Op Ex & Lean Six Sigma

Maximizing the Value of CRO Relationships

Open collaboration, commitment and mutually agreed upon goals will accelerate the value of CRO alliances

By Joshua Schultz, Corporate Vice President, Parexel International

Strategic partnerships with clinical research organizations (CROs) can deliver multiple benefits for biopharmaceutical companies of all sizes by reducing direct and indirect costs, improving efficiencies and accelerating speed to market. However, such relationships require open collaboration; mutual investments in time, process improvements and technologies; robust, multi-level governance; and a commitment to long-term success to achieve their maximum potential.

Cost Savings and Strategic Partnerships
Until recently, biopharmaceutical companies engaged CROs in project-by-project, transactional relationships to lower costs, utilize internal resources more efficiently and decrease risk. These relationships were similar to outsourcing relationships that have been used for decades in other industries. Although transactional models can reduce fixed costs and improve operational efficiencies to a degree, they typically cannot deliver the high levels of operational efficiencies needed to meet the challenges of today’s changing biopharmaceutical research and development (R&D) landscape.

In recent years, sponsor relationships with CROs have evolved into more committed and complex multi-year strategic partnerships designed for multiple studies. These partnerships leverage the CRO’s resources and experience and deliver broad-based solutions across the clinical development continuum. In these partnerships, CROs generate direct cost reductions by establishing rates that incorporate expected partnership efficiencies or volume discounts that enable shared savings driven by the long-term nature of the relationship and a larger amount of work.

Streamlined contract structures and pre-negotiated rates dramatically reduce study delays associated with completing contracting activities, request for proposal (RFP) completion times and competitive bidding. Additional cost-savings result from dedicated staffing, training efficiencies, better utilization of resources, up-front study design and innovations.

Quantifying Indirect Costs Savings
Direct cost savings represent only a fraction of total savings possible from a well-constructed, long-term strategic partnership. Most savings can be derived from reducing the level of sponsor project oversight, improving cycle times, building trust and accountability and having easier data access.

Compared to traditional transactional models, oversight cost reduction can be dramatic. Partnership-level agreements that define key project management criteria — such as agreed-upon quality standards, project metrics, governance, shared incentives and improved communications — can dramatically reduce the need for extensive hands-on management, while still assuring a high level of information exchange about each project’s progress. Duplication of effort can also be reduced because the CRO can take over many of the day-to-day project tasks, allowing sponsor employees to focus on other priorities. As a result, strategic partnerships can increase the average sponsor-to-CRO oversight ratio from 1:3 to 1:8 and even 1:15 — equivalent to saving up to 20% of a CRO’s professional fees for a typical project.

Accelarating Cycle Times
One of the greatest areas of potential savings in a strategic relationship results from reducing development timelines driven by operational improvement and the streamlining of the processes necessary to develop the study protocol. Compared to transactional outsourcing in which the CRO relationship typically starts later in the development process, in a strategic partnership the CRO’s experience and expertise can be accessed before the protocol is approved. Early CRO involvement can also help with designing trials that focus on results that support regulatory approval, reimbursement and market access.

The CRO can help develop more efficient protocols or operational plans that can significantly reduce a study’s overall time and cost. In addition, CRO partners can increase speed by investing in operational improvements such as clinical report form (CRF) libraries, study start-up templates, data transfer specifications, contract backup language, automation and technology integration. All of these documents can be approved before a study begins.

The time and costs of product development can also be reduced by using technology to automate tasks and improve visibility to data, leveraging the CRO’s global presence to access patients and expertise that might be difficult to access locally, and the bundling of services across a program or a compound.

Measuring Drivers of Value
Strategic partnerships have become a value-driven approach to clinical development focused on reducing sponsor oversight while retaining quality, accessing innovation and driving faster cycle times. Metrics to accurately measure and demonstrate a partnership’s value should be defined at the beginning of the relationship, and then measured throughout the course of each project to demonstrate their health and progress.

Among metrics that should be defined and measured at the beginning of an engagement are: financial success, operational improvements (study milestones, cycle times, productivity, quality, etc.), innovation metrics around improvements in processes and technology, and stakeholder analyses to provide an overview of partnership goals and progress.

Maximizing Value of a CRO Relationship
Maximizing the value of a relationship with a CRO requires addressing the following four steps:

1. Understand that mutual investments are necessary. Both sponsor and CRO must invest in processes, technology and systems alignment. Investments aren’t necessarily financial in nature and are often based on defining goals, anticipating issues and measuring results. In addition, investments in partnership-level agreements that define how teams should interact and effectively manage change can help build the trust necessary to advance the relationship.

2. Define commercial terms to align incentives. Fees, prices and expertise-sharing must be aligned at the beginning of each project. As a relationship matures, this becomes easier because both sponsor and CRO understand the necessary approaches to align incentives. In short-term transactional projects, it is often difficult to align incentives because of the more limited nature of the transactional relationship.

3. Ongoing refinement. Both sponsor and CRO must be willing to define what constitutes success and prioritize key value drivers to measure a partnership’s financial, stakeholder and innovation value. Planning should include a robust, multi-level governance structure that includes GMP and manufacturing colleagues, and a communications plan that encourages ongoing, open dialogue, rather than ad hoc, issue-centered discussions. These definitions and planning should start at the relationship’s beginning, with the understanding that partnership improvements will continue throughout the life of the relationship.

4. Work on the partnership. Successful strategic partnerships begin with an understanding that there will be challenges along the way. When issues arise, the partners have already defined how to address them. Experience shows that the more time the sponsor and CRO invest in building the partnership, defining success metrics and communicating frequently and openly, the greater the return. For this reason, partnerships designed for multiple studies over an extended period of time tend to be the most successful. Generally, it can take 12 months to reach an initial steady state and two years to see the full value and benefits of a strategic partnership. Such benefits are difficult to realize in a one-study, transactional relationship.

Evolution Continues
Strategic partnerships between biopharmaceutical companies and CROs will continue to evolve from the traditional transactional model toward integrated relationships that drive value through increased alignment and efficiencies. The greatest challenge in maximizing a strategic partnership’s value is the investment in dollars and the time needed to create a deep, integrated and meaningful relationship and the patience for those investments to pay off. A strong commitment by both partners in the relationship’s long-term success, along with greater alignment of commercial terms and true collaboration, will maximize benefits and minimize risks. 

About the Author
Joshua Schultz is corporate vice- president, Strategic Partnerships, at Parexel International. He leads the Strategic Partnership group at Parexel, which is focused on developing and executing innovative relationships with key pharmaceutical companies. He has held a number of roles within Parexel, including building a group dedicated to efficient operational design and launch of clinical studies (START) and another focused on pharmacovigilance. Prior to joining Parexel, Schultz served as vice-president of corporate development at Veritas Medicine, which he co-founded. Previously, he worked at Mercer Management Consulting, where he developed growth strategies for Fortune 500 companies.

Published in the September 2013 edition of Pharmaceutical Manufacturing magazine

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