more stable and consistent in the future. 

Full-Service vs. Clinical FSP Model  

The decision facing many sponsors is whether to choose a full-service CRO or to select a functional service provision (FSP) model. Both approaches have well-defined strengths and weaknesses, so the personality and structure of the sponsor often dictates which route is chosen. 

In general, small sponsors tend to gravitate toward full-service CROs, since these smaller organizations do not possess the in-house resources to handle most—or all—of the services required in the development process. Mid-tier companies tend to be more comfortable with the clinical FSP model, which allows them to pick and choose best-in-class vendors for specific services. 

Many companies prefer the one-stop-shop, horizontal aspect of full-service, preferring to eliminate any vendor management obstacles by ceding control to the full-service CRO. Other organizations recognize the benefits offered by vertical, niche CROs, including reduced overhead, flexibility and the potential for reduced time to study startup. 

There are merits to either strategy, so it often comes down to the preference and past experiences of the sponsor, as well as how open that sponsor is to considering both approaches. 

Matching Sponsor-CRO Strengths and Goals  

Organizations also must ask themselves what they are seeking in an outsourcing relationship. In a Booz & Company survey of 32 biopharma executives, 61 percent were in pursuit of long-term relationships rather than fee-for-service project. Is an outsourcing partner a good fit for progressing a study through all phases? Or is the arrangement more suited to a one-off agreement? 

As well, companies must take into account the therapeutic area. Due to the complexity of oncology studies, the right CRO can be a boon in the vital-yet-tricky areas of patient recruitment and site selection. In such circumstances, the selection of a full-service CRO or the adoption of a clinical FSP model could make all the difference in the successful—or not—navigation of therapy-specific obstacles. 

In these situations, consideration of potential CROs might include a thorough examination of background in specific phases and experience in particular therapeutic areas. Such due diligence could yield invaluable insights into whether a sponsor’s goals align with those of the CROs that are being considered. 

Maximize the Benefits of Outsourcing 

Faced with the looming patent cliff, supply-chain issues and dwindling pipelines, Big Pharma has been forced to take a closer look at outsourcing as a way to bolster development and manufacturing strategies. Electing for a leaner approach makes sense for a variety of reasons, but it does not eliminate the need to address the concerns above, ranging from innovation to emerging markets. 

So the next time you find yourself at an industry trade show, engaged in a conversation about outsourcing over coffee, skip the surface-level clichés and jump into the debates over quality vs. pricing, full-service vs. FSP models and me-too vs. rare-disease research. After all, only by asking the hard questions about the difficult topics will the conversation turn from why everyone should outsource to how everyone can get the most out of outsourcing. 

Scott Vogelsberg is communications manager at Datatrial, an oncology-focused boutique data management company, and managing editor of the DataBridge blog. The views expressed are his own. Scott can be reached at scott.vogelsberg@datatrial.com or on Twitter (@Datatrial).