The Bulletin

Issue Number 17: Autumn 2012

Welcome to the PCMG newsletter no 17.

If you were with us at PCMG Annual Conference in Portugal in June, here’s a chance to refresh

your memories. If you weren’t there, read on to find out what you missed! The meeting was a great

success as always, with many interesting presentations and great networking opportunities.

Personally, I cannot even express my feelings of joy at getting “back to business” and seeing so

many of the familiar faces I have not seen for some time.

This Bulletin includes Andy Parrett’s critical dissection of strategic partnerships in our space, which

has prompted a valuable debate in PCMG circles. Meanwhile a piece from Carl Emerson discusses

the relationship between purchasing and outsourcing. Two words that can have the same meaning -

or can they?

We also have important information concerning Committee vacancies. Please read. There will be

some big changes in the Committee next year, with Andy Parrett, David Davies, Rhona Saunders,

Dave Webber and Tim Steven all deciding not to stand for re-election. I’m sure you will all join me

in thanking them for their great contribution to PCMG!

In other news, whilst the world still seems to be in financial crisis and the fate of the Euro continues

to be hotly debated, we have responded to the limitations on member travel by organising our first

webinar event. Held on the 12th of September, the webinar featured findings of the recent PCMG

supported PwC study in R&D outsourcing in hi-tech industries. Members responded with great

interest, with 33 attendees. An impromptu survey of their thoughts on the event showed that 100%

of respondents would attend future PCMG webinars.

PCMG continues to support Informa’s Partnerships event held each November and perhaps you will

be reading this copy inserted in your delegate bag! If so, I hope you have a very enjoyable and

useful conference!

Amy

Anne Maria Ylisaari

PCMG Committee Member

annemariaylisaari@gmail.com.

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CONTENTS

PCMG Annual Conference Review ................................................................................................ 3

As Soon as One Conference Finishes.............................................................................................. 6

PCMG Committee Elections: Call for Nominations. ................................................................... 7

Musings on the Remits of Outsourcing Managers and Procurement ......................................... 8

Strategic Partnerships: The Emperor's New Clothes ................................................................... 9

December Workshop: An Inside Look at the Financial Side of Clinical Trials....................... 14

January Workshop: Working with Clinical Trial Technical Providers ....................... ........... 15

Event Schedule................................................................................................... ............................ 16

PCMG Membership

The Pharmaceutical Contract Management Group is a professionally-constituted body dedicated to

optimising the outsourcing performance of its members and their companies. It is open to anyone

employed by a pharmaceutical company who has a significant interest and involvement in

outsourcing.

PCMG Sponsorship

Our workshops and annual conference provide excellent opportunities for

service providers to engage with contract managers in the pharmaceutical

industry. Our popular workshop sponsorship includes a presentation slot for

your representative to discuss key industry issues with participants, whilst

conference packages provide a range of further opportunities.

Recruitment Advertising Opportunities

You can advertise job opportunities in Outsourcing, Contract Management or associated positions

directly to the PCMG membership via the PCMG website.

PCMG OFFICE CONTACT DETAILS

For all queries contact Sam Dignan: Tel: +44 (0) 1625 664 546.

Bulletin contributions are always welcome.

pcmg@kingstonsmith.co.uk

www.pcmg.org.uk

3

PCMG 8th Annual Conference 2012

Returning to the Algarve in Portugal this year, the 8th

PCMG Annual Conference tackled the

topic of “Innovation in a Changing Market”. Set in the impressive grounds of the Sheraton Pine

Cliffs Hotel, the location and agenda stimulated interesting discussions and worthwhile debate.

Committee member Lan Bandara reports.

Day One

Introduction

Opening the conference, PCMG Vice Chair

Rhona Saunders of Biogen Idec introduced

the agenda for the day. Rhona also covered

some key PCMG activities including an

update on the new PCMG website.

Strategic partnerships: As good

as they claim?

PCMG Chairman, Andy Parrett, started the

morning session with a thought-provoking

and controversial presentation. Andy critically

evaluated the proposed benefits of strategic

partnerships, stating that there was no

evidence supporting many of the claims made

regarding partnerships in the industry. He also

suggested that strategic partnerships may lead

to a lack of choice and so result in a

monopoly for the larger CROs.

