The Future of RD Outsourcing: Investigating development hurdles, key challenges strategies to optimize CRO relationships

Date: January 22, 2010
Pages: 158
US$ 3,835.00
Publisher: Business Insights
Report type: Strategic Report
Delivery: E-mail Delivery (PDF), Hard Copy Mail Delivery, CD-ROM Mail Delivery
ID: FB43B433B00EN

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The Future of RD Outsourcing: Investigating development hurdles, key challenges  strategies to optimize CRO relationships
For several years, drug developers have been under intense pressure to introduce new products in an environment of escalating R&D costs, blockbuster patent expiration and resulting generic competition, increasingly complex science, heightened regulatory scrutiny, and other pressures. The global economic meltdown has exacerbated these challenges with new R&D staff and budget reductions. In order to remain competitive, drug makers must now do more with less. Outsourcing, particularly to low cost offshore venues like India and China, offers a means to maintain productivity within new cost parameters.

However, while some drug makers have optimized their R&D outsourcing methodologies and have developed sophisticated processes to select, monitor and manage a wide range of projects, many other R&D outsourcing projects fail due to poor planning on the part of sponsors. A large proportion of these failures could be averted as many of the most common reasons for failure are preventable problems relating to R&D outsourcing strategy, supplier evaluation & selection, contracting, project organization and expectations, supplier management, culture, staff turnover and intellectual property.

Key features of this report

  • Discussion of the factors leading to current imperatives to increased outsourced R&D.
  • Detailed descriptions of both effective and ineffective R&D outsourcing approaches.
  • In depth analysis of the types of different R&D outsourcing relationships, their advantages and disadvantages.
  • 5 case studies that illustrate R&D outsourcing best practices.
  • Comprehensive discussion of offshore R&D outsourcing, particularly focusing on India and China.

  • Scope of this report

  • Understand the driving forces behind R&D outsourcing.
  • Save time and money with the report’s succinct compilation and analysis of current R&D outsourcing trends.
  • Learn how R&D outsourcing will evolve over the next several years and why.
  • Assess your competitive position vis-à-vis other drug makers and learn about R&D outsourcing best practices via detailed case studies.

  • Key Market Issues

    (1) Although cost cutting has previously not been a concern for R&D departments, the current economic environment has brought expense reduction programs into research labs. Most of the leading drug makers have recently undertaken and/or are currently in the midst of broad R&D cost cutting programs

    (2) Because drug makers must continue to introduce new products, maintaining high productivity is key. R&D outsourcing offers a means to achieve this, particularly via low cost offshore outsourcing.

    (3) Most R&D outsourcing programs do not focus on a single approach but include several different types of relationships with contractors. The savviest drug makers combine these approaches in a well thought-out, synergistic manner while many others will implement them in a slipshod, ineffective fashion that results in high project failure rates.

    Key findings from this report

    (1) Usage of CROs will rise by 9.9% annually through 2014 with the greatest growth in Phase IIIb and IV testing at 13.8% per year.

    (2) While the top 10 CROs account for more than half of all R&D outsourcing, more than 1,000 others comprise the remaining 44%.

    (3) Offshore outsourcing, particularly to India and China, offers cost savings of 30% to 60% compared to the US and Western Europe.

    (4) The 100 Indian CROs tend to be larger and more focused on clinical trials while the 300 Chinese CROs are smaller and many are building strong pre-clinical capabilities.

    Key questions answered

  • Why is R&D outsourcing rising?
  • Which types of R&D outsourcing approaches are currently most common?
  • Which forms of R&D cost cutting will increase most in the future?

  • The Future of R&D Outsourcing
    Challenges facing drug developers 10
    Dynamics of outsourced R&D 11
    R&D outsourcing in Asia 12
    Strategies to optimize R&D outsourcing relationships 13
    The future of R&D outsourcing 14


    Summary 16
    The drug approval process 17
    US 17
    Europe 21
    The Mutual Recognition Procedure (MRP) 21
    The National Competent Authorities 23
    Rising financial pressure 24
    Expiring patents on blockbusters 24
    Decreasing market exclusivity 27
    Healthcare cost containment 28
    Rising usage of generics 28
    Elimination of coverage 30
    Step therapy 31
    Utilization of OTCs 31
    Manufacturer rebates 32
    Consumer skepticism of drug benefits 32
    Drug development imperatives 33
    Targeting large markets 34
    Focus on efficacy 34
    Expansion into biologicals 36
    Decreasing time to market 36
    Drug development hurdles 37
    More complicated disease targets 38
    Rapidly escalating costs 38
    Reduced R&D staff 40
    Heightened regulatory scrutiny 43
    Declining drug approvals 44
    Conclusion 46


