Challenges with Large CROs — Misaligned Incentives and Unnecessary Burden

To bring new therapies to market, sponsors large and small engage contract research organizations (CROs) for their knowledge and expertise in navigating the complex landscape of drug development and regulatory pathways. A recent McKinsey analysis on the role of CROs noted that the trend of outsourcing to CROs for the past few decades has reversed for some players. Larger pharma companies, in particular, are observed to return to more insourcing of their clinical research.

Further, the top 15 pharma companies’ share of the industry’s pipeline shrunk from 40% in 2011 to 20% in 2021. An IQVIA report noted that emerging biopharma companies, relatively smaller than the large global players, are increasingly responsible for a larger share of the research and development (R&D) pipeline – a record 65%, up from 34% in 2001. In 2021, these emerging companies sponsored 3,386 clinical trials, an increase of nearly threefold in ten years. R&D spending in smaller biotech is forecasted to grow twice as fast as their larger counterparts.

As the demand for clinical research services continues to grow, contract research organizations will be necessary to help drug discovery startups run trials efficiently. Though larger, well-known CROs may offer a wide range of services and are often favored for their extensive resources and expertise, their size and scale can also lead to challenges that are detrimental to the success of clinical trials. In this article, we will explore the misaligned incentives and unnecessary burdens that come with working with large CROs, and why it’s important for sponsors to consider alternative solutions.

The Problem with Misaligned Incentives with Large CROs

Large CROs, such as PPD, IQVIA, and Syneos Health, have a significant incentive to prioritize their own profits and bottom lines, often at the expense of the clinical trials they conduct. In many cases, their focus on maximizing revenue can lead to misaligned incentives with sponsors, resulting in subpar trial design, data collection, and analysis. This can ultimately undermine the quality of the research and jeopardize patient safety. In addition, the complex and often opaque contracts between CROs and sponsors can further exacerbate these issues.

Stakeholder alignment, particularly between sponsors and CROs, paves the way for efficient outcomes in clinical trials. When both parties are aligned on study objectives, timelines, and communication channels, they can work together more effectively to achieve the desired results. This alignment also facilitates proactive risk mitigation, as well as the identification and resolution of issues as they arise. By fostering a culture of transparency and collaboration, stakeholders can ensure that their resources are used effectively, timelines are met, and, ultimately, that the clinical trial produces meaningful results. Overall, stakeholder alignment is a key factor in driving the success of clinical trials.

The Burden on Emerging Biotech and Pharma Companies

In 2022, McKinsey surveyed 80 CRO customers (both large and small pharma, including biotech) on their satisfaction with the services of top global CROs. The study found that emerging biotech companies are less satisfied with their CROs than large pharma companies. Some small biotech companies reported a misalignment of incentives by their larger CROs and the feeling of being underserved.

In the McKinsey survey, small companies were defined as those with annual revenues of less than $2.5 billion, while established companies had yearly revenues of more than $10 billion. Service areas measured were: medical writing, bioanalytical and central-lab services, biostatistics, clinical monitoring, data management, supply delivery logistics, medical monitoring, site selection, project management, study design, site and patient payments, quality assurance, patient selection and recruitment, and specialty-lab services.

Across all service areas, both small and established biopharma companies rated services from the top ten CROs at seven or below (on a scale of 1 to 10). Small biopharma companies reported lower satisfaction rates for all 14 CRO service areas than large companies.

The McKinsey study also revealed the following areas of misalignment:

  • Strategic Partners: Small biotech companies need more strategic advice and integration of technology point solution providers by the CROs they work with. They seek CROs that complement their scientific expertise as “thought partners, ” providing access to needed tools and established relationships.
  • Lacking Priority: The C-suite of small biotech companies are hands-on in the choice of CRO and feel that their CRO partners do not focus enough on their needs
  • Incentives: CROs with fee-for-service contracts risk inefficient outcomes due to unanticipated additional services, inadequate cost controls, and delays at different stages, among others.
  • People: Small biotech companies perceive that the CRO teams assigned to them lack experience and expertise and are subject to a high turnover of key team members, like clinical research associates. In turn, this contributes to the risk of inefficient outcomes highlighted above.
  • Equally disappointing: Small biotech respondents reported that large CROs offered a similar (underwhelming) experience, contributing to their dissatisfaction with the services provided.

