Sunday, December 15, 2013

Strategic Partnerships in Big Pharma: Implications for Small and Mid-sized Sponsors

Traditionally, large biopharmaceutical companies have outsourced clinical study responsibilities to a wide variety of external vendors, distributing the work across many service providers.  For their part, large CROs have routinely provided services to both large and small biopharmaceutical companies to keep their top-notch resources utilized to capacity and add to their bottom line.

Over the past several years, large sponsors and CROs have been trading in these transactional, fee-for-service business relationships for longer-term, tightly-integrated strategic partnerships.  And the trend is only accelerating.

Earlier this year, CRO Parexel surveyed 26 biopharmaceutical companies who represent 39% of R&D industry spending. In the resulting publication, the Strategic Partnership 2013 Report, respondents emphasized the importance of these collaborative arrangements.  Most recently, at the Partnership in Clinical Trials conference in Vienna last month, Pfizer reported partnerships with just 2 full-service CROs, down from the 17 outsourcing relationships they used to have.  Baxter reported a similar shift.

The advantages for sponsor companies are many: shared risk, knowledge transfer, lower costs, increased efficiencies, shorter time to market, and the ability to implement the massive data integration that risk-based monitoring requires.  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 FSP arrangements.  Both companies benefit from the shared goals and shared investment inherent in their relationship.  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 partnerships.

As is frequently the case, a new advantage for one segment of the industry can become a new disadvantage for another.  Small and medium-sized biopharmaceutical companies, like their large counterparts, have been feeling the strain of higher costs and smaller staffs.  The trend towards alliances among the large players adds to these economic pressures, as it increases competition for top-drawer CRO resources. The reduced availability of these outsourcing options could mean 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 partnerships.

Small and medium-sized biopharmaceutical companies need to adapt by considering one of two approaches.  They could look beyond their traditional service providers and consider selecting smaller outsourcing partners who may 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.)  They could also consider establishing strategic partnerships of their own.   Doing so would increase the expertise and technology to which they’d have ready access, and could extend their global reach.

A robust vendor qualification program has always been important to sponsors, yet the move toward strategic partnerships may elevate its priority.  If small and medium-sized biopharma companies decide to move their business to smaller providers or forge strategic partnerships with new or existing providers, they will need to increase the time and resources they currently invest in vendor qualification activities.  Selection committees should be formed from many different departments across the sponsor company and selection criteria should be formally documented. QA auditors must be well-prepared, audits must be thoroughly conducted, resulting CAPA activities must be tracked, and issues that are identified must be resolved to the satisfaction of both parties. Sponsor companies may opt to engage outside expertise to perform qualification audits or to develop comprehensive in-house vendor qualification programs.

The trend toward strategic partnerships among large companies is reshaping the terrain for all industry players.  Small and mid-sized companies who take the time to review current outsourcing arrangements, assess alternative models, and thoroughly qualify new vendors and partners will fare the best.

By Laurie Meehan

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