The changing scene

Paul Richter of Jina Ventures followed Andy

with some interesting financial observations.

He noted that CRO growth is now outpacing

Pharma, due to Pharma downsizing and to

increased levels of outsourcing. CROs are

seen as very profitable businesses, and many

have been privatised in recent years through

venture capital investment.

Mike Sitton, Clear Cut Services, then

provided an entertaining personal perspective

of the changes in clinical research over the

last 25 years.

Rhona Saunders opening the conference

Following Mike, Professor Trott from the

University of Portsmouth reviewed some of

his research into outsourcing in this area.

Completing the morning session, Peter

Carberry of Astellas summarised some of the

key changes in the industry over the last 30

years. Both Pharma and CROs have evolved

their businesses to meet the challenges of the

economic environment. The next level of

innovation may be more use of co-

development/co-investment models.

Comparisons with other

industries

After lunch, Professor John Seddon of

Vanguard Consulting took everyone through

his observations of outsourcing and partnering

in different industries. He identified a

common pattern where segmenting

organisations into different compartments in

the wrong way has had a clear negative effect

on productivity and efficiency.

4

Fireside chat

The next session was a new take on an old

idea - the ‘Fireside Chat’ concept.

Conversation was fuelled by three

protagonists: Joe von Rickenbach, CEO of

Parexel and CRO pioneer, who gave the CRO

perspective; Mike Sitton, presenting the

sponsor viewpoint, and Prof John Seddon,

bringing a (potentially incendiary) external

perspective. The moderator was Richard

Scaife, Mitsubishi.

Debating whether CROs and strategic

alliances have really brought tangible benefits

to clinical trial management, each participant

had contrasting experiences. The conversation

suggested that CROs may be the main

beneficiaries of such relationships, but that

the reason for this lay partly at the door of

pharma: sponsors’ short-term outlooks can

prevent alliances from maturing and realizing

mutual benefits.

Heating up, the discussion moved on to

consider the evolution of ‘Mega-CROs’ and

the resulting polarization of the market. All

three protagonists shared concerns over the

potential diversion of business focus and

continuity during mergers and acquisitions.

Overall, the chat provided interesting insights

into the fact that innovation in our business

may not always be beneficial to all concerned.

“This house believes CROs are

the source of all innovation”

The first day ended with the popular Oxford

debate. This year, the motion tabled was

“This house believes CROs are the source of

all innovation.”

Supporting the motion were Jon Wood of

Syne Qua Non and Karen Redding of

Fireside chat with Richard Scaife, Josef Von

Rickenbach, John Seddon, and Mike Sitton.

Phlexglobal. In opposition were Craig

Coffman of Endo and Matthew Bardsley of

AstraZeneca.

Convincing lucid arguments were put forward

by both parties in this entertaining debate, and

it was left to the moderator, Steve Martindill

(Gilead Sciences), to choose the winner. In

the end, for the first time since the debates

began, he declared a draw!

The carnival comes to town

The gala dinner was another spectacular event

set outside in the grounds of the hotel. With

the sun setting in the background and a

refreshing breeze, everyone had the chance to

reflect on the first day’s presentations and

discuss thoughts and ideas arising from what

they had heard.

After an excellent meal, we were delighted to

hear how Stuart McGuire of Chiltern is on the

road to recovery.

A fantastic evening’s entertainment followed,

sponsored by Chiltern. Dazzling juggling and

fire eating acts were followed by carnival

dancing right off the streets of Rio.

We finished the night relaxed and refreshed,

ready to get back down to business on day

two.

5

Day Two

Innovation, complexity, and the

need to foster the right

environment

Faiz Kermani, SFL Regulatory Affairs &

Scientific Communication, kicked off the

second day with a summary of innovation in

the regulatory arena and highlighted a

surprising number of new initiatives in this

area. This was followed by John Bennett

(JABPharma) who discussed the complexity

of clinical trials.

Switching tracks, Roger Joby (1to1to1), a

long standing contributor to PCMG events,

highlighted the lack of innovation in clinical

contracts. He also noted, however, that there

was not much motivation in the industry to

make changes to this paradigm.

