Post on 21-Dec-2015
University of Chicago Graduate School of BusinessBio-Pharma Alumni Organization
October 2006
A.T. Kearney’s Pharmaceutical R&D Location Attractiveness Index
Pharma R&D Moves Offshore
2Clinical Trial Offshoring
A.T. Kearney’s Pharma R&D off-shoring research has generated extensive interest in the media
A Publication of the TIMES OF INDIA Group
Bio-Pharmaceutical R&D Statistical
Sourcebook 2006/2007
3Clinical Trial Offshoring
Although Pharmaceuticals is a global industry, clinical studies are largely conducted in the U.S. and Western Europe driven by relevant expertise and intellectual property protection considerations
In the last two years, companies have increasingly turned to offshore locations to supplement their primary clinical trials, with the goal of increasing speed to market and the benefit of lower costs
To provide a systematic framework for evaluating geographical options for offshoring clinical trials, A.T. Kearney developed a structured country attractiveness index
We evaluated15 representative countries – the outcome: China ranked the highest overall, followed by India and Russia
The fact-based approach to the index provides insight into the future direction of clinical trials and specifically the attractiveness of locations based on structured criteria
The index should be considered a tool to support decision making in offshoring decisions and is flexible to be customized based on corporate priorities
Country attractiveness doesn’t suggest a narrow focus, but rather should be leveraged as a basis for diversifying clinical trial activities
Risks clearly exist in any offshoring of clinical trials, requiring careful planning and management in trial design and execution
Executive Summary
4Clinical Trial OffshoringSource: A.T. Kearney analysis
The pharmaceutical industry has historically lagged other industries in off-shoring
Stage 1Capacity
Augmentation
Stage 2Proof of Concept
Stage 3Value
Realization
Stage 4Strategic Supplier
Management
Stage 5Global
Operating Model
Financial InstitutionsGE, Citi,
Amex, HSBC
AutomotiveFordConsumer
Products & Retail P&G, Nestlé
Offshore Industry Lifecycle Curve – Pharmaceutical vs. Other Industries
UtilitiesSouthern Company
AEP
Other
Pharmaceuticals
However, the pace of off-shoring within the pharmaceutical industry has intensified over the last 1 – 2 years
5Clinical Trial Offshoring
R&D, particularly clinical trials, is better suited to off-shoring when compared to other parts of the pharmaceutical value chain
Clinical trials for a drug can cost up to $1 Billion and can take as many as 14 years to complete
Early Exploratory
Late Exploratory
Discovery
Pre-Clinical Evaluation
New Compound Discovery
Clinical Trials and Lifecycle Management
FDA Approval
Post Approval Trials and Drug
Sales
Sta
ge
s o
f a
D
rug
’s L
ife
C
yc
le
• New molecules are discovered here
• Molecules are formulated as drugs tested on animals for efficacy and safety as part of pre-clinical development and evaluation
Testing an experimental drug or treatment in a small group of people (20-80) for the first time to evaluate its safety, determine a safe dosage range, and identify side effects
I
II
III
The experimental study drug or treatment is given to a larger group of people (100-300) to see if it is effective and to further evaluate its safety
The experimental study drug or treatment is given to large groups of people (1,000-3,000) to confirm its effectiveness, monitor side effects, compare it to commonly used treatments, and collect information that will allow the experimental drug or treatment to be used safely
Post marketing studies delineate additional information including the drug's risks, benefits, and optimal use
IV
Phase Comments Phase CommentsSub Activities Comments
6Clinical Trial Offshoring
Top pharmaceutical companies are increasingly conducting clinical studies outside the US and in offshore locations
Pharma company-ranked by total # of
studies
Total # of studies
Studies with
location in the US
Studies with location
outside the US
BMS 186 180 87
GSK 173 142 90
Roche 148 129 70
Pfizer 147 129 67
Novartis 139 119 37
Eli Lilly 131 105 72
Abbott 67 60 29
Astra Zeneca 56 49 19
Johnson & Johnson 48 41 24
Schering-Plough 44 40 27
Wyeth-Ayerst 35 29 13
Aventis 27 23 9
Total 1,201 1,046 544
Top 12 Pharma companies as a percentage of total industry studies
Notes: (1)The top 12 companies account for only 2% of all pharma companies. Posting on the site clinicaltrials.gov is voluntary but increasingly popular. The data represent a snapshot in time and covers almost 600 companies worldwide
Source: Clinicaltrials.gov (as of 08/26/05) and A.T. Kearney analysis; excludes studies where locations were not provided
Number of studies by top 12 Pharma companies1
