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What Does the Future Hold for
Clinical Service Provider-Sponsor Relationships?

Executive Summary of Results from the
Avoca 2010 Industry Survey
                                         June 2010
CONTENTS




 Introduction:
     Objectives of the Industry Survey
     Methodology
     Respondents


 Key Findings


 Conclusions




                                         2
OBJECTIVES OF THE INDUSTRY SURVEY




 Each year, The Avoca Group polls industry management to understand trends in
 the outsourcing of clinical research.


 2010: How outsourcing relationships are expected to change between the
 present and 2014.




                                                                                3
OBJECTIVES OF THE INDUSTRY SURVEY




Questions were posed about:
  Drivers of change in sponsor-clinical service provider relationships


  Changes companies plan to make to increase the efficiency and quality of
  outsourced clinical trials


  Strategies for successful implementation of new outsourcing strategies and
  tactics


  How planned changes will impact outsourcing strategies, vendor selection
  priorities, and the management of outsourcing relationships.




                                                                               4
METHODOLOGY




 Invitations to participate were emailed to selected executives and managers of
 sponsor and service provider companies during Q1 2010.


 Links within the emails directed respondents to the appropriate web-based
 survey instruments:
     sponsor perspective
     provider perspective


 Respondents who completed the survey were offered an executive summary of
 the survey results.


 For questions in which participants were asked to respond on behalf of their
 companies, only one respondent per company (the most senior) was used in the
 analysis in order to avoid over-representation of companies with multiple
 participants.

                                                                                  5
RESPONDENTS




285 surveys
  109 sponsor surveys
      73 companies
      72% pharmaceutical companies; 22% biotech; 6% other
      48% self-described “Top 20”
      70% executive/middle management


  174 service provider surveys
      88 companies
      71% full-service CROs
      59% self-described “Top 20”
      79% executive/middle management



                                                            6
Sponsor Respondent Companies
Abraxis Bioscience        Cardiokine                     GlaxoSmithkline               Orion Pharma
                                                         Global Alliance for TB Drug
Achaogen                  CareFusion Research Services                                 OSI Pharmaceuticals
                                                         Development
Actavis South Atlantic    Celgene                        Grunenthal                    Otsuka
Actelion                  Celtic Pharma Development      Hoffmann-La Roche             Pain Therapeutics
ActivX Biosciences        Chugai Pharma Europe           Incyte                        Ratiopharm
Adnexus                   Cognizant                      Intendis                      Regeneron
Allergan                  Collins                        Johnson & Johnson             Sanofi
Allon Therapeutics        Cordis Corporation             Knopp Neurosciences           Santhera
Amarin Technologies       Coughlan                       Kowa Research Europe          Shire Pharmaceuticals
                          Dainippon Sumitomo Pharma
Amgen                                                    Lexicon                       Solvay Pharmaceuticals
                          America
Amylin                    Deltanoid Pharmaceuticals      Lilly                         Teva Pharmaceuticals
Astellas Pharma           Dey LP                         Lundbeck                      Tibotec
AstraZeneca               Eisai                          MedImmune                     Vicus Therapeutics
Baxter                    Endo                           Merck                         Wyeth Research
Bayer Schering Pharma     Ferring                        Millennium

BIAL                      Five Prime Therapeutics        Mitsubishi Pharma Europe
Biogen Idec               Forest Laboratories            Novartis
BMS                       Fresenius Biotech              Novo Nordisk
                          Genentech, Member of Roche
Cadence Pharmaceuticals                                  Ocasio
                          group




                                                                                                                7
Provider Respondent Companies
Aagami                           DCL Medical Laboratories          KLIXAR                    QED Clinical Services
Acurian                          Eurofins Medinet                  Kromite LLC               Quanticate
Aepodia                          Eurotrials                        Kuantum CRO               Quest Diagnostics
Asia Global Research             ExecuPharm                        Laboratorio Hidalgo       Quintiles
                                 FOCUS Clinical Drug
Asiatic Clinical Research                                          LatAm Clinical Trials     Radiant Research
                                 Development
Averion                          Forma Life Science Marketing      Manipal Acunova Limited   RadPharm
Axiom Marketing                  Gagnon                            Medpace                   REGISTRAT
AXIS Clinicals                   GFA                               MedPoint Communications   ResearchPoint
Axis Group                       GVK Biosciences Private Limited   MRC                       RH Bouchard & Associates
                                                                                             Ronald Fehst Research
Beckman Coulter Genomics         Harrison Clinical Research Group Myoderm
                                                                                             Consultants
Biomedical Systems               Harte Group                       Ockham                    RxResearch Staffing
C3i                              i3 Research                       Omnicare                  Sariola-Heiner
ClinForce                        ICON                              Paragon Biomedical        SQV Clinical Research Services
Clinical Financial Services      INC Research                      PAREXEL                   Stiris Research
Clinical Research Management     IndiPharm                         Pharma Medica Research    TFS Trial Form Support
Cogent Performance
                                 InsightRx Consulting LLC          Pharma Services Network   TKL Research
Management
COMSYS Clinical                  Integrium                         PharmaNet                 Toone
ConsentSolutions                 invivodata                        PharmaWrite               US Oncology
Covance                          IRB SERVICES                      Pharm-Olam                Vantage BioTrials
CRS Clinical Research Services   Iris                              PPD                       VirtualScopics
Cyncron                          John R Vogel Associates           PRA                       Woodley Equipment Company
Datatrial                        Kendle                            PSI                       ZeeCRO

