A STUDY OF OUTSOURCING CLINICAL RESEARCH PROJECTS TO ASIAN COUNTRIES (INDIA): ITS GROWTH AND FUTURE PROSPECTS

ABSTRACT

Outsourcing is increasingly becoming a trend within the clinical research industry. The pharmaceutical and biotechnological spend on outsourcing was estimated to be $48 million in the year 2008 and is expected to increase to $48 million by 2010 [Bloch et al, 2006].
The concept of outsourcing for the development and global studies on new drugs has become widely accepted in the pharmaceutical industry due to its cost and uncertainty. India is going to be the most preferred location for contract pharma research and development due to its huge treatment naïve population, human resources, technical skills, adoption/amendment/implementation of rules/laws by regulatory authorities, and changing economic environment. But still ‘miles to go' to fulfil the pre-requisites to ensure India's success. In spite of all the pitfalls, the country is ambitious and optimist to attract multinational pharmaceutical companies to conduct their clinical trials in India.

The research methodology is done mixing the quantitative and qualitative methods as explained by Creswell (Creswell, J. W., 2003). The questionnaires designed for collecting data had open-and-closed ended questions to obtain both quantitative and qualitative data for the analysis. An extensive literature review of existing trend of outsourcing clinical research project was carried out.

Six interviews were conducted; two interviews to gain an understanding of the process and the activities outsourced by the pharmaceutical industry, benefits and risks involve in outsourcing, why Indian CRO are considered better to outsource the clinical research projects and four interviews to evaluate the strategies employed by the CRO in order to improve the relationship with key clients.

The primary conclusion from this study is that outsourcing is a necessity within the clinical research industry. The study concluded that the many pharmaceuticals from UK are outsourcing their clinical research mainly to Asian countries for fast, cost effective and quality results. The study concluded that the relationship between the client and the CRO is the key element for the future of outsourcing clinical research projects.

Chapter 1- Introduction and Background

1 INTRODUCTION

“Outsourcing allows companies to reduce costs, benefits consumers with lower cost goods and services, and causes economic expansion that reduces unemployment, and increases productivity and job creation.” [Elder, 2009]

According to the American heritage dictionary outsourcing is defined as the “procurement of services or products from an outside supplier or manufacturer in order to cut costs” [Amiti, 2004]

This chapter aims to understand the rationale behind this project which is on understanding the process of outsourcing within the clinical research industry.

The cost of drug development has been consistently on the rise, which has led to the pharmaceutical industry looking for new methods for conducting clinical research [Jayshree, 2005]. These companies have also been trying to develop strategies in order to identify and focus on their core competencies [McIvor, 2000]. This has now been achieved by the process of outsourcing.

Contract research was initially limited to pre-clinical studies and clinical trial services; however it now covers a varied range of activities. [Jayshree, 2005] Outsourcing therefore has become a customary business strategy. [Editors, May 2005]. As time progresses a number of activities are outsourced to service providers such as Contract Research Organisations (CRO). It has been estimated that there are 1200 organisations which are involved in clinical research; these include pharmaceutical and biotechnological in-house clinical management, site management organisations (SMOs), academic and medical centres, private research sites and contract research organisations. These organisations aid in completion of the projects within the stipulated timelines and thereby increase the profit margins of the pharmaceutical companies.

In the US, 60% of the clinical research activities were outsourced to CROs, in the year 2001. The CRO market has been growing rapidly ($1 billion in 1992 to $8 billion in 2002). This growth is evident not only in terms of revenue generation; but also in the number of patients being recruited in clinical trials (7 million in 1992 to 20 million in 2001). Therefore there is an increasing demand in the pharmaceutical industry for outsourcing activities to these service providers. [Jayshree, 2005]

In order to meet the project requirements and timelines the pharmaceutical companies attempt to select the best service provider from several CROs. There is an intense competition between these organisations. I.1 illustrates the results of a survey conducted by Contract Pharma in 2005 wherein the respondents have graded the various characteristics they expect from a CRO in terms of very important and / or important.

1.2 RESEARCH TITLE

A study of outsourcing clinical research project to Asian countries (India), its growth & future prospects

1.3 RESEARCH BACKGROUND

As time progresses a number of activities are outsourced to service providers such as Contract Research Organisations (CRO). It has been estimated that there are 1200 organisations which are involved in clinical research; these include pharmaceutical and biotechnological in-house clinical management, site management organisations (SMOs), academic and medical centres, private research sites and contract research organisations. These organisations aid in completion of the projects within the stipulated timelines and thereby increase the profit margins of the pharmaceutical companies.

In the US, 60% of the clinical research activities were outsourced to CROs, in the year 2001. The CRO market has been growing rapidly ($1 billion in 1992 to $8 billion in 2002). This growth is evident not only in terms of revenue generation; but also in the number of patients being recruited in clinical trials (7 million in 1992 to 20 million in 2001). Therefore there is an increasing demand in the pharmaceutical industry for outsourcing activities to these service providers. [Jayshree, 2005]

Clinical trials are designed to help us find out how to give a new treatment safely and effectively to people. With escalating pressure on research and development (R&D) cost-containment across the global pharmaceutical industry, there is increased focus on reducing the cost of clinical development. The additional problem of delayed development is also affecting new drug introductions, losing incremental revenues. This dual challenge of accelerating clinical development and reducing costs has forced major pharma companies to look at alternative destinations for sourcing patients for their global studies. Exploration on these lines guides pharma industry to take interest in the countries like Latin America, Eastern Europe and Asia. Amongst Asian countries, India stands out prominently due to its huge treatment-naïve patient's population, English speaking doctors and a large pharmaceutical presence that has dominated the world market due to cheap generics. As the multinational drug companies in the United States and Western Europe look east to outsource research and clinical trial activities, countries such as India will gain proficiency and expertise, assisting its move from generic and speciality contract manufacturing to innovative drug discovery and development in its own right, setting the stage for increased global competition. [Unknown, website:http://www.cyfuture.com/history-ofoutsourcing.htm].

India has emerged as a strong base for clinical trials in recent times. Due to the multitude of benefits it offers, the country is fast growing as a centre of conducting clinical trials for many international companies. India, with its huge patient base, low cost advantage, completion of cilia trial on time, improving infrastructure, and with a strong government support is witnessing a double digit growth in its clinical trial market. All major pharmaceutical companies and Clinical Research Organisation (CROs) have already started conducting their clinical trials in India, and with improving infrastructure, industry friendly regulations and trained workforce, the growth is only likely to increase in future.

1.4 RATIONALE FOR CHOSEN TOPIC

I decided to do my research on outsourcing because my personal interest and also clinical research outsourcing became the most important factor in the economic growth of many developing countries. I strongly believe that this paper provide some good literature along with some organizational evidences which will be beneficial to other pharmaceutical industry to outsource their clinical trials to India.

Further as I have chosen my area as a clinical research outsourcing from European countries to many developing Asian countries along with the risk involvement in it so I will be collecting theories and information from pharmaceutical companies which will provide some evidence to the topic. In addition to the theories, I will be interviewing the mangers of pharmaceutical companies to find out their opinion and on that basis I will further review my topic.

Also my personal interest in this topic is that I have worked in the clinical research industry for around 3.5 years. I know many of the processes and whole flow of the study completion. I have worked in CRO for top pharma companies like Pfizer and GlaxoSmithKline so I know all the insights of clinical research its importance, criticality and confidentiality. Also by working on this thesis I will get to know UK pharmaceutical market and how they carry out their clinical research. It will definitely help me in my job search as I want to work in clinical data management field in UK pharma or CRO.

1.5 RESEARCH QUESTIONS:

They are a means to structure, focus and direct the dissertation and to reconcile the objectives with the primary research.

(I need your inputs regarding how to reference this portion of work as I have taken it from your notes)

Research is an organised and systematic way of finding answers to questions. Questions are central to research. If there is no question, then the answer is of no use. Research is focused on relevant, useful, and important questions. Without a question, research has no focus, drive, or purpose.

Research questions:-

1) To understand the UK pharmaceutical/clinical research Industry.

