Size Associations in the CRO Outsourcing Relationship

The Avoca Group conducted a survey in 2011 to examine how outsourcing strategies, practices, challenges, and outcomes differ by the size of the sponsor and the size of the provider when outsourcing clinical research (1). The survey was conducted to determine whether there is a pattern whereby sponsor companies of different sizes (i.e., small, medium, and large) choose to work with providers of different sizes or type. And if so, was the association a rational one? That is, do sponsors select the types of providers that will provide them with the best service? The survey also addressed what this association means for clinical service providers.

The survey was taken by a total of 193 respondents; 109 were sponsors representing a mix of small, medium, and large-sized companies, and 84 were providers of varying sizes. The survey focused on a wide range of sizes of sponsors and providers with respect to the following: provider selection; provider performance, overall and by task, by both the size of the provider and the size of the sponsor; sponsor strengths and weaknesses in provider engagement and management, by size of sponsor; and by specific CROs that perform particularly well for sponsors of different sizes.

Survey results

The data from the 2011 survey suggest there is a close association between the size of the sponsor company and the size of the CRO selected to perform clinical trials. Most survey respondents felt that large sponsor companies (i.e., annual revenue > $1.5 billion) are best served by mid-sized to large CROs (i.e., top 15 and top five), whereas smaller sponsor companies (i.e., annual revenue < $100 million) are best served by small to mid-sized providers (i.e., top 15 CROs and below). This perception is supported by an analysis of satisfaction rates by percentage of outsourcing spend allocated to the largest CROs. The size of the sponsors tends to go with the size of the providers.

Survey data revealed that for 67% of the Big Pharma companies surveyed, most of their outsourcing spend goes to the top five CROs. Seventy percent of small pharmaceutical companies dedicate less than 10% of their outsourcing spend to the top five CROs.

On the providers' side, for most of the top five CROs, the majority of revenue comes from Big Pharma and less than 25% derives from small sponsor companies. For most of the small, full-service CROs surveyed, less than 25% of revenue derives from big pharma, and most revenue derives from small biotechnology and pharmaceutical companies.

Rational selection. Do sponsors associate with the types of providers that will provide them with the best service? Or is it only the perception of "right size" that drives sponsors to select vendors of corresponding sizes?

Figure 1: Sponsors’ responses when asked what size of clinical service provider they felt provided the best service.

The reported rates of satisfaction among both the sponsors and providers were examined, and they showed that respondents from Big Pharma, medium-sized pharmaceutical companies, and small pharmaceutical companies were all most likely to feel that they were best served by mid-sized CROs rather than by the top five CROs or smaller providers (see Figure 1). For their part, clinical service providers felt that large pharmaceutical companies are best served by the top 5 CROs (see Figure 2).

Figure 2: Providers’ responses when asked what size of clinical service provider they felt provided the best service.

The data show that even though sponsors of different sizes generally select different sets of providers, their satisfaction rates are remarkably similar. Similarly, providers also are most likely to be satisfied with relationships with like-sized pharmaceutical companies. The data show:

• Small and midsized sponsors that use the top five CROs to meet less than 25% of their outsourcing needs are generally more satisfied than are small and mid-sized sponsors who use the top five CROs more liberally.

• In contrast, large sponsors that use the top five CROs to meet at least 50% of their outsourcing needs are generally more satisfied than are large sponsors that use the top five CROs less.

Thus, it does appear that the observed association is rational. Sponsors are selecting the providers with whom they are most satisfied.

Different sizes, different strengths

Replies to survey questions indicate why the outsourcing decision is based on several factors.

The sponsors' view. The reasons sponsors provided to explain their choices of CROs make sense in light of the strengths different-sized providers bring to the table. Pharmaceutical executives summed up the differences as follows: "Large, full-service CROs are best when a global footprint, infrastructure, and 'deep' experience are needed. The Big Pharma and biotech sponsors and big drug developers rely on the large, full-service CROs if they're doing a large, pivotal, Phase III clinical trial."

Pharmaceutical executives feel that the big CRO has "been there, done that" on projects of this size. With such large financial resources being dedicated to global trials, executives planning a Phase III trial feel more assured that a big CRO will give them the required attention and a good team, and they may also feel more comfortable with the financial stability of a large CRO. Full-service CROs have large capacity, the ability to risk-share, and well-standardized procedures, including training and quality-control activities.

Executives feel that medium-sized CROs are best when it comes to value and having less staff turnover than the larger CROs. Medium-sized CROs also typically provide more flexibility, quality personal service, and senior management involvement.

Smaller CROs, executives indicate, are best when it comes to flexibility, responsiveness, attention, and involvement of senior management. They also tend to have lower turnover than is found with larger CROs. Because they do not maintain a large infrastructure, smaller CROs are more cost-effective. As one executive from a small pharmaceutical company stated in the survey: "Smaller CROs have better personnel assigned for small sponsor companies. Big CROs tend to treat smaller customers worse."