                                                                                                                              8
Key Findings
Sponsor Data




                                                                                   10
                                                                                        15
                                                                                             20
                                                                                                  25
                                                                                                       30
                                                                                                            35
                                                                                                                 40
                                                                                                                      45
                                                                                                                           50
                                                                           0
                                                                               5
                           Better measurement of provider performance
                                (Key Performance Indicators [KPI])

                               Increased use of preferred providerships


What changes has your            Better methods of/criteria for provider
                                              selection

company recently (last     Better internal information sharing regarding
                              clinical research provider performance

 2 years) made, or is it                  Reduced number of providers

  currently making, to               Better delineation of expectations

improve the efficiency          Implementation of a functional "Lessons
                                         Learned" program
   of its outsourcing                     Improved outsourcing models
     relationships?        Better capturing of relationship metrics (Key
                                   Relationship Indicators [KRI])

                               Increased use of technology platforms to
                                      improve communications



   (73 companies)                      Change in specific providers used


                                            More functional outsourcing


                                           More full-service outsourcing

                                Increased incorporation of performance
                                        bonuses into contracts

                                Increased incorporation of performance
                                        penalties into contracts

                                         Increased number of providers



                                                                                                                                10
Provider Data




                                                                         10

                                                                              20

                                                                                   30

                                                                                        40

                                                                                             50

                                                                                                  60

                                                                                                       70

                                                                                                            80
                                                                     0
                                Enhanced focus on repeat business


                              Improved relationship management


What changes has your               Increased pursuit of preferred
                                            providerships
company recently (last       Better capture of customer feedback

 2 years) made, or is it
                            More senior management involvement
  currently making, to
improve the efficiency          Better delineation of expectations



    of its work with          Better measurement of performance
                               (Key Performance Indicators [KPI])


        sponsors?           Increased use of technology platforms
                                 to improve communications

                               Better internal information sharing
                                 regarding sponsor expectations

                                    Improved outsourcing models

   (88 companies)
                                      Different resourcing models

                           Implementation of a functional "Lessons
                                    Learned" program

                            Better capture of relationship metrics
                              (Key Relationship Indicators [KRI])

                           Increased incorporation of performance
                                   bonuses into contracts

                           Increased incorporation of performance
                                   penalties into contracts


                                                                                                                 11
Themes




For sponsors:
  Consolidation of outsourced work with a restricted number of preferred
  providers
  Changing criteria for selection of providers and preferred providers
  Investment in formal programs for measuring and managing performance and
  relationship quality


For providers:
  Increased focus on pursuit of long-term “preferred” client relationships
  Investment in formal programs for measuring and managing performance and
  relationship quality




                                                                             12
Future Direction #1

                                               Sponsors:
Consolidation of outsourced work with preferred providers

                                              Providers:
      Increased focus on pursuit of long-term “preferred”
                                       client relationships
Where are we now?




 69% of sponsors currently have preferred provider arrangements.


 More than ¾ of providers are increasing their pursuit of repeat business, and
 more than half are increasingly pursuing preferred provider relationships in
 particular.




                                                                                 14
Sponsor Data

  What approximate percentage of your      How has this percentage changed
clinical research outsourcing spend went    between 2007 and the present?
   to your preferred providers in 2009?



               11%                                                  Increased
                              0% - 25%
                                                26%
                              26% - 50%                             Decreased
     42%
                     25%
                              51% - 75%
                                           4%                       Stayed the
                              76% - 99%                             same
                                                       70%
                                                                    Don't know
                              Don't know
              22%




    N=45                                    N=47

                                                                                15
Provider Data

What approximate percentage of your    How has this percentage changed
annual revenue came from preferred      between 2007 and the present?
          clients in 2009?



         11%                                                    Increased
                          0% - 25%
                                        31%
                 35%      26% - 50%                             Decreased
   23%
                          51% - 75%
                                                     55%        Stayed the
                          76% - 99%                             same
                                         14%                    Don’t know
                          Don’t know
           31%




  N=71                                 N=67

                                                                            16
Is there evidence that increased allocation to
preferred providers results in higher quality work or
             greater value? If so, why?




