Everest Group is a Dallas consulting firm that has been surveying the pharmaceutical industry to plumb the depths of its relations with suppliers. Like a marriage counselor fearlessly going into topics that neither spouse wants to look at too closely, Everest is seeing warning signs.

Those signs are all the more ominous because Everest isn’t working exclusively in the life sciences. It has experiences across all industries.

The 2007 edition of the Everest survey (announced at the Institute for International Research Partnerships with CROs conference) implies a gap between perception and reality, between sugary rhetoric and standard practice.

“Our unique focus is we help organizations look at their options in terms of optimizing their operations through a variety of sourcing options,” says the Everest Group’s managing principal, Todd Hintze.

Database Details

Everest has both a traditional consulting practice and a research arm. Its database of 9,500 sourcing transactions includes voluminous contract details, broken down by 125 different cities around the world. A transition is upon us, Hintze says. “We’re at the inflection point, right at the tipping point,” he told the crowd at the IIR meeting in Orlando.

In other industries, the progression through various stages and phases of outsourcing has been relentless, steady. Not so in pharma. It’s stalled.

In Orlando, Hintze took the podium with a colleague, Everest engagement director Rich Karbt. “The thing that has troubled Rich and I is why is the CRO sector pausing at this inflection point?” Hintze asked. “Because we’re myopically focused on efficiencies? Because we’re unwilling to accept and examine new [outsourcing] models? Are we getting the value from the [outsourcing] model that has been proven in other industries and other functional areas?”

For 2007, its third such survey, Everest polled 280 respondents across the sponsor and CRO sectors, from a broad range of types of companies and professional roles.

“We’re seeing that they are not reaping the full advantages of outsourcing that we’re seeing in other industries,” Hintze told ClinPage in a separate conversation. “They are not taking advantage of a traditional outsourcing relationship.”

A Lagging Industry?

What does happen? Nothing that would be recognizable in other industries. What happens in the life sciences is very different. ”A request for proposal will be developed by the sponsor, probably reviewed within operations, within the clinical community, within finance and then, proverbially tossed over the wall to the CROs,” says Hintze. “And it’s up to the CROs then to interpret what’s the most important thing.”

In other industries, he notes, risk and authority are transferred to the supplier. That’s not incidental, business-school stuff but the heart of the nature of outsourcing. “We don’t want to be pedantic,” Hintze says. “We recognize that there are certain components of CRO services where you can’t shift the risk, whether from a clinical perspective or from an operational perspective.” Without a transfer of risk and authority, real gains in cost or productivity are unlikely.

Communication Gap

Hintze says that the sponsor community and CROs may not be on the same page. “A lot of our survey results, as we’re getting back from the sponsors, show a mismatch in between what the CROs are thinking and what the sponsors are thinking,” he says. CROs believe they are evaluated and chosen mostly on the basis of a low price.

In fact, Hintze and Kabrt report, sponsors are more keenly worried about therapeutic area expertise and experience in diverse geographic areas. “They’re looking for access to expertise,” says Hintze. “And it may be in a therapeutical class. Or they’re looking for access to new geographies. Or to new tools and technologies.”

A Contractor By Any Other Name

On some level, it’s about defining and using familiar terms properly. “We refer to this as outsourcing. But the way it’s operationalized continues to be light contracting,” Hintze explains.

Such basic blocking and tackling as metrics, contracting and governance are often rushed or ignored in the clinical trials outsourcing arena. And that is not leading to good results for the sponsor community.

Never Talking Turkey

By way of example, Hintze tells of a CRO that was performing data management for a sponsor. A dispute arose. The sponsor elected not to pay the CRO’s invoice at a time when data was supposed to be swept into the sponsor’s systems. In response, the CRO withheld the data. The matter escalated.  Neither side knew how to resolve the issue—or even who was empowered to do so.

Hintze believes other industries, with mature outsourcing strategies, might never have allowed the mess to arise. Initial negotiations and service agreements between the sponsor and the CRO could have provided a framework for ongoing access to vital clinical data while the dispute was resolved. The fact that there was no clear way to move forward is emblematic of a less-than-advanced use of outsourcing in the life sciences.

Thinking About Governance

Says Hintze: “In other industries, as a part of governance and as a part of traditional outsourcing contracting, you’ll have clauses and functions in there that are intended to provide a continuation of services despite disputes. This sponsor and this CRO were only meeting quarterly. There was no issue escalation mechanism in place to address these types of issues.”

He doesn’t mince words. Hintze says the industry’s customary rush to start trials, to mobilize sites and functional teams, accelerates to such a degree that sound communication and good management practices between CROs and sponsors are given short shrift. “They don’t discuss what should be measured,” he says.

ClinPage will have more insights from Hintze later this year, when we debut an audio version of our conversation, complete with a transcript. Other thought leaders who wish to be interviewed should contact the .