At the time, the focus was controlling capacity fluctuations that impacted overall profitability, the work assigned to contractors was commoditized and not directly involved with the generation of intellectual property, and the majority of contracts went to businesses in the U.S. and EU. Ultimately, the opportunity for savings didn’t pan out as desired because hiring out mass production of unspecialized products didn’t provide much of an advantage — the expense of subcontracting was comparable to doing the work in-house.
The true opportunity for savings through outsourcing started to take shape in the early part of the 21st century. Developing countries with strong education systems relaxed their trade borders around the same time that China and India started to strengthen patent laws. While some pharmaceutical companies opted to open their own research facilities overseas, others sought out CROs in these emerging markets. Within a few years, the amount of work and the complexity of the projects increased. The tipping point in the shift of the dynamic between sponsor and CRO from a client/vendor relationship to a partnership — with shared goals, transparent strategies and mutual trust — occurred when some CROs started to expand their service offering to include discovery programs.
The results from Nice Insight’s annual survey show that the practice of outsourcing Discovery remains common, with only a slight fluctuation in popularity over the past three years, from 50 percent in 2012 to 47 percent in 2014. Discovery is now the third most popular phase during which sponsors engage outsourcing services, after preclinical (55 percent) and Phase I (49 percent). The likelihood of engaging outsourcing services decreases somewhat through the subsequent phases, from 41 percent for Phase II, 32 percent for Phase III and 27 percent for Phase IV/Post-Launch studies.
Among the different sponsor segments, there was some variation in the frequency of outsourcing services for Discovery Phase work. However, each sponsor segment showed a strong preference for using a global, full-service CRO rather than a local, full-service CRO or a specialty CRO. Interestingly, Emerging Pharma companies are the most likely to outsource Discovery, with 51 percent of respondents indicating their company would engage services for this stage. Biotech and Big Pharma followed, each with 49 percent. Emerging Biotech companies followed with 39 percent outsourcing Discovery, and approximately one-third of Specialty Pharma companies (35 percent) engage outsourcing services during this phase of the drug cycle. Traditional pharmaceutical companies tend to outsource Discovery Phase work with a greater frequency than Biotech companies.
Secondary industry research supports the notion that outsourcing discovery improves lead optimization, which is crucial to ensuring a strong pipeline. And, among those who reported their company outsources Discovery Phase projects, 93 percent sought target ID and validation services and 94 percent looked for lead identification. Lead optimization and candidate selection followed, with 85 and 72 percent respectively. These figures have remained consistent across Discovery focused outsourcing surveys over the past three years. Though, the specific capabilities within these categories have evolved somewhat, in that skills previously identified as “future expectations” have shifted to “current expectations.”
It is still too early to know how successful the practice of engaging a CRO for Discovery will be when it comes to accelerating new drugs to market. But current practices, combined with some ambitious activity among global, full-service CROs (in the acquisition of smaller, Discovery-centric businesses) suggest the practice of outsourcing Discovery will continue to push the evolution of the Sponsor-CRO relationship, which will have a positive impact on drug development.
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