Global Outsourcing

Introduction

Global outsourcing of pre-clinical studies is an increasingly important aspect of drug discovery and development. In order to extract the most value out of an outsourced pre-clinical project abroad there are several strategic decisions that require the sponsor's attention. Sponsors that have clear ideas about the level of quality of studies, as well as the flexibility that is desired and required communication speed, will be better positioned to succeed. Additionally, the sponsor representative must assess themselves as to their ability to manage studies abroad, where they may not perceive the same level of control over a study as if it were done domestically. There are several reasons why a pharmaceutical or biotechnology company may choose to outsource their pre-clinical studies. Where companies have a brick and mortar foot print, the costs of outsourcing studies can be lower as compared to performing the studies in-house due to reduced fixed costs. At the same time, new technologies have enabled the generation of many more potential pre-clinical candidates and for this reason, outsourcing can also be a viable strategy that allows companies to flexibly increase capacity as needed. Outsourcing can also serve as a conduit to scientific expertise that is not currently possessed at the company. When these activities are outsourced beyond the sponsor’s national borders several challenges exist to ensure a good interaction, as well as high-quality data in order to help the sponsor to make smart decisions about how to progress candidate compounds. Notable amongst these factors are communication, cultural norms, animal welfare standards, shipping logistics, legal practice and interpretation of regulatory guidelines. Now that there are an increasing number of international laboratories that are capable of generating high-quality data that can even conform to the Good Laboratory Practices (GLP) standards, the sponsor should understand these challenges before engaging with global providers of pre-clinical services.

When choosing a global outsourcing partner is important to consider the sponsor’s motivation for the interaction. If cost is the key factor in the search, a sponsor should consider that, in general labor, is about 80% of the cost of a study. In this light, a search that weighs the labor arbitrage factor will likely find the lowest costs for a study. However, in developing countries where the advantage of labor arbitrage is greatest, there can be extensive turnover of staff in the laboratories. As these regions open an increased number of contract labs, the turnover rate can be high as staff from the already established laboratories become more valuable and are recruited to the newly started laboratories. The sponsor should evaluate the staff training records before placing studies and favor labs that have well-trained and reasonably long-tenured employees. Furthermore, to reduce cost it is advantageous to focus on labs that specialize in providing commodity rather than bespoke services. Several global contract labs focus on a given area, for example, screening ADME services or medicinal chemistry support and these focused labs typically are in the best position to compete on a price basis. Another method of cost savings is to take advantage of a natural resource that is abundant in a given region. One example is the relative ease of obtaining cynomologous monkeys in China. It might take several months and a large expense to initiate a study that used cynomologous monkeys in the United States; however, such a study can start relatively quickly and realize significant cost savings in China where the colonies are large and well established. Currency arbitrage, where the value of a specific currency relative to the domestic currency can vary over time, can be leveraged to lower costs. This strategy can be best realized when a sponsor has a focused set of experiments to accomplish in a relatively short amount of time.

In the early stages of interviewing international laboratories, it is good practice to share with the contract lab the long-range goals for a program which reveals the myriad of studies required to complete the program. This will incent the contract lab to keep prices low. Often times a global lab will sell their services at near cost or even at a loss for the first set of studies to engage the customer. To capture the best cost and ensure value, a sponsor might take a staged approach towards study placement, contracting for a single study or a small suite of studies that could lead to a large program of studies in order to assess how basic interactions work between the laboratory and the sponsor. These initial interactions can be assessed in terms of protocol development, is it a smooth process or does it take an extended amount of time; also should a problem occur during a study how is the sponsor notified, is it according to their expectations, and are the written reports sufficient for the sponsors purpose. This is also a time for the sponsor to assess to what degree the contract lab will be a scientific partner as opposed to a technical partner. For example, if a study result is outside of what was expected, how does the lab react and do they offer follow-up experiments, troubleshooting exercises or does the laboratory only communicate the results to the sponsor and wait for further instructions. In this early stage, it is recommended to assess the technical quality of the lab by sending blinded positive controls for whichever assay is being performed by the laboratory. A sponsor should use their own discretion about the quantity and which positive controls to send; however, to assure the sponsor representative and their organization about the competence of the global partner, positive controls are essential to going forward with a global laboratory. During the assessment period the sponsor may wish to negotiate prices for a larger commitment to the contract laboratory which will lock in the desired cost savings.