Matt Bolton completed the morning session

with a lively and refreshing review of

innovative companies. He pointed out that

innovation doesn’t always happen by chance.

Many companies make an investment in

fostering the right environment, and allocate

time specifically for work on innovation.

Operational innovation

The last session focused on operational

efforts. Dr Fraser Inglis from the Glasgow

Memory Clinic provided an investigator site

perspective, and Nicky Yarwood of Roche

Products took a closer look at monitoring.

The final presentation of the day was from

Steve Kent of Perceptive Informatics, who

reviewed many of the tools available in

clinical research.

Lively discussions on the terrace

Overall, the meeting provided a fantastic

overview of innovation in our industry. It’s

clear much progress has been achieved over

the last two decades – but perhaps things have

not progressed as quickly as in other

industries.

Over the next 20 years, we can certainly

expect to see more changes that impact the

way we work. There is still room for

improvement.

Lan Bandara

PCMG Committee

lan_bandara@eisai.net

WANTED: Feedback,

News, Articles

We welcome your comments and views. We

promote and support an open exchange of

ideas and we welcome input from both our

Pharma members and from non-members

including service providers. If you have any

comments or suggestions concerning the

PCMG, the bulletin or any articles in it, or if

you would like to contribute to future

Bulletins, please get in touch with Sam

Dignan.

6

As Soon as One Conference Finishes...

It’s time to plan the next. Here, Richard Scaife, 2013 Conference Chairperson, reflects on how

we can make the annual conference as accessible and relevant as possible in today’s tough

climate, and introduces next year’s plans.

The hot question as soon as each Annual Conference closes is always "...where next year?" We

have listened to the broad range of feedback from members and sponsors and, while it's impossible

to meet everyone's preferences, we can have followed the key principles of making the conference

different, stimulating and feasible. The resort venue concept has worked well, but there was concern

that in the current business climate it was making it difficult for members submitting travel

requests. We also needed to improve accessibility for participants across Europe, and to consider

delegate room costs. After narrowing down a long list of potential venues, the PCMG committee

has now made the final selection..........Budapest!

The actual venue is now being finalised to make the meeting as special as ever, but still cost-

effective. However, we can confirm dates of Wednesday evening, 5th June 2013 finishing on

Friday 7th June, so block this space in your schedules now!

As for content, these are challenging times for sponsors and providers. Subsequently, the theme for

the 2013 conference is to go 'Back To Basics’, refining existing tools, developing new ones and

pooling our knowledge to develop baseline standards of practice. The Conference Steering

Committee and PCMG members are finalising an agenda that will challenge conventions, stimulate

interaction, and provide content of tangible value that delegates can take away and apply

immediately in the working environment.

As well as PCMG members’ attendance being crucial to the ongoing success of this meeting, please

start thinking now of how you can involve other project team members. Clinical PMs have a

vested interest in many of the agenda items such as study feasibility, pricing transparency, who is

best placed to be lead PM - sponsor or CRO?, communication best practice and more. While

budgets remain tight, there's no better time to remind your colleagues of the relatively low cost of

attending PCMG - a conference that is designed for content, not commercial gain.

That's my sermon for today. My thanks to everyone who has helped us in the intensive preparations

to date. Feedback, as always, is welcome!

2013 here we come....

Richard Scaife

PCMG 2013 Conference Chairperson

RScaife@m-pharma.co.uk

7

PCMG Elections

One of the great strengths of PCMG is that the organisation is run by members for the benefit of

members. The committee, the officers and the directors are active PCMG members who give time

when their day jobs permit to serve as a ‘management team’ and organise activities such as the

workshops, webinars, training events and the annual conference.

PCMG could not function without the support of these individuals. On behalf of the membership, I

would like to extend heartfelt thanks for the work they do week in and week out to further the goals

of PCMG.

