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Is Clinical Trials Outsourcing really helping the Pharmaceutical Industry?

Healthcare | Apr, 2023

Every year, the pharmaceutical industry invests billions of dollars for the research and development (R&D) of new drugs that provide medical benefits. In 2019, the pharmaceutical industry poured USD83 billion to R&D expenditures for discovering and testing new drugs, conducting clinical trials, developing incremental innovations, and conducting post-approval testing for safety-monitoring. The share of revenues that pharmaceutical companies are devoting to R&D is rising significantly. One of the world’s biggest pharmaceutical companies, Roche Holding AG invested USD15.15 billion in 2022 for R&D.

On average, pharmaceutical companies invest about one-quarter of their revenue for R&D expenses, which is more than other knowledge-based industries, such as semiconductors, technology software and hardware. Developing drugs is a costly and uncertain process, which can result into unnecessary expenditure for the biopharmaceutical companies. According to U.S. Food and Drug Administration, only 12% of drugs entering clinical trials are approved for use. Hence, increasing R&D costs per non-molecular entities (NMEs) is creating concerns around the sustainability of the pharmaceutical industry’s business model.

How is Clinical Outsourcing Shaping the Pharmaceutical Sector?

In an effort to reduce R&D costs and accelerate the drug development process, pharmaceutical and biotechnology companies are resorting to clinical outsourcing. The partnerships with contract development and manufacturing organisations (CDMOs) enable businesses to safely and rapidly advance small molecule therapies into clinical trials, and patients. Pharmaceutical outsourcing is now a movement with momentum and grabs a larger share of the dollars spent by companies on preclinical, clinical, and post-clinical services. Passing over in-house work to academic and private contract research organization, pharmaceutical companies can maintain their research and development levels and save billions of dollars.

The pharmaceutical companies can choose to outsource from a wide spectrum of activities, from assay development to hit exploration, lead optimization to target validation. However, clinical trial outsourcing remains the focal point of such collaborations for pharmaceutical companies. Some of the advantages that clinical trial outsourcing presents are lower costs, shorter turnaround times, and better results. Beyond cost-effectiveness, outsourcing clinical trials provide the ability to rapidly scale up and down and eliminate the challenges that come with internal legislation, labour laws, etc. Moreover, downward pressure from government on drug pricing and increasing competition from generics and biosimilars are also encouraging companies to increasingly outsource their clinical trials. For instance, LEO Pharma, a global leader in medical dermatology, and clinical research organization, ICON entered a strategic partnership to scale clinical trial execution recently. The collaboration would improve the lives of dermatology patients, leading to the development of new drugs for skin disorders.

Contract research organizations are rapidly emerging as a trusted partners for pharmaceutical companies. CROs are now being actively involved for discussion of ideas, expert guidance, and decision making with accountability. Earlier, top pharma companies used to be sceptical about sharing intellectual inputs  and fostered in-house drug discovery with huge investments. But now, they are putting back the money and externalizing the whole activity as they now think that the risks of sharing IP with third-party CRO are ‘manageable’.

Factors Influencing the Clinical Trial Outsourcing Market Growth

The pharmaceutical industry is under pressure to accelerate the delivery of new therapeutics while cutting costs and navigating regulatory changes. However, outsourcing clinical trials can potentially reduce timelines for development, cut down risks of trial failures and overcome constrictive regulatory hurdles. Here are some of the factors positively affecting the growth of clinical trial outsourcing market growth.

Enhanced Focus on Patient-Centric Approach for Complex Clinical Trials

Conventional clinical trial models rely on large population groups coming to hospitals or other clinical sites. For instance, the rare disease market is a huge opportunity for biopharmaceutical companies but recruiting patients can stand as a huge challenge. Similarly, in cases like Alzheimer’s or Dementia, patient retention can be quite difficult. Centralized healthcare facilities can eliminate the difficulty of patient recruitment. These facilities can offer everything from a pharmacy to on-site lab, which allow organizations to conduct trials leveraging the state-of-art infrastructure while maintaining the quality of standards that patient expect. Besides, clinical research organizations have the latest technologies, which enable them to provide unique insights and ensure optimal clinical trial performance. Taking a patient-centric approach and focusing extensively on clinical trials can provide customized solutions with higher standards of accuracy and efficiency than in-house trial models. Moreover, improved patient-centricity accelerates recruitment and reduced dropout rates.

