Bid Grids in Phase 1: Sliced and Diced!
Drug development is a complex business dependent on the collaboration of Companies, researchers, Governments, contractors and patients. A successful development program can involve an investment in excess of $1Bn, with no guarantee of return. Cost control is essential to the developing Company, and ultimately the price paid by medical funders and patients. Conducting Phase 3 trials that fulfil regulatory submission requirements is by far the largest expenditure that Pharmaceutical Companies face. Engaging the right clinical research organisation (CRO) to conduct such studies is pivotal to a program’s success.
As the process of vendor selection has become more ‘systemised’, outsourcing managers have become more reliant on project management tools, and ‘Bid Grids’ developed by individual Companies to manage both the front end contract award, on-going expense reconciliation and change order processes. The benefits of implementing such controls in Phase 3 are clear and are often quantified financially within companies.
Vendor selection in Phase 1 studies
Historically, most major Pharmaceutical Companies had their own Phase 1 units. However, as the CRO outsourcing model transitioned to include Phase 1 studies, vendor selection became the responsibility of the Clinical Pharmacology Department and was normally directed by the lead scientist for the project. Analysis of this approach during the 1980’s and 90’s indicated that it provided variable degrees of success. Decisions were complicated by differences in the level and quality of service provided by CROs, costs and ability to work with Sponsor teams. Many companies concluded that moving this function to outsourcing groups would save time, money and improve overall quality. Although the reasoning behind these decisions was valid, it required outsourcing groups to have access to the right skills mix to be able identify ‘the right CRO for the job’. One consequence has been the unrelenting march of Company specific bid grid to aid decision-making. It works for Phase 3, therefore it must be a good thing?
Difference between Phase 1 and Phase 3
Phase 1 is an exploratory science generating a knowledge-base of effects that any new molecule can have in humans. It is intended to inform development decisions, and as such, it is inherently ‘unpredictable’ as clinical pharmacologists seek to identify the true potential of new medicines. Under these conditions progress can sometimes be serendipitous. In contrast, Phase 3 is a deterministic enterprise that seeks conformity and uniformity in order to ensure that the regulatory package meets all agency requirements for safety and efficacy. Project management tools used in Phase 3 to manage vendor selection are therefore ‘constraining’ by intent.
How Bid Grids impact Phase 1 CROs
Even with models designed to established unitised costs for each aspect of a service request, as with all businesses, Phase 1 CRO’s must apply a certain ‘guesstimate’ of the costs of performing their business. Each Phase 1 CRO is unique in its costing model, based on factors such as location, estate costs, staffing and profit. Most can adapt to a wide variety of study designs to produce market-tested study budgets that include a small profit margin.
Sponsor Bid Grids impose an artificial external costing system that seeks to unify different Phase 1 CROs into producing similar cost ‘profiles’. Completion of a bid grid takes a disproportionate amount of time and resource to complete. Sponsors can often be insensitive to the administrative burden this places on a Company, ensuring that only larger ‘admin-rich’ groups can thrive. As with other forms of pharmaceutical outsourcing, the net effect is favouring outsourcing partners that resemble the Sponsor in corporate form, exacerbating inherent inefficiencies by duplicating structures and hierarchies. Ultimately, in this model, Sponsors pay more for this service in the cost of their studies. As the number of market competitor Phase 1 CROs reduces, these costs will increase further and so it can be predicted that bid grids in the Phase 1 environment serves, at least in part, to counter their purpose.
Plurality
The past 10 – 15 years has seen a decline in the number of commercial Phase 1 Units in the EU through a brutal series consolidations and closures. Decline of the Phase 1 service industry has been less related to Unit capability than to financial structures, resulting in fewer independents and more Corporate adjuncts. Reduction in the number of suppliers has resulted in a greater reliance on preferred partnerships and formal joint ventures. Drug development has fallen victim to the curse of unintended consequences. Bid grids have reduced the need for in-house expertise, built on years of Industry experience, and greater ‘efficiency’ of outsourcing in Phase 1 has resulted in a marked reduction in diversity and innovation. The practical upshot will eventually impact on innovation, potentially leading to fewer new drugs making it to market.
What can be done?
Ultimately, the industry benefits from a vibrant Phase 1 industry. Start-up biotech companies have become the life-blood of Big Pharma. Focused on the fulfilment of profitable partnership responsibilities, mega CROs are not structured to service the biotech sector in terms of customer care and focus. Consequently, a reduction in independent suppliers has reduced the ability of the EU to deliver true innovation
To overcome this, drug developers must seek partners who share their passion for innovation and scientific knowledge. The application of strict project management tools are counter-productive to this ambition, and the role of the bid grid might be small but is indicative of this trend. Perhaps the simplest solution would be to eliminate bid grids altogether? Obtaining 3–5 competitive bids can easily establish the ‘market value’ of a study and good negotiation can do the rest. Appropriate tools to manage time and finance can be implemented post award and, under this system, unsuccessful competitors won’t have invested a metaphorical kidney in the process.
An alternative solution would be to seek consensus across the industry as to what represents a suitable method of collating bids using a common ‘grid’. Paradoxically, Pharmaceutical Companies seek to guard their ‘bid grid’ with the same ferocity as they do for drug IP! This tool doesn’t deliver any commercial advantage to a competitor, therefore if you are proud of your grid, make it publicly available and enter a wider discussion on the future vibrancy of the Industry.
If you are interested in this subject or other issues impacting Phase 1 research then Graham invites you to contact him through LinkedIn.