Improving Efficiency in Drug Development- Impact of ... - Project 2007

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Business Management Consultants

Improving Efficiency in Drug Development

Impact of Project Management

and

Strategic Outsourcing

Thomas Lander, M.D. & Tom Johns, Ph.D.


1st International Athens Conference on

Project Management Best Practices

Athens, July 1st, 2006

Business Management Consultants

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

Business Management Consultants

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


Business Management Consultants

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

Business Management Consultants

The Project Life Cycle of Drug Development

Attrition

T
ime

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Expected to Grow Faster than Supply

*No numbers available for the period after 2001

Source: Parexel, 2002
-
04; Goldman Sachs, 11/04; CenterWatch, 2003


1977-78
1989-92
1998-01
30
60
82
0
20
40
60
80
100
Average number
of 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 development
CAGR (02-04)
# of PC
compounds,
2004
1115
286
313
348
548
292
169
Growth in #

of investigators

CAGR (98
-
02)

7%

Demand for Clinical Resources

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Access to Patients is Critical

>1
Month
delay
1 Month
delay
On schedule
2003
0
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 1
Phase 2
Phase 3
42%
31%
30%
0
10
20
30
40
50%
Delays in clinicial trials
% longer than planned duration
Business Management Consultants

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



Business Management Consultants

Approach to Strategic Outsourcing:

What

to

outsource?

How

to

outsource?


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

Business Management Consultants

Approach to Strategic Outsourcing:

What

to

outsource?

How

to

outsource?


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

Business Management Consultants

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





Business Management Consultants

Drug Development Process

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Functional Clinical Capabilities

Patient

enrollment:

Investig
ator/site
selection

Patient
recruitme
nt

Data

management:

Data
mgmt:
Data entry

Data
mgmt:

Data
review

Trial
monitori
ng

Statisti
cal

analysi
s

Reporting &

regulatory:

Safety
reporting &
communic’n

Clinical
study
report
writing

Regulato
ry filings

Trial strategy

& design:

Concept
studies

Target
product
profile

Clinic
al
dvpt
strate
gy

Trial
desig
n

Bio
-
availabi
lity
studies

Project

management:

Program
mgmt

Study
mgmt

Site
mgmt

Supporting

activities:

Lab
servic
es

IVRS

Ima
gin
g

Biomar
ker
studies

ECG

Dru
g
sup
ply

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Model preferred by most fully
integrated pharma companies

Functional Outsourcing

3

Study A

B

C


. . .

. .
.

Y

Activity 1

. .
.

2

. .
.

.

.

.


.

.

.


.

.

.


.

.

.


.

.

.

X

. .
.


CRO

CRO

CRO

Tactical Outsourcing: Function or Study

3

Study A

B

C


. . .

. .
.

Y

Activity
1

. .
.

2

. .
.

.

.

.


.

.

.


.

.

.


.

.

.


.

.

.

X

. .
.


CRO

CRO

CRO

Model preferred by most biotech
companies

Study
-
driven Outsourcing

Business Management Consultants

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)

Characteristics

Adoption

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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

Business Management Consultants

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

Other
ICON
CRL*
Kendle
PPD
SFBC
Parexel
PRA
Covance
MDS
Quintiles
Other
Kendle
CRL*
SFBC
PRA
ICON
Covance
MDS
Parexel
PPD
Quintiles
Other
SFBC
PRA
Kendle
MDS
CRL*
ICON
Covance
Parexel
PPD
Quintiles
Other
Kendle
Parexel
PRA
ICON
Covance
PPD
Quintiles
Other
SFBC
PRA
ICON
MDS
PPD
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 phase
2003
Business Management Consultants

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

Business Management Consultants

CRO Surveillance Working Practice




Roles & Responsibilities



(Sponsor roles and responsibilities, CRO roles and responsibilities)


Surveillance Process

Planning 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)

Business Management Consultants

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

Business Management Consultants

Non
-
core
competence

Core

competence

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 Development

Complete task list
for each
development
function

Decision Tree Based on Core and Non
-
Core Tasks

Preferred Solution

Business Management Consultants

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

Business Management Consultants

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

Implementatio
n



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

Business Management Consultants

The Project
-
based Organization and the CRO

Beyond Matrix beyond Decentralization

Projects


Bus


Dev

Sales

Ops

MIS

The

Company

PM

PM

Project


A

Project


B

CRO

Business Management Consultants

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”

Business Management Consultants

Putting a CRO System
“In Control”

Measure

Evaluate

Correct

People don’t fail
-

Systems Fail

Control

is a

Process

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The Role of the CRO Changes During the Project’s Life

CRO

CRO

CRO

CRO

Business Management Consultants

5:1

20:1

The Amount of the CRO’s Planning Dictates your ROI

How does planning effect a CRO’s performance?

*

Cross functional teams

develop projects

*

Active project knowledgeable

leaders are at front
-
end

*

Engineering & Project

functions report to businesses

not to plant management

*

Continuous improvement

systems exist

*

Systematic

performance

measurement

exists

*

In
-
house resources used to

develop

and shape projects.

The Business Roundtable,

The business stake in effective

pr

oject systems
,


1997

C

haracteristics of the Best

Pr

oject Systems

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Work Breakdown

WBS

Project

Objectives

Project

Organization

Project

Baseline

(Budget)

Recycle

1

2

3

4

5

Project

Schedule

Risk

Key is Simplicity
&

What is Project Planning

Client

Requirements

Agreement

Control

Accountability

Communications

Control

Project Execution

Plan

“5” Tools of

Management

Planning

Behaviors

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And What are the Top Five Risks?

Probable

(1/12)

Infrequent

(1/120)


Remote

(1/1200)

Improbable

(1/12,000)

Likelihood

Severity

Marginal

Catastrophic

Critical

Unacceptable

Acceptable

Controlled

Risk Legend

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Functionally Described

CRO Work

Functional Outsourcing

3

Study A

B

C


. . .

. .
.

Y

Function 1

. .
.

2

. .
.

.

.

.


.

.

.


.

.

.


.

.

.


.

.

.

X

. .
.


CRO

CRO

CRO

The Tactic of Outsourcing Determines the CRO Role

3

Study A

B

C


. . .

. .
.

Y

Function 1

. .
.

2

. .
.

.

.

.


.

.

.


.

.

.


.

.

.


.

.

.

X

. .
.


CRO

CRO

CRO

Cross
-
functional

CRO Work

Study
-
driven Outsourcing

Business Management Consultants

The WBS Style May Change During the Project’s Life

Multiple Phases

Clinical Trial

A Study

Business Management Consultants

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

Characteristics

CRO

CRO

CRO

CRO

or

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Increasing Role of the PMO with Increasing Maturity

Of the CRO Relationship

Business Management Consultants

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

Business Management Consultants

The Project
-
based Organization with CROs

Beyond Matrix beyond Decentralization

Projects


Bus


Dev

Sales

Ops

MIS

The

Company

PM

PM

Project


A

Project


B

CRO

Business Management Consultants

Thank you

Questions?