The McKinsey report goes on to suggest how large CROs can serve biotech companies more effectively and be better strategic partners:

  • Integrator: Establish themselves as a reliable integrator of point solutions that match the needs of sponsors
  • Strategic Partners: Build relationships with founders and CEOs early on and position themselves as end-to-end strategic partners, as biotech companies had indicated was lacking
  • Commitment: Focus on reliability and credibility by going over and beyond program management to provide strategic advice at the biotech company’s scientific and clinical experts level. Improve engagement with the C-suite.

Strategic Partnerships

To shed light on the value of strategic partnerships between sponsors and CROs, OCT Clinical, a CRO based in Eastern Europe, surveyed industry professionals in the U.S. and Europe. Respondents included CROs and sponsors (pharma and biotech companies). Among the sponsors who responded, 45% reported their experience with their current CRO as moderately or entirely unsatisfactory. Notably, 60% of sponsors not completely satisfied with their CROs were working with global CROs. Sponsors highlighted the most challenging issues with their CROs: quality issues (lack of understanding of therapeutic areas), recruitment issues, and communication issues.

On the flip side, surveyed CROs highlighted their concerns when working with sponsors, including quality issues, e.g., lack of accuracy in study design and protocols (57% of respondents), lack of understanding of therapeutic areas and indications (34%), and communication issues (23%). Further, uncertainty about responsibilities and decision authority were identified as significant barriers to maximizing potential benefits.

This survey highlights the importance of selecting the right partner when embarking on a clinical trial. To ensure successful outcomes, sponsors and CROs must work together in a strategic partnership that is built on a foundation of mutual trust, respect, and alignment. As such, it is essential for sponsors to carefully evaluate potential CRO partners. Similarly, CROs should carefully consider sponsor fit, ensuring that they have the necessary resources and capabilities to deliver on the trial’s objectives. By building strong strategic partnerships, sponsors and CROs can overcome the challenges of drug development, achieve efficient outcomes, and ultimately, bring new treatments to market faster.

Partnering with Small CROs

While large CROs offer a range of advantages, there are also many benefits to partnering with smaller CROs. Small CROs often have a more specialized focus and can provide a more personalized approach to drug development. They can offer greater flexibility and nimbleness, allowing them to adapt quickly to changes in study design or protocols. Furthermore, they are often able to offer more competitive pricing, making them an attractive option for small and large sponsors looking to minimize costs.

Small CROs may also have a more collaborative approach, working closely with sponsors to develop customized solutions that meet their specific needs. This approach can result in more streamlined and efficient clinical trial development, as small CROs are often more agile and able to respond quickly to the evolving needs of the trial.

Moreover, smaller CROs may offer a more hands-on approach to clinical trial management, providing sponsors with direct access to the individuals responsible for the success of the trial. This level of accessibility can lead to greater transparency, as sponsors have a more direct line of communication with the team responsible for the trial’s progress.

In summary, partnering with a small CRO can offer sponsors a more personalized, flexible, collaborative, and cost-effective approach to clinical trial development. As such, sponsors should consider the benefits of partnering with a smaller CRO when embarking on their next clinical trial.

The Vial CRO

In its quest to reimagine clinical trials, small CROs like Vial have deployed the strategies McKinsey recommended above. In addition, Vial has a culture that matches emerging biotech companies, can offer more flexibility for customization and can provide undivided attention through a partner-like model. The Vial CRO offers next-generation technology and clinical trial services that can help streamline your next clinical trial for up to 50% of the costs with our fixed-fee pricing model. Our team of ClinOps experts has a proven track record of delivering successful clinical trials, and we are committed to providing our clients with the personalized, collaborative, and cost-effective solutions they need to bring new treatments to market faster.

For more on working with a small CRO, check out our article, The Benefits of Working with a Small CRO: Speed, Agility, and Working with a True Partner.

To learn more about Vial, the CRO for Biotech powered by technology, visit us here.

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