The cost of drug development has soared during the past ten years compelling pharmaceutical and biotechnology companies to look for new, smarter ways of conducting clinical research. Driven by mounting market pressures, companies are increasingly implementing outsourcing strategies to increase revenues through faster drug development. By decreasing their in-house facilities and staff, and outsourcing more of their R&D functions, pharmaceutical and biotechnology companies are reshaping the drug development services industry. This industry has evolved from providing limited clinical trial services in the 1970s to a full-service industry that today encompasses the entire drug development process, including preclinical evaluations, study design, clinical trial management, data collection, biostatistical analysis, and completing product regulatory requirements.

Outsourcing is not a new concept to pharmaceutical companies; however, its use increased dramatically in the mid-1990s, and it is expected to continue to increase going forward. It is estimated by 2004 nearly 42% of all pharmaceutical drug development expenditures will be committed to outsourcing, as compared to the 4% that was outsourced in the early-1990s. Some estimate that there are currently over 1,200 organizations involved in the clinical research, including pharmaceutical and biotechnology in-house clinical research, site management organizations (SMOs), academic medical centers, private research sites, and contract research organizations (CROs).

CROs were first organized as outsourcing service companies that provided only clinical trial management. Today, many CROs have expanded their scope of services to provide comprehensive management of the complex drug trial processes for their client companies, as well as providing access to vast areas of expertise, which may not exist in the client’s internal organization. Over the past few years, CROs have received the lion's share of outsourced clinical research revenue. In 2001, in the United States, CROs received an estimated 60% of the clinical research outsourced from pharmaceutical companies.

Typically, large CROs compete on the basis of medical and scientific expertise in specific therapeutic areas; the ability to manage large-scale trials on a global basis with strategically located facilities; by providing medical database management capabilities; providing statistical and regulatory services; the proven ability to recruit principal investigators, and patients into studies; and the ability to integrate information technology with systems to improve the efficiency of contract research. The combination of the growing trend by pharmaceutical companies to outsource a wider range of services, and the need to pass products through the testing and regulatory process in a rapid, cost-effective manner, has lead to skyrocketing growth of the CRO market. The CRO market grew from $1 billion in 1992 to more than $8 billion in 2002. CROs enrolled 7 million research subjects in 1992, and 20 million in 2001.

The efficiency of a clinical trial can be greatly compromised by the challenge of efficiently enrolling patients, securing clinical trial sites, and collecting data. Pressure to expedite clinical trials, while reducing the cost of the trials, has led to yet another new, rapidly evolving business: Site Management Organizations (SMOs). SMOs are quickly consolidating the fragmented clinical investigator market into well-managed networks of sophisticated clinical research sites. SMOs are management service companies that organize and manage multi-site clinical trials through contractual relationships with site owners, or direct ownership of the sites. Analysts estimate that the SMO industry will grow at a rate of about 43% per year over the next few years. Although SMOs represent competitors of CROs, they are also often subcontractors to them. It is estimated that as many as half of an SMO’s clients are CROs.

It is imperative that pharmaceutical and biotechnology companies pass their product through the testing and regulatory process in a rapid, cost-effective manner. To accomplish this goal, pharmaceutical companies are relying on outsourcing strategies to provide the services that can bring their therapeutics to market faster.

This report explores the complexities and costs of the clinical research in the drug development process. In addition to a thorough evaluation of the market data, the report goes on to

• examine government regulations governing human trials,
• describe how and where clinical trials are conducted,
• examine the process by which investigators and patients are recruited,
• identify the trends and issues in outsourcing clinical research, and
• profile CROs, SMOs and various niche competitors in the clinical trials industry.

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