2) To define the nature and characteristics of outsourcing

3) What is the importance of Clinical Research industry?

4) What is the relationship between pharmaceutical industry and CR industry?

5) Why outsource clinical research?

6) Why outsource clinical research mainly to Asian countries?

7) What are the effects of outsourcing clinical research on a pharmaceutical industry?

8) How to improve relationship between pharma and CRO in the process of outsourcing?

9) Which elements are most important for relationship between pharma and CRO both now and in future?

10) How to manage performance throughout the outsourcing process to improve its future?

1.6 RESEARCH AIMS AND OBJECTIVES

Outsourcing is a fascinating field which now forms a core component of business within the clinical research industry. This chapter aims to understand the aims and objectives which are intend to be completed during the course of this project.

1.6.1 Aim:

To understand the growth and future prospects in outsourcing of clinical research projects from UK Pharma to Clinical Research Organisation in Asian countries.

This research was conducted in order to understand the process of outsourcing within the clinical research industry. This research is mainly based on pharmaceutical companies in UK and Europe who outsources their most of the clinical trial work to overseas companies mainly in Asian countries .The actual aim of this research is to find out why there is an increase in outsourcing of clinical trials to Asian countries and what are the future prospects for both pharma companies and CRO where the projects are getting outsourced. This research also talks about what benefits the companies have due to outsourcing its clinical trials to developing countries.

1.6.2 Objectives:

The following are the objectives of the research

1. To understand the current scenario of outsourcing within the clinical research industry.

2. Analysis of UK's Pharmaceutical industries where companies are going for outsourcing

3. What are the various reasons behind outsourcing?

4. Analysis of Clinical Research Organisations in Asian countries were outsourced jobs get done.

5. Overlook on the procedure of outsourcing and the basis on which selection outsource company is being done.

6. To identify the risks and benefits involved in outsourcing from the perspective of a client and service provider.

7. To develop a questionnaire in order to establish the internal views of a leading Pharmaceutical (Client) and CRO (service provider) on outsourcing.

1.7 THE STRUCTURE OF DISSERTATION

This paper consists of following chapters which are,

Dissertation document structure:

Chapter 1: Introduction

In chapter 1, an introduction to outsourcing and clinical research industry was given in order to provide the reader a good background of outsourcing and clinical research industry. The

Chapter also addresses why UK Pharma companies choose CRO in Asian countries (India) for outsourcing and the relationship between them.

Chapter 2: Literature review

This chapter provides background information on the processes of outsourcing as well as gives an overview of outsourcing within the clinical research industry.

Chapter 3: A structured research methodology

A background on the research methodologies, knowledge claims, research strategies, and data collection was given as the first part of this chapter. The implemented research process and methodology for this research study was explained subsequently. The last part of the chapter addressed the validation process and the objectives achieved through the research study.

The author of this thesis selected a research methodology mixing the quantitative and qualitative methods as explained by Creswell (Creswell, J. W., 2003). The questionnaires designed for collecting data had open-and-closed ended questions to obtain both quantitative and qualitative data for the analysis. An extensive literature review of existing trend of outsourcing clinical research project was carried out.

Chapter 4: Company Case

Chapter 5: Data Collection and Analysis of the project

Six interview were conducted from the UK Pharma and CRO in India to gain an understanding of the process and the activities outsourced by the pharmaceutical industry, benefits and risks involve in outsourcing, why Indian CRO are considered better to outsource the clinical research projects and what is the future prospects of outsourcing clinical research by developing good relationship between client and CRO.

Chapter 6: Conclusions and Recommendations

The primary conclusion from this study is that outsourcing is a necessity within in the clinical research industry. The study concluded that the many pharmaceuticals from UK are outsourcing their clinical research to Asian countries for fast, cost effective and quality results. The study also concluded that the relationship between the client and the CRO is the key element for the future of outsourcing clinical research.

CHAPTER 3 RESEARCH METHODOLOGY

3.1 INTRODUCTION

In the previous chapters I have presented the overall background to the topic and also supportive literature to the outsourcing of clinical research along with relationship building in between CRO and pharma. The main aim of this chapter is to outline the research methodology used for this topic. In this chapter we will provide and discuss the content of the research approach towards the topic and designing of it used throughout the study of it.

3.2 RESEARCH PROCESS

This is traditional and highly structured view of research process. This model also provides research as neat and orderly process, with one stage leading logically on to the other. As provided in step 1 research topic can be identified as a result of your course, work, job, interest area or general experience. On the basis of research topic in order to narrow down the research area, research problem is defined which focuses on particular research problem with small enough of investigation. Next step is to tell how exactly the research is to be conducted which is followed by the collection of the data which includes primary and secondary data. After analyzing and interpreting this collected data final report is being written.

3.3 NATURE OF RESEARCH PROBLEM

Conducting research in the real world was a challenge for dissertation due to the lack of a central body/authority to provide information related to pharmaceutical and CRO confidential data regarding outsourcing of clinical research. The followings are some of the key challenges faced during the research process:

3.3.1 Lack of transparency

An effort was made to address some questions through the questionnaires related to the outsourcing of clinical research and its benefits, the risks you face when you outsource processes to the CRO, the key issues that lead to a loss of business from the clients, and the competencies that differentiate the CRO from its competitors. These questions were either not answered or answered with uncertainties by some respondents. The author has to take out the information through indirect ways of addressing the questions over the interviews conducted with some of the Operational managers and employees in person or through phone interviews. This indeed increased the time and effort in the data collection phase in the research process but was overcome with certain limitations.

3.3.2 Inadequate references:

The author had struggled to find good references or documents related to outsourcing clinical research, its future and all the other relevant data was offered either through the common portal or the business department's sites. The lack of academic case studies on information security, publications, or white papers was a challenge for the extraction of information in the literature review and data analysis.

Despite the above challenges, the objectives of the research as mentioned in Section 1.4 were the pillars of the research methodology and the research process was implemented to achieve them.

3.4 RESEARCH METHOD

Research method tells about the methodologies used for the research topic. The main aim of this method is to discuss and select the appropriate method to achieve the research objectives which also provide the structured and systematic way throughout the process to perform the research.

A Research Method is nothing but a way in which the data is arranged to get desired output. It can also be defines as a systematic and orderly approach to the collection and analysis of data. In any research collected or gathered is always called as samples or data, which is raw, specific, untreated, undigested and therefore largely meaningless. The analysis arranges the data in a meaningful manner and resolves research questions. So it is very important to select a correct analysis method on the correct set of data to get accurate results and outputs for the research problem. There are several different analytical methods, which are commonly used in business and management research works. These methods vary according to the nature and scope of the topic and thesis, the sources of data to be used, the purposes of gathering data, the amount of control in obtaining the data, and assumptions to be made in analyzing the data.

3.5 RESEARCH DESIGN

Research design is a ‘Science of planning procedures for conducting studies so as to get the most valid findings' (Vogt, 1993, P.196). Research design will give you detailed plan and guide about focus of your research. Research design is a strategic research approach which is adopted to answer the research questions. The research approaches are classified as exploratory, descriptive or analytical research. Exploratory research is generally conducted for the topics where hardly any few or nothing to refer for the researcher in terms of work done by previous researcher. Researcher conducts the exploratory research for three main purposes a) diagnosing a situation, b) Screening alternatives, C) Discovering new ideas.(Zikmund,200). In general exploratory research is meaningful in any kind of situation where there is not a exact understanding in order to proceed with research (malhotra, 2004).

Research conducted for this project was largely exploratory, which involved brand equity research; a research wherein the researcher determines the favorability of a particular brand among its customers [Trochim, W.M.K, 2006].

In order to fulfill the aims and objectives set for this project a schedule of tasks to be completed was drawn up:

1. A comprehensive study of article and reports which dealt with basic outsourcing as a concept.

2. A study of articles and reports related to outsourcing within the clinical research industry to provide an insight into the functioning of pharmaceutical companies.

3. Evaluation of the information gathered so as to compile a literature review.

4. Preparation of questionnaires as tools to obtain the generic information about outsourcing within a leading pharmaceutical company.