    Summary 50
    Contract research organizations 51
    The role of CROs 51
    Services offered by CROs 51
    Discovery 53
    Preclinical evaluation 54
    Clinical trials 54
    Repositioning 55
    Expanding technological expertise 56
    Reasons for outsourcing R&D 56
    Types of relationships 60
    Preferred vendors 63
    Functional service providers 64
    Risk sharing 64
    Technology partnerships 65
    Drug licensing 66
    Benefits and limitations of using CROs 66
    Long term cost savings vs. high short term expenses 67
    Speed to market vs. potential project overruns 68
    Access to expertise vs. CRO staff turnover 70
    Flexibility vs. loss of control 71
    Ability to customize research vs. CRO clutter 72
    CRO usage 72
    Usage estimates 2009 - 2014 73
    Leading CROs 73
    Conclusion 74


    Summary 78
    Introduction 79
    Offshore outsourcing of clinical research 81
    Offshore outsourcing of preclinical research 82
    Contract research in India 84
    Key outsourcing issues 86
    Intellectual property 86
    Regulatory issues 87
    Business issues and infrastructure 88
    Leading players 90
    CRO usage and market size 90
    CRO developments in India 91
    Case study: GlaxoSmithKline 92
    Contract research in China 95
    Key outsourcing issues 96
    Intellectual property 97
    Regulatory issues 98
    Business issues and infrastructure 100
    Leading players 102
    CRO usage and market size 103
    CRO developments in China 103
    Case study: Eli Lilly 106
    Offshore outsourcing partnerships 108
    Types of relationships 108
    Early stage collaborations 109
    Global networks 110
    Conclusion 111


    Summary 114
    Introduction 115
    Key causes of and remedies for R&D outsourcing failures 116
    Outsourcing strategy 118
    Supplier evaluation and selection 119
    Contracting 122
    Renegotiation 124
    Project organization and expectations 125
    Supplier management 126
    Culture 128
    Corporate cultural differences 129
    Ethnic divergence 130
    Management changes and personnel turnover 131
    Management changes 131
    Personnel turnover 133
    Intellectual property 133
    R&D outsourcing best practices 134
    Case study: Wyeth 134
    Case study: AstraZeneca 135
    Case study: Eisai 136
    Conclusion 137


    Summary 140
    Introduction 141
    The drug development landscape in the US and EU 142
    Near term: 2010 - 2011 143
    Long term: 2012 - 2015 146
    R&D outsourcing trends 147
    Near term: 2010 - 2011 152
    Long term: 2012 - 2015 154
    Conclusion 155
    Index 156


    Figure 1.1: US and EU spending on generic drugs, 2009 30
    Figure 1.2: US NME approvals vs. R&D spend ($bn), 1990-2009* 46
    Figure 1.3: Average US R&D spend per NME approval ($m), 1990 – 2009* 47
    Figure 2.4: Services offered by CROs 52
    Figure 2.5: Potential benefits and limitations of using a CRO 68
    Figure 2.6: Growth of outsourced R&D by segment ($m), 2009-14 74
    Figure 2.7: Market analysis of major CROs, 2009 75
    Figure 3.8: Advantages and disadvantages of leading Asian outsourcing venues 80
    Figure 3.9: Clinical and preclinical test capabilities of India and China 83
    Figure 3.10: Growth of outsourced R&D to India by segment, 2009-14 91
    Figure 3.11: GlaxoSmithKline sales vs. R&D expense (£m), 2000-09 94
    Figure 3.12: Growth of outsourced R&D to China by segment ($m), 2009-14 104
    Figure 3.13: Eli Lilly sales vs. R&D expense ($m), 2000-09 107
    Figure 3.14: Key characteristics of offshore partnering relationships 109
    Figure 4.15: Risk factors when outsourcing R&D 117
    Figure 5.16: Confidence level of drug development & outsourcing predictions, near vs. long term 143
    Figure 5.17: Drug development trends, near vs. long term 144
    Figure 5.18: Relative usage & growth of different types of R&D outsourcing relationships, near vs. long term 148
    Figure 5.19: R&D outsourcing trends, near vs. long term 151


    Table 1.1: CDER Drug Advisory Committees, December 2009 21
    Table 1.2: Leading European National Competent Authorities, 2009 25
    Table 1.3: Leading European National Competent Authorities, 2009 (ctd) 26
    Table 1.4: Revenues and patent expirations for selected companies’ blockbusters, 2009 27
    Table 1.5: Leading medicinal research areas, 2009 35
    Table 1.6: Significant R&D staff reductions, 2008-09 41
    Table 1.7: US NME approvals, 2000-09 45
    Table 1.8: US R&D spend for approved NMEs ($), 1990-2009 45
    Table 2.9: Key characteristics of CRO partnering relationships 62
    Table 4.10: Reasons for time and budget overruns 127
    Table 4.11: Corporate cultural characteristics of sponsors and contractors 129
    Table 5.12: Global growth of outsourced R&D by stage ($bn), 2009-14 153

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