                                                   17
Sponsor Data

In general, how satisfied are you with the work that has been done for you by
                           Clinical Service Providers?
                                                                                                                     N
  % spend to preferred
             providers

 No preferred providers                       52%                               24%                  24%             21




                 0 - 75%                           64%                                 16%             20%           25




             76% - 99%      5%                       58%                                     32%              5%     19



                           0%           20%                40%                60%             80%             100%
           Very satisfied - 5    4   Neither satisfied nor dissatisfied - 3     2     Very dissatisfied - 1



                                                                                                                         18
Sponsor Data

In general, how satisfied are you with the value that you have received for the
               money spent on your Clinical Service Providers?
                                                                                                                    N
   % spend to preferred
             providers*

  No preferred providers 5%         14%                       48%                               33%                 21




                 0 - 75%                     48%                               28%                  24%             26




             76% - 99%                           58%                                      37%                5%     19



                           0%             20%              40%                 60%           80%             100%
* p<.05    Very satisfied - 5   4     Neither satisfied nor dissatisfied - 3     2   Very dissatisfied - 1



                                                                                                                        19
Provider Data

            In general, how satisfied are you with your relationships with the
                             sponsors with which you work?
    % revenue                                                                    N
from preferred
       clients*
                                                                                 25




                                                                                 37




                                                                                 8




  * p<.01


                                                                                     20
PROVIDERS: Do you feel that your company performs more effectively for its
preferred providers than it does for its other clients?
  43% yes
  41% no
  16% don’t know




                                                                             21
Provider Data




                                                                     10

                                                                          15

                                                                               20

                                                                                    25

                                                                                         30

                                                                                              35

                                                                                                   40

                                                                                                        45
                                                             0

                                                                 5
                                 Better understanding of
                                 expectations/standards


   If you feel that your             Increased trust/less
                                      micromanagement
 company performs more
     effectively for its       Greater volume allows for
                               more efficient processes
preferred providers than it
                               Increased level of senior
 does for its other clients,   management involvement
 what do you feel are the        Higher staff satisfaction
         reasons?                    leads to better
                                      performance

      (70 responses)           Relationship management
                                    systems improve
                                      performance
                                     Performance
                               management/governance
                                systems add motivation

                                 Higher staff satisfaction
                                  leads to less turnover

                               Superior staff assigned to
                                  preferred provider
                                        studies

                                Increased organizational
                                       motivation

                                                                                                             22
Summary




 Currently, nearly half of sponsors concentrate at least 75% of their outsourced
 work with preferred providers, and this fraction is on the rise.


 Those sponsors that concentrate their outsourcing spend with preferred
 providers enjoy enhanced satisfaction with performance and value.


 Similarly, providers that concentrate their business with preferred clients have
 a much higher level of satisfaction with their client relationships.




                                                                                    23
Future Direction #2

                        Sponsors:
Changing criteria for selection of
             preferred providers
What have sponsors expected from their preferred providers until now?


What do sponsors expect from their preferred providers moving forward?


What do providers believe that sponsors expect from their preferred providers
moving forward?




                                                                                25
Sponsor Data

What did your company expect of its preferred providers in the recent past? (2007-2009)
                                                                                                                   N
                                 Discounted rates                     58%                        37%          5% 59

        Increased level of oversight by provider’s
                                                                 42%                        51%               7%   57
                   senior management

       Preferred access to specific staff members          26%                        62%                    12%   58

   Formal relationship management program from
                                                           24%                45%                      31%         58
                      provider
                 Formal performance
                                                           24%                    51%                  25%         59
         measurement/management by provider

                    Formal governance structure           23%                     53%                   25%        57

        Advice/input regarding strategic planning     9%                53%                        39%             57


                                                     0%         20%         40%         60%        80%        100%
                 Always expected - 3       Sometimes expected - 2                 Did not expect - 1




                                                                                                                       26
Sponsor Data

What does your company expect from its preferred providers in 2010 and beyond?
                                                                                                           N
                              Discounted rates                     72%                            25% 3%   61

     Increased level of oversight by provider’s
                                                                 64%                           33%    3%   61
                senior management
              Formal performance
                                                                 61%                       29%       10%   62
      measurement/management by provider
Formal relationship management program from
                                                             51%                         36%         13%   61
                   provider

    Preferred access to specific staff members               50%                          47%         3%   62

                 Formal governance structure                 50%                          45%         5% 60

     Advice/input regarding strategic planning         31%                        56%                13%   62

                                                  0%    20%            40%         60%         80%    100%
              Always expected - 3       Sometimes expected - 2               Did not expect - 1