5. Selecting relevant interviewees for conducting the interview.

6. Preparation of questionnaires in order to interview key people within the organisation who were responsible for ensuring that deliverables are met in a timely manner.

7. Conducting the interviews

8. Transcription of the responses obtained during the interviews

9. Analysing the responses obtained and generating the results.

10. Conclusions and recommendations from the results obtained.

These tasks required a comprehensive collection of information from various sources. The collection of data for analysis and interpretation was done in two phases:

1. Desk Research

2. Field Research

3.5.1 Desk Research

The desk research comprised a comprehensive and extensive literature review in order to gain a thorough understanding of the industry, outsourcing. This took place during the first four weeks of the project. The reading material covered a range of internet articles and industrial reports. The majority of the articles were found by using internet research. This method of research involved the extensive use of the Internet especially the World Wide Web [Berry, D. M. (2004)]. The search engines used to look for information included Google, Yahoo, MSN, Google Scholar and the UWIC library search hub. Some reports were also provided by the Industry Supervisor.

The articles were read and the information which was relevant to the project aims was reviewed and included in the literature review which forms the second chapter of the thesis. Some of the well known reports such as the Tufts reports and a report by Alison Sahoo, (2006) on Pharmaceutical Outsourcing Strategies did not only provide very good background information but also provided a plethora of information on outsourcing.

Name of report

Kind of information provided

McKinsey Reports

These reports provide comprehensive information on issues such as consolidation, licensing, biotechnology pipeline, outsourcing within the industry etc [McKinsey & company website, accessed on 12 Dec 2009]

Tufts Reports

Strategic information for drug developers, regulator and academic researchers to help improve the quality of pharmaceutical development, review and utilisation [Tufts website, accessed on 15 Dec 2009]

International Biopharmaceutical Association Publications

The publications give information on product updates, news and industry trends, these journals have articles on the current issues related to the industry [IBPA website, accessed on 20 Dec 2009]

William Blair & Company reports

These reports provide information on research providers and high quality growth companies. [William Blair and Company website, accessed on 22 Dec 2009]

International Monetary Fund reports

These reports provide information on high quality research and publish articles by a variety of guests on a number of topics [IMF Staff Papers, accessed on 27 Dec 2009]

3.5.2 Field Research

The research on the subject of outsourcing included the construction of questionnaires and interviewing internal members of a leading CRO in order to fulfil the aim of the project. There are two types of research classified on the basis of type of questioning:

1. Quantitative research

2. Qualitative research

Quantitative research is research which uses a combination of inferential statistics and descriptive statistics as tools to analyze data and draw conclusions. It involves random sampling techniques to enable valid and credible sampling from a particular population.

This kind of market research includes surveys and questionnaires which express a statistically significant result. [Bradburn et. Al. 1988]

Qualitative research, on the other hand, generally precedes the quantitative research. It aids in understanding a problem, setting up a hypothesis and determining the route to be taken for the quantitative research. This type of research is expensive and does not progress as rapidly as its counterpart. The number of respondents in this type of research is few and therefore the results of such a research cannot be extrapolated to the entire population [Malhotra, 2006].

The essential guide to doing research

The research carried out in this study was qualitative in nature and hence did not generate a large amount of statistical information.

It was decided, with the consent of the University and the Industry Supervisors, that the aims and objectives of the project could be fulfilled by interviewing relevant people within the CRO itself.

There were four interviews, in total, which were conducted. Two interviews were conducted from the members which belong to pharmaceutical company and other two were conducted from CRO, which is service provider for this pharmaceutical company.

3.6 Data collection

There are two main types of data collection primary data collection and secondary data collection.

Primary data is the one which can be obtained by researcher directly, by observation or measurement of phenomenon in a real world without any disturbance of third party involvement. (walliman,2005). In every case researcher is answerable for his sources and should be able to argue in defense of quality of his sources.

In secondary data the information is subjected to the source of reference. The main difference between primary and secondary data is, Primary data is originated by researcher for specific purpose of addressing the problem where as secondary data have been already collected for the purpose of other than problem (Malhotra, 2005).

In the data collection process, both questionnaires and interviewing methods were adopted. The interview data were analyzed using the immersion approach (Robson, C., 2002)

The questionnaires were designed to include open ended questions and closed ended questions in order to give the participants the flexibility to add more comments and points and not be restricted to the answers provided for any question (Creswell, J. W., 2003).

3.6.1 Review of secondary resources:

* Related research papers, journals, industrial white papers, and surveys were researched, collected, indexed, and reviewed by the author. The objective of this step was to have a good repository of all journals and conference proceeds addressing the topic of outsourcing, different methods of outsourcing, clinical research industry, pharmaceutical industry , and increase in the outsourcing of CRO projects to developing countries like India , china etc.

* During the course of the research, the author had either read or skimmed through more than 50 journals, whitepapers, conference proceedings, and books. Only 50 references regarded useful to the research were indexed and documented.

3.6.2 Identifying Interviewees:

It was of paramount importance to select the right people to interview from a plethora of people, each skilled in their own field. With the intention of obtaining the maximum amount of information from the interviewees about outsourcing within the clinical research industry, people who were crucial to increasing the business opportunities for the leading pharmaceutical were chosen for these interviews. These people form a bridge between the top pharmaceutical companies and the CRO; hence it was decided that they were the best in the field of outsourcing within the CRO and therefore were selected for the interview. The questionnaires for the interviews were prepared accordingly.

The field research was carried out in two phases:

1. Phase I: Preparation of questionnaires

2. Phase II: Conducting the interviews

Phase I (the preparation of the questionnaire) required the author of this thesis to have an appreciation of the challenges of the industry and the current state of the art with respect to outsourcing in order to be able to target the questions in the most appropriate manner. There were two different questionnaires employed and these were directed at two different business activities that could be outsourced. These were:

1. Questionnaire for members belonging to pharmaceutical company.

2. Questionnaire for members who are part of CRO

Structured interviews:

Two questionnaires (A and B) were created and were sent to Pharmaceutical Company (Pharma) and the CRO (Clinical Research organisation) respectively with specific and direct questions related to the areas of research interest. A preliminary interview with the head of Outsourcing Department in the pharmaceutical company was conducted to explain the purpose of the research and seek his opinion on the questionnaires and their objectives. Some of the heads of the departments did not have the chance to fill questionnaire and requested the author to fill them during their interviews.

Mailed/Online questionnaire

Both questionnaires A & B were sent to the appropriate participants. The participants were invited based on their management involvement and based on their strong background on the outsourcing issues. The questionnaires were sent via email to them and the feedbacks were received through email.

Both questionnaires A and B were developed as an output of this phase with different sets of questions addressed to the two categories of respondents (pharmaceutical company and Clinical Research Organisation). The questionnaires were sent and assistance offered to clarify the questionnaires questions if needed.

The background information was obtained by a comprehensive study of the available literature and that has been reported in Chapter III. This chapter aims to report the results obtained during the interviews which were conducted as part of the research.

3.6.3 Questionnaire for members belonging to pharmaceutical company related to outsourcing

This questionnaire was designed to obtain information about the kind of support work that the leading pharmaceutical outsources at the moment. This questionnaire is intended for the management team involved in outsourcing of clinical research projects to other CRO's in Asian countries. The purpose of this questionnaire is to have clear understanding of outsourcing process, risk assessment, future prospects and increase in outsourcing to Asian countries.

Question Numbers

Reasons for including the questions for Questionnaire A

Q 1 - Q4

These questions were designed to obtain information about the interviewee, his role in the company and the kind of activities the CRO outsourced.

Q5 - Q7

These questions were aimed at understanding the risks faced by the CRO during the process of outsourcing. These questions also aimed to obtain information about the process of risk assessment.

Q8 - Q9

These questions attempted to obtain information about the process of outsourcing within the CRO and measures that were intended to be taken to improve the process.

Q 10 - Q 13

These questions were designed to obtain information on outsourcing from companies that did not outsource any activities.