Number of studies sponsored by
industry
Number of studies conducted by Top
12 Pharma
Percentage of studies conducted by Top 12 Pharma
2910 1201 41%
Number of studies sponsored by industry with
location outside the US
Number of studies with location
outside the US sponsored by Top
12 Pharma companies
Percentage of studies with location
outside the US by Top 12 Pharma
companies
1125 544 48%
48% of trials conducted by
Top 12 Pharma have locations outside the US
7Clinical Trial Offshoring
Most major pharma companies are pro-actively off-shoring clinical trials to attractive, low-cost destinations
Notes: (1) Posting on the site clinicaltrials.gov is voluntary but increasingly popular. The data represent a snapshot in time(2) Total number of studies is less than the sum over all countries due to the use of multiple locations for most trials
Source: Clinicaltrials.gov (as of March 2006, February 2007) and A.T. Kearney analysis; excludes studies where locations were not provided
Number of active clinical trial studies sponsored by Top 12 Pharma outside the US (March 2006, Feb. 2007) (2)
135
77
288
69
180 182
161
12 16
148
124
294
81
199
279
169
23 26
0
50
100
150
200
250
300
Eli Lilly Novartis GSK Merck BMS Sanofi Aventis Pfizer Biogen Amgen
Mar-06 Feb-07
8Clinical Trial Offshoring
Off-shore clinical trial activity has increased by ~20% in just the past year
Notes: (1) Posting on the site clinicaltrials.gov is voluntary but increasingly popular. The data represent a snapshot in time(2) Total number of studies is less than the sum over all countries due to the use of multiple locations for most trials
Source: Clinicaltrials.gov, A.T. Kearney analysis; excludes studies where locations were not provided
Number of active clinical trial studies sponsored by Top 12 Pharma outside the US
119
137
84
68 65
28
4954
63
52
2936
26
36
2629 27 28
1824
8
124
109
101
9388
8073
69
56 5451 49
41 39 37 35 34 32 29 2825 23
20 18121819
242528 23
0
50
100
150
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lia
Mex
ico
Ru
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Arg
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Bra
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So
uth
Ko
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So
uth
Afr
ica
Tai
wan
Isra
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Ch
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Ro
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Per
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Mar-06 Feb-07
20% increase in off-shoring activity in ~ 1 year
9Clinical Trial Offshoring
• Phase 3 studies are more likely to have locations outside the US:
– Patient populations required are large
– Investigator grants and patient compensation is a large part of trial cost, making certain offshore locations attractive
• Phase 1 studies have comparatively fewer offshore locations:
– Ethical considerations as this phase determines safety of the trial drug
– Focus on healthy volunteers vs. specific patient profile
• Phase 4 studies are increasingly including locations/ data from patients in countries outside the US once the drug is on the market
75
407492
84
531
1142807
200
0%
20%
40%
60%
80%
100%
Phase 1 Phase 2 Phase 3 Phase 4
A higher percentage of Phase 3 clinical trials are conducted offshore relative to other phases
Source: Clinicaltrials.gov ( as of 8/10/05) and A.T. Kearney analysis
Observations
Percentage and Number of Studies in US and Offshore Locations – by Phase
Studies with location outside US
Studies with location in US only
12%
26%
38%
30%
12991549606 284
10Clinical Trial Offshoring
Speed to market and reduced costs have been cited as primary reasons for offshoring clinical trials
Selection of Offshoring Location
A structured and fact-based approach to identifying country attractive for clinical trials is an important component of any offshoring strategy
Long Term Offshoring Goals – Reduce Costs, Gain In-
Country Experience, Develop New Markets
Many low-cost countries are improving their regulatory conditions and level of clinical trials expertise
Pharma companies are positioning themselves to gain operating experience in these countries, where per patient costs can be as low as one third of the U.S. costs
Several low-cost countries, including India and China are attractive as potential new markets for innovative drugs
?
Source: Global clinical trial conference discussions and and A.T. Kearney analysis
Short Term Offshoring Goals – Supplement U.S. and Western
European Trials
Offshore trials can “rescue” a U.S. trial that is lagging due to slow patient recruitment
Companies have used offshore trials for parallel development tracks when FDA concerns caused delays in the U.S.
