Pharmaceutical firms hiring CROs to conduct more clinicals

NEW YORK -- Pfizer turned to contract research organizations for four out of every 10 of its clinical trials last year as the drugmaker sought to increase the flow in its pipeline of new treatments.

Bruce Linkov, associate director of clinical research administration at the fifth-largest pharmaceuticals company in the United States found 23 different CROs to do the work for him.

"We have a very large pipeline," Linkov said. "You could hire a lot of people to do the work, then do you fire them when you're done? We don't like to do that." Under pressure to keep costs down and get drugs to market quickly, pharmaceutical companies like New York-based Pfizer can no longer afford to keep drugs in development for a decade or more, just waiting for someone to get around to them. The beneficiaries are CROs -- extra arms, legs and minds for hire, who will do anything from animal testing to handling regulatory affairs, although their lifeblood is clinical trials. "If you look at it, we're really the `D' in `R&D'," said Beth Leahy, a spokeswoman for Princeton, N.J.-based Covance, the second- largest CRO. "The reason that outsourcing has become more popular is that if you outsource to a company that has expertise, you realize economies of scale." Analysts say that the pharmaceutical industry spends about $20 billion on development annually. By the end of this year, about $3 billion of that is expected to go to CROs, up from only $700 million in 1990, said Michael Martorelli, an analyst with the Pennsylvania Merchant Group. "What we've seen over our 10-year period is a dramatic increase in both the size and duration of contracts," said Rachel Selisker, chief financial officer of the biggest CRO, Quintiles Transnational, founded in 1987. "They're approaching the tens of millions. There have been contracts in the industry in excess of $100 million." Quintiles had 1996 revenue of $537.6 million. In the first half of this year, revenue was $360.5 million, a gain of 49 percent from the year-ago period. Like the drug companies themselves, CROs have undergone consolidation. Now, a few large companies such as Quintiles, Covance, and Parexel International dominate the industry. As CROs get more work and more expertise, they have developed some advantages over the companies that spawned them. "We can add to their cost efficiencies by helping them speed product development and time to market," said Pat Grebe, spokeswoman for Durham, N.C.-based Quintiles. Many companies used to take their time developing drugs, often letting projects languish until administrators could get around to them, analysts said. "It better not take you 10 years anymore, or else you'll be unprofitable," Martorelli said. Quintiles has done work for about 3,000 companies worldwide, Grebe said. The company has 9,000 employees in the Americas, Europe and the Asia/Pacific region. Covance has a regular client base of about 270, Leahy said, with about 5,700 employees around the world, 10 percent of whom have a doctorate of some sort. The most successful CROs have extensive databases of physicians, patients and investigation sites and are able to mold that information for any client's use. "They may already know all the investigators, they may have preferred relationships with a lot of them," Pfizer's Linkov said. "They are very flexible and nimble." To get new drugs approved by regulators, companies have to sponsor a series of clinical trials in which the drugs are given to closely monitored patients. The trials, which test a drug's efficacy and safety, are conducted under contract by doctors at hospitals around the world, referred to as investigators. The biggest critics of CROs from the beginning have been clinical investigators, the myriad doctors who give patients experimental drugs and monitor the results. Adding a CRO to the equation, they complain, damages the valuable relationship between the pharmaceutical company and the doctor who will eventually sell the drug. Whitehouse Station, N.J.-based drugmaker Merck has a reputation for not using CROs for exactly that reason. "We would lose a tremendous pool of thinking if we chose to divorce ourselves from investigators," said Mary Guenst, senior manager of contract and cost management at Merck. "We choose to perform as much as possible ourselves, so we're as close as can be to our data, to our patients, so we're in close contact with our investigators." Partly in an attempt to address this issue, Waltham, Mass.-based CRO Parexel and Georgetown University in Washington have formed a permanent partnership called the Georgetown/Parexel Pharmacology Research Unit. "We have probably all become a little more businesslike," said Darrell Abernethy, a Georgetown physician and director of the unit. "We add scientific value and the potential for discovery of new information to the product that a CRO would offer. Parexel is bringing their efficiencies with regard to management and structure.

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