CROs set for world drug development domination

Contract drug development spending reached $19bn in 2005 and will increase at an annual rate of 17 per cent to exceed $42bn by 2010, according to a new report by Kalorama Information, publishing division of MarketResearch.com.

The continual push by pharma firms to reduce drug development costs, bring drugs to market more quickly, and increase the number of new drugs in the pipeline has forced the rapid growth of this cost, time-and resource-saving services segment.

"Outsourcing will only continue to expand as pharma and biotech companies come to rely on these services to cover gaps in their own capacity, increase their skills base, and bring drugs to market more efficiently,"​ said Anne Anscomb, the report's author.

CROs are dominating the scene, having evolved to become full-service providers who are able to offer services covering the entire drug development process, and are slowly stealing market share away from academic medical centers (AMCs) - the reigning players of the 1990s. The amount contracted to CROs during 2005 reached almost $13bn, while only $6bn was outsourced to other competitors.

In 2005, CROs held 68 per cent of the drug development outsourcing market, while AMCs held only 29 per cent, down from 50 per cent ten years previously, according to the report titled "Outsourcing in Drug Development: The Contract Research Market from Preclinical to Phase IV."​

Site management organisations (SMOs) and other small players, including independent clinical studies sites, central laboratories and various niche companies, such as electronic technology, packaging and patient recruitment providers, held a tiny 3 per cent of the contract drug development market in 2005.

Two key things have propelled CROs to their current perch - significant merger and acquisition activity among CROs, leading to an increase and diversification in service offering capabilities; as well as a change in drug companies' attitudes towards CROs, who are now being regarded in a more sophisticated light as a long-term partner rather than an emergency "stop-gap" measure.

In addition, AMCs - once the staple of this industry - have been watching the lion's share of clinical research being diverted away from themselves to CROs who are providing a cheaper cost structure, with a fixed fee arranged at the planning stage of the project, payable upon completion.

On the other hand, clinical trial funding is made to an AMC (such as a university) in the form of a grant, however, 40-70 per cent of this grant is charged as overhead costs, thus, outsourcing clinical trial projects to a CRO, which don't charge such high overheads, tends to cost a sponsor less, said the report.

With more than 1,000 CROs already operating worldwide, 260 in North America, 460 in Europe and the rest mainly in South America and Asia, and with cost as the primary driver in this business, CRO world domination is set to continue.