• Full disclosure with the offshore country’s regulatory authorities is needed to avert ethical concerns
Introduction of vaccines in developing countries prior to introduction in U.S. has been shown to be successful
11Clinical Trial Offshoring
A.T. Kearney developed an index to assess the attractiveness of countries for conducting clinical trials
Patient Pool (30%)
Size and availability of suitable patient pool
Cost Efficiency (20%)
Cost efficiency of labor Cost efficiency of facilities and
travel
Regulatory Conditions (20%)
Food and Drug Administration visibility
Country’s regulatory laws Strength of intellectual
protection
Relevant Expertise (15%)
Number of clinical research organizations
Number of clinical trials Size and availability of labor force
with relevant skills
Infrastructure and Environment (15%)
Protection of intellectual property Health-care infrastructure Country infrastructure Country risk factors
Country Attractiveness Index Criteria and Weighting
12Clinical Trial Offshoring
Our research indicates that China and India are the most attractive offshore locations to perform clinical trials outside the US
6.88
3.86
4.27
4.28
4.46
4.56
4.69
4.81
4.84
4.90
5.00
5.00
5.26
5.55
5.58
6.10
USA
Ireland
Singapore
Israel
Taiwan
South Africa
Germany
Hungary
Poland
Argentina
UK
Czech Republic
Brazil
Russia
India
China
Patient Pool Cost Efficiency Regulatory Conditions Relevant Expertise Infrastructure/Environment Total Score
Overall Country Attractiveness Index1
Note: (1) Higher scores indicate higher level of attractiveness(2) The set of 15 countries analyzed has been selected based on size, diversity, and geographical distribution, and is not meant to be comprehensive across all potential locations for offshoring
13Clinical Trial Offshoring
South Africa
Argentina
Brazil
China
India
Singapore
Taiwan
Hungary (hidden)
Russia
Poland
Ireland
United KingdomIsrael Germany
Czech RepublicUSA
HighLow Relevant Expertise
Small
Large
Pat
ien
t P
oo
l
Large patient pools, availability of relevant expertise, and lower costs make China and India attractive
Sources: World Bank 2003, World Development Indicators database 2003 and A.T. Kearney analysis
Relative Cost Efficiency1
Increasing bubble size indicates greater cost efficiencies
Country Attractiveness Components – Patient Pool, Relative Expertise and Cost Efficiency
14Clinical Trial Offshoring
Improvements in regulatory conditions and the infrastructure of emerging markets will drive the pace of change of offshoring
Argentina
Brazil
China
India
Singapore
Taiwan Hungary
Russia
Poland
Ireland
UK
USA
South Africa
Israel
Germany
Czech Republic
FavorableUnfavorable Infrastructure and environment
Unfavorable
Favorable
Reg
ula
tory
Co
nd
itio
ns
Source: A.T. Kearney analysis
Available patient pool – size of bubble is proportional to the size of the available patient pool
Country Attractiveness Components – Regulatory Conditions, Infrastructure/Environment and Patient Pool
15Clinical Trial Offshoring
Patient Pool: The large populations of China and India provide the greatest potential for patient recruitment
Overall Patient Pool Score3Urban Population1 (millions)
Treatment Naïve Population Score2
Notes: (1) Urban population is capped at 350 million due to limited benefit from extremely large populations (2) Higher scores indicate more treatment naïve populations (3) Higher scores denote large available patient pools; urban population weighted 55%, professional deliveries weighted 20%, treatment naïve populations weighted 25%
Source: World Bank 2003; UNICEF WDI Database; A.T. Kearney analysis
9.94
8.04
6.56
6.13
4.38
4.24
3.98
3.97
3.96
3.34
3.33
3.14
2.81
2.69
2.66
5.64
China
India
Brazil
Russia
Argentina
Poland
Hungary
Czech Republic
Taiwan
South Africa
Israel
Germany
UK
Singapore
Ireland
USA
Urban Population ScoreProfessional Delivery ScoreTreatment Naïve Population Score
350298
147105
735348
332624
87642
233
ChinaIndiaBrazil
RussiaGermany
UKTaiwan
ArgentinaSouth Africa
PolandCzech Republic
HungaryIsrael
SingaporeIreland
USA
5555
4444
333
22
11
1
RussiaIndia
ChinaBrazil
PolandHungary
ArgentinaCzech Republic
TaiwanSouth Africa
IsraelIreland
SingaporeUK
Germany
USA
16Clinical Trial Offshoring
Cost: Russia has the lowest overall cost structure followed by Argentina, China and India
Overall Indexed Costs3
Notes: (1) Clinical professional average includes physicians weighted 47%, nurses weighted 29%, and statistical mathematician weighted 24% (2) Facilities rental and CRO cost perspective are indexed to US = 1.0(3) Higher scores denote higher cost; labor index weighted 80%, facilities and travel index weighted 10%, CRO cost perspective weighted 10%. This metric is converted to a cost efficiency metric when incorporating into the overall country attractiveness index
Source: SalaryExpert.com; WDI Database; Economist Intelligence Unit; CBRE Global Markets Rent 2005; A.T. Kearney analysis
Cost of Labor1 (Indexed to US=1)
0 0.5 1 1.5 2
RussiaArgentina
ChinaIndia
BrazilCzech Republic
HungaryPoland
Taiw anIsrael
UKSouth Africa
IrelandSingaporeGermany
USA
Overall Country Average
Clinical Professional Average
Facilities Rental and CRO Cost Perspective2
0 0.5 1 1.5 2 2.5
South AfricaArgentina
