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TRANSCRIPT
The Bulletin
Issue Number 17: Sept 2012
Welcome to the PCMG newsletter no 17.
If you were with us at PCMG Annual Conference in Portugal in
June, here‘s a chance to refresh your memories. If you weren‘t there, read on to find out what you
missed! The meeting was a great success as always, with many interesting presentations and great
networking opportunities. Personally, I cannot even express my feelings of joy at getting ―back to
business‖ and seeing so many of the familiar faces I have not seen for some time.
This Bulletin includes Andy Parrett‘s critical dissection of strategic partnerships in our space, which has
prompted a valuable debate in PCMG circles. Another interesting piece discusses the relationship
between purchasing and outsourcing. Two words that can have the same content - or can they?
We also have important information concerning Committee vacancies. Please read. There will be
some changes in the Committee, and I‘m sure that you‘ll all join me in thanking Committee
members Andy Parrett, David Davies, Rhona Saunders and Tim Steven, who have decided to step
down and so will not be available for the next election. I‘m sure you all will join me in thanking
them for their great contribution to PCMG! You will also find, as usual, information on
forthcoming events.
Whilst the world still seems to be in financial crisis and the fate of the Euro continues to be hotly
debated, we have responded to the need for savings by organising our first webinar. To be held on
the 12th
of September, the webinar will be on the topic of ―R&D outsourcing in hi-tech industries - a
research study.‖ Members have shown a great deal of interest in the idea of webinars, and these
could prove a useful way for PCMG to provide added value for the membership fee.
Looking forward to seeing you all in London in the beginning of October,
Amy
Anne Maria Ylisaari
PCMG Committee Member
Stop Press: See page 7
for details of PCMG’s
first webinar, to be held
on 12th
September.
2
CONTENTS
PCMG Annual Conference Review ................................................................................................ 3
PCMG Committee Elections: Call for Nominations .................................................................... 6
PwC R & D Outsourcing Research Study and Webinar. ............................................................. 7
Musings on the Remits of Outsourcing Managers and Procurement ......................................... 8
Strategic Partnerships: The Emperor's New Clothes ................................................................... 9
October Workshop: Ensuring the Quality of Your Service Provider ...................................... 14
December Workshop: An Inside Look at the Financial Side of Clinical Trials. ..................... 15
Event Schedule................................................................................................... ............................ 16
PCMG Membership
The Pharmaceutical Contract Management Group is a professionally-constituted body dedicated to
optimising the outsourcing performance of its members and their companies. It is open to anyone
employed by a pharmaceutical company who has a significant interest and involvement in
outsourcing.
PCMG Sponsorship
Our workshops and annual conference provide excellent opportunities for
service providers to engage with contract managers in the pharmaceutical
industry. Our popular workshop sponsorship includes a presentation slot for
your representative to discuss key industry issues with participants, whilst
conference packages provide a range of further opportunities.
Recruitment Advertising Opportunities
You can advertise job opportunities in Outsourcing, Contract Management or associated positions
directly to the PCMG membership via the PCMG website.
PCMG OFFICE CONTACT DETAILS
For all queries contact Sam Dignan: Tel: +44 (0) 1625 664 546.
Bulletin contributions are always welcome.
www.pcmg.org.uk
3
PCMG 8th
Annual Conference 2012
Returning to the Algarve in Portugal this year, the 8th
PCMG Annual Conference tackled the
topic of “Innovation in a Changing Market”. Set in the impressive grounds of the Sheraton Pine
Cliffs Hotel, the location and agenda stimulated interesting discussions and worthwhile debate.
Committee member Lan Bandara reports.
Day One
Introduction
Opening the conference, PCMG Vice Chair
Rhona Saunders of Biogen Idec introduced
the agenda for the day. Rhona also covered
some key PCMG activities including an
update on the new PCMG website.
Strategic partnerships: As good
as they claim?
PCMG Chairman, Andy Parrett, started the
morning session with a thought-provoking
and controversial presentation. Andy critically
evaluated the proposed benefits of strategic
partnerships, stating that there was no
evidence supporting many of the claims made
regarding partnerships in the industry. He also
suggested that strategic partnerships may lead
to a lack of choice and so result in a
monopoly for the larger CROs.
