Advantage Asia: Bloom Of CRO Industry

The CRO that sprung-up in Asia, particularly in India and China, about a decade ago, received its initial thrust from the escalating R&D costs that were immobilizing the R&D programs of many global pharmaceutical companies. The recent economic slowdown in some of the major western economies has further strengthened the need to outsource some parts of the developmental work to countries with cost advantages. The large patient pool, most of them treatment-naïve, was and still remains the most attractive feature of the CRO industry in Asia. This coupled with lower manpower costs, lower investigator costs and lower cost of overheads for conducting clinical trials in India and China, has driven the growth of this industry in the last few years.

The Asian CRO industry has been estimated to be around $1 billion in 2007 and is all set to double in size by 2010. The largest share of this industry will be held by India, China and Australia. Other Asian countries that are fast developing the technical expertise and trained personnel to cater to the growing global trend of outsourcing clinical research are South Korea, Hong Kong, and Taiwan.

India is the fastest growing outsourced clinical research destination in the Asia Pacific region; with the clinical research market in India (which was about $100 million in 2005) estimated to triple in size by 2010. India’s big advantage remains the availability of large numbers of well-qualified personnel. The cost benefits of conducting a clinical trial in India are well proven by the whopping 50 percent savings in conducting phase I, and nearly 60 percent savings in conducting phase II & III trials in India. The government too has done its bit by signing the TRIPs agreement and setting up a regulation to protect intellectual property rights; by providing fiscal incentives to research-based companies and by allowing the same phase studies (as the country of origin) to be initiated in India. This growth is further augmented by the rapid advances made in the improvement of medical infrastructure in India. Local corporate hospitals like the Apollo group are expanding their presence in various parts of India and are adding several different types of specialties to each center. Also, International hospital chains like Columbia-Asia have entered India and are all set to scale-up the medical infrastructure in India to International levels. These changes have increased the confidence of global pharmaceutical companies in India being able to provide quality CRO services.

China is the next in line. According to some reports there is a 15 percent cost advantage in conducting phase I studies in China; and a 20 percent cost advantage for phase II & III studies. Like India, China too has abundance of well-qualified personnel and its government too is providing easy access to financial assistance to entrepreneurs interested in setting up R&D related businesses through grants and loans; in fact the Chinese government has set up International level pre-clinical facilities in Beijing and Shanghai. This commitment to R&D has resulted in China being able to attract some global players to increase their presence there; for instance, in early 2006, AstraZeneca announced its plans to add a further $100 million to its research program in China.

Recent Challenges

The Indian and Chinese CRO industry could have proliferated at a much faster pace had they not been held back by some of the issues that are unique to this part of the world. The major issue has long been the lack of skills (particularly among Indian and Chinese clinical research personnel) that are taken for granted among personnel of similar qualifications in the West. The other issues include the lack of adequate infrastructure required to ensure quality of the study; inaccuracies in the documentation; improper interpretation and implementation of global regulatory requirements and growing concerns regarding confidentiality of study outcomes.

Some of the more recent challenges that have been thrown at the Asian CRO industry are the need for global data, EU Clinical Trials Directive and Electronic Data Capture (EDC). Global pharmaceutical companies seek CROs with global presence because of their need for global data; this is often challenging to local CROs in Asia who have limited global presence. According to Gregory Holmes, Executive VP for Clinical Operations at SFBC, a contract research organization based in North America, “A lot of our business is driven from the US and North America but we continue to diversify. We find that it’s necessary to run clinical trials on all continents; it’s just part of the regulatory package.”

The EU Clinical Trials Directive has made the conduct of clinical trials in Europe increasingly complicated, thus driving the pharmaceutical industry to look for CROs who can provide greater regulatory support in this changing environment. Sources indicate that the complexity of conducting clinical trials has increased manifold; for instance, by 2005 the number of clinical procedures involved in a clinical trial had reached >85, a 70 percent increase over those required in 2000.

EDC has now become a way of life in the clinical research industry as this is believed to improve process efficiencies. This will require CROs to either create their own EDC software or partner with IT service providers that have the expertise to convert the paper-based records to electronic ones.

As safety has become the focus of most research, CROs who can partner with pharmaceutical companies to provide additional safety and efficacy data that will inevitably be requested by the large regulatory bodies like the FDA are now more sought-after. In this scenario, the Asian CROs now increasingly have to find global partners who can take them up the value chain.

Future outlook

Even as the pharmaceutical industry is evolving and adopting newer business models, by moving away from the blockbuster, me-too brands towards research in understanding disease pathways; the CRO industry remains the backbone of the pharmaceutical industry’s research efforts. This is reflected in the fact that the worldwide CRO industry which was believed to be about $18 billion in size in 2007, is all set to grow by 14-15 percent annually in the coming years. This is reflected in the confident statement by Greg Holmes, Executive Vice President of Clinical Operations, SFBC, who says, “There’s a huge surge right now and I think in terms of supply and demand, there’s more demand. It’s a great time to be a CRO. In turn, the number of drugs being developed through phases II-IV has also increased.”

The main drivers of this growth are early development and phase I activity. By outsourcing early stage development work to expert CROs, global pharmaceutical companies have been able to increase the number of targets that they can put through clinical development. “Pipeline trends highlight preclinical and phase I as the fastest-growing areas of drug development during the last two to three years. One of the factors driving this growth is a greater focus on eliminating drug candidates at an earlier and less costly stage of development,” says Simon Higginbotham, Vice President and Chief Marketing Officer, Kendle.