                                                                                                               27
Biggest movers:
  Formal performance measurement
         24%      61% say always expect
                    25%    10% say do not expect


  Formal relationship management
         24%      51% say always expect
                    31%    13% say do not expect


  Formal governance structure
         23%      50% say always expect
                    25%    5% say do not expect



                                                   28
Provider Data

What do you feel that sponsors expected from their preferred providers in the recent past
                                     (2007-2009)?
                                                                                                               N
                                   Discounted rates                55%                      42%         4%     139

         Increased level of oversight by provider’s
                                                             31%                      66%               4%     140
                    senior management

        Preferred access to specific staff members          29%                      67%                4%     139

                  Formal performance
                                                           19%                 64%                    17%      137
          measurement/management by provider

                     Formal governance structure       14%                     72%                    14%      132

    Formal relationship management program from
                                                       12%               57%                      31%          136
                       provider

         Advice/input regarding strategic planning     9%                64%                      26%          138

                                                      0%         20%     40%         60%        80%     100%
                   Always expect - 3        Sometimes expect - 2           Did not expect - 1



                                                                                                                   29
Provider Data

What do you feel that sponsors expect from their preferred providers in 2010 and beyond?

                                                                                                        N
                                Discounted rates                     75%                        23% 2% 122

                Formal performance
                                                               53%                      41%         6% 121
        measurement/management by provider
       Increased level of oversight by provider’s
                                                             46%                       53%          1% 121
                  senior management

                   Formal governance structure             41%                      50%            9% 115

     Preferred access to specific staff members           38%                       59%             3% 121

      Formal relationship management program                                                            121
                                                         30%                   59%                12%
                    from provider

      Advice/input regarding strategic planning          30%                    60%               11% 121

                                                    0%     20%       40%        60%         80%     100%
                     Always expect - 3        Sometimes expect - 2         Did not expect - 1


                                                                                                            30
Summary




 Sponsors have come to expect much more investment in and formalization of
 the management of their preferred provider relationships than they did even in
 the recent past.


 Providers appreciate many of sponsors’ expectations of preferred relationships,
 but may under-recognize the importance of formal relationship management
 programs.




                                                                                   31
Future Direction #3:

Increased use of formal performance and
               relationship management
Where are we now?




 54% of sponsors currently have Formal Relationship Management Programs in
 place with at least one of their clinical service providers.


 66% of providers currently have Formal Relationship Management Programs in
 place with at least some of their clients.




                                                                              33
Sponsor and Provider Data

If your company has a formal relationship management program in place with any of its
                  vendors/clients, what does the program include?


                                                        Sponsors        Providers
                                                                   %                %
   Formal governance structure                                     89           66
   Lessons Learned Meetings                                        86           85
   Performance metric assessment and review                        84           79
   Issue documentation and resolution
                                                                   76           79
   program/escalation procedure
   Systematic ways of gathering relationship
                                                                   57           47
   metrics from internal staff (e.g. surveys)
   Systematic ways of gathering relationship
                                                                   32           55
   metrics from partner staff



                                                                                        34
Of those who have experience with formal relationship management programs:


  68% of sponsors report having had primarily positive experiences.
       An additional 30% report a mix of positive and negative.


  61% of providers report having had primarily positive experiences.
       An additional 31% report a mix of positive and negative.




                                                                             35
Formal Performance Measurement:
Sponsors



 55% of sponsor companies currently use Key Performance Indicator
 measurements (KPIs) to evaluate clinical service providers.
      30% of respondents from these companies feel that their KPIs are
      adequate.
      So 17% of sponsors are doing this AND doing it satisfactorily.


 23% of sponsor companies currently use Key Relationship Indicator
 measurements (KRIs) to evaluate their relationships with clinical service
 providers.
      68% of respondents from these companies feel that their KRIs are
      adequate.
      So 16% of sponsors are doing this AND doing it satisfactorily.




                                                                             36
Formal Performance Measurement:
Providers



 71% of provider companies currently use Key Performance Indicators (KPIs) to
 evaluate their own performance.
     49% of respondents from these companies feel that their KPIs are
     adequate.
     So 35% of providers are doing this AND doing it satisfactorily.


 31% of provider companies currently use Key Relationship Indicators (KRIs) to
 evaluate their relationships with sponsors.
     62% of respondents from these companies feel that their KRIs are
     adequate.
     So 19% of providers are doing this AND doing it satisfactorily.




                                                                                 37
Summary




 Although most companies report having positive experiences with relationship
 management programs, many face challenges in operationalizing the metrics
 component to formal performance and relationship management.


 Clinical service providers appear to have been more aggressive about, and more
 successful at, implementing formal performance metrics than have sponsor
 companies.