The providers' view. As noted previously, providers also report that they are more satisfied when they work with sponsors of corresponding size. Providers that felt that sponsors of different sizes performed differently on these tasks most often felt that Big Pharma sponsors performed best. Most felt that Big Pharma sponsors were better than smaller sponsors at specifying tasks to be performed, and all relevant assumptions, in request for proposals. Providers, however, felt that smaller sponsors were better at considering CROs' input and advice during the bid stage.

A survey respondent from a large CRO explained it as follows: "The big challenge [in working with smaller sponsors] is dealing with a sponsor that has little or no concept of the complexity, and thus the true cost of, clinical development." Another CRO executive noted: "When the small company requires us to provide cross-functional services, we must utilize a greater amount of project management resources to coordinate efforts between third-party firms. Also, smaller companies may require a greater amount of consultation for the drug-development activities. This may result in additional manpower spent to plan programs and greater communication."

"Efficiency would improve overall if the smaller sponsors engaged the CRO earlier in the process," another provider said, "so that we could be involved more strategically and could help them in planning their needs."

Smaller sponsors, however, were seen by most provider respondents to perform just as well as did larger sponsors in certain areas as follows:

• Establishing appropriate contracts with CROs

• Respect of provider team members

• Team leadership

• Having reasonable expectations for the resources required by CROs to complete tasks

• Identifying the most suitable CROs to bid on projects

• Evaluating bids from CROs

• Adhering to own commitments

• Communication.

Research found other important benefits that were cited by CROs with respect to small to mid-sized biotechnology and pharmaceutical companies. "Small to mid-sized biotechnology companies are less difficult to manage because typically...you are working directly with key decision makers, and there is no middle-man communication, which streamlines productivity," one provider noted. "There is more flexibility with process and approach," stated another. An appropriate level of management and less bureaucracy than with large pharmaceutical companies were also noted.

Size does matter

Avoca's data certainly suggest that there is a feeling in this industry that size does matter. It is important to consider what is at play behind the issue of size in organizations, such as the belief that infrastructure and training at a large global CRO are better, especially in emerging markets. There are already concerns about having trained staff in these parts of the world and investigators who really understand the clinical trials. The large CROs have invested in these regions, and they have hired big teams, and have a big global footprint and an infrastructure already in place. So if Big Pharma is looking for a strategic partnership, they tend to pick from the top five CROs. Big sponsors are consolidating their relationships and creating strategic relationships.

On the surface, it might appear that the small- to mid-sized CROs would have a difficult time competing against the larger CROs. Yet, according to the survey, many pharmaceutical executives stated that on a day-to-day, project-team basis, the small to mid-sized CROs provide better service because they're able to be flexible and provide better teams. This explains why respondents from Big Pharma, medium-sized pharmaceutical companies, and small, revenue-generating pharmaceutical companies were all most likely to feel best served by mid-sized CROs as opposed to the top five CROs or smaller providers.

For a mid-sized CRO, this is great news, because while the top pharmaceutical sponsors are spending most of their money in the top-sized CROs, it does not mean they necessarily feel the biggest CROs are the best service providers. And that perception creates opportunity for the smaller CRO, which does specialty work in its realm of expertise with any size company.

Investing in the relationship. No matter what size organizations work with each other, it is going to come down to being clear about expectations, building trust, and taking time to invest in the relationships so that no matter what size the organizations are, they are optimal relationships and outcomes. As long as the organizations have the resources and capabilities to be able to run the trial, success depends on the relationship that sponsor companies and providers build with each other. If the relationship between the two partners is strong, the trials are going to run better—no matter what size organizations are working together on a given project.

Bidirectional, mutual respect. It is important that there be a continued shift in Big Pharma's relationship with CROs toward one that demonstrates respect for the fellow professionals they are working with on a given project. The attitude that "you are my vendor—do as I say" has been moving toward "we should have respect for each other." More sponsor organizations are examining themselves and asking if their team is doing its best to foster these mutually respectful relationships with clinical service providers. They are acknowledging that it is crucial to provide training on how to manage effectively, and respectfully, the CROs and to collaborate to build trust and transparency.

Conclusion

There is a difference among sponsor companies and CROs on which companies contracts with each other, and there is a difference in perceptions about capabilities, resources, infrastructure, and expertise. Despite these differences, they share common interests for safety and efficiency, and the drug is likely to be tested in clinical trials globally, making the CRO-sponsor relationship adaptable to companies of varying sizes.

Janice Hutt is chief operating officer of The Avoca Group. janice.hutt@theavocagroup.com

Reference

1. Avoca Group, State of Clinical Outsourcing Survey (Princeton, NJ, 2011).