3.6.4 Questionnaire for members belonging to CRO related to outsourcing

This questionnaire is intended to obtain viewpoints of experienced employees of the CRO in order that an insight into outsourcing from the perspective of a service provider could be reported. The purpose of this questionnaire is to have clear understanding about relationship with client, impact of pricing and globalization on the business inflow, and its future prospects.

Question Numbers

Reasons for including the questions for Questionnaire A

Q 1 - Q4

These questions were designed to obtain information about the interviewee, his role in the company and the kind of activities the CRO outsourced.

Q5 - Q7

These questions were aimed at understanding the risks faced by the CRO during the process of outsourcing. These questions also aimed to obtain information about the process of risk assessment.

Q8 - Q9

These questions attempted to obtain information about the process of outsourcing within the CRO and measures that were intended to be taken to improve the process.

Q 10 - Q 13

These questions were designed to obtain information on outsourcing from companies that did not outsource any activities.

3.5. Chapter summary

The main areas covered in the research methodology chapter are the scientific background of the research methodology, knowledge claims adopted, the implemented research processes, the methods of data collection, and the two type of questionnaires used to to get the understanding of outsourcing clinical research from pharma to Asian CRO. The author used the post-positivism, constructivism, and the pragmatism knowledge claims. The research analysis of the data was using both qualitative and the quantitative research strategies. A research process adapted from Business Research (Collins, & Hussey, 2003). Methodology was followed to achieve the research objectives. The qualitative and quantitative data analyses were applied on the data collected from both questionnaires. The qualitative analysis was mainly to use a combination of inferential statistics and descriptive statistics as tools to analyze data and draw conclusions. Qualitative research, on the other hand, generally precedes the quantitative research. It aids in understanding a problem, setting up a hypothesis and determining the route to be taken for the quantitative research.

CHAPTER 5 FINDINGS AND ANALYSIS OF THE PROJECT

5.1 Introduction:

The main purpose of this chapter is to discuss and investigate between conflicts in the opinion of managers in pharma and CRO companies. The findings mainly identify types of value conflict for various outsourcing companies in terms of their opinion and approach towards it. In accordance with my topic I found that personal interview would be the best way to collect the primary data. As this helped me to get to know some of the genuine opinion of the other and also provides the platform which allows you further cross question in order to get to find out exact motive and reason behind that. This is done by interviewing Mangers of the pharma company and CRO.

5.2 Analysis of Interview and Questionnaire Results for outsourcing by a leading Pharma Company.

Purpose:

This questionnaire is intended for the management team involved in outsourcing of clinical research projects to other CRO's in Asian countries. The purpose of this questionnaire is to have clear understanding of outsourcing process, risk assessment, future prospects and increase in outsourcing to Asian countries.

1) Process of Outsourcing in Pharma Company

The results from the interviews from the pharma company showed that although a number of activities could be completed in house there was an inherent need to outsource activities.

The company has been outsourcing laboratory discovery, biological screening, formulation, clinical pharmacology, clinical trials, new drug application (NDA), and promotional marketing, Study close out activities, Data Management & Coding for the last 15 years.

There were two interviews conducted for outsourcing by the Pharma Company. The research demonstrated that the company outsourced the majority of the activities to the CRO present in the Asian countries mainly India, which were related to Whole study, Study start-up activities, Study Conduct activities, Programming Data Management & Coding, Medical writing, Study close out activities

This questionnaire was designed to understand the general process of outsourcing of key activities of a leading Pharma company. Given below are detailed responses to all questions asked.

The first interviewee (Interviewee I) was the Business Development
Operations Manager of a leading Pharma company, whose role is to make suggestions to departments which play a critical role in making strategic decisions about outsourcing within the organisation.

The process that is generally followed for outsourcing an activity for the company is to get a vendor or a set of vendors to bid for the selected activity. If the vendor is a new entity i.e., the pharma company has not had a previous relationship/engagement with the vendor i.e. CRO, then the Pharma adopts the Request For Information (RFI) plus Request For Proposal (RFP) route.

The Pharma starts the outsourcing process by seeking inputs on an RFI. After evaluating the inputs received from the vendor in response to the RFI the Pharma determines whether the vendor is competent and whether the vendor's candidature should be progressed to the next stage. Assuming that the vendor “passes” the RFI stage, the Pharma then floats an RFP to short-listed vendors. During the RFP phase the Pharma seeks a detailed proposal from the vendor for the activity that the Pharma is interested in outsourcing and that the vendor has expressed a keenness to undertake. However, if the vendor has worked with the Pharma in an earlier engagement and the delivery of services had been found to be satisfactory, then the Pharma can opt to proceed directly to the RFP stage, thus bypassing the RFI stage.

Once proposals have been received from the short-listed vendors, the Pharma evaluates all aspects of it and then makes a “Go” or “No-Go” decision based on the budgets and other aspects which are dependent on the service that is intended to be outsourced. If the Pharma has been satisfied with the performance of the vendor during a few previous engagements, then the vendor could be classified as a “Preferred Vendor” and the Pharma could make arrangements to outsource activities to that vendor, possibly even without going through the RFI / RFP route. This is the beginning of a strategic relationship with the vendor.

The company intends to improve the process of outsourcing by trying to get multiple vendors to bid for the same activity on a competitive basis and provide a chance to new vendors to prove their mettle. This would enable the Pharma to choose the most appropriate vendor from a wider cross section of vendors. The individuals tasked with making the decision for outsourcing, ideally would like to have more time (mainly to arrive at a considered decision) to decide whether or not to go ahead with outsourcing a particular activity, in order to avoid making the wrong decisions which could result in termination of contracts. However, care would need to be exercised in order to ensure that the need to arrive at a correct decision does not result in the cliché, “Analysis Paralysis” - which results in endless analysis being carried out without any decision being taken.

The second interviewee (Interviewee II) was the Senior Director, Project Management within the oncology department. He has been in this role for three months and had been the Global Head for Data Management for two years prior to his current position. He stated that the key activities outsourced by the organisation included Whole study, Study start-up activities, Study Conduct activities, Programming Data Management & Coding, Medical writing, Study close out activities. He indicated that there is a group of preferred vendors or CRO's and, therefore, these CRO's are generally selected when any additional activities need to be outsourced.

Both the interviewees stated that there was a tendency for the organisation to have preferred providers who become preferred once the organisation has worked with them. This method has its own advantages and disadvantages. The principal drawback of this approach is that once a vendor becomes preferred the organisation will refrain from using other vendors who might be able to perform the activity in a more reliable way and at a lower price.

Interviewee I specifically highlighted this drawback regarding preferred suppliers and expressed concerns that the work might be able to be carried out more cost effectively and that the quality might, indeed, have been better if another supplier had been used.

The primary advantage, on the other hand, of the tactic adopted by the organisation is that the organisation can form a strategic relationship with the vendor. This is the result of implicit trust being placed in the vendor and therefore allowing the organisation to avail benefits from the vendor due to the nature of the relationship. The benefits include a possible increase in the number of individuals who might work on a single project, thus increasing the turnaround time for that particular activity.

Interviewee I mentioned that in order to make the process of outsourcing more effective and to ensure success during outsourcing, the organisation should take longer during the decision making process. This change, he felt, would decrease the number of contracts terminated due to a wrong decision being taken. However, care should be taken that ensuring the need to arrive at a correct decision does not result in the cliché “Analysis - Paralysis”, which results in endless analysis being carried out without any decision being taken.

2) What are the key activities that are outsourced by Pharma companies to the CRO?

This question was asked of all the four interviewees. 5.3 illustrates all the activities that the four Pharma companies as a whole outsource to the CRO. The depicts a consolidated opinion as it gives the number of respondents against the activities that are outsourced. In the 5.3 CTS refers to Clinical trial supplies and CDS refers to Clinical data management systems

Activities outsourced to the CRO

3. variables involved in implementing the processes of outsourcing

There were a number of variables involved in implementing the processes of outsourcing; some were independent while others were dependent upon each other. Table 6.1 highlights a few variables and their dependence on a clinical trial activity to be outsourced.