The changing scene
Paul Richter of Jina Ventures followed Andy
with some interesting financial observations.
He noted that CRO growth is now outpacing
Pharma, due to Pharma downsizing and to
increased levels of outsourcing. CROs are
seen as very profitable businesses, and many
have been privatised in recent years through
venture capital investment.
Mike Sitton, Clear Cut Services, then
provided an entertaining personal perspective
of the changes in clinical research over the
last 25 years.
Rhona Saunders opening the conference
Following Mike, Professor Trott from the
University of Portsmouth reviewed some of
his research into outsourcing in this area.
Completing the morning session, Peter
Carberry of Astellas summarised some of the
key changes in the industry over the last 30
years. Both Pharma and CROs have evolved
their businesses to meet the challenges of the
economic environment. The next level of
innovation may be more use of co-
development/co-investment models.
Comparisons with other
industries
After lunch, Professor John Seddon of
Vanguard Consulting took everyone through
his observations of outsourcing and partnering
in different industries. He identified a
common pattern where segmenting
organisations into different compartments in
the wrong way has had a clear negative effect
on productivity and efficiency.
4
Fireside chat
The next session was a new take on an old
idea - the ‗Fireside Chat‘ concept.
Conversation was fuelled by three
protagonists: Joe von Rickenbach, CEO of
Parexel and CRO pioneer, who gave the CRO
perspective; Mike Sitton, presenting the
sponsor viewpoint, and Prof John Seddon,
bringing a (potentially incendiary) external
perspective. The moderator was Richard
Scaife, Mitsubishi.
Debating whether CROs and strategic
alliances have really brought tangible benefits
to clinical trial management, each participant
had contrasting experiences. The conversation
suggested that CROs may be the main
beneficiaries of such relationships, but that
the reason for this lay partly at the door of
pharma: sponsors‘ short-term outlooks can
prevent alliances from maturing and realizing
mutual benefits.
Heating up, the discussion moved on to
consider the evolution of ‗Mega-CROs‘ and
the resulting polarization of the market. All
three protagonists shared concerns over the
potential diversion of business focus and
continuity during mergers and acquisitions.
Overall, the chat provided interesting insights
into the fact that innovation in our business
may not always be beneficial to all concerned.
“This house believes CROs are
the source of all innovation”
The first day ended with the popular Oxford
debate. This year, the motion tabled was
―This house believes CROs are the source of
all innovation.‖
Supporting the motion were Jon Wood of
Syne Qua Non and Karen Redding of
Fireside chat with Richard Scaife, Josef Von
Rickenbach, John Seddon, and Mike Sitton.
Phlexglobal. In opposition were Craig
Coffman of Endo and Matthew Bardsley of
AstraZeneca.
Convincing lucid arguments were put forward
by both parties in this entertaining debate, and
it was left to the moderator, Steve Martindill
(Gilead Sciences), to choose the winner. In
the end, for the first time since the debates
began, he declared a draw!
The carnival comes to town
The gala dinner was another spectacular event
set outside in the grounds of the hotel. With
the sun setting in the background and a
refreshing breeze, everyone had the chance to
reflect on the first day‘s presentations and
discuss thoughts and ideas arising from what
they had heard.
After an excellent meal, we were delighted to
hear how Stuart McGuire of Chiltern is on the
road to recovery.
A fantastic evening‘s entertainment followed,
sponsored by Chiltern. Dazzling juggling and
fire eating acts were followed by carnival
dancing right off the streets of Rio.
We finished the night relaxed and refreshed,
ready to get back down to business on day
two.
5
Day Two
Innovation, complexity, and the
need to foster the right
environment
Faiz Kermani, SFL Regulatory Affairs &
Scientific Communication, kicked off the
second day with a summary of innovation in
the regulatory arena and highlighted a
surprising number of new initiatives in this
area. This was followed by John Bennett
(JABPharma) who discussed the complexity
of clinical trials. Switching tracks, Roger Joby
(1to1to1), a long standing contributor to
PCMG events, highlighted the lack of
innovation in clinical contracts. He also
noted, however, that there was not much
motivation in the industry to make changes to
this paradigm.