PolandCzech Republic
BrazilChina
HungaryIsrael
SingaporeIndia
Taiw anRussia
GermanyIreland
UK
USA
Facilities Rental
CRO Cost Perspective
0.40
0.48
0.52
0.56
0.61
0.61
0.68
0.77
0.86
0.90
0.99
1.09
1.19
1.25
1.58
1.00
Russia
Argentina
China
India
Brazil
Czech Republic
Hungary
Poland
Israel
Taiwan
South Africa
UK
Singapore
Ireland
Germany
USA
Labor Cost Facilities and Travel Cost CRO Cost Perspective
17Clinical Trial Offshoring
Regulatory Conditions: Central/ Eastern European countries are attractive for regulatory conditions, while India and China are lagging
Overall Regulatory Conditions Score1,3
Notes: (1) Higher scores indicate higher attractiveness(2) Country specific laws include ease of shipping lab samples and regulatory approval times (3) FDA visibility is weighted 40%, country specific laws are weighted 40%, and General IP protection is weighted 20%
Source: FDA CDER; WEF Global Competitiveness Report; A.T. Kearney analysis
6.26
6.23
5.51
5.28
4.77
4.58
4.52
4.44
4.36
4.31
4.20
3.90
3.74
2.93
1.48
8.23
Germany
UK
South Africa
Poland
Russia
Singapore
Czech Republic
Israel
Ireland
Argentina
Hungary
Taiwan
Brazil
India
China
USA
FDA visibility Country Specific Laws General IP Protection
FDA Visibility1
Country Specific Laws1,2 and General IP Protection1
4.624.044.034.03
3.723.61
2.151.151.15
0.400.400.400.400.400.40
8.67
UKGermany
South AfricaRussia
ArgentinaPolandBrazil
Czech RepublicHungary
IsraelChinaIndia
SingaporeTaiw anIreland
USA
Voluntary Action ScoreNo. of Inspections Score
7.737.377.30
7.137.00
6.776.50
6.406.236.23
5.274.80
4.704.62
2.20
7.93
GermanySingapore
UKIsrael
IrelandCzech Republic
South AfricaPolandTaiwan
HungaryRussia
BrazilArgentina
IndiaChina
USA
Country Specific LawsIPR Protection
18Clinical Trial Offshoring
Relevant Expertise: China and Russia scored highest on relevant skilled labor
8.47
1.49
2.64
2.76
2.90
3.02
3.12
3.18
3.19
3.45
4.09
4.22
4.35
4.93
5.32
5.68
USA
Ireland
Singapore
Taiwan
Israel
Brazil
Czech Republic
Hungary
Argentina
South Africa
India
Russia
Poland
UK
China
Germany
Organization Expertise/Experience Relevant Skilled Labor Pool
Overall Relevant Expertise Score2
Notes: (1) Based on the market presence of the 12 largest clinical research organizations (weighted 50%) and amount of clinical trials conducted (weighted 50%)(2) Higher scores denote greater availability of relevant expertise; organizational expertise and experience weighted 60%, relevant skilled labor pool weighted 40%
Source: clinicaltrials.gov; Physician Index Annual; WHO/EIP/HRH; NSF; A.T. Kearney analysis
Organizational Expertise and Experience1
7.376.94
6.345.20
4.834.614.604.53
4.244.074.05
3.863.783.71
1.90
9.81
GermanyUK
PolandSouth Africa
ArgentinaIndia
HungaryCzech Republic
IsraelTaiwanRussia
SingaporeChinaBrazil
Ireland
USA
CRO presenceVolume of clinical trials
Relevant Skilled Labor Pool
0 500 1000 1500 2000 2500 3000 3500
USA
ArgentinaTaiwan
SingaporeSouth Africa
IrelandIsrael
Czech RepublicHungary
PolandUK
BrazilGermany
IndiaRussia
China
No. of doctorsNo. of nursesNo. of scientific degrees
19Clinical Trial Offshoring
10.010.010.010.010.0
6.76.76.7
3.33.33.3
0.00.00.00.0
10.0
GermanySouth Africa
SingaporeIreland
UKCzech Republic
TaiwanHungary
IsraelArgentina
BrazilChinaIndia
RussiaPoland
USA
Overall Infrastructure / Environmental Score2
Notes: (1) Healthcare criteria includes number of beds per 1000 people. Country infrastructure includes transportation, use of English and “personal contact” rank(2) Higher scores denote increased attractiveness; IP weighted 30%, Country Infrastructure weighted 25% , country risk weighted 25%, healthcare infrastructure weighted 20%
Sources: World Bank; PhRMA and Office of US Trade Representative Special 301 Report; Economist Intelligence Unit; CIA World Factbook; TOEFL; A.T. Kearney analysis
8.93
8.48
8.16
8.10
6.95
6.50
6.50
6.17
5.50
4.81
4.65
4.20
3.63
3.53
3.49
8.48
Singapore
UK
Germany
Ireland
Czech Republic
Taiwan
Hungary
South Africa
Israel
Argentina
Brazil
Poland
China
India
Russia
USA
Pharma IP Protection and Market AccessHealthcare InfrastructureCountry InfrastructureCountry Risk
Infrastructure Index (Healthcare and Country)1
Infrastructure / Environment: Ireland, UK, Germany and Singapore provide the most attractive environment driven by strong IP protectionPharma IP Protection and Market Access
7.877.52
7.347.07
6.896.52
6.235.785.73
4.984.974.97
3.863.83
7.71
SingaporeUK
GermanyIreland
IsraelCzech Republic
TaiwanHungary
PolandArgentina
BrazilRussia
ChinaIndia
South Africa
USA
Healthcare Score
Country Score
20Clinical Trial Offshoring
Current Situation
Key Findings
Overview of Top-Ranking Locations
Offshoring Considerations
Appendix
Agenda
21Clinical Trial Offshoring
9.94
7.38
1.48
5.31
3.63
6.10
3.98
5.91
4.48
3.32
6.34
4.87
0
2
4
6
8
10
Patient Pool Cost Efficiency RegulatoryConditions
RelevantExpertise
Infrastructure /Environment
Total Score
China
Median Score (Error Barsindicate Min/Max Score)
China offers large patient pools, low costs and sufficient qualified investigators, but a challenging regulatory environment
Current Situation
Trials / Regulatory 24 trials conducted in China by Top 12 pharma in 2005; 31 in 2006 1 FDA inspection 2000 – 2005