Variable

Independent of activity

Dependent on activity to be outsourced

Cost

ü

Time taken to complete the activity

ü

Resource

ü

Quality of activity

ü

Location of the activity

ü

Culture and language of location

ü

Regulatory environment of location

ü

Although the activities illustrated in Table 6.1, have been classified as dependent and independent of a clinical trial activity that is being outsourced. at a decision making level these variables could not be considered independently since they were intricately intertwined. For example, there were certain Pharma companies that preferred to outsource only certain parts of a clinical study but this was solely dependent on the nature of the relationship that the CRO shared with its clients.

When asked what kinds of activities were outsourced to the CRO, the interviewees mentioned activities which encompassed all spheres of clinical research. This could be attributed to the experience that the CRO has in the field and the expertise it has in almost all the therapeutic areas.

4. Outsourced countires

Both Interviwee 1 and interviwee 2 respondented that most of their outsourcing activities were outsourced to asian countires and spefically India . The respondent supported their answers with the benefits associated with working in India

High level of patient consent: 70 percent of patients return with informed consent

Chemistry expertise: Innovative reverse engineering by generics companies and experience as a key chemistry outsourcing target have created a strong chemistry knowledge base

Government initiatives: In addition, a range of government initiatives have improved the environment and reduced the risks associated with carrying out research in India. The government's removal of the limit on foreign direct investment in the pharmaceutical, industry, allowing 100 percent foreign ownership of enterprises (April 2002) is an example

India has now mandated International Conference on Harmonization of Technical Requirements for Registration of Pharmaceuticals for Human Use GCP guidelines for all clinical research in India, and companies, hospitals and clinics are beginning to comply with GCP guidelines; the government has removed customs duty on materials imported for clinical trials (customs duty had been as high as 55 percent in the past) and will provide 10-year tax breaks to companies making R&D investments in the country.

Interviewee 1 replied saying that their company has been outsourcing all the core activities from 5-8 years and they are looking forward to build the same kind of relationship with all the CRO's present in Asian countries.

6) Formal Risk Assessment

According to both the Interviewee there is a formal risk assessment which is carried out prior to making the decision to outsource activities to a vendor i.e. CRO. The assessment includes a thorough evaluation of the terms and conditions of the vendor as well as a review of the price quoted by the vendor for the particular activity. The Pharma addresses most risks by doing a complete assessment of the pros and cons of entering into a contractual agreement with the vendor. There is also a complete SWOT (Strengths, Weakness, Opportunities and Threats) analysis carried out. Once the decision is made then a formal contract is entered into with the selected vendor for outsourcing that activity.

7) Where do you see R&D outsourcing in the next 20 years?

All the interviewees predicted that the process of R&D outsourcing would increase tremendously within the next 20 years. They believed that Pharma companies would increase the outsourcing of a number of activities related to R & D.

Interviewee 1 stated that the increase in R & D outsourcing in the future could be attributed to the ability to convert fixed costs into flexible costs and the fixed resources into flexible resources, making flexible resourcing the primary reason for outsourcing R & D.

Interviewee 2, on the other hand, believed that in the future there would be a complete change in the current model for outsourcing. Pharmaceutical companies would lack the infrastructure to manage large projects. This would force them to outsource R & D and would enable undertaking of an increased number of studies. 5.12 depicts the responses of the interviewees to the question “What is the future of R & D outsourcing?”

Future of R & D outsourcing

Interviewee 3 believed that the future of R & D outsourcing would see a transformation due to the presence of big players conducting trials with large amounts of money. This would lead to an increase in the pressure on companies to complete the trials within the stipulated timelines. The best method to tackle this issue would be to outsource its R & D, thus increasing the amount of R & D outsourcing.

Interviewee 4 stated that pharmaceutical companies would prefer to reduce the amount of money they were currently spending on developing a new drug. Going forward, they would discover a compound and outsource the development of the compound. There would be different models of outsourcing and once 1 or 2 Pharma companies started to outsource the development of the compound the rest would follow suit.

8) India : Potential Hub for outsourcing

Both Interviewee 1 and Interviwee 2 agree that India is emerging as a global hub for clinical research. According to projections from their comapny, the Indian clinical research industry could attract US $1.5 billion of revenue from U.S. and European sponsors by 2010, creating a demand for more than 10,000 investigators trained in good clinical practice (GCP) and supported by nearly 50,000 clinical research professionals.

Analysts in the company projected that by 2008, up to 30% of global clinical trials will take place outside the U.S. and Western Europe, and India has emerged as a favourable destination for these trials.

9) Critical Success factors

According to Interviewee 1 the Critical Success Factors to improve the process of outsourcing in the clinical research industry business are:

(1) Time and cost reduction through ongoing efficiency improvement,

(2) High effectiveness of the clinical research process, by providing the desired results and products,

(3) Ongoing improvement of the quality, both input to and output of the process,

(4) Adding value to the sponsor, as a by-product of the process.

10) Future of outsourcing within the pharmaceutical industry

The last section of the results dealt with the future of outsourcing within the industry and its impact on the business inflow. It is anticipated that in the future, there would be an improvement in the current technology, especially in the method of data capture such that the process of data capture is efficient and cost effective. Electronic Data Capture is an example of improving technology; however data analysis is not as efficient as this process and thus needs to be improved. eDC has not been completely accepted by all the companies and cannot be used for all studies. This can be attributed to the fact that it is a relatively new method and there is an apparent reluctance to use the method since a number of clinical research professionals are not skilled in using it. In the future, however, paper data will be dispensed with and accurate and reliable methods of data capture will be used.

E-Sourcing is another area which in the future will become a normal procedure for Pharma companies. It potentially encompasses all the techniques that focus on the price and quality of products that are developed for the creation of a successful drug in the market. A major advantage of this method is that it allows various departments to give their opinion on a single project. This would be useful when generating an RFP as the applications could be provided on the company intranet and the various departments within the company could input their views. A comprehensive RFP would result and there would be decreased resistance and problems during the project as everyone would have had the opportunity of contributing to the RFP [EPIQ, Accessed 6 September 2007].

The general consensus of the interviewees was that the amount outsourcing within the clinical research industry was going to increase rapidly. The results demonstrated a clear need for outsourcing as most of the Pharma companies lacked the resources to handle large studies in house. Interviewee 4 believed that, in the future, Pharma companies would discover a compound and the rest of its development would be outsourced. This is attributed to the increasing number of blockbuster drugs whose patents are expiring in 2008 (Appendix 5).

This research demonstrated that outsourcing is becoming a necessity within the clinical research industry and will continue to increase exponentially in the foreseeable future.

Analysis of Questionnaire and Interviews Results from CRO Company

Purpose:

This questionnaire is intended to obtain viewpoints of experienced employees of the CRO in order that an insight into outsourcing from the perspective of a service provider could be reported. The purpose of this questionnaire is to have clear understanding about relationship with client , impact of pricing and globalization on the business inflow, and itss future prospects .

Is the outsourcing relationship with the client tactical or strategic? If tactical what can be done by the CRO to make it strategic?

There were three types of responses to this question. 5.4 refers to the responses obtained from the interviewees.

The key clients account for approximately 50 - 60% of the CRO business. Pharma shares a strategic relationship with the CRO; this is indicative of the fact that the amount of business received from Pharma 1 is much greater than that of the other key clients. While Interviewees 2 and 3 stated that there was a need for their tactical relationships to graduate to becoming strategic, Interviewee 2 also felt that the CRO needed to work harder with the client. Interviewee 3, on the other hand, thought that the way to make the relationship strategic would be by understanding the client's needs and thus partnering with them in a cost-efficient manner without compromising on the quality of the work done. Interviewee 4 responded that since the CRO shared a relatively good relationship with Pharma 4, he believed that it bordered between tactical and strategic and to convert the relationship to a strategic one, it would necessitate the CRO taking more risk in terms of co-funding development projects which would require increased investment in the relationship.

If the client company were to acquire or merge with another company then would it have a positive or negative impact on the CRO and why?

Responses to “If the client were to acquire or merge with another company”

This question gave rise to mixed responses as most interviewees believed that if the client company acquired another company it might be a positive move for the CRO as the outsourcing strategy of the client company would not change. The counter view was the concern that it could have a negative impact since there could be a change in the outsourcing strategy. The acquiring company might not, for example, be interested in the alliance between the client and the CRO which might, in turn, lead to a loss of business for the CRO.