Matt Bolton completed the morning session
with a lively and refreshing review of
innovative companies. He pointed out that
innovation doesn‘t always happen by chance.
Many companies make an investment in
fostering the right environment, and allocate
time specifically for work on innovation.
Operational innovation
The last session focused on operational
efforts. Dr Fraser Inglis from the Glasgow
Memory Clinic provided an investigator site
perspective, and Nicky Yarwood of Roche
Products took a closer look at monitoring.
The last presentation of the day was from
Steve Kent of Perceptive Informatics, who
reviewed many of the tools available in
clinical research.
Lively discussions on the terrace
Overall, the meeting provided a fantastic
overview of innovation in our industry. It‘s
clear much progress has been achieved over
the last two decades – but perhaps things have
not progressed as quickly as in other
industries.
Over the next 20 years, we can certainly
expect to see more changes that impact the
way we work. There is still room for
improvement.
Lan Bandara
PCMG Committee
What would you like to see at
next year‟s conference?
Agenda development is already underway,
and we would welcome your ideas for
topics and speakers.
Please send suggestions to Richard
Scaife, Conference Chair for 2013.
Email: [email protected]
6
PCMG Elections
One of the great strengths of PCMG is that the organisation is run by members for the benefit of
members. The committee, the officers and the directors are active PCMG members who give time
when their day jobs permit to serve as a ‗management team‘ and organise activities such as the
workshops, webinars, training events and the annual conference.
PCMG could not function without the support of these individuals. On behalf of the membership, I
would like to extend heartfelt thanks for the work they do week in and week out to further the goals
of PCMG.
The structure of the current PCMG management team is as follows:
Board Directors (3-4) Officers (4) Committee (Number not set)
Andy Parrett Chairman: Andy Parrett Alison Moor Antje Hindahl Vice Chair: Rhona Saunders Anne Maria Ylisaari Cliff Leat Treasurer: Cliff Leat David Webber David Davies Secretary: David Davies Lan Bandara Lesley Matthews Richard Scaife Stephanie Kamp Steve Martindill Tim Steven
The directors, officers and committee are appointed for a two-year period. After two years, the
individuals must either step down or offer themselves up for re-election. Andy Parrett, David
Davies, Rhona Saunders and Tim Steven have indicated that they will not stand for re-election for
the 2013-14 period. There will therefore be vacancies for one or two directors and three officers.
Meanwhile we expect a need to fill several vacancies on the wider committee.
Would you like to put your name forward to help drive PCMG forward in 2013-14, either as a
director, officer or a committee member?
Nominations are sought from the membership, to be received in writing on or before 14th
December
2012. Please contact me or any of the current team if you would like to discuss any of the roles,
informally, in confidence.
Should we receive more candidates than vacancies for any given role, then an election will be held.
Elections must be concluded and ratified by the time of the AGM. This will be held on 23 January
2013, during the first workshop of the year.
This is your chance to make a real difference to PCMG in the future!
David Davies
PCMG Secretary
Tel: +44 (0) 7764682332
7
2012 R & D Outsourcing in Hi-Tech Industries –
A Research Study
During 2011-12, PricewaterhouseCoopers, in collaboration with PCMG, conducted a research
study into R&D outsourcing in hi-tech industries. Here, PwC’s Andy Brown introduces the study
and the results.
The main focus of the study was clinical outsourcing, but
we also interviewed some of the world‘s leading aerospace
& defence, hardware, software, and telecommunications
companies. We recorded 71 face-to-face interviews in 42
companies across 9 countries, covering both customers and
suppliers. Interviewers used ‗hidden needs‘ methods drawn
from psychology (Repertory Grid and Cognitive Mapping).
Interviews typically lasted 90 minutes, and were recorded
and transcribed for discourse analysis.
We presented our preliminary Repertory Grid analysis at
the PCMG Conference in Dubrovnik, in June 2011. This
suggested the following:
There is high variability in how customers and
suppliers perceive each other and the performance
of their relationships.
