The Rise of Outsourcing in Pharmaceutical R&D
Over the past few decades, the U.S. CROs market has seen significant changes in how research and development is conducted. One of the biggest shifts has been the rise of contract research organizations (CROs) that allow pharmaceutical companies to outsource various clinical trial services and functions.
There are a few key factors that have driven this trend toward outsourcing:
Higher costs of in-house R&D - As drug development has grown more complex with advanced therapies like biologics, the costs of maintaining in-house R&D capabilities have skyrocketed for pharmaceutical companies. Outsourcing pieces of R&D lowers the fixed costs companies must bear.
Focus on core competencies - By outsourcing non-core services, pharmaceutical companies can focus internal resources on areas like business development, marketing, and areas of science that directly impact their pipeline. U.S. Contract Research Organizations have more specialized expertise that allows them to conduct certain services more efficiently.
Flexibility and scalability - Using CROs provides flexibility for pharmaceutical firms to scale up or down their R&D activities based on changing market conditions and the needs of individual projects. CROs can flexibly manage variable costs and capacity.
The Rise of the U.S. CRO Industry
In response to the growing demand from pharmaceutical outsourcing, the contract research organization industry has boomed, particularly in the United States. According to a 2020 report from industry research firm Source Global Research, the top 20 CROs reported over $35 billion in revenue for 2019, with much of that total coming from the large U.S.-based players.
Some of the largest and most prominent U.S.-based CROs include IQVIA, formerly known as Quintiles and IMS Health, Parexel International, PRA Health Sciences, Pharmaceutical Product Development (PPD), Charles River Laboratories, and ICON plc. Many of these companies have grown rapidly through strategic acquisitions of smaller CROs and complementary services providers. For example, in 2016 Quintiles completed a mega-merger with IMS Health to create IQVIA and further solidify its position as the top CRO globally.
Many U.S. CROs are also publicly traded on stock exchanges like the New York Stock Exchange, providing an additional source of capital to support continued expansion. The sustained growth of the CRO industry has also helped foster the emergence of many specialist niche players focused on individual services like laboratory testing, data management, biostatistics, and monitoring.
A Hub for Late-Stage Clinical Research
While CROs globally conduct clinical trials and related services across all development phases, the United States in particular has become a dominant location for late-stage clinical research activities. Access to patient populations as well as world-class academic medical centers make the U.S. an attractive choice for large international Phase III trials. CROs have also established coast-to-coast networks of investigator sites optimally designed for these massive global studies.
Important factors driving the concentration of late-stage trials in the U.S. include:
- Regulatory acceptance - Results from U.S. sites are reliably accepted by both U.S. and European regulators given comparable standards, reducing duplicative efforts.
- Physician research experience - U.S. physicians tend to have deep experience serving as clinical trial investigators through affiliation with academic institutions.
- Broad access to diverse populations - No other country offers access to such a large, ethnically/demographically diverse population pool ideal for generalizable results.
- Established research infrastructure - Sites, IRBs/ethics bodies, and coordinated operational support from CROs streamline set-up and execution of large late-stage programs.
- Compensation for participation - U.S. standard payments to physicians and hospitals conducting research make commercial studies viable.
Together, these advantages cement the prominent role of U.S.-based CROs and their network of investigator sites in successful global drug approvals each year. As a result, pharmaceutical outsourcing to American CROs has remained consistently strong, driving ongoing consolidation and growth.
Delivery of Specialized Service Areas
In addition to overall clinical development services, U.S. CROs have established particular competitive positions in various specialized functional areas:
Laboratory Services - Major CRO-owned labs like Covance Labs, PPD Laboratories, and Charles River Laboratories have built leading global preclinical and bioanalytical testing networks. Their scale and quality systems benefit large pharmaceutical outsourcing programs.
Data Management - Industry leaders like PRA Health Sciences, PAREXEL, and IQVIA have extensive data management capabilities supporting all phases. Their integrated EDC, clinical data repository, and analytics services speed studies.
Real-World Evidence - Through acquisitions of health information/EMR companies, IQVIA, PPD, and Syneos Health now offer comprehensive real-world and late phase data solutions.
Regulatory Consulting - CROs deploy global regulatory experts from the FDA to PMDA to guide biopharma's evolving submissions for cellular/gene therapies, digital health, etc.
Start-up Support - U.S. CRO accelerator programs nurture development of innovative biotechs and their first clinical milestones through specialized bundled offerings.
Together, these capabilities demonstrate the broad and deep spectrum of integrated clinical research and related functional services that U.S. CROs can deliver. Their ability to tackle the full product cycle from preclinical through commercial launch makes them attractive total solution providers to pharmaceutical clients worldwide.
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