On a scale of 1 - 5 how would you rate the attractiveness of the method of pricing the CRO has adopted in order to gain more business and why?

Responses to attractiveness of the method of pricing

There were different responses to this question as the relationship each client had with the CRO was different and therefore the reasons varied accordingly ( 5.6).

Interviewee 2 believed that the pricing model was very complex and therefore rated it as a ‘3'. He believed that the RFP model used was flawed and consequently made the process of pricing very complex. He also stated that the method of pricing was not efficient.

Interviewee 3 thought that while the pricing was good for going head to head with a global CRO, but it was not adequate when it needed to be pitched against a local CRO. The method of pricing also did not favour aggressive timelines and therefore could lead to a loss of business.

Interviewee 4 thought that the pricing models were currently unattractive to Pharma companies and a different pricing strategy needed to be adopted. He felt that a pricing strategy which allowed the CRO to take more risk should be adopted, so that the Pharma companies would outsource more business to the CRO.

What are the competencies that differentiate the CRO from its competitors?

The response to this question was mostly similar from all the interviewees. 5.8 has been created illustrates the responses in form of a graph.

Interviewee 4, however, felt that although the CRO's global footprint provides it with an edge over its competitors, there were no other differentiating competencies which would urge the Pharma companies to outsource its activities to the CRO. The interviewee believed that there was a need to improve the CRO's efficiency and productivity so that it could win more business from the top-rung players within the pharmaceutical industry. This could be done if the CRO was involved in deals with the clients, which would involve a great deal of risk in terms of the CRO investing much more time and money in the projects.

Another method of improving the amount of business the CRO could win, would be to have strategic alliances with key customers. This would help the CRO to become a preferred vendor for the client and would give the CRO an edge over its competitors.

What are the key issues that lead to a loss of business from the clients?

Interviewee 1

1. Decision Making

2. Budgets

Interviewee 2

1. Lack of Quality

2. A change in the outsourcing strategy

Interviewee 3

1. Not being able to deliver on key projects

2. Inability to commit to aggressive timelines

Interviewee 3 believed that the loss of business from Pharma 3 could have been mitigated during their previous alliance, if the CRO had carried out the feasibility of the project comprehensively.

Interviewee 4

1. Lack of resources

2. Lack of Expertise

Impact of relationship with the client on business inflow

The nature of the relationship between the client and the CRO played a crucial role in determining the amount and the kind of activities that were to be outsourced to the vendor. There are two kinds of relationships a vendor can have with a client, Tactical or Strategic. All service providers aim at converting their tactical relationships into strategic ones [Chapter III, section 3.3]. It can be understood that a strategic relationship between the vendor and the client increases the amount of business from the client. This then allows both the parties to work towards the common goal which was envisioned at the time the alliance was formed. There is, however, no binding agreement between the client and vendor which suggests that the client can walk out of the relationship at any time. To avoid this situation the vendor must ensure that the methods used to ensure that deliverables are within timelines are dynamic.

There was a tactical relationship between the Pharma Company and CRO and consensus was that to convert the tactical relationship into a strategic one the CRO had to

1. Increase the amount of risk in terms of co-funding projects, and investing a larger amount of money in projects

2. Complete the work in a cost efficient manner

3. Minimal compromise on the quality

4. Employ strategies which were client oriented

6.3 depicts the important factors which aid in converting a tactical relationship into a strategic one.

An interesting method of improving the relationship with the client was recommended by Interviewee 4, which stated that in order to be able to handle a number of large trials the organisation must undergo a considerable change in its structure. He opined that the organisation in the future should have a core management and a number of franchise organisations which would deal with the clients.

Impact of the pricing model on business inflow

Currently, the Pharma Industry does not have a well defined cost structure which defines the pricing of all the activities that have to be outsourced; therefore this leads to most CROs pricing their activities in such a way that it generates a high profit margin. Even though the CROs generate high profit margins, they are comparatively more cost effective for the Pharma companies; hence it compels them to outsource a larger number of activities to the CROs in order that they can minimise their costs.

The method of pricing adopted by the CRO was not rated very highly by the interviewees. They attributed this to be one of the reasons for reduced business from the client. However, information should be sought from the client in order to confirm this view. This could be another reason for the problems experienced in the transformation of a tactical relationship into a strategic one. At the time of carrying out the research, the CRO had an activity-based pricing model. There were two variables in this model which determined the total project price. They were:

1. Time taken to complete the activity 2. Cost for the completion of the same activity

Generally the activity was priced on an hourly basis and the total price for the project was the sum total of the price estimated for the completion of each activity [Soenen M, 2006].

There were disadvantages of this model. The primary one being that the key clients found the CRO expensive and therefore tended to outsource only selected components of projects. Another disadvantage of this method was that the CRO may find it difficult to price the activities which were business related as they could not be measured on an hourly basis.

Impact of globalisation on business inflow

The main cause of a growing interest of Pharma companies in developing countries is that there is a diverse patient population. Access to large pools of patient population results in an accelerated patient recruitment rate. Patient recruitment is a major stumbling block and therefore there are a number of times when missing deadlines could be attributed to it [Bloch et al, 2002; Chapter III, section 3.3.1]. As a result, it is not surprising that countries such as India are preferred destinations for outsourcing activities. Therefore if these companies are apprehensive about outsourcing at this stage they might lose out on opportunities to establish a foothold in these countries.

In a span of the last 15 years there have been approximately twenty-two large-scale acquisitions and mergers within the pharmaceutical industry [Dr. J. Mittra, undated]. Between 1999 and 2001, seven out of the top ten drug companies were in the process of merging. This had an evident negative impact on most CROs [John Kreger, 2007]. According to John Kreger (2007) an acquisition or a merger of a key client has been detrimental to the amount of new business a CRO might receive. This, however, did not have an impact on the projects which had been outsourced before the acquisition or merger. The impact on new business in the case of a merger was attributed to the time taken for the newly merged companies to decide upon the key strategy forming party.

Acquisition or merger of a key client with another company could be another factor Acquisition or merger of a key client with another company could be another factor

which might affect its relationship with the CRO therefore having an impact on the amount of business the CRO receives from the client. However, the impact on the relationship was believed to be dependent on the company which had acquired or merged with the client. 6.4 illustrates the effect of a merger on the relationship with the company.

Effect of acquisition of a key client on the relationship with the CRO

The acquisition or merger of a key client could have a negative impact on the CRO as

there is the possibility of the newly formed company having enough resources in house to complete some of the activities which had previously been outsourced. Thus, the relationship with the client after the merger or the acquisition needs to be nurtured so that the CRO remains a preferred service provider and continues to obtain more business.

Impact of the CROs competencies on business inflow

A CRO's competencies are a very important influential factor in the decision making process of a company when it considers outsourcing and the selection of a CRO is generally done on a study-specific basis in respect of the value that the CRO could add to the process while completing it. However if the relationship with the CRO was strategic then most of the priority projects would be outsourced to the CRO. The responses received to the competencies that differentiated the CRO from its competitors varied from “Global reach” to “Technology”. A number of leading pharmaceutical companies who were key clients of the CRO had a better global foothold in comparison to the CRO. If it were not for the evident reduction in cost due to outsourcing, these Pharma companies would have been able to conduct most of their studies in house. Competencies such as “global reach” could not, therefore, be perceived as the sole differentiating factor from other competitors. The CRO must be able to demonstrate competency in terms of the following in order to differentiate itself from its competitors and retain its position as one of the leading CROs:

1. Cost efficiency

2. Quality

3. Improved technology

4. Experience

5. Skilled expertise in several therapeutic areas

6. Good Infrastructure

7. Good Management Structure

To avoid losing key clients in the future the CRO should consistently review its core competencies and focus on improving them in order to differentiate itself from its competitors.

The responses to almost all the common questions which were asked suggested ways and means of improving the relationship with the clients so as to improve the business inflow.

