News | February 12, 1998

Clinical CROs Get Mixed Reviews

Pharmaceutical out-sourcing isn't just for manufacturing. Drug companies are contracting out more and more of their activities, including the management of clinical trials. In a roundabout way even this activity affects manufacturing: If clinical trials aren't managed properly, drugs don't get approved and, hence, they are not manufactured.

In a study published February 6, CenterWatch reported that pharmaceutical and biotech companies intend to increase their usage of contract research organizations (CROs) despite concerns about quality and costs of CRO services (Figure 1).

CenterWatch, which monitors and comments on clinical trials, estimates that the pharmaceutical industry will spend $3.3 billion on CRO services in 1998, up from $1.8 billion in 1995. During this time research and development out-sourced, as a percentage of total R&D spending, increased from 16 percent to 23 percent. Despite this tremendous growth pharmaceutical industry managers are growing increasingly wary of CROs' ability to maintain quality while keeping costs down. Such concerns may eventually temper the enthusiasm for CROs and other out-sourcing firms, especially in manufacturing.

CenterWatch reports that 40% of companies surveyed believe that the quality of work at CROs has deteriorated during the past two years (Figure 2). Plus, all companies surveyed (15) report that CROs are more expensive than performing work in-house (Figure 3).

The main reason drug companies turn to CROs is to lower their fixed costs. For clinical trials, whose occurrence and frequency cannot be easily predicted, companies are able to reduce staff and hire CROs on an as-needed basis as drugs move through clinical trials. While there may be long-term savings in this strategy, drug firms are now convinced that on a per-trial or per-project basis CROs are more costly than utilizing existing in-house resources.

Other cost-related complaints:

  • CROs charge customers for mistakes or problems arising from the CRO
  • Extremely wide quote ranges from different CROs, sometimes as high as 500%
  • Realization that the costs of in-house management and accounting resources must be added to the cost of using CROs. One firm estimates it takes 25 in-house employees to manage 100 out-sourced employees.

Service and cost were the most highly rated selection criteria for CROs, with 53% of those surveyed listing these factors as their top priority. Next was the ability to deliver patients for clinical trials (47%) and therapeutic expertise (40%). The CRO's financial resources (13%), size (6%) and global capacity (6%) were the least sought-after qualities (Figure 4)

Data collection (77%), statistical analysis (57%), pharmacoeconomics (39%), medical writing (36%), negotiating budgets and contracts (36%), and site selection (34%) were the most-used services.

For more information, contact: Bob Whitaker, Analyst, CenterWatch, Inc., 581 Boylston St., #506, Boston, MA 02116. Tel: 617-247-6074.

by Angelo DePalma