As sponsors navigate the complex clinical research landscape, one of the most critical decisions they face is choosing the right resourcing model. Should they partner with a CRO, utilize functional service providers (FSPs), bring on consultants and contractors, or build an internal team? We sat down with Mark Shapiro, a veteran management consultant in the pharmaceutical and life sciences industry, to explore these options and provide guidance on selecting the right approach.
Mark brings over 20 years of industry experience, having worked in clinical operations and development across CROs, biotech, and pharma companies. After completing his MBA, he became a management consultant focused on growth and transformation initiatives, working with industry leaders like Amgen, Celgene, Genentech, and Onyx. He also helped launch and grow a global oncology-focused CRO to 1,000 employees before its acquisition by a private equity group.
Currently, Mark is a Partner at Pharma Initiatives, a consulting group supporting companies in pharma, biotech, and the CRO space. He also serves as COO at xCures, a real-time healthcare data platform that automatically aggregates medical records, normalizes and structures them into a searchable database.
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Summary, Key Points, and Practical Takeaways
This interview has been edited for clarity and length.
Nick Capman: Can you give us an overview of the different resourcing models available in clinical research today?
Mark Shapiro: The outsourcing business in pharmaceutical research and development has become exceptionally vast. It actually began right here in North Carolina about 35 years ago, which explains why most CROs are either headquartered here or have significant operations in the area.
While the project-based CRO model was the original approach, CROs started introducing what they call FSP or functional services provider relationships, which have become very common. Perhaps the most dominant but least recognized model is the consultant-and-contractor model. In my experience, most pharmaceutical and biotech companies now use all three models in different capacities.
The employee model, which has often been considered preferable, especially for key strategic positions in pharma and biotech, has become increasingly difficult because the labor market is tight. This is true not just in the US but globally — it's a tight market for high-skilled pharmaceutical executives and technically skilled professionals. Because of this, companies have been looking to contractors and consultants to fill that high-tech skill need.
At the same time, because so much of the R&D portfolio is happening in biotech, many companies don't have the scale to make it sensible to implement or employ full, permanent functional services. For them, they do a lot of project outsourcing. Where you see the intersection of these two is in the functional model — most companies, if they don't have an employee overseeing an outsourced provider, need some level of expertise to understand what they're buying and ensure they're getting what they pay for. That role is sometimes now filled not just by employees, but by contractors.
Functional service relationships don't really start to emerge until companies reach a mid-sized level. Small organizations try to minimize the number of vendors because, being small and constrained by personnel, it's certainly hard to manage more vendors. That's why they tend to stick to a small number of project-based outsource relationships.
What are some of the different types of functional service providers available?
Functional provider relationships often started in areas where some expertise is required, but they tend to be viewed a bit more as commodities. Most notably, data management was kind of the first area for functional outsourcing relationships, and now you tend to see it in what they call biometric — sort of data management and stat programming — and safety. Global pharmacovigilance tends to be two big areas for functional outsourcing.
There was a real trend, led by Pfizer some years ago, towards even functional outsourcing in clinical operations and monitoring. But that has been pulled back a bit after they received a 483 for inadequate oversight of their vendor because they were outsourcing to somebody who was then subcontracting to thousands of freelancers. Being a big player, there was some concern about quality oversight and consistency in that model. So at least in clinical operations, it's come back to more of a project level thing rather than a functional provider model. But certainly in data management, safety, and biostats, there are lots of functional provider relationships. And of course, all the big CROs provide it, but there are also specialty groups.
What advice would you give to smaller companies about considering CROs versus FSPs?
For small companies, it's absolutely critical to first ensure you have enough internal expertise, including through consultants, to outsource anything successfully. One of the great risks for small companies is assuming that a CRO that claims they can do anything, or even assuming that because a CRO is big, they can do anything, will work out. Those assumptions often lead to unsuccessful relationships, which is precisely why there's also a large market of mid-sized CROs, specialty CROs and functionally oriented CROs.
The FSP model is hard until you have some level of expertise in place. However, it's becoming increasingly important for even small companies to have greater control over their data. If you do project-level outsourcing on a program to different vendors, you end up with high hidden costs down the line if the program is successful, particularly when trying to integrate across different data standards. We've definitely seen more small companies trying to take more ownership of data, moving towards small functional provider relationships where they may take on more ownership, at least of the systems and oversight of safety and data management, even if they're using some outsourced resources to operate in their system.
In that sort of first-in-human Phase 1 setting, where you don't really know where the program is going to go – obviously you have hopes and ideas, but things can go in lots of different directions and there's not much scale there – those things are very suitable either to do fully in-house, like bringing the resources in even as contractors, or fully outsourcing it to a project-level CRO with appropriate oversight.