                                                                                  38
Conclusions
Conclusions




 Both sponsors and service providers appear to recognize the benefit of focusing
 on long-term, preferred relationships and alliances, and of investments in
 increased monitoring and management of the performance of these
 relationships.


 It appears that careful selection of a restricted number of “preferred”
 outsourcing partners and increased investment in formal management of
 relationships with those partners leads to increased efficiency and quality of
 outsourced clinical research.


 Companies that invest in establishing excellent sets of metrics, comprehensive
 and formal relationship management programs, and effective change
 management strategies are most likely to benefit from this approach.




                                                                                   40
2010 Avoca Report

In the 2010 Avoca Report, The Avoca Group presents the complete data
                obtained in the 2010 Industry Surveys.

  Topics include the future of companies’:
       overall approaches to outsourcing
       priorities in the selection of all providers and preferred providers
       strategies and tactics for measuring and managing outsourcing
       relationships
       planned use of risk-sharing and alternative resourcing outsourcing models
  The report also examines companies’ experiences and satisfaction with the
  outsourcing management approaches to date, and investigates whether “early
  adopters” are in fact experiencing better outsourcing outcomes. Further, the
  report explores the challenges faced by companies in introducing new
  approaches and requirements for successful implementation. Material
  differences between “Top 20” and smaller sponsor companies, and between
  CROs and other types of provider companies, are presented and discussed. The
  report is approximately 70 printed pages and contains 48 tables and figures.
  If you are interested in obtaining a copy of the full 2010 Avoca Report, please
  visit our website at www.theavocagroup.com.

                                                                                    41
Improving the Health of Critical Business Relationships




                                                                 Thank you

                                                                 Contact Avoca at:
                                                                   (609) 252-9020
                                                          www.theavocagroup.com
                                                          info@theavocagroup.com

                                                                 179 Nassau Street
                                                                          Suite 3A
                                                              Princeton, NJ 08542

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2010 Avoca Report Executive Summary