This variability occurs both across the market and
within individual customers and suppliers.
There is a disconnect between customers and
suppliers in what they expect as the norm for ‗high
quality‘ relationships and what attributes
differentiate performance.
Both customers and suppliers recognize the
importance of personal interaction and relationships
to performance, and yet both rate each other with a
high variability.
At the PCMG webinar on 12 September 2012, we will compare these Repertory Grid findings with
a similar automotive study, and then move onto new analyses of both the Cognitive Map interviews
and a follow-up on-line survey conducted with clinical outsourcing customers. We will discuss the
challenges facing both Pharma and its suppliers, and make suggestions for urgent action.
Dr Andy N Brown
PricewaterhouseCoopers
Find out more –
PCMG Webinar
Wednesday 12th September 1300 - 1400 BST 1400 - 1500 CEST Andy Brown from PricewaterhouseCoopers will present further details of the results of their research into R&D outsourcing in hi-tech. If you were at the annual conference in 2011 in Dubrovnik, you may have heard Andy present the preliminary findings, which were received with a great deal of interest. This research project has involved a significant amount of input from PCMG along the way, and the results are likely to be relevant to all members whatever their specific job role. This is PCMG’s first ever webinar. If successful we would like to provide further webinars to members on a periodic basis as an addition - not a replacement - to our current face to face workshops and annual conference.
To register for the webinar, go to
http://event.on24.com/r.htm?e=5051
80&s=1&k=AA8075A65141424AF
A5AEB3106A5E403 .
8
Musings on the Remits of Outsourcing/Contract
Managers and Procurement Specialists
The topic of the balance between the roles and remits of outsourcing/contract managers and
those working in the procurement function is a perennial favourite. Carl Emerson has
experience in both clinical development and procurement. In this article, he shares observations
gained during more than twenty years of working in the field – and asks a few questions, too.
The early days
As pharmaceutical companies started out on their first outsourcing projects, they soon discovered the
adventure of outsourcing raises problems for the untrained and inexperienced. It quickly became
apparent that if the same difficulties were not to be repeated over and over again, it was going to be
essential to capture learning and build up a pattern of best practice. Further to this, it also became
clear that the skills required were too extensive to be simply bolted onto the job of a clinical
manager. This led to the emergence of a dedicated outsourcing management function, populated by
experts within clinical who were able to build up a toolbox of templates, establish workable
procedures, and guide the uninitiated and untaught through the muddy waters of first time RFPs and
contracts.
Procurement gets worried
As spend grew, and outsourcing became increasingly standard practice, the amount of money
changing hands inevitably caught the attention of senior management, and the procurement function
started to express concerns that best practice might not be being followed. This led, in many
companies, to an uneasy dialogue as both groups tried to communicate the importance of their
respective experience in this area of huge cost and critical delivery.
What‟s the point of a clinical outsourcing manager?
So, the big question. Why is a clinical outsourcing manager necessary, when, for the rest of the
world‘s industries, procurement can do it all? I‘m now in a company where all outsourcing is done
through procurement. We do a fantastic job with source plans, category strategies, Porters' analysis,
market segmentation, savings targets and contract execution, all good procurement stuff. But the
customer groups want to see more of our managers, more operational support, more hands-on
running of meetings and training sessions.
These are all essential added-value activities, but not ones that contribute to our procurement
department objectives. This isn‘t necessarily a problem, but it certainly raises a number of issues.
Is Pharma so different from other industries?
So, what makes these added-value extras so necessary in this industry? Anyone can say their
particular industry is different. Surely, it is just a question of project management?
The answer is that Pharma really is different. Yes, of course large Pharma companies need to apply
best procurement practice. As in every other industry, companies need watertight contracts,
transparency over spending, validated savings. But the projects outsourced are extremely complex,
requiring a high level of scientific understanding. Trial conditions can be very variable,
circumstances can change, and results can be unexpected.
9
Agreements have to take account of all these factors – and that‘s why you can‘t employ pure
procurement practices without clinical understanding.
To test the theory...
If you want to test the theory, just try calling an investigator a 'supplier' and treating him as such -
and see how far you get!
