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Business Management Consultants
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Improving Efficiency in Drug DevelopmentImpact of Project Management
andStrategic Outsourcing
Thomas Lander, M.D. & Tom Johns, Ph.D.
1st International Athens Conference onProject Management Best Practices
Athens, July 1st, 2006
Business Management Consultants
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The pharmaceutical industry is missing an opportunity to realize the full potential of clinical development outsourcing.
Current outsourcing practices of most big pharmaceutical firms are overly conservative, combined with sub-optimal project management practices.
Clinical Capability Sourcing:
Trends and Strategies – Point of View,
January 2005, Bain & Company
Bain & Company Believes
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The 3 Most Critical Success Factors in Drug Development
Speed + Quality + Cost
Quality(Planned Results)
Resource(Budget)
Schedule(Time)
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Trends in Capitalized Preclinical, Clinical and Total Cost per Approved New Drug
J.A. DiMasi et al.Journal of Health Economics 22 (2003) 151–185
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Risks in Drug Development
• Unexpected failures = attrition
(e.g. toxicology issues, unsatisfactory bioavailability, adverse events)
• Unforeseeable delays
(e.g. regulatory hurdles, manufacturing issues)• Lack of feasibility
(e.g. inclusion/exclusion criteria, access to patients)• Explosion of cost
(e.g. additional studies or long-term outcomes required
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The Project Life Cycle of Drug Development
Attrition
Time
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Expected to Grow Faster than Supply
*No numbers available for the period after 2001Source: Parexel, 2002-04; Goldman Sachs, 11/04; CenterWatch, 2003
1977-781989-921998-01
30
60
82
0
20
40
60
80
100
Average numberof trials per NDA*
Oncology
CNS
Musculo-skeletal
GI
Infec-tious
CV
Respir-atory
18%
15% 15%
11%
9%
6%6%
0
5
10
15
20%
Compounds in preclinical developmentCAGR (02-04)
# of PCcompounds, 2004 1115286 313 348 548 292 169
Growth in # of investigatorsCAGR (98-02)
7%
Demand for Clinical Resources
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Access to Patients is Critical
>1Monthdelay
1 Monthdelay
On schedule
20030
20
40
60
80
100%
Delays in patient enrollment % of trials (US)
Source: CenterWatch, 2003; Cutting Edge, 05/04; Literature search
Preferred access to investigators and patients increasingly important
Phase 1Phase 2Phase 3
42%
31% 30%
0
10
20
30
40
50%
Delays in clinicial trials% longer than planned duration
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Factors Accounting for an Increasing Trend Towards Outsourcing
4
Future capability sourcing
Maturation of outsourcing
industry
Globalization & rise of developing world
clinical sourcing
Expected shortages of clinical resources(investigators & patients)
Increasing pressures on pharma R&D
2
3
1
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What Makes Outsourcing the Preferred Choice?
• Strategic shift towards new disease areas• Sub-critical mass of distinct functions,
e.g. clinical operations, data management etc.
• Temporary need for “one-time” large scale clinical trials, e.g. Phase III/IV
• High risk projects with uncertain outcome
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Approach to Strategic Outsourcing:
What tooutsource?
How tooutsource?
• Which capabilities/tasks are strategically important and therefore critical to keep in-house?
• Is the sponsor prepared to accept full strategic partnership with CROs?
• Preferred provider vs. one-by-one decision?
• Full service vs. functional service?
• Full delegation of responsibility vs. tight control
Two key questions
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Approach to Strategic Outsourcing:
What tooutsource?
How tooutsource?
• Which capabilities are strategically important and hence critical to keep in-house?
• Is the sponsor prepared to accept full strategic partnership with CROs?
• Preferred provider vs. one-by-one decision?
• Full service vs. functional service?
• Full delegation of responsibility vs. tight control
Two key questions
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There are Different Ways of Outsourcing
Tactical Strategic
By Function or by Study irrespective of strategic impact, e.g.
Functions 1,2 …
or
Studies A,B,…
Depending on strategic impact, e.g.
only non-core activities
or
partnership with CRO, e.g. risk/profit sharing
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Drug Development Process
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Functional Clinical Capabilities
Patientenrollment:
Investigator/site
selection
Patient recruitment
Datamanagement:
Data mgmt:
Data entry
Data mgmt:Data review
Trial monitoring
Statisticalanalysis
Reporting ®ulatory:
Safety reporting & communic’n
Clinical study report writing
Regulatory filings
Trial strategy& design:
Concept studies
Target product profile
Clinical dvpt
strategy
Trial design
Bio-availability
studies
Projectmanagement:
Program mgmt
Study mgmt
Site mgmt
Supportingactivities:
Lab service
sIVRS
Imaging
Biomarker studies
ECGDrug
supply
Business Management Consultants
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Functional Outsourcing
3
Stu
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B C . . .