  • 1. What Does the Future Hold for Clinical Service Provider-Sponsor Relationships? Executive Summary of Results from the Avoca 2010 Industry Survey June 2010
  • 2. CONTENTS Introduction: Objectives of the Industry Survey Methodology Respondents Key Findings Conclusions 2
  • 3. OBJECTIVES OF THE INDUSTRY SURVEY Each year, The Avoca Group polls industry management to understand trends in the outsourcing of clinical research. 2010: How outsourcing relationships are expected to change between the present and 2014. 3
  • 4. OBJECTIVES OF THE INDUSTRY SURVEY Questions were posed about: Drivers of change in sponsor-clinical service provider relationships Changes companies plan to make to increase the efficiency and quality of outsourced clinical trials Strategies for successful implementation of new outsourcing strategies and tactics How planned changes will impact outsourcing strategies, vendor selection priorities, and the management of outsourcing relationships. 4
  • 5. METHODOLOGY Invitations to participate were emailed to selected executives and managers of sponsor and service provider companies during Q1 2010. Links within the emails directed respondents to the appropriate web-based survey instruments: sponsor perspective provider perspective Respondents who completed the survey were offered an executive summary of the survey results. For questions in which participants were asked to respond on behalf of their companies, only one respondent per company (the most senior) was used in the analysis in order to avoid over-representation of companies with multiple participants. 5
  • 6. RESPONDENTS 285 surveys 109 sponsor surveys 73 companies 72% pharmaceutical companies; 22% biotech; 6% other 48% self-described “Top 20” 70% executive/middle management 174 service provider surveys 88 companies 71% full-service CROs 59% self-described “Top 20” 79% executive/middle management 6
  • 7. Sponsor Respondent Companies Abraxis Bioscience Cardiokine GlaxoSmithkline Orion Pharma Global Alliance for TB Drug Achaogen CareFusion Research Services OSI Pharmaceuticals Development Actavis South Atlantic Celgene Grunenthal Otsuka Actelion Celtic Pharma Development Hoffmann-La Roche Pain Therapeutics ActivX Biosciences Chugai Pharma Europe Incyte Ratiopharm Adnexus Cognizant Intendis Regeneron Allergan Collins Johnson & Johnson Sanofi Allon Therapeutics Cordis Corporation Knopp Neurosciences Santhera Amarin Technologies Coughlan Kowa Research Europe Shire Pharmaceuticals Dainippon Sumitomo Pharma Amgen Lexicon Solvay Pharmaceuticals America Amylin Deltanoid Pharmaceuticals Lilly Teva Pharmaceuticals Astellas Pharma Dey LP Lundbeck Tibotec AstraZeneca Eisai MedImmune Vicus Therapeutics Baxter Endo Merck Wyeth Research Bayer Schering Pharma Ferring Millennium BIAL Five Prime Therapeutics Mitsubishi Pharma Europe Biogen Idec Forest Laboratories Novartis BMS Fresenius Biotech Novo Nordisk Genentech, Member of Roche Cadence Pharmaceuticals Ocasio group 7
  • 8. Provider Respondent Companies Aagami DCL Medical Laboratories KLIXAR QED Clinical Services Acurian Eurofins Medinet Kromite LLC Quanticate Aepodia Eurotrials Kuantum CRO Quest Diagnostics Asia Global Research ExecuPharm Laboratorio Hidalgo Quintiles FOCUS Clinical Drug Asiatic Clinical Research LatAm Clinical Trials Radiant Research Development Averion Forma Life Science Marketing Manipal Acunova Limited RadPharm Axiom Marketing Gagnon Medpace REGISTRAT AXIS Clinicals GFA MedPoint Communications ResearchPoint Axis Group GVK Biosciences Private Limited MRC RH Bouchard & Associates Ronald Fehst Research Beckman Coulter Genomics Harrison Clinical Research Group Myoderm Consultants Biomedical Systems Harte Group Ockham RxResearch Staffing C3i i3 Research Omnicare Sariola-Heiner ClinForce ICON Paragon Biomedical SQV Clinical Research Services Clinical Financial Services INC Research PAREXEL Stiris Research Clinical Research Management IndiPharm Pharma Medica Research TFS Trial Form Support Cogent Performance InsightRx Consulting LLC Pharma Services Network TKL Research Management COMSYS Clinical Integrium PharmaNet Toone ConsentSolutions invivodata PharmaWrite US Oncology Covance IRB SERVICES Pharm-Olam Vantage BioTrials CRS Clinical Research Services Iris PPD VirtualScopics Cyncron John R Vogel Associates PRA Woodley Equipment Company Datatrial Kendle PSI ZeeCRO 8
  • 10. Sponsor Data 10 15 20 25 30 35 40 45 50 0 5 Better measurement of provider performance (Key Performance Indicators [KPI]) Increased use of preferred providerships What changes has your Better methods of/criteria for provider selection company recently (last Better internal information sharing regarding clinical research provider performance 2 years) made, or is it Reduced number of providers currently making, to Better delineation of expectations improve the efficiency Implementation of a functional "Lessons Learned" program of its outsourcing Improved outsourcing models relationships? Better capturing of relationship metrics (Key Relationship Indicators [KRI]) Increased use of technology platforms to improve communications (73 companies) Change in specific providers used More functional outsourcing More full-service outsourcing Increased incorporation of performance bonuses into contracts Increased incorporation of performance penalties into contracts Increased number of providers 10
  • 11. Provider Data 10 20 30 40 50 60 70 80 0 Enhanced focus on repeat business Improved relationship management What changes has your Increased pursuit of preferred providerships company recently (last Better capture of customer feedback 2 years) made, or is it More senior management involvement currently making, to improve the efficiency Better delineation of expectations of its work with Better measurement of performance (Key Performance Indicators [KPI]) sponsors? Increased use of technology platforms to improve communications Better internal information sharing regarding sponsor expectations Improved outsourcing models (88 companies) Different resourcing models Implementation of a functional "Lessons Learned" program Better capture of relationship metrics (Key Relationship Indicators [KRI]) Increased incorporation of performance bonuses into contracts Increased incorporation of performance penalties into contracts 11