The structure of the current PCMG management team is as follows:

Board Directors (3-4) Officers (4) Committee (Number not set)

Andy Parrett Chairman: Andy Parrett Alison Moor

Antje Hindahl Vice Chair: Rhona Saunders Anne Maria Ylisaari

Cliff Leat Treasurer: Cliff Leat David Webber

David Davies Secretary: David Davies Lan Bandara

Lesley Matthews

Richard Scaife

Stephanie Kamp

Steve Martindill

Tim Steven

The directors, officers and committee are appointed for a two-year period. After two years, the

individuals must either step down or offer themselves up for re-election. Andy Parrett, Dave

Webber, Rhona Saunders, Tim Steven and I have indicated that we will not stand for re-election for

the 2013-14 period. There will therefore be vacancies for one or two directors and three officers.

Meanwhile we expect a need to fill several vacancies on the wider committee.

Would you like to put your name forward to help drive PCMG forward in 2013-14, either as a

director, officer or a committee member?

Nominations are sought from the membership, to be received in writing on or before 14th December

2012. Please contact me or any of the current team if you would like to discuss any of the roles,

informally, in confidence.

Should we receive more candidates than vacancies for any given role, then an election will be held.

Elections must be concluded and ratified by the time of the AGM. This will be held on 23 January

2013, during the first workshop of the year.

This is your chance to make a real difference to PCMG in the future!

David Davies

PCMG Secretary

david.davies@futuramedical.com

Tel: +44 (0) 7764682332

8

Musings on the Remits of Outsourcing/Contract Managers and Procurement Specialists

The topic of the balance between the roles and remits of outsourcing/contract managers and

those working in the procurement function is a perennial favourite. Carl Emerson has

experience in both clinical development and procurement. In this article, he shares observations

gained during more than twenty years of working in the field – and asks a few questions, too.

The early days

As pharmaceutical companies started out on their first outsourcing projects, they soon discovered

the adventure of outsourcing raises problems for the untrained and inexperienced. It quickly became

apparent that if the same difficulties were not to be repeated over and over again, it was going to be

essential to capture learning and build up a pattern of best practice. Further to this, it also became

clear that the skills required were too extensive to be simply bolted onto the job of a clinical

manager. This led to the emergence of a dedicated outsourcing management function, populated by

experts within clinical who were able to build up a toolbox of templates, establish workable

procedures, and guide the uninitiated and untaught through the muddy waters of first time RFPs and

contracts.

Procurement gets worried

As spend grew, and outsourcing became increasingly standard practice, the amount of money

changing hands inevitably caught the attention of senior management, and the procurement function

started to express concerns that best practice might not be being followed. This led, in many

companies, to an uneasy dialogue as both groups tried to communicate the importance of their

respective experience in this area of huge cost and critical delivery.

What’s the point of a clinical outsourcing manager?

So, the big question. Why is a clinical outsourcing manager necessary, when, for the rest of the

world’s industries, procurement can do it all? I’m now in a company where all outsourcing is done

through procurement. We do a fantastic job with source plans, category strategies, Porters' analysis,

market segmentation, savings targets and contract execution, all good procurement stuff. But the

customer groups want to see more of our managers, more operational support, more hands-on

running of meetings and training sessions.

These are all essential added-value activities, but not ones that contribute to our procurement

department objectives. This isn’t necessarily a problem, but it certainly raises a number of issues.

Is Pharma so different from other industries?

So, what makes these added-value extras so necessary in this industry? Anyone can say their

particular industry is different. Surely, it is just a question of project management?

The answer is that Pharma really is different. Yes, of course large Pharma companies need to apply

best procurement practice. As in every other industry, companies need watertight contracts,

transparency over spending, validated savings. But the projects outsourced are extremely complex,

requiring a high level of scientific understanding. Trial conditions can be very variable,

circumstances can change, and results can be unexpected.

9

Agreements have to take account of all these factors – and that’s why you can’t employ pure

procurement practices without clinical understanding.

To test the theory...

If you want to test the theory, just try calling an investigator a 'supplier' and treating him as such -

and see how far you get!

Carl Emerson

carlinbelgium@gmail.com

Strategic Partnerships: The Emperor's New Clothes

In this article, first published on 7th

August in Pharmaceutical Executive (www.pharmexec.com),

PCMG Chairman, Andy Parrett, argues that current strategic partnership models are neither

strategic nor partnerships. And they don’t add value to clinical trial outsourcing.