Then, if you're looking at going into a Phase 2 program where you'll have more diversity and expect to do more studies, it's going to make sense to implement systems and processes for consistency in how you do things. If it's going to be a big Phase 2 program with multiple studies, standardizing your data management can certainly make sense.
On the safety side, program-level safety definitely makes a lot of sense. With the way the regulations have evolved in the US and Europe, you really need to look across every study, every indication where you're studying some compound. Breaking that up at the project level has diminished because now you've got a bunch of different vendors who have to talk to each other about safety events in order to try and do any kind of integrated trend analysis. That's hard to coordinate, expensive, and certainly from a quality standpoint, there are lots of ways that can break down.
What considerations should companies keep in mind when deciding between consultants/contractors and full-time employees?
For companies that have venture-backed type funding structures or achievement milestones, you really don't want to commit as much to full-time employees and building infrastructure. You need flexibility to scale up and scale down, even month to month, project to project.
One thing that has always impressed me about our industry, Nick, and I think is very challenging, is that these are high-risk projects, and portfolio prioritization changes constantly. The certitude that what you're working on right now is a priority — will it still be a priority in six months? That's just hard to plan for. External factors can change — regulatory delays, manufacturing delays, new results from other companies. So you really need to build in a lot of flexibility into your workforce, and flexibility and scalability are just things you can't do with in-house employees in this environment. It's simply, even for big companies, close to impossible.
If you're looking at your resourcing in a growing biotech company strategically, you really want to avoid paying to train up external people that aren't committed to your organization. For some of these key roles, whether they're key operational or scientific roles, you really want, even if it's like contract or consultant to permanent, to bring in the know-how. As you do studies and learn things and build relationships with sites and investigators, you really don't want to pay the CROs to get that training and expertise on your behalf.
For those key things, where it's IP strategy, relationships — you want to have a plan of growing your internal workforce towards maintaining that expertise in-house. Because if the person who has all the site relationships is at a CRO and they decided to switch CROs, it's not easy for you to follow them. You've just spent a lot of money on studies making that person an expert on the thing that you need to be an expert at.
That human capital strategy is really important, and the functional provider thing is a bridge along that pathway. As you become an expert on setting up databases and designing studies in a particular therapeutic area, if you're doing novel work, eventually you're going to be the expert, not the CRO. If you're doing something that the CRO has done 100 times before, your whole program is not very novel. But if you're doing novel science in a biotech company, you shouldn't expect that the CRO is really an expert on something where you're the only person who's ever done it before. Everything you learn in that process, you want to consolidate that learning internally as quickly as you can. That's really the balance between flexibility and consolidation.
Mark’s key takeaways:
Evaluate your core risks, first. Look at where the risks are in your program. Wherever there are risks, those are the things you really need to develop your expertise around. If it's manufacturing risk, like with a CAR-T program, you need to internalize that expertise even if you contract out the actual manufacturing production.
Guard strategic relationships. For areas like rare diseases where relationships with investigators and patient groups are crucial, you want that person to be a sponsor employee or a contractor with a goal of growing into an employee, because so much value creation happens through those relationships.
Consider fractional clinical resources. Some roles, particularly in regulatory or statistics, don't have a full-time workload — they have short, intense periods followed by spaces of low intensity. These roles don't make sense to fill with employees right away, though it's good to get to the scale where they do.
Use your time effectively. One truism in this business is that time is the one thing you can't get more of. Companies often lose time by not moving with urgency on key things. Sometimes they set parameters that a role has to be an employee, but with highly specialized expertise, many consultants or potential employees can't wind up all their commitments right away. Not deciding or not being flexible about these things can cost valuable time.
Recognize ClinOps recruitment as a specialty. One of the big challenges is that organizations sometimes don't recognize that even the process and ability to hire and find qualified resources, whether contractor or consultant, is its own specialized expertise. Some biotech companies and CROs have established formal relationships with recruiters and recruiting firms to fill the role of recruiting for them because they realized they couldn't meet the needs on their own.
Mark Shapiro is a management consultant focused on pharmaceutical and life sciences. His company, Pharma Initiatives, helps companies in pharma, biotech, and the CRO space with growth and transformation initiatives. With 20 years of industry experience spanning clinical operations, development, and management consulting, Mark has worked with leading organizations, including Amgen, Celgene, Genentech, and Duke University. He also successfully launched and grew a global oncology-focused CRO to 1,000 employees before its acquisition by a private equity group.
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