There’s been a shift lately in the way Big Pharma is doing business. Traditionally, large pharmaceutical companies would outsource clinical study responsibilities to a wide variety of external vendors, essentially distributing the work across many service providers. Large CROs routinely performed work for both large and small pharmaceutical companies to keep their top-notch resources utilized to capacity and add to their bottom line.
More recently, economic pressures have moved Big Pharma away from transaction-based, fee for service arrangements with their CROs, and towards strategic alliances with them. The advantages for sponsor companies are many: shared risk, knowledge transfer, and shorter time to market. Strategic alliances are arguably as advantageous for the CROs, providing a steady pipeline of work that’s larger in scope and longer in duration than is typical under traditional arrangements. The industry journals are replete with sage warnings about culture incompatibilities and intellectual property protection, but done correctly, there may be few significant downsides to these strategic alliances.
As is frequently the case, a new advantage for one segment of the industry is a new disadvantage for another. Small and medium-sized pharmaceutical companies, like their large counterparts, have been feeling the strain of higher costs and smaller staffs. Adding to these economic pressures, the trend towards alliances among the large players increases competition for top-drawer CRO resources. The reduced availability of these outsourcing options likely means smaller sponsor companies will pay higher prices for services. It could also mean that at the same time they are paying more, the quality of service and level of commitment they receive may be reduced, as the best and most experienced CRO staff members are dedicated to projects associated with strategic alliances.
Just as Big Pharma has taken a look at the economic environment and has begun forming nontraditional business relationships, small and medium-sized should take stock and make some adjustments, as well. They should begin looking beyond their traditional outsourcing choices and consider selecting smaller outsourcing partners who may well be in a better position to focus on individual projects and give priority to shorter term engagements. After all, a project that’s small to a big CRO will be comparatively big to a small CRO.
Effective vendor prequalification has always been important, yet this new environment may elevate its priority. If small and medium-sized sponsors look to expand their set of outsourcing partners, they will need to increase both the time and resources they currently invest in prequalification activities. To further ensure that potential new service providers have the ability to deliver quality and timely results, companies may increasingly opt to engage third-party consultants to perform additional prequalification audits or to develop comprehensive in-house vendor qualification programs.
Bottom line: The trend toward strategic alliances among large companies will change the terrain for many industry players; competition for the services of large, established CROs is likely to increase. Smaller sponsor companies can compensate by emphasizing vendor prequalification procedures and subsequently contracting with capable, smaller services providers.
Expert consultants at Polaris would be happy to talk to you about any CRO prequalification needs you may have. Contact us at info@polarisconsultants.com or visit our website at www.polarisconsultants.com.
by Laurie Meehan
This blog discusses trends and issues in the pharmaceutical and dietary supplement industries. Click the SIGN UP link to subscribe to occasional notifications of new blog posts.