  • 12. Themes For sponsors: Consolidation of outsourced work with a restricted number of preferred providers Changing criteria for selection of providers and preferred providers Investment in formal programs for measuring and managing performance and relationship quality For providers: Increased focus on pursuit of long-term “preferred” client relationships Investment in formal programs for measuring and managing performance and relationship quality 12
  • 13. Future Direction #1 Sponsors: Consolidation of outsourced work with preferred providers Providers: Increased focus on pursuit of long-term “preferred” client relationships
  • 14. Where are we now? 69% of sponsors currently have preferred provider arrangements. More than ¾ of providers are increasing their pursuit of repeat business, and more than half are increasingly pursuing preferred provider relationships in particular. 14
  • 15. Sponsor Data What approximate percentage of your How has this percentage changed clinical research outsourcing spend went between 2007 and the present? to your preferred providers in 2009? 11% Increased 0% - 25% 26% 26% - 50% Decreased 42% 25% 51% - 75% 4% Stayed the 76% - 99% same 70% Don't know Don't know 22% N=45 N=47 15
  • 16. Provider Data What approximate percentage of your How has this percentage changed annual revenue came from preferred between 2007 and the present? clients in 2009? 11% Increased 0% - 25% 31% 35% 26% - 50% Decreased 23% 51% - 75% 55% Stayed the 76% - 99% same 14% Don’t know Don’t know 31% N=71 N=67 16
  • 17. Is there evidence that increased allocation to preferred providers results in higher quality work or greater value? If so, why? 17
  • 18. Sponsor Data In general, how satisfied are you with the work that has been done for you by Clinical Service Providers? N % spend to preferred providers No preferred providers 52% 24% 24% 21 0 - 75% 64% 16% 20% 25 76% - 99% 5% 58% 32% 5% 19 0% 20% 40% 60% 80% 100% Very satisfied - 5 4 Neither satisfied nor dissatisfied - 3 2 Very dissatisfied - 1 18
  • 19. Sponsor Data In general, how satisfied are you with the value that you have received for the money spent on your Clinical Service Providers? N % spend to preferred providers* No preferred providers 5% 14% 48% 33% 21 0 - 75% 48% 28% 24% 26 76% - 99% 58% 37% 5% 19 0% 20% 40% 60% 80% 100% * p<.05 Very satisfied - 5 4 Neither satisfied nor dissatisfied - 3 2 Very dissatisfied - 1 19
  • 20. Provider Data In general, how satisfied are you with your relationships with the sponsors with which you work? % revenue N from preferred clients* 25 37 8 * p<.01 20
  • 21. PROVIDERS: Do you feel that your company performs more effectively for its preferred providers than it does for its other clients? 43% yes 41% no 16% don’t know 21
  • 22. Provider Data 10 15 20 25 30 35 40 45 0 5 Better understanding of expectations/standards If you feel that your Increased trust/less micromanagement company performs more effectively for its Greater volume allows for more efficient processes preferred providers than it Increased level of senior does for its other clients, management involvement what do you feel are the Higher staff satisfaction reasons? leads to better performance (70 responses) Relationship management systems improve performance Performance management/governance systems add motivation Higher staff satisfaction leads to less turnover Superior staff assigned to preferred provider studies Increased organizational motivation 22
  • 23. Summary Currently, nearly half of sponsors concentrate at least 75% of their outsourced work with preferred providers, and this fraction is on the rise. Those sponsors that concentrate their outsourcing spend with preferred providers enjoy enhanced satisfaction with performance and value. Similarly, providers that concentrate their business with preferred clients have a much higher level of satisfaction with their client relationships. 23
  • 24. Future Direction #2 Sponsors: Changing criteria for selection of preferred providers
  • 25. What have sponsors expected from their preferred providers until now? What do sponsors expect from their preferred providers moving forward? What do providers believe that sponsors expect from their preferred providers moving forward? 25
  • 26. Sponsor Data What did your company expect of its preferred providers in the recent past? (2007-2009) N Discounted rates 58% 37% 5% 59 Increased level of oversight by provider’s 42% 51% 7% 57 senior management Preferred access to specific staff members 26% 62% 12% 58 Formal relationship management program from 24% 45% 31% 58 provider Formal performance 24% 51% 25% 59 measurement/management by provider Formal governance structure 23% 53% 25% 57 Advice/input regarding strategic planning 9% 53% 39% 57 0% 20% 40% 60% 80% 100% Always expected - 3 Sometimes expected - 2 Did not expect - 1 26
  • 27. Sponsor Data What does your company expect from its preferred providers in 2010 and beyond? N Discounted rates 72% 25% 3% 61 Increased level of oversight by provider’s 64% 33% 3% 61 senior management Formal performance 61% 29% 10% 62 measurement/management by provider Formal relationship management program from 51% 36% 13% 61 provider Preferred access to specific staff members 50% 47% 3% 62 Formal governance structure 50% 45% 5% 60 Advice/input regarding strategic planning 31% 56% 13% 62 0% 20% 40% 60% 80% 100% Always expected - 3 Sometimes expected - 2 Did not expect - 1 27
  • 28. Biggest movers: Formal performance measurement 24% 61% say always expect 25% 10% say do not expect Formal relationship management 24% 51% say always expect 31% 13% say do not expect Formal governance structure 23% 50% say always expect 25% 5% say do not expect 28