Patient Pool With the largest urban population in the world, China provides a
large pool of treatment compliant patients from multiethnic and multiracial backgrounds
Wide spectrum of disease types is represented
Environmental Factors China’s attractiveness is challenged by:
High country risk Lack of national infrastructure Limited enforcement of IP protection Bureaucracy and government regulations requiring trials to be
approved by the SDA, drug import license required for every shipment
Country Attractiveness Scores – China vs. Median
Sources: ClinicalTrials.gov (August 2005, March 2006); CenterWatch July 2002, FDA
Key Takeaways
While patient pool and cost factors are attractive, cultural, regulatory, and infrastructure concerns must be adequately addressed for trials to be conducted successfully in China
High enrollment rates can balance against the lengthy 9-12 month domestic trial approval process
Language can be a hurdle – data is often recorded in Chinese and must be translated before it can be used
China’s attractiveness as growing drug market is also a consideration in conducting clinical trials in China
Expected Future Trends
Government initiatives have helped to improve GCP in China with the establishment of GCP centers to provide training to investigators and staff
22Clinical Trial Offshoring
China: Attractiveness for Clinical Trials - Summary
Strengths
• Large Patient Pools and Relatively Easy Access
– Patient treatment of major diseases centralized to major hospitals making patient access easier
– Large patient populations
• Availability of Relevant Expertise
– Availability of co-operative doctor networks throughout the country
– Chinese CRAs are physicians from the institutions with clinical trial experience and have attended some international clinical trial training
– Real understanding of the science tends to result in fewer queries per trial
– Most major pharmacos have already set up captive R&D centers in China
• Expected to be 4th largest commercial market globally in the next 5 years
Areas for development
• Regulatory environment
– Study startup tends to take 6-9 months, making early phase trials less attractive
– SDA committed to making regulatory changes
• Lack of national infrastructure
• Limited enforcement of IP protection
• Bureaucracy and government regulations requiring trials to be approved by the SDA, drug import license required for every shipment
23Clinical Trial Offshoring
8.04
7.18
2.93
4.093.53
5.58
3.98
5.91
4.48
3.32
6.34
4.87
0
2
4
6
8
10
Patient Pool Cost Efficiency RegulatoryConditions
RelevantExpertise
Infrastructure /Environment
Total Score
India
Median Score (Error Barsindicate Min/Max Score)
With large patient pools and a low cost structure, India’s attractiveness is likely to increase with expected regulatory improvements
Current Situation
26 trials conducted by Top 12 pharma in 2005; 40 in 2006 No FDA inspections 2000 – 2005 Clinical research is considered high quality – trial data has been
accepted at major conferences and journals India has already been established as a popular manufacturing
destination – pharma executives are familiar with the business environment
Key Takeaways
While patient pool and cost factors are attractive, regulatory, IP, and infrastructure concerns must be adequately addressed
IP protection of trial data is a concern that should be monitored for compliance with new laws
Mandatory toxicology tests after Phase 2 completion requires 6 month delay before start of Phase 3
Coordination with local physicians and hospitals is mandatory The practical approach in India is to target large cities and conduct
clinical trials in large hospitals India’s attractiveness as growing drug market with expanding
private health insurance is also a consideration in conducting clinical trials in India
Expected Future Trends
Recently adopted laws will increase IP protection Legislative changes in Q1 2005 now allow India to participate in
simultaneous international Phase 2 and 3 trials. It is also probable that the government will allow Phase I tests in the near future (for drugs that did not originate in India)
Strong overall economic growth will lead to improvements in general and healthcare infrastructure
The CRO supply base is likely to increase as pharmas continue to increase manufacturing and testing in India
Source: PharmaHandbook 2005
Country Attractiveness Scores – India vs. Median
24Clinical Trial Offshoring
6.13
8.02
4.774.22
3.49
5.55
3.98
5.91
4.48
3.32
6.34
4.87
0
2
4
6
8
10
Patient Pool Cost Efficiency RegulatoryConditions
RelevantExpertise
Infrastructure /Environment
Total Score
Russia
Median Score (Error Barsindicate Min/Max Score)
Russia achieved strong scores on multiple criteria with the exception of environment
Current Situation
Trials / Regulatory 5 trials conducted by Top 12 pharma in 2005; 80 in 2006 12 FDA inspections 2000 – 2005
Patient Pool Medical care is centralized – patients with similar symptoms are
treated in the same ward, allowing for ease of patient recruitment (i.e., 2,400 patients recruited in 2 weeks for phase 3 trial of hypertension drug)
Russia has a large population that are treatment naïve and whose diseases are at advanced stages