Carl Emerson
Strategic Partnerships: The Emperor's New Clothes
In this article, first published on 7th
August in Pharmaceutical Executive (www.pharmexec.com),
PCMG Chairman, Andy Parrett, argues that current strategic partnership models are neither
strategic nor partnerships. And they don’t add value to clinical trial outsourcing.
In Hans Christian Andersen‘s ‗The Emperor‘s New Clothes‘, two tailors promise their leader a suit
that is invisible to anyone unfit for office. In fact, there is no suit. But everybody goes along with it:
the Emperor doesn‘t want to seem incompetent; the people don‘t dare to challenge him. In clinical
trial outsourcing, we see a similar phenomenon - except our Emperor is the pharmaceutical
executive, our tailors the large CROs, and our invisible suit, strategic partnering. In the story, it
takes the foolhardy effrontery of a young boy to expose the truth. I‘d like to cast myself in that role
for this article.
The popular view
Strategic partnership deals are the fashion in our space, with numerous public announcements in
recent years.1 There have been a number of reviews and commentaries on the trend, most of which
conclude that strategic partnerships are beneficial to the sponsor companies implementing them.1,2,5
A good summary of the popular view has been provided by industry observer Kenneth Getz, who
says:
―Partnerships hold promise in establishing long lasting relationships that benefit from strategic
insight into & engagement in future portfolio needs. Under these relationships, sponsors partner
with fewer CROs . They gain the assurance of dedicated global capacity and expertise under shared
governance, coordinated communication and issue resolution and integrated operating processes
and systems.‖2
My italics there highlight the elements Getz associates with strategic partnerships. These recur
throughout the literature, along with others such as economies of scale, risk sharing and trust. But
what value is associated with each of these features? Are the benefits real? Where is the evidence?
The facts
The British mathematician and philosopher Bertrand Russell once said: ―Never let yourself be
diverted either by what you wish to believe, or by what you think would have beneficent social
effects if it were believed. But look only, and solely, at what are the facts.‖3
10
This is a useful approach to take when examining strategic partnerships because, although the
vision of collaborative sponsor-CRO alliances — that is, we‘re all in it together — might sound
appealing, facts demonstrating real added value are hard to find and reasons to doubt are many.
Here, I list some common-sense objections to each strategic partnership feature – points you will
rarely hear mentioned in a debate where facts are ignored in favour of righteous platitudes.
Strategic Partnership
Feature Disadvantage
Long Lasting
Relationships
Reduced flexibility/agility. Reduced competition (which impacts on
cost, quality and innovation).
Fewer Providers See above.
Dedicated Global
Capacity
Dedicated resources negate the benefit of Just In Time resourcing.
And why pay the premium for global capacity every time if it might
be cheaper to match vendor capability to project requirements?
Shared Governance
Governance is expensive. Popular models are based on issue
escalation rather than Risk & Quality Management, and obscure
who the customer is so harming delivery.
Integration
Integration introduces prohibitive exit costs for the relationship,
therefore incurring the same disadvantage as Long Lasting
Relationships and Fewer Providers.
Economies of Scale What economies of scale? The big CROs who sell this benefit tend
to be the most expensive. Economies of flow are more important.4
Risk Sharing
Risk sharing in service contracting does not exist because if you try
to transfer risk, you pay a premium even if you never encounter the
risk.
Trust
Trust is a false concept where applied between organisations, but
one that appeals due to the mind’s tendency to personify groups. It
is used as an excuse for zero transparency, which should be the
real basis for prolonged engagement of a provider.
Examine the literature. The main benefit said to arise from strategic partnerships is the promise of
savings. However, the only company that appears to have put their name to a figure on this is Eli
Lilly (20% on data management & monitoring, but no details given of how the saving was achieved
or measured).5 Meanwhile, there is other evidence that partnership savings are not materialising,
with last year‘s RW Baird Survey suggesting CRO costs have increased, particularly for large
pharma where the majority of the strategic partnership deals have been created.6
In a nutshell, there are two big problems with strategic partnerships in our industry. The first is that
they are not strategic. The second is that they are not partnerships.