CROs and CMOs as Sources of Innovation

The pharmaceutical industry is characterized by years-long R&D cycles, which delays the entry of drugs into the market. In an increasingly complex environment, biopharmaceutical companies require more flexible approaches, remote capabilities, and standardized systems, and contract research organizations are equipped with latest technologies and personnel to fulfil all the requirements for clinical trials. More and more companies are seeking to choose one full-service contract research organizations (CROs) and contract manufacturing organizations (CMOs) rather than several niche providers to simplify supply chain and reduce time to market. Leveraging latest technologies such as digital robots, CROs and CMOs can eliminate redundant processes and high-volume repeatable tasks. Small pharmaceutical companies struggle while performing in-house development, manufacturing, regulatory affairs, product testing and validation. This, in turn, is creating opportunities for CMOs and CROs to become a strategic partner for these small companies and help them achieve their goals.

Growing Preference for Offshore Clinical Trial Outsourcing

The cheapest way for pharmaceutical companies in developed worlds is to conduct clinical trials in developing countries. Besides, regulations are more stringent in countries like United States, Japan, and United Kingdom when compared to most preferred countries for offshore clinical trial outsourcing such as China, India, Africa, etc. The greater availability of “naive” participants with drug-free bodies are allow pharmaceutical companies to conduct unadulterated tests, which provides better results. Besides, high levels of poverty and illiteracy provide an endless supply of volunteers for clinical trials. CROs are well-aware of local conditions and networks, which facilitates access to clinics, researchers, doctors and “willing” participants. Moreover, opting for offshore clinical trial outsourcing ensures increased diversity and access to research through reaching more people from different geographical locations.

In recent years, many health systems are merging to create larger ones or big organizations are acquiring smaller private firms to fulfil evolving demands of end users. However, it would be impractical to procure expensive equipment if a research company decides to later on merge or acquire a company that already has one. Thus, the best alternative for pharmaceutical companies would be to tap into resources and niche expertise of CROs to save costs and time.

Opportunities for Clinical Trial Outsourcing

Rising incidences of chronic disorders and associated mortality rates are contributing to an increase in R&D spending for the development of potential novel products, which is expected to create opportunities for CROs. Moreover, rising competitiveness among pharmaceutical companies to capture large market share have increased the demand for contract Biotechnology and Pharmaceutical services. Additionally, growing R&D on large molecules and enhanced focus on finding drugs for rare disorders are aiding to the growth of clinical trial outsourcing market.   

According to the TechSci Research report on “Clinical Trial Outsourcing Market – Global Industry Size, Share, Trends, Opportunity, and Forecast, 2017-2027 Segmented By Clinical Trial Phase (Phase 0, Phase 1, Phase 2, Phase 3, Phase 4), By Therapeutic Area (Oncology, Hematology, Central Nervous System, Cardiovascular/Metabolic, Respiratory, Infectious Diseases, Immunology, Rare Diseases, Medical Devices, Others), By End User (Biotechnology & Pharmaceutical Companies, Medical Device Companies, Academic & Research Institutions) and By Region”, the global clinical trial outsourcing market is projected to grow at a formidable rate during the forecast period. The market growth can be attributed to the rising need for new and advanced drugs and therapeutics to be tested and approved. Besides, increasing investments in healthcare research and drug development activities and growing demand for advanced and effective therapeutics are contributing to the market growth. Additionally, growing investments by private and public players as well as government authorities to improve medical care are providing a boost to the global clinical trial outsourcing market.