Expected Changes for Contract Research Organizations – Asrar Qureshi’s Blog Post #1040

Expected Changes for Contract Research Organizations – Asrar Qureshi’s Blog Post #1040

Dear Colleagues! This is Asrar Qureshi’s Blog Post #1040 for Pharma Veterans. Pharma Veterans Blogs are published by Asrar Qureshi on its dedicated site https://pharmaveterans.com. Please email to pharmaveterans2017@gmail.com for publishing our contributions here.

Credit: Mikhail Nilov

Credit: Pavel Danilyuk

Credit: Pavel Danilyuk

This blogpost also partakes information from The Boston Consulting Group Article. Link at the end.

Preamble

CROs are specialized companies that provide research and development services to pharmaceutical, biotechnology, and medical device companies. They assist in the development, testing, and regulatory approval processes for drugs and medical products. CROs offer a range of services, including clinical trial management, data analysis, regulatory consulting, preclinical research, and post-marketing surveillance. 

CROs Working Framework

• Client Engagement: CROs enter contracts with sponsors (pharma or biotech companies) to conduct specific R&D tasks.

• Project Management: They plan and execute studies, manage timelines, and ensure regulatory compliance.

• Data Collection and Analysis: Use advanced technologies to capture clinical trial data and perform statistical analysis.

• Regulatory Support: Help clients navigate global regulatory requirements, including submission to agencies like the FDA, EMA, or WHO, or local regulatory bodies of the country.

Infrastructure

• Global Reach: Most CROs have a global footprint, offering localized expertise and access to diverse patient populations.

• Technological Integration: They use platforms for electronic data capture (EDC), remote monitoring, and artificial intelligence (AI) for trial optimization.

Efficiency Drivers

• Cost Savings: Outsourcing R&D to CROs reduces infrastructure costs for sponsors.

• Expertise: Specialized knowledge in therapeutic areas ensures quality and compliance.

• Faster Timelines: Established processes and resources speed up development.

Current Geographic Distribution of CROs

North America

• Headquarters for many leading CROs (e.g., IQVIA, Parexel, Labcorp Drug Development).

• Major R&D hubs due to the U.S. being the largest pharmaceutical market.

Europe

• Countries like the UK, Germany, and Switzerland host significant CRO activity due to robust regulatory frameworks and pharma presence.

Asia-Pacific

• Rapid growth in India and China due to cost advantages, skilled workforce, and large patient pools.

• Singapore, South Korea, and Japan are advanced markets with high-quality infrastructure.

Emerging Markets

• Africa and Latin America are gaining attention due to untapped patient diversity and increasing regulatory maturity.

• Drug Regulatory Authority Pakistan is showing a list of 26 CROs, out of which 25 have valid licenses. 

Future Challenges to CROs – BCG View

CROs control most clinical development services particularly in biopharma and it is expected to remain so. In fact, spending on site-specific services is expected to continue to grow at a mid-single-digit rate. Growth in specialized vendor services will likely outpace other areas, with some clinical technology segments seeing annual revenue increases in the high single-digit or low double-digit range. Core CRO services will retain most of the clinical development outsourced spending, with mid-single-digit growth, only slightly below the historical rates that have supported steady shareholder returns over the past five years.

At the same time, the market is evolving. Sponsors are altering sourcing models and making model-changing investments in technology, data science, and artificial intelligence (AI). CROs themselves are targeting clinical technology investments and pushing industry consolidation by acquiring smaller entities and site networks.

CROs also face customer-related challenges. Sponsors register dissatisfaction with CRO performance, citing limited consistency in speed and quality, a lack of the latest technology, and lagging decentralized trial implementation, among other factors. While CROs do not always set themselves up for success, sponsors impose their own constraints on performance through difficult governance and process frameworks and often by leaving CROs out of critical trial design and planning decisions. These factors open opportunities for innovative incumbents and new entrants to win share and possibly develop disruptive offerings.

Three significant trends can be sighted.

Shifting roles and needs of patients and trial sites

The traditional site-based model for clinical trials will evolve as sponsors and participants try to address longstanding issues that threaten to worsen over time. Examples include rising trial costs, sluggish startups, and low patient enrollment, which slows market entry. The burden on investigators and subjects is high, and the incentives to participate in clinical research remain low. As major COVID-19 studies wind down, overall patient enrollment numbers are returning to the levels they were at ten years ago and are projected to remain essentially flat through 2028. Developments in precision medicine, new modalities, increased study complexity, and limited global trial infrastructure exacerbate these issues.

Increased adoption of advanced technologies and AI

Further disruption of current CRO value pools, such as clinical monitoring, project management, and patient recruitment, is likely through widening adoption of digital technology and AI. The disruption could amount to some $18 billion, or 40% of the total current value for CROs.

Much of that disruption will probably come about through shifts from labor-intensive manual to tech-enabled automated solutions in outsourced services. In the process, value may shift from large CROs to smaller contract organizations, tech startups, and sponsors, fostering a more fragmented and competitive market landscape. There is also an opportunity for nimble CROs to defend their turf and capture new sources of value and competitive advantage.

Sponsors changing sourcing strategies

Customers of the clinical development services outsourcing market have historically been bifurcated between biotech and large pharmaceutical companies. The former has relied on full-service, or end-to-end, outsourcing vendors because of resource limitations, while the latter has tended toward functional service providers for greater control and what they hope will be better performance.

In the future, though, end-to-end CROs will likely gain the upper hand, benefiting from the maturation of many clinical development services. It will be easier for large CROs to compete with more specialized vendors as quality differentiation dissipates. End-to-end CROs can also expect to benefit from sponsors’ rising focus on operational efficiency. Sponsors may even consolidate vendors to improve efficiency by reducing the capacity required to onboard many different vendors for a particular study, for example.

Sum Up

CROs will continue to play a pivotal role in the evolving landscape of pharmaceutical and clinical research, adapting to technological advancements, regulatory changes, and global health needs.

However, even in an attractive market for CROs, most companies will have to make choices. Only the largest and best-resourced firms can both protect existing value pools and capitalize on new ones. Doing both will require investing across the board in sites and patients, advanced technologies and AI, and portfolio expansion. Other CROs will need to decide where the best opportunities lie in an evolving marketplace, and successful execution will likely require changes to their operating models. Sponsors will benefit from doing their part as well, leveraging CROs as strategic partners across the various stages of clinical development, including the design and planning stages.

The market is already shifting. CROs that want to maintain or acquire leadership positions should move quickly.

Concluded.

Disclaimers: Pictures in these blogs are taken from free resources at Pexels, Pixabay, Unsplash, and Google. Credit is given where available. If a copyright claim is lodged, we shall remove the picture with appropriate regrets.

For most blogs, I research from several sources which are open to public. Their links are mentioned under references. There is no intent to infringe upon anyone’s copyrights. If, however, it happens unintentionally, I offer my sincere regrets.

Reference:

https://www.bcg.com/publications/2024/big-changes-to-pharma-cros?utm_campaign=none&utm_description=ealert&utm_topic=none&utm_geo=Global&utm_medium=email&utm_source=esp&utm_content=Nov%2029,%202024&mktNoTrack=1&mkt_tok=Nzk5LUlPQi04ODMAAAGXFzq6_AAu8xsUiaFj2839bjO-n4ZKFR7j0TTSgs769THY7FC_ZMBD4w0QL9CpRgymYqg0e8fun3VXRlPUE79hC0Tyws214a6u-LTdn1T2sg3aW2w