11
What Does „Strategic‟ Mean?
The concept of strategic purchasing can be traced back to a seminal paper by Peter Kraljic
published in Harvard Business Review in 1983.7 Kraljic explained how suppliers can be classified
in terms of cost and the risk they present of failing to supply (perhaps failing to recruit patients).
The implications of Kraljic are shown in Figure 1. When assessing suppliers, we calculate what the
supply failure risk is versus cost, which gives us a definition of value. Now, if awarding an entire
portfolio, it is reasonable to position small CROs at point A representing low cost but high risk,
while the larger, better-established CROs might occupy point B, representing high cost with lower
risk. The place any buyer would like to be is at point C, but that isn‘t very realistic. Instead, the goal
might be to get to point D.
The message is that it may be better to do that by investing in mitigating the risk of a low cost
provider than by negotiating discounts with an established one.
Investment to support a provider is a real strategic
approach. Procurement professionals call it ‗supplier
development‘, and it is clear to see how such a philosophy
might lend itself more readily to engaging cheaper, riskier,
smaller providers.
In our industry, however, we have made it a pre-requisite of
strategic partnerships that the provider is large and global.
Figure 1
Kenneth Getz observes: ―Small and mid-sized CROs have largely been left behind while major
CROs — the only organizations with sufficient scale and diverse talent — service a growing
number of integrated relationships.‖2
This prevailing attitude reduces the science of procurement to mere shopping, and is reminiscent of
the old phrase ―nobody ever got fired for hiring IBM.‖ Strategic purchasing should be about
mitigating supply failure risk, but in our space nobody ever talks about that in the same breath as
strategic partnering. The single biggest risk of supply failure — not recruiting patients — is never
mentioned. The focus instead is on discounts. It‘s depressing that such tactical, point-of-contract
saving-mechanisms are constantly touted as strategic solutions when frankly they are not.
The problem is that faced with a $125 billion patent cliff, executives are desperate to focus on
immediate savings that can only be reported through tactical means. So pharma talks strategic, but
acts tactically, and nobody can blame the big CROs for making some money out of the situation. As
in the story, the Emperor has brought his predicament entirely upon himself.
Partnerships and the Risk Dynamic
In the Journal of Clinical Research Best Practices, Ronald Waife writes: ―[T]here is nothing to be
gained by characterizing service providers as partners… the criticism of a pay-for-service
relationship in favour of something somehow more lofty is misplaced and misleading.‖8
12
True partners would share interests, risks and profits. However, in Waife‘s analysis, sponsor risks
and profits are high, while CRO risks and profits are more modest. On this latter detail I tend to
disagree. My observation is that those CROs who have cornered the strategic partnership market
actually generate profits (as a percentage of earnings) comparable to those of their clients.
Consider the market. Private equity companies have been scrambling to get into the CRO business
over the last 8 years, with 14 formerly public CROs having moved into private ownership.9 Such
investors don‘t go hunting acquisitions in industries where profits are modest. Strategic partnering
is where they want to be. Associated acquisition activity has led to a consolidation of CROs, and
economists tell us that as the number of suppliers decreases, so prices rise in the pursuit of profit.10
This is especially true in the supplier base for strategic partnerships because, remember, we have
made it a pre-requisite of strategic partnerships that the provider is large and global. This has
limited our options, with one analyst claiming that the six largest CROs now account for 50% of
total clinical CRO revenues.11
This means a market that economists describe as ‗oligopoly‘,
characterized by, among other features, high profits for the suppliers.10
It would be OK for the CRO side of the partnership to enjoy high profits if they shared the risk but,
as Waife points out, this is where the partnership concept really breaks down:
―The CRO‘s risk in non-performance is mostly one of tarnished reputation… [but] responsibility for
failure is usually obscure… [and] sponsors are notoriously loathe to pursue penalties. If there is a
sanction it would most likely be loss of work. But … sponsors routinely continue to give work to
service providers who have failed them.‖8
Put simply, risk sharing does not exist between customer and service provider, and you can‘t have a
partnership without shared risk. Waife and I agree on the solution for this dilemma: accept that the
risk is always with the client, who should therefore take responsibility for managing the risk.
