October Special Report
September 17, 2010
Is the most time-honored business model in clinical trial outsourcing out of step with our era?
Most contract research organizations (CRO) charge on the basis of time and materials. Such companies resemble construction firms that erect skyscrapers. If the design of the skyscraper changes, the builder adjusts its fee. If more steel is needed, that goes on the bill, too.
The CRO industry knows that sponsors frequently and significantly alter their clinical trial plans. The time and materials method insulates the CRO from being asked to do twice as much work for the same price.
Hard Hat Model
But the sponsor community, meanwhile, knows that some trial costs seem to spiral beyond the expanding scope of a project. In some quarters of the sponsor community, there is resentment on this front. The fact that sponsors are shedding the people who used to handle such work themselves is a complication. There can be diminishing in-house expertise to assess whether or why a particular project cost too much.
We know some readers are squirming. They will insist that clinical development is vastly more complex than putting up an office tower in Miami.
Indeed, unlike a construction project, a clinical trial has many workers from multiple organizations at multiple locations. That introduces communication issues and ambiguity when colleagues must review each others' work. In a clinical trial, there may be highly customized software that has never been used before—in contrast to a welder or carpenter who uses the same tools for years. The subcontractors on a trial most likely have never worked together before. And unlike a building project, a clinical trial may be trying to find research subjects who are simultaneously being recruited by similar projects. It's as if two buildings were being built on the same lot.
Finally, it's a given that more sites and countries will be needed to finish many clinical trials. In architectural terms, it's as if the sponsor community deceives itself—dupes itself—into budgeting for a 15-story building despite the fact that an 18-story building will probably be required in the end. Given the higher cost of an 18-story building, it's only fair that a CRO is compensated for the extra floors. Some CROs don't stay in business because of failing to anticipate what can go wrong on floors 16, 17 and 18.
The context for sponsor self deception is important.
In the past, with fat revenue streams from blockbusters, sponsors may have looked at a higher-than-expected bill from a CRO and shrugged. There was so much money in those days that it may not have mattered that a project required a few extra million dollars.
Here's a news flash. Those days are gone. Perhaps they will return. Perhaps cows will teach themselves to play backgammon.
Or perhaps Wall Street analysts, skeptical that mammoth pharmaceutical companies can grow, will demand more financial and operational exactitude of the publicly traded life sciences firms.
There's no doubt that the science in clinical trials is advanced. The science often surpasses what happens in academic medicine, which prefers tiny numbers of patients and iffy statistics. The real question in this age of outsourcing is whether the industry's execution of projects and the attendant financial forecasting can be raised to the level of the science.
Given our industry's slow pace of change (and general CRO resistance to technology) one possibility is that the existing time and materials approach will persist. Old ways of doing things could be embalmed in amber, permitting major clinical studies to unfold in ways that other industries would regard as operationally and financially sloppy. Here's a test. Is your company planning massive, global, multi-year trials with Microsoft Excel? Why not an abacus?