In Hans Christian Andersen’s ‘The Emperor’s New Clothes’, two tailors promise their leader a suit

that is invisible to anyone unfit for office. And everybody goes along with it: the Emperor not

wanting to seem incompetent; the people not daring to challenge him. In clinical trial outsourcing,

we are witnessing a similar phenomenon - except our Emperor is the pharmaceutical executive, our

tailors are the large CROs, and our invisible suit is strategic partnering. In the story, it takes the

foolhardy effrontery of a young boy to expose the truth. I’d like to cast myself in that role for this

article.

The popular view

Strategic partnership deals are the fashion in our space, with numerous public announcements in

recent years.1 And there have been a number of reviews and commentaries on the trend, most of

which conclude that strategic partnerships are beneficial to the sponsor companies implementing

them.1,2,5 A good summary of the popular view has been provided by industry observer Kenneth

Getz, who says:

“Partnerships hold promise in establishing long lasting relationships that benefit from strategic

insight into & engagement in future portfolio needs. Under these relationships, sponsors partner

with fewer CROs . They gain the assurance of dedicated global capacity and expertise under shared

governance, coordinated communication and issue resolution and integrated operating processes

and systems.”2

My italics there highlight the elements Getz associates with strategic partnerships and these recur

throughout the literature, along with others such as economies of scale, risk sharing and trust. But

what value is associated with each of these features? Are the benefits real? Where is the evidence?

The facts

The British mathematician and philosopher Bertrand Russell once said: “Never let yourself be

diverted either by what you wish to believe or by what you think would have beneficent social

effects if it were believed. But look only, and solely, at what are the facts.”3

10

This is a useful approach to take when examining strategic partnerships because, although the

vision of collaborative sponsor-CRO alliances — that is, we’re all in it together — might sound

appealingly noble, facts demonstrating real added value are hard to find and reasons to doubt are

many. Below, I list some common-sense objections to each strategic partnership feature – points

you will rarely hear these mentioned in the debate as, conveniently, facts are ignored in favour of

righteous platitudes.

Strategic Partnership

Feature Disadvantage

Long Lasting

Relationships

Reduced flexibility/agility. Reduced competition (which impacts on

cost, quality and innovation).

Fewer Providers See above.

Dedicated Global

Capacity

Dedicated resources negate the benefit of Just In Time resourcing.

And why pay the premium for global capacity every time if it might

be cheaper to match vendor capability to project requirements?

Shared Governance

Governance is expensive. Popular models are based on issue

escalation rather than Risk & Quality Management, and obscure

who the customer is so harming delivery.

Integration

Integration introduces prohibitive exit costs for the relationship,

therefore incurring the same disadvantage as Long Lasting

Relationships and Fewer Providers.

Economies of Scale What economies of scale? The big CROs who sell this benefit tend

to be the most expensive. Economies of flow are more important.4

Risk Sharing

Risk sharing in service contracting does not exist because if you try

to transfer risk, you pay a premium even if you never encounter the

risk.

Trust

Trust is a false concept where applied between organisations, but

one that appeals due to the mind’s tendency to personify groups. It

is used as an excuse for zero transparency, which should be the

real basis for prolonged engagement of a provider.

Just examine the literature. The main benefit said to arise from strategic partnerships is the promise

of savings. However, the only company that appears to have put their name to a figure on this is Eli

Lilly (20% on data management & monitoring)5 and in that case there is no detail given of how the

saving was achieved or measured. Meanwhile, there is evidence that savings are not materialising

in the partnership space, with last year’s RW Baird Survey suggesting CRO costs have increased,

particularly for large pharma where the majority of the strategic partnership deals have been

created.6

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In a nutshell, there are two big problems with strategic partnerships in our industry. The first is that

they are not strategic. The second is that they are not partnerships.

What Does ‘Strategic’ Mean?

The concept of strategic purchasing can be traced back to a seminal paper by Peter Kraljic

published in Harvard Business Review in 1983.7 Kraljic explained how suppliers can be classified

in terms of cost and the risk they present of failing to supply (perhaps failing to recruit patients).