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Activity 1 . . .
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X . . .
CRO
CRO
CRO
Tactical Outsourcing: Function or Study
3
Stu
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Activity 1 . . .
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CRO CRO CRO
Model preferred by most biotech companies
Study-driven Outsourcing
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Four Basic Models How to Structure Sponsor-CRO Relationships
• 100+ providers• Sponsor SOPs• Ad-hoc contracts
One-off Deals
• Historically the dominant model
• Still frequently used by smaller pharma/ biotech
Preferred Vendor
• 2-10 preferred providers
• Master services agreement and standard SOPs
• Arm’s-length relationships
• Used by most big/mid-size pharma/biotech today
Strategic Vendor
• 3-10 strategic providers
• Performance- based contracts
• Tight process integration
• Direct team communication
• A few big pharma in process of implementing this model
Strategic Alliance
• ~5 exclusive providers
• Risk sharing• Very tight process
integration• Joint teams• Potentially ownership
links
• A few mid-size pharma (eg, Sankyo, Solvay)
• Some big pharma (eg, Wyeth in data mgmt, GSK in lab svcs)
Traditional
Today
Emerging
Ch
ara
cte
risti
cs
Ad
op
tion
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There Is No “One Model Fits All”
Fully Integrated “Big Cap” Company
Mid Size Company
Virtual “Small Cap” Company
Tactical outsourcing only
< 50 % of development budget
Tactical and strategic outsourcing of defined tasks
50 - 80% of development budget
Complete outsourcing of all non-strategic tasks
> 80% of development budget
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CRO Capabilities
*CRL includes Inveresk.Note: Quintiles split based on 70% late stage, 30% early stage. PRA split based on focus on Phase I and Phase IV.Source: F&S, 2003; Parexel R&D Statistical Sourcebook, 2004/2005; CenterWatch, 2001; analyst reports; Bain analysis
OtherICONCRL*
KendlePPD
SFBC
Parexel
PRA
Covance
MDS
Quintiles
Other
KendleCRL*SFBCPRA
ICONCovance
MDS
Parexel
PPD
Quintiles
Other
SFBCPRA
KendleMDS
CRL*ICON
Covance
Parexel
PPD
Quintiles
Other
KendleParexel
PRAICON
Covance
PPD
Quintiles
Other
SFBCPRAICONMDSPPD
Quintiles
Covance
Phase I Phase II Phase III Phase IV Central Lab
$0.7B $0.9B $1.6B $1.5B $1.2B
Total =$5.8B
0
20
40
60
80
100%
Revenue by clinical phase2003
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Critical Success Factors in Strategic Outsourcing
Establish novel strategy and operating model in line with strategic outsourcing
Selection of few preferred CRO providers to purchasing power and at the same time to reduce internal management efforts
Minimize no. of interfaces with external third parties
Standardization of CRO management including communication tools
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CRO Surveillance Working Practice
Roles & Responsibilities (Sponsor roles and responsibilities, CRO roles and responsibilities)
Surveillance ProcessPlanning phase(Outsourcing, Resource and Budget Planning, Expectation Planning, Communication and Training Planning, Surveillance and Quality Planning, Document Planning, Other activities)Conduct phase(CRO Performance Management, CRO Surveillance, Management of internal interfaces) Evaluation Phase Reporting Phase
Briefing Documents(Performance Metrics, Content of status report, Communication Plan, Site Monitoring Surveillance visit report, Examples of relevant findings, Explanation of Local Site Manager tasks)
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Internal Process Required to Ensure Efficient Outsourcing
Select preferred partners
1
Responsibility:Outsourcing Management + Internal customers (as applicable)
Deliverable: List of preferred partners
Continuous evaluation of
outsourced projects
3
Responsibility: Outsourcing Management
Input: Project team
Deliverables:•CRO performance metrics•Audits•Continuous project review by Sponsor and CRO•Review of CRO selection
Outsourcing plan on study level
2
Responsibility: Clinical Project Leader (+team)
Deliverable:Plan for all services based on work breakdown and critical path analysis required
Feedback loop
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Non-core competence
Corecompetence
Outsource
In-house
• Operational tasks • Routine quality control
checks and conduct of routine audits
• Document/Information compilation, translation and formatting
• Strategy Development• Planning• Steering & Management• Expert knowledge &
expertise• In- and external interactions
& co-operations • Business DevelopmentComplete task list
for each development
function
Decision Tree Based on Core and Non-Core Tasks
Preferred Solution
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Key Components of a Strategic Partnership Model Between Sponsors and CROs
Mutual economic incentives
Operational alignment
Common long-term objectives
• Win-win to both sponsor and vendor
• Better use of resources
• Operational alignment between sponsor
and vendor
• Openness to change traditional processes
• Early involvement of CRO
• Establish long-term relationship
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Three Steps to Establish a Novel Outsourcing Strategy
Diagnosis
• Review of current capabilities and performance
– KPIs
– External benchmarks
• Gap analysis based upon
– Diagnostic findings
– Expected future needs
• Define capability sourcing strategy
Redesign
• Establish project groups for
– Process redesign
– Organizational redesign
– Identification of non-core tasks to be outsourced
• Decide on time frame• Get buy-in from key
stakeholders• Create pilot
Implementation
• Appoint project leaders• Define new roles and
responsibilities• Refine incentives• Revise resource and
budget plans• Establish dedicated
outsourcing infra-structure
• Provide specific training to accommodate new skill set
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The Project-based Organization and the CRO
Beyond Matrix beyond Decentralization
Projects
Bus Dev
Sales Ops MIS
TheCompany
PM PM
ProjectA
ProjectB
CRO
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While No “One Model Fits All”
Fully Integrated “Big Cap” Company
Mid Size Company
Virtual “Small Cap” Company
Tactical outsourcing only Tactical and strategic outsourcing of defined tasks
Complete outsourcing of all non-strategic tasks
The System must be “In Control”
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Putting a CRO System “In Control”
Measure Evaluate
Correct
People don’t fail - Systems Fail
Controlis a
Process
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The Role of the CRO Changes During the Project’s Life
CRO CRO CRO CRO
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5:1
20:1
The Amount of the CRO’s Planning Dictates your ROI
How does planning effect a CRO’s performance?