As the pharmaceutical industry faces increasing scrutiny and tighter regulations, they in turn expect greater rigor out of their clinical research service providers. Since the CRO industry is very fragmented, global pharmaceutical companies often tend to create preferred service provider lists. While large groups like Quintiles, Covance and Parexel can find their way to the preferred vendor lists quite easily, some of the smaller CROs are now heading towards consolidation and forming strategic partnerships in order to compete for a position on these lists. Asian CROs have begun their quest for expansion through partnerships and one such alliance was formed in the second half of 2007 between the Russian, Synergy Research Group (SynRG) and Neeman Medical International (NMI), an India-based CRO, which established a new CRO Worldwide Network alliance to be “able to compete with global CROs in the bids for large international multi-center clinical studies.”

Several local CROs in Asia are now looking at expanding outwards. This trend is clearly visible from the recent acquisitions by Indian CROs of either parts of business or entire CRO set-ups in Europe. Take for instance the case of Synchron Research Services, an Ahmedabad, India-based CRO who announced in the first quarter of 2008 that they had acquired (for approximately $6.7 million) the stand-alone bio-analytical and bio-marker facility of Paraxel in France. This is touted as one of the significant acquisitions in CRO industry in India. Paraxel is also believed to have increased its stake in Synchron from 19.5 percent to 31 percent. This seems to be the perfect example of local focus and global reach.

It is estimated that in the period 2008 to 2012, the top 50 global pharmaceuticals companies are going to face patent expiries on $102 billion worth of brands (Source: Generic Series: Optimizing Brand Lifecycle Management: Winning Strategies to Maximize Revenue in the Face of Growing Generic Competition. DMHC2401 | Publication Date: 15 July 2008). This will further squeeze the margins of pharmaceutical companies that are already struggling with the prospect of low R&D productivity and low ROI on R&D investments. Thus, to save on developmental costs, global pharmaceutical companies are more likely to partner with full-service CROs rather than go about looking for a number of service providers who have proven abilities in several service areas related to clinical research. These services include preclinical/toxicology services; conduct of clinical trials from phase I to phase IV; site management services; regulatory affairs support; quality assurance; data management services; and laboratory analysis services. See figure 1 for services that form part of full-service CROs.

Emphasizing the emerging need for full-service CROs, Dr D’Sylva, CEO, Commonwealth Biotechnologies (CBI) said, at the Second Annual Global R&D Congress in Washington DC, “Simply adding affordable capacity by outsourcing to Asia is no longer sufficient,” and that drug companies are increasingly asking “CROs to provide more value by operating as full collaborators, with integrated service offerings, the ability to innovate and solve problems.”

However, even though full-service CROs are the order of the day, not all large CROs can provide all the specialty services and often this vertically integrated business model is not profitable for mid-sized and smaller CROs. Hence, large CROs are now looking at partnering with specialty CROs that have a proven track record in specialty services like clinical site management services; laboratory services; clinical data management services, etc. This is a win-win solution since it provides the pharmaceutical industry with a combination of the best possible service providers and the large and mid-sized CROs can join hands and gets a sizeable chunk of the business instead of competing for the same
piece of pie.

While the full-service model is followed by very few CROs in Asia, there are plenty of smaller CROs that specialize in and provide many of the associated services like clinical site management, data management, safety reporting, drug distribution and central laboratory services.

The following sections give further details regarding two key associated services of CROs in Asia; namely, clinical site management services and central laboratory services.

Clinical Site Management Services

Site management services include site initiation, site monitoring and project management.

Some of the advantages of using CROs with efficient clinical site management services are:

• Early study initiation due to ability to gain quick regulatory approvals and getting on board good study investigators because of presence of site coordinators.
• Quick ethics committee approval.
• Clinical research coordinators help in speedy patient enrolment and retention up to study closure.
• Constant supervision of site activities ensures quick resolution of issues and maintaining quality standards.
• Ensuring that ‘clean data’ is generated from the site thus reducing data management time and cost.
• Ensuring regular supply of investigational drug to the sites.
• Ensuring that sites comply with ICH GCP and other regulatory guidelines.

Central Laboratory Services

Laboratory services are required in order to analyze the body fluids or other specimens collected from the patients or study participants by the study investigators at the various sites at which the study is being conducted. Large CROs like Covance have central laboratory services that process shipments of specimens received from study sites across the world.

At the time of receipt these specimens are separated according to their storage requirements e.g., those that need to be frozen or refrigerated, need to be separated from those that are kept at room temperature. Once the specimen kit is received at the central laboratory, it is checked against a customized, protocol-specific database to verify the visit number, the tests required to be performed, any optional tests that may be required, patient demographic, time/date of specimen collection and also stability and appropriate storage history of the specimen kit.

When the specimen is being processed or analyzed, each kit containing the specimen and its accompanying tube is appropriately bar-coded to give it a unique identity which links it to the patient and the specific visit during which the specimen was collected.

Some CROs may also offer on-site testing for the simpler studies with short timelines. The larger CROs with well-equipped central laboratory services can offer a range of analytical options which address a variety of scientific disciplines starting from the basic ones like routine chemistry and pathology, microbiology, virology, immunology, hematology, flow cytometry, to the more complex ones like genomics.

In addition to central laboratory services, large global and full-service CROs can also offer what is known as ‘local laboratory services’ which allow the specimens to be processed at laboratories near the study sites but through a software link allow the specimen-related data to be sent to a central laboratory that collects specimen-data and not actual specimens on a real-time basis.

The advantages of having central laboratory services are:

• Quick, high-quality and uniform data availability
• Rapid access to safety data required for quick decision-making
• Laboratory results are consistent and conform to a single global standard that can be understood by investigators across geographies
• Real-time access to laboratory data saves data management time and costs