Lack of quality medical care has led to eagerness among patients to sign up for clinical trials and to comply with trial protocols
Environment Russia imposes a clinical trials tax IP concerns have placed Russia on the US’s priority ‘watch list’
Key Takeaways
Russia is attractive for trials where recruitment of a large patient pool is required in a short time frame
Ethics of recruitment requires careful attention; physicians can make up to 10 times their salary through clinical trials potentially creating an incentive to neglect to inform patients of risk factors
Clear procedures for and close monitoring of patient recruitment is necessary to ensure compliance with international ethical standards
Sources: clinicaltrials.gov; Fortune, July 26, 2005, Special 301 Report of the Office of the US Trade Representative
Expected Future Trends
Drug companies are well established in Poland and the Czech Republic – Russia and other eastern European countries are increasingly attractive due to patient pool, lower costs, relevant skill labor pool
Country Attractiveness Scores – Russia vs. Median
25Clinical Trial Offshoring
6.566.97
3.74
3.02
4.655.26
3.98
5.91
4.48
3.32
6.34
4.87
0
2
4
6
8
10
Patient Pool Cost Efficiency RegulatoryConditions
RelevantExpertise
Infrastructure /Environment
Total Score
Brazil
Median Score (Error Barsindicate Min/Max Score)
Brazil has a large patient pool and significant cost efficiencies, but lags in the areas of regulatory and environment
Current Situation
94 trials conducted by Top 12 pharma in 2005, 73 in 2006 5 FDA inspections 2000 – 2005 Brazil is primarily attractive because of its large patient pool and
low costs ICH GCP has been implemented A substantial portion of Brazil’s population is ethnically close to US
and European population Clinical trial costs are about 70% of US costs Brazil is attractive for trials of drugs for the Japan market
Japan is the second largest pharmaceutical market Brazil has the largest (1.1 million) ethnic Japanese population
outside of Japan Foreign trial results on ethnic Japanese are now accepted by
Japan authorities
Key Takeaways
Brazil has had a long track record for clinical trials and remains attractive based on the scoring across the criteria
Clinical trials approval is traditionally slow
There are strong IP protection laws; however, enforcement is generally weak
Expected Future Trends
Stem cell research has been legalized
Country Attractiveness Scores – Brazil vs. Median
Source: clinicaltrials.gov
26Clinical Trial Offshoring
3.97
6.96
4.52
3.12
6.95
5.00
3.98
5.91
4.48
3.32
6.34
4.87
0
2
4
6
8
10
Patient Pool Cost Efficiency RegulatoryConditions
RelevantExpertise
Infrastructure /Environment
Total Score
Czech Republic
Median Score (Error Barsindicate Min/Max Score)
The Czech Republic’s attractiveness is based on its low cost structure and favorable regulatory environment
Source: clinicaltrials.gov, Pharma Handbook 2005, PhRMA Special 301 Report
Country Attractiveness Scores – Czech Republic vs. Median
Current Situation
44 trials conducted by Top 12 pharma in 2005, 85 in 2006 2 FDA inspections 2000 – 2005 Pharmas are already well established in the Czech Republic for
conducting clinical trials The Czech healthcare system operates at low cost
Average Czech physicians’ monthly salary is $550 Investigator fees and CRO/monitoring fees are approximately 50-
70% of U.S. amounts
Key Takeaways
Although the available patient pool is not particularly high, the Czech Republic has strong IP protection, low operating costs, and a strong healthcare infrastructure
The Czech Republic is ideal for companies beginning to offshore clinical trials based on proximity to western Europe, relative absence of cultural, regulatory, and environment barriers, and tested/ track record in clinical trials
Expected Future Trends
The Czech Republic’s accession to EU membership will likely lead to a narrowing of its cost advantage over time
27Clinical Trial Offshoring
Current Situation
Key Findings
Overview of Top-Ranking Locations
Offshoring Considerations
Appendix
Agenda
28Clinical Trial Offshoring
Key Considerations
• The Food and Drug Administration (FDA) has guidelines for clinical trials and relies on pharmaceutical companies to adhere to Good Clinical Practice (GCP)
• Keep a pulse on regulatory environment changes in attractive off-shoring locations
• Most developing countries have Intellectual Property infringement issues, although the landscape is improving (e.g. India)
• Maintain a strong emphasis on due diligence and tight contracts
• Consider the organizational, language-related and supply chain implications of off-shoring trials
• Develop relationships with 3rd parties with local experience (e.g. multinational/ local CROs)
• Develop detailed/ practical contingency plans
• Ethnicity may affect trial results due to metabolic and genetic variations
• Reduce overall risk by diversifying trial locations over multiple countries
Pharma companies must consider a variety of factors in developing their clinical trial offshoring strategy
Development of Off-Shoring
Criteria
Protect Intellectual
Property
Understand Culture and
Ethnic Differences
Assess Operational Implications
Know the Local
