The IT outsourcing industry has laid down a solid foundation in terms of establishing and providing service and pricing model that can be ramped up to provide value added and highly skilled outsourcing services. Like the IT outsourcing industry in India, the clinical research industry was also established and expanded by home grown organisations. This sector has grown from a BOT (Build Operate and Transfer) model to a BPO and now to the Full Service outsourcing model.
Functional service has been ranked high among the buzz words of the clinical research industry. Both sponsor organisations and service providers are equally excited about the opportunities this model offers and the potentially win-win situation it provides to them. Sponsor organisations typically send individual protocol-related service RFPs (request for proposals) to CROs and follow-up with contract negotiations. Sponsors have realised the benefits of reduced oversight and contract management a complete functional service outsourcing model offers saving valuable time and resources. Depending on the contract terms and conditions, there can be a decrease in time and effort to manage the out-of-scope work load discussions. Sponsors are concerned about the management of out of scope work load as this also entails working with finance and extra approvals. This also may help service providers because the structure of the contractual terms allow for flexibility and responsiveness to address out-of-scope work. Organisations can implement work scope contract that deals with ranges for the units of work instead of fixed units.
The majority of functional services outsourcing contracts are role-based, especially when APEC (Asia Pacific Economic Cooperation) region resources are involved. In the role-based sourcing model, sponsors request a fixed number of resources and pay for the time spent by these resources on their projects. This approach has similarities to T&M ( time and material ) contract but is different in that is provides dedicated resources to sponsors on their projects for the long term. Sponsors can use these resources the way that best suits their needs. This kind of resource management involves some oversight and these oversight members need to make sure that there is sufficient work available to keep the contracted resources busy. Service providers require visibility and commitments on the amount of work they can expect on a regular basis to keep their resources adequately tasked and staffed.
The more innovative and challenging model that benefits sponsors is deliverable-based functional service outsourcing. This contract can provide much more flexibility for sponsors because they can estimate the amount of expenses they can anticipate based on their book of work for that year or next. This allows them to better plan their financial priorities. In this model, the cost for each deliverable or task will be set. This approach helps to manage and estimate their overall spend. A CRO’s resources can still be 100% dedicated to a sponsor, but the number needed can be managed by the Service Provider.
Mergers and acquisitions activity in the pharmaceutical industry has inspired CROs and starting 2010, many small- to medium-sized and niche players have merged to form medium to large-sized CROs. This benefits not just these CROs but also the industry overall. Pharmaceutical organisations are increasingly looking to have large and long-term functional service outsourcing and are excited to see the consolidation of talent into bigger pools because they can access more stable and cost-effective service.
It is evident from press releases generated by pharma as well as CROs that they are targeting the APEC region as their future destination for conducting clinical trials as well as for other clinical services. This will be a boon for India’s clinical service industry. Unless local players step up their game, global CROs will emerge as winners due to their renewed size and increasing presence in the Indian market. Global CROs have operational abilities as well as expandable service offerings that may make them more appealing to big pharma.
The functional service model is here to stay. However, the structure is as yet undefined as market forces will continue to define shape it. The APEC region has potential to make this model successful for both Pharma well as for service industry as they have qualified resource pool as well as cost effectiveness on their side. The dedicated work model and long term nature of FSP contracts help in providing stable and cost effective services from India. It is critical for clinical services organisations in India to provide quality, value added, and cost effective service models to emerge as winner in this ever changing service domain.
Vijay Moolaveesala works for PharmaNet/i3, a division of InVentiv Health in India, as Director of Strategic Alliance. Vijay is heading the India operations of one of the biggest client services vertical of PharmaNet/i3. Until recently, he lead the Global Statistical Programming group based out of Columbus, Ohio, USA. Vijay has been working for PharmaNet/i3 for 10 years and before that he also served Pharma and CRO organizations.