Taking responsibility for risk means the sponsor needs to be the boss, not a partner. Partnerships
create governance hierarchies built around issue escalation and nannying project teams. CRO
personnel often sit on committees where they are equal or senior to sponsor personnel, blurring the
distinction between customer and service provider and harming delivery. We should replace this
traditional governance with a lean system where pharma focuses on risk and quality management
and the CRO gets on with delivering its services.
Waife concludes: ―[Why] not just pay your CRO for competent work without all the ‗partnership‘
trappings? Look at any recent press release announcing a new sponsor-CRO partnership. Every
single service or advantage listed… can be purchased… from that CRO… without a partnership
agreement.8
Waife might as well say that partnerships in pharma are like lipstick on a pig. No matter how you
dress up service delivery, it‘s still service delivery. Any suggestion the sponsor might benefit from
subscribing to the fantasy is groundless in fact and potentially dangerous.
13
Conclusion
In summary, strategic purchasing is concerned with mitigating the risk of supply failure. This risk
cannot be shared, because service providers and sponsors have different interests. A partnership
relationship is one where risks are genuinely shared because interests are shared. The concept of a
strategic partnership is therefore an oxymoron. It cannot be fit for purpose, and is a classic example
of how an idea can become popular despite practically zero evidence of claimed benefits.
It has probably not escaped your notice that should (as would seem likely) the risk/cost profiles of
CROs described in Figure 1 vary significantly between trials (so that, for a given trial, a cheaper
CRO may also sometimes be less risky) then a policy of radically limiting one‘s supplier base will
impact the possibility of achieving best value from one trial to another. Thorough study of this
dynamic — considering total cost of ownership in order to fully understand the pros and cons of
limiting one‘s options — is therefore essential for any sponsor considering its sourcing strategy.
Taking such an evidence-based approach is well rehearsed in the procurement profession, where it
is called ‗value analysis‘. However, to my knowledge, no such analysis has ever been undertaken
prior to implementing a preferred provider policy for clinical trial outsourcing.
Adoption of procurement best practice is what has been missing in clinical trial outsourcing as
pharmaceutical executives have preferred a wild goose chase for the utopian dream of partnering
with service providers. I would add that when sponsors accept that they alone own their risk — that
they cannot share it via misconceived partnerships — then they can justly demand full transparency
and slim profit margins from CROs who, ring-fenced from risk, will have no excuse not to comply.
Perhaps only then will sponsors secure the ultimate prize of reducing real costs rather than
recognizing imaginary savings…and subscribing to the myth of the Emperor‘s New Clothes.
References
1. Graham Hughes, Contract Research Annual Review 2011, The Complete Picture of the Contract Research Market, Biopharm Knowledge Publications 2011.
2. Kenneth Getz, ―Profound Shifts in Outsourcing Landscape‖, 10–15, Inside Outsourcing, A Supplement to Applied Clinical Trials, November 2011.
3. Bertrand Russell, BBC Interview, 1959.
4. Prof. John Seddon, ―Why do we believe in economy of scale?‖ White paper, July 2010.
5. Karyn Korieth, ―Integrated CRO alliances growing but poorly executed,‖ 1, 12–16, CenterWatch Vol 18, issue 09, September 2011.
6. Nick Taylor, ―CRO prices increasing, survey finds,‖ www.outsourcing-pharma.com, 29th September, 2011.
7. Peter Kraljic, ―Purchasing must become supply management,‖ Harvard Business Review, September 1983.
8. Ronald S. Waife, ―Partnership Heresy,‖ Journal of Clinical Research Best Practices, Vol. 8, No 1, January 2012.
9. Paul Richter, Jina Ventures, speaking at 8th Annual PCMG Conference, June 2012.
10. Hunt & Morgan, ―The Comparative Advantage Theory of Competition,‖ Journal of Marketing, 1–15, Vol 59, April 1995.
11. Jim Miller, President PharmSource Information Services Inc, Feb 2011.
Andy Parrett
PCMG Chairperson
14
October Workshop
Ensuring the Quality of Your Service Provider
London, Thursday 4th
October
Quality Metrics and Quality Risk Management are hot topics in the pharma industry at the moment.