The implications of Kraljic are shown in Figure 1. When assessing suppliers, we calculate what the

supply failure risk is versus cost, which gives us a definition of value. Now, if awarding an entire

portfolio, it is reasonable to position small CROs at point A representing low cost but high risk,

while the larger, better-established CROs might occupy point B, representing high cost with lower

risk. The place any buyer would like to be is at point C, but that isn’t very realistic. Instead, the goal

might be to get to point D.

The message is that it may be better to do that by investing in mitigating the risk of a low cost

provider than by negotiating discounts with an established one.

Investment to support a provider is a real strategic

approach. Procurement professionals call it ‘supplier

development’, and it is clear to see how such a philosophy

might lend itself more readily to engaging cheaper, riskier,

smaller providers.

In our industry, however, we have made it a pre-requisite of strategic partnerships that the provider is large and global.

Figure 1

Kenneth Getz observes: “Small and mid-sized CROs have largely been left behind while major

CROs — the only organizations with sufficient scale and diverse talent — service a growing

number of integrated relationships.”2

This prevailing attitude reduces the science of procurement to mere shopping, and is reminiscent of

the old phrase “nobody ever got fired for hiring IBM.” Strategic purchasing should be about

mitigating supply failure risk, but in our space nobody ever talks about that in the same breath as

strategic partnering. The single biggest risk of supply failure — not recruiting patients — is never

mentioned. The focus instead is on discounts and, for me, it’s depressing that such tactical, point-of-

contract saving-mechanisms are constantly touted as strategic solutions when frankly they are not.

However, due to the $125 billion patent cliff our industry faces, pharmaceutical executives are

desperate to focus on savings – immediate savings – that can only be reported through tactical

means. So pharma talks strategic, but acts tactically, and nobody can blame the big CROs for

making some money out of the situation. It’s like the Emperor’s New Clothes. It wasn’t the fault of

the tailors. The Emperor brought his predicament entirely upon himself.

12

Partnerships and the Risk Dynamic

In the Journal of Clinical Research Best Practices, Ronald Waife writes: “[T]here is nothing to be

gained by characterizing service providers as partners… the criticism of a pay-for-service

relationship in favour of something somehow more lofty is misplaced and misleading.”8

True partners share interests, risks and profits. However, in Waife’s analysis, sponsor risks and

profits are high, while CRO risks and profits are more modest. But on this detail I tend to disagree

because my observation for the subset of CROs who have cornered the strategic partnership market

is that they generate profits (as a percentage of earnings) comparable to those of their clients.

Just consider the market. Private equity companies have been scrambling to get into the CRO

business over the last 8 years, with 14 formerly public CROs having moved into private ownership.9

Such investors don’t go hunting acquisitions in industries where profits are modest and, all the

while, strategic partnering is where they most want to be. The acquisition activity associated with

this has driven a consolidation of CROs, and economists tell us that as the number of suppliers

decreases, so prices rise in the pursuit of profit.10

This is especially true in the supplier base for strategic partnerships because, remember, we have

made it a pre-requisite of strategic partnerships that the provider is large and global. This has

limited our options, with one analyst claiming that the six largest CROs now account for 50% of

total clinical CRO revenues.11 This means a market that economists describe as ‘oligopoly’,

characterized by, among other features, high profits for the suppliers.10

It would be OK for the CRO side of the partnership to enjoy high profits if they shared the risk but,

as Waife points out, this is where the partnership concept really breaks down:

“The CRO’s risk in non-performance is mostly one of tarnished reputation… [but] responsibility for

failure is usually obscure… [and] sponsors are notoriously loathe to pursue penalties. If there is a

sanction it would most likely be loss of work. But … sponsors routinely continue to give work to

service providers who have failed them.”8

Put simply, risk sharing does not exist between customer and service provider, and you can’t have a

partnership without shared risk. Waife and I agree on the solution for this dilemma: accept that the

risk is always with the client, who should therefore take responsibility for managing the risk.

Taking responsibility for risk means being the boss, not a partner. Partnerships create governance

built on issue escalation and nannying project teams with CRO personnel in committees where they

are equal or senior to sponsor personnel, blurring the distinction between customer and service

provider and harming delivery. We should replace traditional governance with a lean system where

pharma focuses on risk and quality management and the CRO gets on with delivering its services.

