A history of: Contract Research Organisations (CROs)
Robin Walsh
pharmaphorum
Whilst most of those working in the pharmaceutical industry have felt the pressures of rising costs and thinning pipelines over the last twenty years, some entrepreneurial souls have managed to turn a profit from such travails. These are the Contract Research Organisations, or CROs, who have managed to carve a niche out of providing solutions to drug companies cheaper than they can themselves.
The roots of the current CRO marketplace can be traced back to the 1940s and 1950s, with the foundation of companies like Huntingdon Life Sciences and Charles River Laboratories. They provided either animals for clients to experiment on, or conducted the tests themselves, in a wide range of scientific areas rather than just pharmaceuticals1. Later, in the 1960s, increasing regulation of pharmaceutical products, through acts such as the 1962 Kefauver Harris Amendment to FDA rules in the US, increased the need for drug companies to systematically test their compounds2. HLS and others increasingly expanded into preclinical testing of toxicology for pharmaceutical companies.
However, the industry only began to emerge in its present form in the late 1970s and early 1980s. Quintiles, today the largest CRO in the world, was founded in 1982 by Denis Gillings to formalise the statistical consulting work that he’d been doing for drug companies since the mid 1970s3. Likewise, Parexel, another of today’s top companies, was founded in 1982, and PPD was founded initially as a one-man consulting company in 19854,5. Coincidentally, both Quintiles and PPD were either founded in or rapidly relocated to North Carolina, and others were established in other parts of the East coast. These companies broadened out from the traditional preclinical testing role into clinical trials, logistics, statistics, data management, and other functions. The later 1980s saw an expansion in many of these organisations, with Quintiles for instance opening a UK office and expanding within the US.
"...the industry only began to emerge in its present form in the late 1970s and early 1980s."
The late 80s and 90s were a tumultuous time in the pharma industry. The 80s saw the arrival of a stream of blockbuster drugs, with the first statin and the first SSRI, Prozac, both approved in 1987.6 But costs in the industry were mushrooming too, providing a niche in which for the CROs to expand. The 1990s saw an explosive growth in the market for CRO services, rising from 4% of R&,D spend in the early 90s, to pushing 50% in the mid 2000s. Like with their larger clients in pharma, the 1990s also presaged a swarm of mergers and acquisitions, with PPD for instance acquiring competitor Pharmaco and a number of smaller European firms. In 1997 PPD became, through an acquisition, the first CRO to offer outsourcing of drug discovery as well as merely development, Parexel expanded into the medical marketing arena through acquiring PPS Europe, and Charles River Labs moved into clinical research away from its traditional pre-clinical area through the acquisition of Inveresk in the early 2000s. Quintiles, on the other hand, expanded more off its own bat, setting up subsidiaries in Europe and the Pacific Rim in the early 90s, but also acquired a number of smaller companies. Covance, another one of today’s biggest CROs, emerged around this time, spun off in 1997 by the glass and ceramics manufacturer Corning Inc, who had accumulated some healthcare companies as subsidiaries.
The CRO market in the 80s and early 90s was a volatile one, with companies largely taking up the spillover from pharma’s in-sourced trials programmes, this merely tactical state of affairs meant the market could change from glut to drought very rapidly, with obvious consequences for the long-term growth of the companies concerned. As the market matured however, the role of the CRO shifted again, becoming more strategic and playing a more long-term role, almost as a branch of the sponsor’s own team. This strategic relationship was mirrored in the increasing range of services being offered, many companies could offer a service from discovery, through clinical and preclinical testing, regulatory approval to healthcare communications at the end of the process. If a drug company wanted, it could do no work of its own at all, outsourcing the entire process to CROs.
"…the event illustrates the risky and experimental nature of drug development."
The industry has had its fair share of controversy. This has mainly been connected with animal welfare, when a number of exposés at various companies showed poor standards and mistreatment. Many of these companies, and Huntingdon Life Sciences in particular, have borne the brunt of an often violent campaign by animal rights activists since the 1990s. Others have criticised ethical shortcomings in some pieces of clinical research on humans, particularly those conducted in the developing world. There have been some potentially dangerous incidents too, such as when a predecessor company of Covance imported some Ebola infected monkeys in to the US in the late 80s, or the Northwick Park trial in 2006, where Phase I testing of a novel monoclonal antibody provoked very strong adverse reactions in volunteers. In the latter case, an enquiry showed that the CRO wasn’t to blame, despite the negative publicity, and the event illustrates the risky and experimental nature of drug development.
But despite these problems, the CROs continue to go from strength to strength. Their focus on money saving high technology ideas continues, with many players becoming involved in “adaptive” clinical trials. These study designs use complex Bayesian statistics to enable to reduce, for instance, the number of patients used, or stop an inefficacious trial early, without compromising the statistical significance of the results. Naturally, they are both computing- and expertise-heavy, complementing already existing areas of strength for many CROs, and enabling some newer, more technology-oriented CROs, such as Clinphone, recently acquired by Parexel, to make their names in the area.
"…the much lower cost-base of the developing world has proved irresistible to nearly everyone in the drug development marketplace."
The other area that promises further growth is the expansion of large scale clinical research into new areas of the globe. Since the 1990s, pharma companies and CROs have set up trials in Latin America, Eastern Europe, where high-quality infrastructure and well trained doctors left over from communism provided an attractive prospect, India, with its enormous population and English-speaking medical staff, and China. The flow hasn’t entirely been one way – Chinese CROs like WuXi AppTec have set up labs in the US – but the much lower cost-base of the developing world has proved irresistible to nearly everyone in the drug development marketplace.
In conclusion, what started out as a cottage industry has become a sector worth $15 billion in 2007, and a highly consolidated one, with the top 10 companies controlling 56% of the market, and employing tens of thousands of workers across the world. CROs have developed a set of expertise and proprietary knowledge and technology to rival any pharma company. Their basis in profitability problems of big pharma means that they’re not going to be facing any shortage of clients in coming years, but they also now represent a key part of the division of labour in healthcare, that doesn’t seem like going anywhere.
References:
1. http://en.wikipedia.org/wiki/Animal_testing
2. http://en.academic.ru/dic.nsf/enwiki/3859332
3. http://www.quintiles.com/information-library/bios/dennis-gillings-phd-cbe/
4. http://en.wikipedia.org/wiki/Parexel
5. http://www.ppdi.com/about_ppd/timeline/
6. http://www.merck.de/en/company/history/history.html
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About the author:
Robin Walsh is a freelance writer on healthcare and the pharmaceutical industry. He is currently training to be a doctor, and previously worked in medical communications. He can be contacted at Robwalsh9@hotmail.com.
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