Spending on Contract Research Services Slowing Down

Industry Benchmark: Part 2 CRO

The results for the 2017 Nice Insight CRO survey are in. This year is different from others as there is a dramatic downward shift in spending by survey participants, with reductions in spending expected to continue over the next five years.

The 2017 Nice Insight Clinical Research Organization (CRO) Outsourcing Survey¹ includes input from 608 outsourcing-facing pharmaceutical and biotechnology executives. The majority of the respondents are key decision makers; nearly one-third (31%) hold corporate or management positions, with an additional 12% responsible for clinical trials operations and management.

R&D and formulation/analytical departments, as well as quality assurance and quality control departments, are well represented (16% and 15%, respectively). Other respondents hold positions in contracting, sourcing and purchasing; preclinical operations; and regulatory affairs (8%, 6% and 4%, respectively).

Respondents come from around the world (Europe 45%, North America 37%, Asia 18%) and work for all sizes of pharmaceutical companies. While the majority of survey participants work for large pharma and biotech firms (40% are working for firms with over $5 billion/year in sales), midsized ($500 million to $5 billion), small ($100-$500 million) and emerging (<$100 million) pharma and biotech organizations are well represented, with 34%, 20% and 6% of respondents, respectively.

Furthermore, outsourcing takes place all around the globe. At least 20% of survey participants have 6%-10% of their outsourcing projects in Brazil and Argentina, China, Eastern Europe and Turkey, India, Japan, the Middle East, Singapore, Southeast Asia, the U.S. and Canada. In addition, 19% of respondents also have 6%-10% of their projects in Western Europe. These statistics indicate that the survey data should well reflect the current trends and issues occurring in the global pharmaceutical contract research market.

Over one-third of respondents represent companies pursuing the development of new drugs to treat cardiovascular, infectious and respiratory diseases. An additional third work for pharmaceutical manufacturers focused on metabolic disorders and various forms of cancer.

Despite the continued growth in the number of biologic compounds in the candidate pipeline, more survey respondents work for companies involved in the development of small-molecule generics (53%) than large molecules, including new biologic entities (NBEs, 43%) and biosimilars (32%). Meanwhile, 35% of survey participants work for drug manufacturers engaged in the development of new medicines based on small-molecule new chemical entities (NCEs), with the remaining 23% involved in the development of over-the-counter products.

Access to Technology Driving CRO Use

While initially many companies outsourced research, development and manufacturing activities to reduce costs, this is no longer a top driver. Nearly one-third of respondents to the 2017 Nice Insight CRO Outsourcing survey (32%) listed access to specialized technologies as the main reason they partner with CROs. They also desire to improve quality (12%), have incorporated outsourcing in their strategic plans (11%), look for operational and subject matter expertise (9%) and seek to leverage the regulatory expertise of CROs (7%).

Interestingly, although more respondents work for companies involved in the development of biopharmaceuticals, more of the sponsor firms represented by survey participants outsource small-molecule than large-molecule projects: 25% and 22%, respectively, outsource NCEs and generics, while 21% and 16% look for research assistance for NBEs and biosimilars. These numbers are consistent with past outsourcing behavior: drug manufacturers have historically been less likely to use contract service organizations for biopharmaceuticals.

With respect to different phases of the development cycle, survey respondents most frequently outsource to CROs during phase II (47%), phase I (42%) and the preclinical stage (37%). Reduced outsourcing at later stages likely reflects the attrition of projects; far fewer candidates enter phase III and IV trials. Based on these results, it is not surprising that clinical trial services are most often outsourced by survey respondents (64%), followed by preclinical trial services (58%) and specialized services (29%), including process development and scale-up, research (animal) models, in vitro assays and regulatory services.

Careful Selection of Partners

Choosing a CRO is not a trivial exercise. CROs can have a significant impact on the overall timeliness and cost of a development project; it is essential to find a CRO that not only has the desired technical capabilities, but can act as a true partner and serve as an extension of the sponsor company. According to the 2017 Nice Insight CRO survey, industry research, consultants and referrals from colleagues are most often used to identify potential CRO partners. To ensure quality, sponsors are using more methods to identify new partners.

The top industry drivers for respondents when selecting a CRO on a weighted-mean basis are reliability, quality, productivity, innovation, affordability and regulatory track record. It is worth noting, however, that quality was the most frequently cited driver, with 43% of survey participants listing it as an important selection criterion.

Attributes identified most often by respondents as very important factors during initial CRO evaluations include operational, methodological and therapeutic experience (38%), regulatory compliance (34%), having an understanding of customer requirements (34%) and cost (30%).

Once a sponsor company has engaged a CEO, other attributes become important. Those most frequently indicated by survey participants to be very important include quality compliance and on-time delivery. These two factors, along with communication and transparency and meeting project deliverables, were noted as somewhat or very important by 74% of respondents.

The top sources of dissatisfaction with CROs are product and service availability, quality and documentation completion, and timeliness. CROs should take performance in these areas seriously, as they are also factors that will prompt sponsor companies to switch to another provider. Top reasons for doing so as identified by survey participants include better quality (41%), price (37%) and promised timeliness (30%), improved logistics (29%) and lower error rates (29%).

There is good news for those CROs that perform well: 68% of respondents felt it was highly likely that a preferred provider would become a strategic partner, while 62% of survey participants agreed that a CRO that started off as a tactical service provider would become a preferred provider. In addition, 86% of respondents were either very interested or interested in becoming a strategic partner with a CRO in the next 12-18 months.

Decline in Spending Underway

Survey participants currently use a large number of service providers — 45% work with up to 10, 33% with 10 to 20 and 22% with 21 to 30. Notably, 48% of respondents expect the number of CROs they work with to increase, while 44% expect to continue with the same level of outsourcing.

On the other hand, the number of drug manufacturers spending more than $50 million/year on contract research services dropped noticeably from 56% in 2016 — which was itself more than double the proportion of previous years — to 47%. More importantly, while 40% expect their spending on outsourcing to CROs to increase, 50% predict it will decline in the next five years.

These numbers are quite different from those obtained for the 2016 Nice Insight CRO survey, in which nearly 75% of respondents expected spending to increase.² The reduced spending matches the significant drop in the number of new drugs approved by FDA in 2016 — down from 41 in 2014³ and 45 in 2015⁴ to just 22 in 2016⁵ as of the end of the year.

Competition in the CRO marketplace appears to be tightening, making it increasingly important for CROs to meet the quality, reliability, timeliness and other expectations of sponsor firms looking to outsource discovery, preclinical and clinical research activities.

Read Industry Benchmark: Part 3 Excipients

References

1. 2017 Nice Insight Preclinical and Clinical Contract Research Survey.
2. Tiene, Guy. “Look for More Outsourcing of Research Activities in 2016.” American Pharmaceutical Review. 31 Jan. 2016. Web.
3. “Novel Drug Approvals for 2014.” U.S. Food and Drug Administration. Web.
4. “Novel Drug Approvals for 2015.” U.S. Food and Drug Administration. Web.
5. “Novel Drug Approvals for 2016.” U.S. Food and Drug Administration. Web.