  • 29. Provider Data What do you feel that sponsors expected from their preferred providers in the recent past (2007-2009)? N Discounted rates 55% 42% 4% 139 Increased level of oversight by provider’s 31% 66% 4% 140 senior management Preferred access to specific staff members 29% 67% 4% 139 Formal performance 19% 64% 17% 137 measurement/management by provider Formal governance structure 14% 72% 14% 132 Formal relationship management program from 12% 57% 31% 136 provider Advice/input regarding strategic planning 9% 64% 26% 138 0% 20% 40% 60% 80% 100% Always expect - 3 Sometimes expect - 2 Did not expect - 1 29
  • 30. Provider Data What do you feel that sponsors expect from their preferred providers in 2010 and beyond? N Discounted rates 75% 23% 2% 122 Formal performance 53% 41% 6% 121 measurement/management by provider Increased level of oversight by provider’s 46% 53% 1% 121 senior management Formal governance structure 41% 50% 9% 115 Preferred access to specific staff members 38% 59% 3% 121 Formal relationship management program 121 30% 59% 12% from provider Advice/input regarding strategic planning 30% 60% 11% 121 0% 20% 40% 60% 80% 100% Always expect - 3 Sometimes expect - 2 Did not expect - 1 30
  • 31. Summary Sponsors have come to expect much more investment in and formalization of the management of their preferred provider relationships than they did even in the recent past. Providers appreciate many of sponsors’ expectations of preferred relationships, but may under-recognize the importance of formal relationship management programs. 31
  • 32. Future Direction #3: Increased use of formal performance and relationship management
  • 33. Where are we now? 54% of sponsors currently have Formal Relationship Management Programs in place with at least one of their clinical service providers. 66% of providers currently have Formal Relationship Management Programs in place with at least some of their clients. 33
  • 34. Sponsor and Provider Data If your company has a formal relationship management program in place with any of its vendors/clients, what does the program include? Sponsors Providers % % Formal governance structure 89 66 Lessons Learned Meetings 86 85 Performance metric assessment and review 84 79 Issue documentation and resolution 76 79 program/escalation procedure Systematic ways of gathering relationship 57 47 metrics from internal staff (e.g. surveys) Systematic ways of gathering relationship 32 55 metrics from partner staff 34
  • 35. Of those who have experience with formal relationship management programs: 68% of sponsors report having had primarily positive experiences. An additional 30% report a mix of positive and negative. 61% of providers report having had primarily positive experiences. An additional 31% report a mix of positive and negative. 35
  • 36. Formal Performance Measurement: Sponsors 55% of sponsor companies currently use Key Performance Indicator measurements (KPIs) to evaluate clinical service providers. 30% of respondents from these companies feel that their KPIs are adequate. So 17% of sponsors are doing this AND doing it satisfactorily. 23% of sponsor companies currently use Key Relationship Indicator measurements (KRIs) to evaluate their relationships with clinical service providers. 68% of respondents from these companies feel that their KRIs are adequate. So 16% of sponsors are doing this AND doing it satisfactorily. 36
  • 37. Formal Performance Measurement: Providers 71% of provider companies currently use Key Performance Indicators (KPIs) to evaluate their own performance. 49% of respondents from these companies feel that their KPIs are adequate. So 35% of providers are doing this AND doing it satisfactorily. 31% of provider companies currently use Key Relationship Indicators (KRIs) to evaluate their relationships with sponsors. 62% of respondents from these companies feel that their KRIs are adequate. So 19% of providers are doing this AND doing it satisfactorily. 37
  • 38. Summary Although most companies report having positive experiences with relationship management programs, many face challenges in operationalizing the metrics component to formal performance and relationship management. Clinical service providers appear to have been more aggressive about, and more successful at, implementing formal performance metrics than have sponsor companies. 38
  • 40. Conclusions Both sponsors and service providers appear to recognize the benefit of focusing on long-term, preferred relationships and alliances, and of investments in increased monitoring and management of the performance of these relationships. It appears that careful selection of a restricted number of “preferred” outsourcing partners and increased investment in formal management of relationships with those partners leads to increased efficiency and quality of outsourced clinical research. Companies that invest in establishing excellent sets of metrics, comprehensive and formal relationship management programs, and effective change management strategies are most likely to benefit from this approach. 40
  • 41. 2010 Avoca Report In the 2010 Avoca Report, The Avoca Group presents the complete data obtained in the 2010 Industry Surveys. Topics include the future of companies’: overall approaches to outsourcing priorities in the selection of all providers and preferred providers strategies and tactics for measuring and managing outsourcing relationships planned use of risk-sharing and alternative resourcing outsourcing models The report also examines companies’ experiences and satisfaction with the outsourcing management approaches to date, and investigates whether “early adopters” are in fact experiencing better outsourcing outcomes. Further, the report explores the challenges faced by companies in introducing new approaches and requirements for successful implementation. Material differences between “Top 20” and smaller sponsor companies, and between CROs and other types of provider companies, are presented and discussed. The report is approximately 70 printed pages and contains 48 tables and figures. If you are interested in obtaining a copy of the full 2010 Avoca Report, please visit our website at www.theavocagroup.com. 41
  • 42. Improving the Health of Critical Business Relationships Thank you Contact Avoca at: (609) 252-9020 www.theavocagroup.com info@theavocagroup.com 179 Nassau Street Suite 3A Princeton, NJ 08542