Contributors: Adrian Otte, KPS Life & Patty Leuchten, WCG Avoca
Outsourcing has become increasingly popular in the biopharmaceutical space, driven by enhanced cost savings, improved timetables, and streamlined risk management. While the rates at which biopharma’s outsourcing has accelerated over the years, there has also been a pronounced shift in the models they choose to optimize results.
The definition of full-service outsourcing (FSO) in the biopharmaceutical space can vary – many sponsors may consider their approach an FSO model despite having only outsourced their monitoring and project management, while others take an entirely hands-off approach. Similarly, those who utilize functional service providers (FSP) can range widely in how many functions they elect to outsource. Some may elect to outsource only one function, while others may contract out every function within a clinical development organization, depending on the sponsor’s individual needs. While each approach can be tailored to varying degrees to match the objectives of a given sponsor, FSPs differ from FSOs chiefly in that they utilize the sponsor’s systems and SOPs rather than those of a contract research organization (CRO). Furthermore, involvement in key trial design and insight into operational oversight forces the sponsor staff to be realistic on deadlines and cost overruns.
The FSP model has experienced an accelerated adoption and increase in popularity in recent years, due, in part, to the flexibility and control it affords sponsors when compared to FSOs. The potential benefits of employing FSPs are alluring – increased quality, decreased costs, strategic control, and greater brand recognition can all be achieved with the right FSP structure. Despite this, many clinical trial sponsors are reluctant to shift away from a more comprehensive reliance on the FSO model, having already transitioned many of their core functions to their CRO partners.
By fomenting strategic FSP relationships with outsourcing partners, a biopharma has the opportunity to build out and enhance their own core competencies while affording themselves access to specialized expertise, achieving cost-saving benefits in the process.
Shifting Models in an Evolving Industry
In 2019, the Avoca Group, a life sciences consulting firm focused on clinical trial execution, analyzed data from approximately 300 survey responses, representing more than 120 global individual sponsor organizations and over 150 contracting organizations, to determine trends in clinical outsourcing spending. Avoca found that among smaller sponsors (sales <$2 billion), more of their outsourced clinical development spend had been allocated to full-service providers when compared with their larger counterparts (from the top 50 biopharmas, sales >$2 billion), which maintain a relatively balanced allocation between full service and FSPs. This difference is anticipated to narrow to a more balanced allocation with smaller sponsors in the next few years, regardless of company size, according to Avoca.
The majority of the providers surveyed by Avoca indicated that a larger proportion of their revenue comes from FSPs than from full-service arrangements and that, like the sponsors surveyed, they experienced stability through 2021 in these relative allocations by model (2021: FSP, 53%; full-service, 47%). Using model-specific spend data to define its cohorts, Avoca compared models across four key clinical outsourcing health indicators – relationships, overall work, quality, and value – to examine the influence of model selection on these factors. In doing so, they found that FSPs were given slightly more favorable responses when compared to full-service in the areas of overall work, quality, and value.
While more long-term studies are required to determine the key drivers that influence these perceptions, the differences in sponsor experience between FSPs and FSOs represent an interesting opportunity within an industry driven by quality, time-to-market, and cost considerations. “We’ve been chronicling the evolution of clinical outsourcing for many years – since the late ‘90s – and a lot of what we’ve examined over time are the relationship variables at play,” said Patty Leuchten, Founder of WCG Avoca and Chief Change Officer of WCG. “We’ve been looking at these things longitudinally, and interestingly, we’ve found that companies employing FSPs or with experience utilizing FSPs reported higher levels of satisfaction around overall quality. Within that, we were able to identify two major drivers: flexibility and control.”
Despite their increasing use, some misconceptions exist surrounding FSPs, particularly when compared to FSOs, which have held a larger share of the market in the last few decades. More recently, an increasing number of sponsors, particularly larger and more established ones, have embraced a hybrid approach to outsourcing, employing both FSPs and an FSO model, which maybe makes sense as a transitional state while moving to an internal/FSP model or as a way to integrate smaller acquisitions which typically use the FSO. One might question the hybrid choice if this is a long-term option as it results in increased overhead to manage different models and can be confusing for internal staff who have to operate across both models.
Establishing an Outsourcing Strategy
For any biopharmaceutical company evaluating their outsourcing strategy, their foremost consideration should be what they consider to be their desired strengths. What are their core competencies? What do they want to maintain control over, and what can they more readily outsource – e.g., for a large biopharma company, study design, analysis, and interpretation of study data might be considered core competencies, whereas monitoring, data management, and programming might be considered non-core. However, designating an activity as non-core does not suggest that it is unimportant or that the biopharma company does not require sufficient expertise to oversee this activity.