Cross functional teamsdevelop projects
Active project knowledgeableleaders are at front-end
Engineering & Projectfunctions report to businessesnot to plant management
Continuous improvementsystems exist
Systematic performancemeasurement exists
In-house resources used todevelop and shape projects.
The Business Roundtable,The business stake in effectiveproject systems, 1997
Characteristics of the Best
Project Systems
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Work BreakdownWBS
ProjectObjectives
ProjectOrganization
ProjectBaseline(Budget)
Recycle
1
2
3
4
5
ProjectSchedule
Risk
Key is Simplicity & What is Project Planning
ClientRequirements
AgreementAgreement
Control Control
AccountabilityAccountability
CommunicationsCommunications
ControlControl
Project ExecutionPlan
“5” Tools ofManagement
PlanningBehaviors
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And What are the Top Five Risks?
Probable(1/12)
Infrequent(1/120)
Remote(1/1200)
Improbable(1/12,000)
Lik
elih
oo
d
Severity
Marginal CatastrophicCritical
Unacceptable
Acceptable
Controlled
Risk Legend
Business Management Consultants
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CRO Work
Functional Outsourcing
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B C . . .
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Function 1 . . .
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CRO
CRO
CRO
The Tactic of Outsourcing Determines the CRO Role
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CRO CRO CRO
Cross-functional
CRO Work
Study-driven Outsourcing
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The WBS Style May Change During the Project’s Life
Multiple Phases
Clinical Trial
A Study
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Maturity of the “In Control” CRO Relationships
• 100+ providers• Sponsor SOPs• Ad-hoc contracts
One-off Deals
Preferred Vendor
• 2-10 preferred providers
• Master services agreement and standard SOPs
• Arm’s-length relationships
Strategic Vendor
• 3-10 strategic providers
• Performance- based contracts
• Tight process integration
• Direct team communication
Strategic Alliance
• ~5 exclusive providers
• Risk sharing• Very tight process
integration• Joint teams• Potentially ownership
links
Traditional
Today
Emerging
Ch
ara
cte
risti
cs
CRO CRO CRO CROor
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Three Levels of a PMO
Level 3Strategic
PMO
IT PMO
EnterprisePMO
CEO
IT Operations Finiance
PMO
Systems SupportDevelopment
Project Level 1Project PMO
Level 2Business Unit
PMO
Increasing Role of the PMO with Increasing Maturity
Of the CRO Relationship
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A. The Weather Station
Traces and reports events without
effecting them Progress against schedule milestones and
deliverables, Budget performance, Quality
performance against requirements, Risk.
B. The Control Tower
Nurtures project management as
a business process within the company Establishes, enforces, improves and maintains and
consults on management standards, e.g. life cycle
management, planning and control, risk management, portfolio management support.
C. The Resource Pool
Provides a pool of skilled, supervised project managers to be assigned to
projects
Develops, coaches, supervises and maintains a pool of project managers; assigns
project managers to projects; accepts overall quality, schedule and budget performance responsibility
for projects
Typical Roles of Project Management Offices PMO
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The Project-based Organization with CROs
Beyond Matrix beyond Decentralization
Projects
Bus Dev
Sales Ops MIS
TheCompany
PM PM
ProjectA
ProjectB
CRO
PM
ProjectC
PM
ProjectB
PM
ProjectA
Projects
ServicePackages
CoreCompetences
FederalInformation Center
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Thank you
Questions?