Waife concludes: “[Why] not just pay your CRO for competent work without all the ‘partnership’

trappings? Look at any press release for a new sponsor-CRO partnership. Every single service or

advantage listed… can be purchased… from that CRO… without a partnership agreement.8

13

Waife might as well say that partnerships in our space are like lipstick on a pig. You can dress up

service delivery as something more beautiful, but it’s still service delivery. Any suggestion the

sponsor might benefit from subscribing to the partnership fantasy is groundless in fact and

potentially dangerous.

Conclusion

In summary, strategic purchasing is concerned with mitigating the risk of supply failure. This risk

cannot be shared, because service providers and sponsors have different interests. A partnership

relationship is one where risks are genuinely shared because interests are shared. The concept of a

strategic partnership is therefore an oxymoron. It cannot be fit for purpose, and is a classic example

of how an idea can become popular despite practically zero evidence of claimed benefits.

It has probably not escaped your notice that should (as would seem likely) the risk/cost profiles of

CROs described in Figure 1 vary significantly between trials (so that, for a given trial, a cheaper

CRO may also sometimes be less risky) then a policy of radically limiting one’s supplier base will

impact the possibility of achieving best value from one trial to another. Thorough study of this

dynamic — considering total cost of ownership in order to fully understand the pros and cons of

limiting one’s options — is therefore essential for any sponsor considering its sourcing strategy.

Taking such an evidence-based approach is well rehearsed in the procurement profession, where it

is called ‘value analysis’. However, to my knowledge, no such analysis has ever been undertaken

prior to implementing a preferred provider policy for clinical trial outsourcing.

Adoption of procurement best practice is what has been missing in clinical trial outsourcing as

pharmaceutical executives have preferred a wild goose chase for the utopian dream of partnering

with service providers. I would add that when sponsors accept that they alone own their risk — that

they cannot share it via misconceived partnerships — then they can justly demand full transparency

and slim profit margins from CROs who, ring-fenced from risk, will have no excuse not to comply.

Perhaps only then will sponsors secure the ultimate prize of reducing real costs rather than

recognizing imaginary savings…and subscribing to the myth of the Emperor’s New Clothes.

References 1. Graham Hughes, Contract Research Annual Review 2011, The Complete Picture of the Contract Research Market, Biopharm Knowledge Publications 2011.

2. Kenneth Getz, “Profound Shifts in Outsourcing Landscape”, 10–15, Inside Outsourcing, A Supplement to Applied Clinical Trials, November 2011.

3. Bertrand Russell, BBC Interview, 1959.

4. Prof. John Seddon, “Why do we believe in economy of scale?” White paper, July 2010.

5. Karyn Korieth, “Integrated CRO alliances growing but poorly executed,” 1, 12–16, CenterWatch Vol 18, issue 09, September 2011.

6. Nick Taylor, “CRO prices increasing, survey finds,” www.outsourcing-pharma.com, 29th September, 2011.

7. Peter Kraljic, “Purchasing must become supply management,” Harvard Business Review, September 1983.

8. Ronald S. Waife, “Partnership Heresy,” Journal of Clinical Research Best Practices, Vol. 8, No 1, January 2012.

9. Paul Richter, Jina Ventures, speaking at 8th Annual PCMG Conference, June 2012.

10. Hunt & Morgan, “The Comparative Advantage Theory of Competition,” Journal of Marketing, 1–15, Vol 59, April 1995.

11. Jim Miller, President PharmSource Information Services Inc, Feb 2011.

Andy Parrett

PCMG Chairperson

Andrew.parrett@btinternet.com

14

December Workshop

An Inside Look at the Financial Side of Clinical Trials

Nice, Thursday 6th December

This workshop explores the complex financial issues at the heart of every clinical trial contract.

Covering topics ranging from budgeting through to managing currency fluctuation, the workshop will

give participants insights and knowledge to help them manage their own spending more effectively.

Workshop Sessions

Financial Considerations in Clinical

Development

• Currency fluctuation.

• Inflation.

• Tax.