Where do you see the CRO in another 10 years

All the interviewees shared the vision that the CRO would grow but their opinions varied as to how it would grow.

Interviewee 1 stated that the number of strategic partnerships with clients would increase and the involvement of the new product development team would increase considerably as a result of new business from the clients.

Interviewee 2 shared the latter view with Interviewee 1 but mentioned that there was a need to change the CRO's operational model. He stated that there was an increasing requirement for CRAs as the workload would increase. The model, according to the interviewee, would have to deal with the issue of recruiting more CRAs to cope with the growth rates of the industry. The industry was booming and therefore there would be increased pressure for the CRO to remain a leader in the field.

Interviewee 3, on the other hand, felt that the CRO would acquire or merge with another company if it remained in the private sector. However, it would be bought by another company if it were to remain in the public sector.

According to Interviewee 4, the CRO currently lacked the capability of handling many large big projects which required a large number of resources. He believed that the model of operation needed to change and proposed a new model which is illustrated in 5.14.

Franchise organisation model

This model would require the organisation to be broken up into components such that

there was a core management and a number of franchisee organisations which dealt with the clients. This would then enable the franchisee organisations to report to the core management and make the process of delivery to the customer more efficient as it would aid the organisation to become more client friendly. According the interviewee if a model like this was implemented then, in the next ten years, the CRO would become more efficient in terms of being able to deliver within the stipulated timelines and it would also make it more productive.

What do you think is the future of the CRO industry?

The majority of the interviewees (3 of the 4) stated that the CRO industry would continue to grow as the number of activities to be outsourced would increase. Table 5.4 illustrates their responses.

Summary of responses to future of the CRO industry

Interviewee

Response

Interviewee 1

1. Increase in the number of strategic relationships with clients

2. Activities will be outsourced by Mid-sized Pharma companies and Biotech companies

Interviewee 2

1. Increase in the amount of risk taken by clients 2. Increase in the amount of business by the industry

Interviewee 3

1. Acquiring of CROs by the bigger players like Accenture and Tata

2. Increase in the amount of risk taken by the client

Interviewee 4

1. The models will be such that there will be an increased generation in margins

2. Improvement in technology will redefine the functioning of the CRO

The industry currently outsources less than 14% of the drug development activities to CROs with most of the activities being completed in-house. Interviewee 4 stated that in the next 10 years it is estimated that the industry will outsource approximately half of its drug development activities - 5.13 refers to the predicted growth in outsourcing in the clinical research industry in the future.

There is an expectation that there will be a marked improvement in the technology

being used by the CROs. Currently technology such as Electronic Data Capture (eDC) is finding its way into most CROs to ease the process of data entry. It is likely that the analysis will also get automated as more sophisticated mathematical analytical models are developed which can be used on a lift-and-drop- mechanism. eDC has been in vogue for the past few years but it has still has not been accepted by all CROs. It is estimated that in another five years electronic data capture will become the norm for data management.

Summary

The general consensus of the interviewees was that the amount outsourcing within the clinical research industry was going to increase rapidly.. Outsourcing from Pharma and Biotechs is a primary source of business for a CRO and the fact that the business inflow within a leading CRO is growing, indicates that these processes are now becoming a necessity for the pharmaceutical companies. There are a number of inferences which can be drawn from this research. The results demonstrated a clear need for outsourcing as most of the Pharma companies lacked the resources to handle large studies in house and therefore there is a necessity to outsource

Interviewee 4 from CRO believed that, in the future, Pharma companies would discover a compound and the rest of its development would be outsourced.

This research demonstrated that outsourcing is becoming a necessity within the clinical research industry and will continue to increase exponentially in the Asian countries like India in foreseeable future.

CHAPTER VII: Conclusions and Recommendations

7.1 Conclusions

This chapter highlights the key inferences from the literature review, results and discussion.

All of the aims and objectives of the project have been met. The overall conclusion that can be drawn from this research is that there is a clear need for outsourcing within the clinical research industry now and it is likely to increase in the future. Outsourcing from Pharmaceutical companies is a primary source of business for a CRO and the fact that the business inflow within a leading CRO is growing, indicates that these processes are now becoming a necessity for the pharmaceutical companies.

There are a number of inferences which can be drawn from this research. The primary conclusion is that the Pharma companies cannot complete all the activities in house and therefore there is a necessity to outsource activities. This suggests that the process of outsourcing drug development within the clinical research industry will continue to grow exponentially.

Outsourcing is a common business practice in the Clinical Research industry. It has become necessary to stay competitive. Because most organisations only have two or three true competencies, it is essential to find and engage other companies that excel in a variety of areas. Outsourcing in the Clinical Research industry has become a global enterprise and there are global regulations to consider. These regulations vary as much as the countries where they are found.

Outsourcing is now an established part of the drug development process. It has evolved from being used to manage fluctuating capacity needs to its rightful place as part of a company's strategy for addressing their drug development needs.

Strategic outsourcing, however, still remains a concept for the pharma industry. While

CROs are stepping up to fulfil the demands of this very specific and special role, the industry has yet to fully embrace its potential benefits. To do so will require pharma companies to ruthlessly evaluate their core and non-core business, accepting that outsourcing can and should be leveraged to be their unforeseen competitive asset.

The CRO industry will need to drive this acceptance of its strategic role, accepting risk and trusting in the long-term benefits that can be enjoyed as the pharma sector slowly adopts strategic outsourcing as a central component of a competitive drug development strategy.

It will be many years before simulated clinical development will begin to diminish the uncertainties and risks of drug development. In the meantime, it remains imperative for both the sponsor and CRO to understand each other's risks and implement ways to manage them. In achieving this, both parties will be able to truly leverage the full potential value of pharmaceutical outsourcing.

This chapter has sought to review the alternative methodologies currently being used by pharmaceutical sponsors to contract with vendors, analyse the advantages and disadvantages of the different approaches, and has attempted to provide a practical framework which the reader can then adapt for his or her specific needs. There is no substitute for transparency and clarity, and it is also important for sponsor and vendor to clearly understand underlying motivations of specific issues such that goal congruence can be achieved. The ultimate goal is to achieve a balanced working relationship and document the understanding of both parties.

This chapter has set out some of the key challenges and assumptions related to managing performance when working with CROs. The first and most important factor to be considered is the strategy and rationale for outsourcing - in other words, what the use of CROs offers over and above existing internal capabilities. This may be short-term access to additional capacity, a long-term strategic outsourcing relationship based on access to specific capabilities, or some combination of both. Whichever is the case, the performance measures selected and managed should be directly related to the defined strategic objectives of the relationship. The processes outlined should be considered as proposals only; they should be tailored by each organisation as there is no single ‘sure fire' approach that will work in all cases. Measurement of those aspects of the sponsor-CRO relationship that are relevant to a successful outcome provides a solid knowledge base on which performance can be assessed and improved jointly, on an ongoing basis. This will help ensure continued professional interactions between sponsor and CRO, and improve the overall climate related to outsourcing clinical development work.

Relationship management represents a significant investment on the part of both the provider and the customer.

With India emerging as IT superpower and clinical trial hub, outsourcing to India for clinical data management is more obvious than predicted. Indian industry, which previously was relied on its cost effectiveness to attract customers, is now moving towards an entirely different direction. Quality and fast response are the new buzzword to dominate the business processes which ensure accurate, reliable services to the customers. While several models of businesses are emerging, only results will tell how many of them are attaining fast break-even after meeting global stringent regulatory standards. The time will test the success of experimentations of each of these players, who cross the critical path with proactive risk management approach in this world of innovations and new technology. The players meeting the industry expectations of increased adoption of global standards, regulatory compliances and the pressures of cost and cycle time reductions in drug development, with an efficient and effective data management system will survive.

