improving efficiency in drug development impact of project management and strategic outsourcing

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




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




The 3 Most Critical Success Factors in Drug Development

Speed + Quality + Cost

Quality(Planned Results)

Resource(Budget)

Schedule(Time)




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




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




The Project Life Cycle of Drug Development

Attrition

Time




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




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




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




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




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




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




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




Drug Development Process




Functional Clinical Capabilities

Patientenrollment:

Investigator/site

selection

Patient recruitment

Datamanagement:

Data mgmt:

Data entry

Data mgmt:Data review

Trial monitoring

Statisticalanalysis

Reporting &regulatory:

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



are needed to see this picture. Model preferred by most fully integrated pharma companies

Functional Outsourcing

3

Stu

dy

A

B C . . .

. . .

Y

Activity 1 . . .

2 . . .

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

X . . .

CRO

CRO

CRO

Tactical Outsourcing: Function or Study

3

Stu

dy

A

B C . . .

. . .

Y

Activity 1 . . .

2 . . .

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

X . . .

CRO CRO CRO

Model preferred by most biotech companies

Study-driven Outsourcing




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




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




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




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




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)




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




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




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




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




The Project-based Organization and the CRO

Beyond Matrix beyond Decentralization

Projects

Bus Dev

Sales Ops MIS

TheCompany

PM PM

ProjectA

ProjectB

CRO




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”




Putting a CRO System “In Control”

Measure Evaluate

Correct

People don’t fail - Systems Fail

Controlis a

Process




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

CRO CRO CRO CRO




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




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




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



are needed to see this picture.Functionally Described

CRO Work

Functional Outsourcing

3

Stu

dy

A

B C . . .

. . .

Y

Function 1 . . .

2 . . .

.

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.

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.

.

.

X . . .

CRO

CRO

CRO

The Tactic of Outsourcing Determines the CRO Role

3

Stu

dy

A

B C . . .

. . .

Y

Function 1 . . .

2 . . .

.

.

.

.

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.

.

.

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.

.

.

.

.

.

X . . .

CRO CRO CRO

Cross-functional

CRO Work

Study-driven Outsourcing




The WBS Style May Change During the Project’s Life

Multiple Phases

Clinical Trial

A Study




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




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




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




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








Thank you

Questions?