Led by: Daniel Nicholson, Outsourcing &

Contract Manager, Grünenthal GmbH.

How Much More are we Paying for

our Trials and is it Justified?

• A historical look at costs.

Led by: TBC, Medidata.

Case-Study: Streamlining Pass-

Through Costs

Led by: David Mantell, European Head,

Global Procurement - Pharma Development

Services, Bayer PLC.

Case Study: System-Supported

Budget Planning, Forecasting and

Management

• System requirements.

• Custom made versus off-the-shelf.

• System features.

• Lessons learned.

Led by: Birgit Viechtbauer, Planning &

Resource Manager, Grünenthal GmbH.

Financial Considerations Around

Outsourcing & Budgets in Other

Industries: What Can we Learn?

• Consulting as a business.

• An introduction to the construction

industry.

• Outsourcing: sub-contractors and

consultants, off-shore working, fully

outsourced model, pros and cons.

• Models and market drivers including

the Buro Happold position; current

position, planned position.

Led by: Andrew Comer, Director

Environment & Infrastructure / Buro Happold

Ltd.

Interactive Presentation: Financial

Assessment of Suppliers

• Why bother?

• Contingencies.

• Providers of credit-worthiness data.

Led by: Mike Sitton, Director, Clear Cut

Services Ltd.

.

Booking Information

Venue: Grand Hotel Aston, Nice.

To book: See www.pcmg.org.uk

PCMG workshops are open only to members

and guests from their company.

15

January Workshop and AGM

Working with Clinical Trial Technical Providers London,

Wednesday 23rd January

We start 2013 with a workshop that will be of value to all those who select and manage technical

providers. With topics ranging from initial assessment through to measuring and tracking, this

workshop will give you tools and techniques that will help you make better-informed decisions about

providers and get the best value from those you do decide to work with..

Workshop Sessions

The workshop will include a separate session

on each of five types of provider: Central

Laboratory Services, IVR, Cardiac Safety,

Imaging, and ePRO. Topics covered will

include:

• Assessment

• Value drivers

• Costs and cost models

• Interpreting proposals

• Measuring performance

There will also be a second session on

working with Central Laboratory providers.

This will focus on ways to track and improve

logistics budget management as study

specifications evolve from initial proposal

through to study delivery.

Central Laboratories

Presenters

Session one: Karolyn Jackson

Clinical Labs Performance Director

Alliance Management, AstraZeneca

Session two: Upinder Grewal

Director, Logistics, Icon Central Laboratory

IVR

Presenter: Wendy Allen-O’Grady

R&D Procurement Manager

Science & Technology Category, Global R&D

Procurement, AstraZeneca

Cardiac Safety

Presenter: Crister Malm

Vice President, Business Development

Europe, ERT & Pharma Guest Speaker TBD

Imaging

Presenter: Andrew McDonald

Imaging Outsourcing Specialist, Key Service

Area Manager, F. Hoffmann-La Roche Ltd.

ePRO

Presenters: Adam Wood, Account Director,

ERT & Pharma Guest Speaker TBD.

Booking Information

Venue: Hilton Kensington, London.

To book: See www.pcmg.org.uk

PCMG workshops are open only to members

and guests from their company.

PCMG AGM

The PCMG Annual General Meeting will be held from 11.40 – 12.15. It is open to all PCMG members, whether attending the workshop or not. Please join us if you can.

16

PCMG Event Schedule

Thurs 6th

December 2012 – Nice

Financial Management of Clinical Outsourcing Sponsored by Medidata

Committee Support – Stephanie Kamp & Alison Moor

Wed 23rd January 2013 – London

Clinical Trial Technical Providers Sponsored by ICON Labs and ERT

Committee Support – Cliff Leat & Andy Parrett

Wednesday 20th March 2013 – Germany (City TBC)

Advanced Negotiation Training Committee Support – Alison Moor

Wednesday 5

th- Friday 7

th June 2013 – Budapest

Annual Conference

Thursday 10th October 2013 –London

KPIs & Metrics Committee Support – Lan Bandara & Steve Martindill

January 2014 –London

Procurement Best Practice & Tools Committee Support – TBC

Non-PCMG Events