The selection criteria on the basis of which a country can attract clinical research business. This includes:

• Adequate patient population, Access to Patients (Number of Subjects) and Patient Demographics

• Number of sites/Access to sites

• Compliance with/Site Development ICH Good Clinical Practice

• A Stable, Honest, Clinical Trial Friendly and Effective Regulatory and Operational framework/environment

• Regulatory and IEC/IRB approval time

• Competitive Start-up time - contract turnaround time

• Import license (study drug, lab supplies)

• Export restrictions (blood, tissue, lab samples)

• Level of Healthcare infrastructure - EC/IRB set-up conforms to ICH-GCP

• Level of Country Infrastructure

• Country Risk Factors

• Standards/Quality of Medical Care

• Other logistic issues (language, medical notes)

• Data Integrity and Copy right protection, IP recognition

• Well trained, experienced, qualified, full time, in-hospital, clinical trial nurses/managers/Doctors

• A potential talent pool from which to hire and to train

• Trainings for developing talent of international standards

• Cost of Labor and size and availability of labor force with relevant skills

• Good quality of investigations

• Level of government engagement

• Commercial considerations

• Security Evaluation

• Sustainability and scalability of business

• Cost of Facilities and Travel

• Perspective of FDA

• Number of CROs

• Number of clinical trials

• Prior performance (research naïve vs. experienced)

• Access to technology (eCRF), lab tests, equipment and/or staffing

• Interest and commitment of Investigators and site staff - time

• Study competition (internal/external)

• Vendor limitations (i.e. central labs)

• Protocol design matching (align with clinical practice)

• Recruitment reliability - projections & previous achievements

Most of the requirements in the above list are available in India the need is to improve them and create better coordination between the stake holders.

7.1.3 Relationship between the Pharma Company (client) and the CRO

In order to become a preferred vendor the CRO needs to be able to ensure that the deliverables mentioned in the contract are met within the timelines. This enables it to improve the relationship with the client, thus giving the CRO an opportunity to try and convert a tactical relationship into a strategic one. As mentioned in literature review the strategic relationship between a client and the CRO benefits both parties.

A number of factors can affect the relationship with the client and thereby prevent it from becoming a strategic relationship:

i. The method of pricing adopted by the CRO

ii. Acquisition or a merger of the client

iii. The issues the clients have with the CRO

iv. Lack of trust that the client has in the CRO

Four of the key clients have a number of issues with the CRO and therefore this can prove to be a stumbling block in transforming the tactical relationships into strategic ones.

7.1.4 Factors affecting business inflow

The results and discussions demonstrate that there are a number of factors that affect the amount of business the CRO obtains from its clients. The primary factor is the existing relationship that the CRO has with the client. This refers to the relationship being tactical or strategic. A strategic relationship increases the business inflow. The factors which affect the amount of business inflow are as follows:

1. Past experience of working with the CRO, if the experience has been good then the amount of business inflow from the client increases.

2. The ability of the CRO to deliver within the timeliness mentioned in the contract. The Pharma companies would prefer to outsource activities to CROs who can deliver within the timelines as it reduces the time required for the drug to reach the market.

3. The ability of the CRO to demonstrate the presence of skilled manpower.

4. The ability of the CRO to demonstrate adequate resources.

5. Presence of infrastructure and technology to conduct trials.

6. The ability of the CRO to complete the activity that is outsourced in a reliable manner without compromising on the quality of the work.

7. The ability of the CRO to handle a large number of projects and deliver effectively. If the CRO can prove its mettle in this area then the business inflow will increase exponentially.

8. The CROs commitment to the relationship it currently has with the client.

9. The ability of the CRO to employ strategies which are much more client oriented.

These strategies will attempt to reduce the issues the client has with the CRO, in effect improving business inflow. Currently the CRO carries out a number of trials for different clients; however they are unable to handle a number of large projects at the same time. This therefore warrants a change in the management structure.

10.4 Study Limitations

The research in this dissertation is naturally limited by the sample of firms included within it. Ideally it would have been preferable to include more firms but the further down the league table you move in general, the sparser is the data. This problem is made more acute when you consider the secretive nature of some pharmaceutical firms and reliable information on research spending, for example, for some of the privately owned firms was difficult to obtain. A second significant problem with a longitudinal study is to obtain a 'valid' and `reliable' data set for all firms and all variables across all years. A number of specific problems arise. Firstly, the industry has undergone a series of mergers and acquisitions where companies disappear and finding archival data for firms which went out of business ten years ago presents a problem. Secondly, reporting standards differ between firms. Thirdly, and perhaps most problematic, how firms classify the world in terms of geographical segments differs between firms. Clearly for a quantitative study which is reliant upon data analysis, such as this one, these problems impose limitations on the scope of the study.

Clinical trials in India: ethical concerns

According to the Associated Chambers of Commerce and Industry, an influential national industry association, India is set to grab clinical trials business valued at approximately US$ 1 billion by 2010, up from US$ 200 million last year, making the subcontinent one of the world's preferred destinations for clinical trials.

Drug companies are drawn to India for several reasons, including a techni­cally competent workforce, patient availability, low costs and a friendly drug-control system. While good news for India's economy, the booming clinical trial industry is raising concerns because of a lack of regulation of pri­vate trials and the uneven application of requirements for informed consent and proper ethics review.

ICMR, a national body responsible for the formulation, coor­dination and promotion of biomedical research, is striving to do just that with the Clinical Trials Registry of India, which it launched in July 2007.

The Clinical Trials Registry en­courages the registration of all clinical trials conducted in India before the enrolment of the first participant. “The registry is meant to bring transparency to clinical trials conducted in India,” explains Kapoor, who is all too aware of the shortcomings of current trial publi­cation practices, including a tendency to publish trial results only when they are positive. “Trials done earlier where the drug has not been found to be effective are sometimes not publicized,” she says, adding that information about failures should also be put in a publicly searchable database.

Recommendations

This section provides an overview of suggestions for implementation.

In view of the results and the discussion the following is recommended:

1. The pricing model currently adopted by the CRO which is activity based, should be gradually converted into an outcomes-based pricing model for key clients without compromising on quality of work.

2. The franchise organisation model which was suggested by Interviewee 4 should be considered for implementation in the future. However if implemented, this model should be applicable only for clients who are responsible for generating revenue which has been steady for at least one year.

3. The CRO should concentrate on the problem areas mentioned by the interviewees due to which there could be a potential loss in business, this can be done by the following:

i. Making an extra effort to deliver on time ii. Recruiting individuals to the company who are experienced

ii. Providing adequate client-specific and study-specific training to individuals within the CRO

iii. By having reliable quality control and quality assurance units in order to maintain the quality of the activity outsourced by the client

4. This study was conducted with a small sample size i.e. six interviewees, therefore the results obtained are not conclusive. This study needs to be carried out with a larger number of interviewees. The personnel responsible for the other four key clients should also be interviewed in order to understand the business implications of outsourcing within the CRO.

5. In outsourcing performance management, the relationship between the use of each type of measures, for example operational and relational, and the performance improvement of the outsourcing companies, outsourcing service providers, and other involved companies should be modelled, measured and tested by empirical studies. The contribution of different measurement approaches to the outsourcing performance improvement can be tested;

6. SLA (service level agreement) has been widely adopted in the outsourcing arrangements. However, it was not frequently mentioned in the identified literature. It contains information of many aspects, such as performance measures and measuring approach, contract and terms, and elements of managing service provider relationships. It has been widely studied for IT outsourcing (Buco et al., 2004; Larson, 1998; Misra, 2004) and business process outsourcing (Bielski, 2004). To understand the use of SLA in the field of outsourcing and its contribution to various aspects is recommended.

7. To achieve a goal of becoming a Global hub of clinical trials, the India will have to overcome challenges like unethical trials, delay in the trial approval, inappropriate protection of clinical data, and lack of Good Clinical Practice (GCP) certified sites and investigators.

8. The over-riding goal of performance management is to ensure and enable good performance and achievement of joint objectives - pro-actively. With this in mind, it is clear that performance must be managed throughout the project, not just reviewed at the end.

Future Work

Outsourcing is a fluid process. There is some give and take from both ends. It is therefore, vital for the continued success of Lilly and its future products, to regularly review and update its outsourcing process. Further review of the additional steps and their impact on the company should be considered regularly. The financial department can undertake an in-depth look at the hidden costs of outsourcing and how they are affecting the company. The management team should continue to be actively involved in the supplier selection and management of the suppliers.