This hands-on interactive workshop sets out to establish best practice on how Outsourcing and CQA
could collaborate to ensure quality in outsourced clinical trials.
Aimed at outsourcing and CQA professionals
together with Clinical Operations colleagues,
the workshop is structured around the goal of
providing a practical best practice document
for each participant to take away at the end of
the day.
Topics under discussion will include:
What basic elements of a Quality
Standards Agreement and/or a Quality
Management Plan should be agreed
between Sponsor and CRO Partners?
What constitutes quality and how is it
measured?
How can you build quality elements
into contracts?
What are the expectations of the
outsourcing group in inspection
readiness?
The day will start with presentations, case
studies and discussions led by experienced
CQA professionals. We will then move on to
interactive sessions covering the basic
elements of a Quality Standards Agreement
and Quality Metrics.
Venue and Booking
The workshop will be held at London‘s
Copthorne Tara Hotel.
Copthorne Tara Hotel
To register for the event and book
accommodation, go to the PCMG website at
www.pcmg.org.uk
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News, Articles
We welcome your comments and views. We
promote and support an open exchange of
ideas and we welcome input from both our
Pharma members and from non-members
including service providers. If you have any
comments or suggestions concerning the
PCMG, the bulletin or any articles in it, or if
you would like to contribute to future
Bulletins, please get in touch with Sam
Dignan.
15
December Workshop
An Inside Look at the Financial Side of Clinical Trials
Nice, Thursday 6th
December
This workshop explores the complex financial issues at the heart of every clinical trial contract.
Covering topics ranging from budgeting through to managing currency fluctuation, the workshop will
give participants insights and knowledge to help them manage their own spending more effectively.
Workshop Sessions
Financial Considerations in Clinical
Development
Currency fluctuation.
Inflation.
Tax.
Led by: Daniel Nicholson, Outsourcing &
Contract Manager, Grünenthal GmbH.
How Much More are we Paying for
our Trials and is it Justified?
A historical look at costs.
Led by: TBC, Medidata.
Case-Study: Streamlining Pass-
Through Costs
Led by: David Mantell, European Head,
Global Procurement - Pharma Development
Services, Bayer PLC.
Case Study: System-Supported
Budget Planning, Forecasting and
Management
System requirements.
Custom made versus off-the-shelf.
System features.
Lessons learned.
Led by: Birgit Viechtbauer, Planning &
Resource Manager, Grünenthal GmbH.
Financial Considerations Around
Outsourcing & Budgets in Other
Industries: What Can we Learn?
Consulting as a business.
An introduction to the construction
industry.
Outsourcing: sub-contractors and
consultants, off-shore working, fully
outsourced model, pros and cons.
Models and market drivers including
the Buro Happold position; current
position, planned position.
Led by: Andrew Comer, Director
Environment & Infrastructure / Buro Happold
Ltd.
Interactive Presentation: Financial
Assessment of Suppliers
Why bother?
Contingencies.
Providers of credit-worthiness data.
Led by: Mike Sitton, Director, Clear Cut
Services Ltd.
. Venue
The workshop will be
held at the Grand
Hotel Aston, Nice.
16
PCMG Event Schedule
Wed 12th
September, online
R&D Outsourcing in Hi-Tech Industries - a Research Study Speaker: Andy Brown, PricewaterhouseCoopers
Thurs 4th
October 2012 – London
Ensuring Quality of your Outsourcing Provider Sponsored by PRA
Committee Support – Antje Hindahl & Judith Zwickel
Thurs 6th
December 2012 – Nice
Financial Management of Clinical Outsourcing Sponsored by Medidata
Committee Support – Stephanie Kamp & Alison Moor
Wed 23rd January 2013 – London
Working with Ancillary Service Providers Committee Support – Cliff Leat & Andy Parrett
Wednesday 20th March 2013 – Europe (TBC)
Procurement Best Practice and Tools Committee Support – Cliff Leat & TBC
Non-PCMG Events