Building a strategic sourcing strategy requires investing in certain core competencies while divesting in other areas, which can often equate to a multi-year process. But failing to engage in this strategic planning can also have wide-ranging implications for biopharmas that, in a few years’ time, may result in widening gaps between those who are proactive in evaluating their outsourcing models and those who delay. “After deciding on core/no-core competencies, companies should consider how they will achieve standardization across studies and programs, flexibility/ease in changing providers and optimize oversight and quality”, said Adrian Otte, a board member for KPS Life. “Within these two main models, I think there is a fundamental difference in how you’re able to standardize. It isn’t something you have to worry about as much with a single study, but once you’re managing multiple studies across multiple programs, it becomes integral.”
Standardization can become more difficult in an FSO model, particularly one that incorporates multiple CROs with disparate systems, standards, and processes. Partnering with a single, large CRO and using their systems and processes may minimize a sponsor’s issues surrounding standardization, but this sort of arrangement can create concerns for sponsors wary of entrusting the entirety of their portfolio to one partner and diluting a risk mitigation approach to their drug development portfolio.
Such sole provider relationships, especially in the FSO model, can lead to lack of competition and flexibility in the event that a company may need to change partners. For those locked into the FSO systems and processes, it can be very hard to transition a study until that study is completed. In contrast, FSP partners typically work on the study within the biopharma companies’ systems and processes so a new partner can be brought on, trained, and the study transitioned at almost any stage. Sponsor quality oversight is also easier when programs are conducted in the pharma company systems and processes rather than trying to achieve adequate oversight through multiple FSO supplier systems.
Achieving Flexibility for the Future
Establishing an outsourcing model and maintaining it can be very important for a biopharmaceutical company: Avoca’s study also found a strong correlation between the longevity of an FSP partnership and the satisfaction emanating from it. While arriving at this equilibrium is possible in the FSO model, the potential for turnover is also greater with an FSO – sponsors tend to transition to new CROs every few years, dissatisfied with some aspect of their performance. “In my experience, it is the FSO bidding process that often creates unrealistic expectations about recruitment rates, with CROs erring toward aggressive recruitment numbers to wow the biopharma management team, which often lacks the expertise, data access, or time to critically review these projections,” Otte said. In contrast, most FSP models require the biopharma company to “own” the study design, site selection, and patient recruitment projections; as such, those tend to be more carefully researched and realistic. Owning aspects such as site selection and patient recruitment does not have to mean that the biopharma group has all the necessary staff or systems in place to complete these activities, but they need to have strong capabilities in order to select specialty providers on a case-by-case basis.
The unique challenges biopharmaceutical trial sponsors face may be driving their shifting outsourcing paradigms, contributing to the space’s overarching trend toward FSPs. Part of this shift can be seen among the largest biopharmas: nearly half of the top 10 companies in the space are moving toward a mixed model (especially for CRAs) that incorporates both FSP and internal resources to further bolster their leadership in certain therapeutic spaces. For many of these companies, the need for continuity of sourcing partners and for internal expertise surrounding their products and pipeline have superseded the comparative convenience of full-service outsourcing. “In thinking back to conversations I’ve had with executives from pharma organizations that had no experience with the FSP model, a common assumption was that there is less of a focus on relationship building compared to FSO models. That simply isn’t the case,” Leuchten said. “In my experience, the focus on establishing enduring relationships with FSPs can be even stronger compared to FSOs because of the typical longevity of these relationships and the need for nuanced conversations around client expectations.”
But even small, niche, and nascent biopharma companies can gain from evaluating their outsourcing strategy early and often. Many emerging companies, viewing their approach in the short term, will choose an FSO model for its seeming simplicity. As the company grows and morphs, its needs change, and it may transition from CRO to CRO until it has formed a large network of providers that has resulted in a patchwork of processes, making standardization next to impossible and quality oversight very difficult.
Ultimately, determining the outsourcing model that is the best fit and right-sized for a biopharma conducting clinical trials is a critical decision. By engaging an FSP, particularly for monitoring and project management, sponsors can achieve better standardization, leading to better quality oversight and lower costs.
As biopharmas continue to specialize in certain pipelines and therapeutics, the need for partnerships that are both long-standing and adaptable has made the FSP model increasingly popular. And with longer-term established FSP/pharma relationships comes the opportunity to better engage with clinical sites through experienced staff who know the product and are familiar with trial processes and issue escalation.