Regulatory Environment
29Clinical Trial Offshoring
Concerns often surface about offshoring clinical trials
Pharma Concerns
Intellectual Property Protection• Data exclusivity may not be protected
– Advance knowledge of a trial’s progress will give competitors unfair market advantage
Regulatory Requirements• Regulatory differences across countries may impact timing and cost of clinical trials
– E.g., drug import licenses required for each shipment, mandatory toxicology tests, language requirements for documents
FDA Acceptability• FDA statements on clinical trials offshoring are considered guidelines; pharmas companies are cautious about
entering new countries
Cultural Differences• Differences in the practice of medicine may impact trial results or affect trial execution
– Concurrent use of herbal medicines may potentially be unreported– Use of physicians (but not nurses) in taking blood samples
• In countries where doctors are culturally authoritative, investigators avoid using consent forms, as patients misunderstand the reason for them
Ethnicity• Ethnicity may impact trial results due to different metabolic rates and other genetic effects• FDA guidelines limit the percentage of a drug’s trials conducted in developing countries
Ethics• Wide disparity between investigator fees and standard salaries could lead to unethical patient recruiting
– E.g., misleading patients about risk factors, enrolling patients that do not fit the trial parameters• Investigators may under-report adverse reactions, believing they are doing sponsors a favor
30Clinical Trial Offshoring
Many risk factors can be mitigated with careful planning and execution
Selected Risk Mitigation Strategies
Knowledge/ Information• Monitor IP legislation and enforcement – do not rely on unsubstantiated information • Leverage CROs to understand a target country’s customs, regulations, and medical practices before establishing
trials
Operational – Structure to Manage Risk • Start initially with a smaller trial(s) in entering a new country• Work with multinational and/ or established local CROs with hands-on in-country experience• Develop partnerships, while maintaining healthy competition among vendors• Develop detailed/ practical contingency plans
Ensure Adherence to Standards of Conduct and Trial Protocols – ‘Build Quality In’ • Conduct rigorous training and monitoring of new investigators, to ensure compliance with ethical standards and to
ensure quality of clinical trial• Conduct audits to ensure compliance with standards (quality, ethical, etc.) • Ensure incentive structure does not cause unanticipated behavior• If using CROs, work with those that have strong IP policies and operating practices with investigators and patients• Hold partners accountable for meeting appropriate FDA standards
Diversify• Diversify portfolio of clinical trail geographies to balance patient pool opportunities, cost efficiencies, expertise,
and regulatory risk• Design clinical trials to recognize ethnic diversity
• Ensure sufficient percentage of trials is conducted in other countries• Set up trial parameters to include range of ethnicities consistent with FDA guidelines
• Ethnic diversity may be an asset if future plans involve sale within clinical trial country
31Clinical Trial Offshoring
Current Situation
Key Findings
Overview of Top-Ranking Locations
Offshoring Considerations
Appendix
Agenda
32Clinical Trial Offshoring
Weighting of criteria reflects the relative importance in assessing location attractiveness
Area of Evaluation/ Criteria Weighting
Patient Base 30%
Cost Efficiency 20%
Regulatory Conditions 20%
Relevant Expertise 15%
Environment 15%
Weights can be tailored to specific offshoring needs
Weights Assigned to Areas of Evaluation
33Clinical Trial Offshoring
Available patient base is evaluated by the size of the urban population and the propensity to seek medical attention
Area of Evaluation
Sub-Category Measurement Relevance
Patient Base
Size of Available Patient Pool
Urban Population Size Clinical trials conducted in urban areas to facilitate patient recruitment
Percent of Urban Childbirths Delivered by Physicians
Proxy for propensity of urban population to seek medical attention
Treatment Naïve Population Many clinical trials require that patients have not had prior treatments
Note: Measurements are converted into a score (range 0-10), and their weighted average is used to arrive at the composite score for the evaluation area
Sources: 2003 World Bank Data; 2003 WDI Database
34Clinical Trial Offshoring
Cost structure is assessed based on relevant labor and infrastructure costs and investigator grants
Area of Evaluation
Sub-Category Measurement Relevance
Cost Efficiency
Cost of Labor Average Physician Salary Investigator fees/grants represent a significant portion of the total costs of the trial
Average Nurse Salary (proxy for clinical research assistant)
Clinical research assistants (CRAs) monitor trial patients, collect data, etc and represent a significant cost of conducting clinical trials
Average Statistical Mathematician Salary (proxy for data management personnel)
Statisticians responsible for data management, data analysis, maintaining database, etc.
