Clinical Research Outsourcing

Drug development company reliance on the outsourcing of clinical research activities continues to rise sharply. In 2007, biopharmaceutical companies spent approximately $8.5 billion worldwide on contract clinical service providers -- not including pass-through costs such as central lab fees and investigator grants. Sponsors spent 17% of their total development budget on CRO services in 2007, up from 14% in 2001. And the annual growth in spending on CRO services, 14.9% annually since 2001, has well outpaced the 10.5% annual growth rate in total global development spending.

A number of factors have contributed to this growing dependence on CROs. At a time when global clinical trial volume and scope is increasing, drug developers face significant capacity constraints. The number of projects in worldwide development has grown 6% annually since 2002, yet many major pharmaceutical and biotechnology companies have not increased their internal clinical research headcount. These capacity constraints are only expected to worsen: Since 2007, many biopharmaceutical companies -- including Schering-Plough, Astra-Zeneca, Pfizer and Merck -- have announced plans to downsize and consolidate their operations in response to difficult market conditions. Companies are turning to outsourcing for flexible capacity to better manage peaks and valleys in development activity.