Average Wages Average wages account for overhead labor costs and services, such as administrative
Infrastructure Costs Average Rental For Office Space (proxy for lab space or office space)
Cost of space for labs, office space, etc.
Round Trip Airfare from London and JFK to Largest City in Country (weighted average)
Management of the trial will likely involve some travel to/ from country
CRO Cost Perspective
Relative Grant Levels Compared to the US
Estimate of country variation in total grant costs
Note: Measurements converted to a score (0-10), weighted average applied to determine composite score for the evaluation areaSources: Salaryexpert.com; WDI Database; Economist Intelligence Unit; CBRE Global Markets Rent; Expedia.com
35Clinical Trial Offshoring
Regulatory conditions considers FDA visibility, in-country regulatory conditions and level of IP protection
Area of Evaluation
Sub-Category Measurement Relevance
Regulatory Conditions
FDA Acceptability and Visibility
Number of Trials On the CDER Clinical Investigator Inspection List
Number of inspections reflects the FDA view of a country’s importance in clinical trials
Percent of Trials Where Inspection Resulted in Voluntary Action Indicated (VAI)
Countries with higher success rates with FDA inspections are more attractive
Country Specific Regulatory Conditions
Ease of Approval for Shipping Laboratory Samples (Rating)
Restrictions on biological shipments may extend lead time and delay initiation of trial
Clinical Trials Regulatory Approval Time (Estimated)
Regulatory approval time varies significantly across countries and is a potential bottleneck
Intellectual Property Protection
EIU IPR Protection Index Pharmas are concerned about potential reverse engineering of trial drugs
Note: Measurements converted to a score (0-10), weighted average applied to determine composite score for the evaluation area Sources: US FDA CDER Clinical Investigator Inspection List (1999-2004); US National Institutes of Health; Economist Intelligence Unit WEF Global Competition
Report; A.T. Kearney Research
36Clinical Trial Offshoring
Relevant expertise is driven by CRO presence, the country’s clinical trial experience and availability of the relevant skilled professionals
Area of Evaluation
Sub-Category Measurement Relevance
Relevant Expertise
CRO Presence and Clinical Trial Experience
Percent of Top 12 CROs Present in Country
Presence of top CROs indicates the availability of the local supply market
Number of Clinical Trials Voluntarily Listed in ClinicalTrials.gov
Number of clinical trials is an indicator for the level of experience
Availability of Relevant Skilled Professionals
Number of Physicians Used as proxy for the availability of suitable physicians for clinical trials
Number of CRAs/Nurses Used as proxy for the availability of clinical research associates
Number of First Degrees in Math / Computer Science / Engineering
Used as proxy for the availability of statisticians
Availability of Talent Pool Overall assessment of availability of talent needed for conducting clinical trials
Note: Measurements converted to a score (0-10), weighted average applied to determine composite score for the evaluation area Sources: ClinicalTrials.gov; Annual Physician Index; 2004 WHO / EIP / HRH; NSF
37Clinical Trial Offshoring
Area of Evaluation
Sub-Category Measurement Relevance
Environment
Pharma Intellectual Property Protection and Market Access
Designation by USTR on Countries’ Adequacy and Effectiveness of IP Rights Protection
Countries that have good IP protection are less likely to have theft or misuse of clinical trial data and materials
Healthcare Infrastructure
Under 5 mortality rate and adult (15-60) mortality rate
Mortality rate is proxy for the level of healthcare infrastructure
Country Infra-structure
Overall Overall Infrastructure Quality Measures ease of conducting clinical trialsTransportatio
nQuality and Density of Road and Rail System
Language TOEFL Score AverageCulture Adaptability
"Personal Contact" Rank
Country Risk
Business Environment
Overall Business Environment Rating
General risk and costs of conducting business in the country regardless of industry; import duty metric is specific to pharmaceutical industry
FDI Confidence Index Rankings
Political Environment
Political Stability Rating
Financial Environment
Currency Fluctuations Relative to the US Dollar
Tax Costs Percent Duty on Drug Importation
Government Support
Extent of Bureaucratic Red Tape
Environment is evaluated based on IP protection, healthcare and country infrastructure, and country risk
Note: Measurements converted to a score (0-10), weighted average applied to determine composite score for the evaluation area Sources: PhRMA (http://www.phrma.org/international/) Special 301 Report; Office of the US Trade Representative Special 301 Annual Review (2005); World
Bank; World Development Indicators (2004); Global Competitiveness Report (2004-2005); CIA World Factbook (2004); Economist Intelligence Unit (2004), Dorlong Kindersley Atlas; Educational Testing Service TOEFL Scores (2001-2002); A.T. Kearney Globalization Index (2005), USDA Trade Information Center (1-800-USA-TRADE)