In turn, if the business focus is on increasing the capacity of an internal facility, then data parity to the internal facility is paramount and the search must focus on finding a partner that has the technical skill to match the data quality that is generated at the domestic site. In this case, it will be important to incorporate a thorough validation phase into the early interactions with the global outsourcing partner. When the purpose is to increase capacity, there is also an increased premium on communication between the internal domestic scientists and the global partner. In this increased capacity scenario, pre-clinical activities are also ongoing at the home site and the outsourcing partner’s activities must be coordinated with internal efforts. These interactions are best facilitated by regular communications between the domestic site and the off-site laboratory and the sponsor should prioritize laboratories that demonstrate that they can provide the communication services needed. Sponsor organizations that have a bilingual, bicultural liaison are especially valuable for this type of outsourcing activity. Working with an international lab will take some extra time and effort in the beginning to ensure that the sponsor’s expectations for a study are clearly understood. To address some of the cultural and communication hurdles that a sponsor finds when conducting studies abroad, it is helpful to standardize the sponsored studies as much as possible. To this end, creating protocol and reporting templates before the sponsor engages the global partner can facilitate the early interactions. For example, if a sponsor intended to run a series of screening pharmacokinetic studies, giving the global lab a clear template that outlined the sponsor’s expectations for strain, anti-coagulant, time points, route of administration, as well as a sample report that defined which parameters are to be measured along with any software requirements, could aid the interaction.

If instead the search is motivated by gaining access to a specific technical need that is not possessed internally, the considerations are similar to projects that seek to increase capacity in that the sponsor will need to prioritize communication and conduct validation exercises. However, in this scenario and when operating abroad, it will also benefit the sponsor to choose a global partner that has exhibited a functional excellence in the field the sponsor is pursuing and who focuses the majority of their efforts on that area. For example, if a sponsor is interested in outsourcing the formulation of their compounds and they do not have internal resources for the project, giving preference to laboratories that have publications in the field as well as client recommendations, along with a sole focus on formulation science, will give the project its best chance for success.

When working in a foreign country it is possible to experience miscommunications because of differences in communication style as dictated by the different cultures. In general, the global contract research organizations (CROs) have tried to train their personnel to understand the western communication style, however, there can be occasional misunderstandings. For example, across many of the Asian nations their communication style is typically less direct and relies more on context than the western style of communication. A study director in China may find it difficult to say 'no' to a request or give negative feedback to a proposal, even when it would be best for the study. Instead of being openly negative, he or she may give an equivocal response that means he or she disagrees but is translated by the western sponsor as being indifferent or without opinion [1]. Studies conducted abroad require that all of the parties are absolutely clear on the study plan. For example, if the sponsor representative expects to be notified immediately when there is a problem with an animal in a toxicology study, this has to be made explicit to all of the parties. Moreover, when mistakes are made or when miscommunications are discovered, it can be viewed as a dishonor in other cultures where the contract work is being performed. Whereas in a western laboratory mistakes may not be as harshly judged and swift communication of errors is actively supported. Setting expectations in terms of when to communicate and the level of detail will greatly facilitate smooth interactions between the laboratory and the sponsor.

Some other cultures also tend to have more strict hierarchical structures as compared to western laboratories which appear flat in comparison. In some situations the sponsor does not necessarily have access to the staff that performs the experimental work, but rather only has access to relatively senior managers. This can have an impact on the communication speed and quality from the sponsor to the study director and their employees. This could have an impact in the case where an exploratory pharmacology model is being established the sponsor may wish to interact with the bench scientists to understand the details of the progress of the project, and perhaps to troubleshoot technical issues, however, this level of access will need to be negotiated early on in the relationship.

Legal Practice

When contracting with vendors abroad, there can be concerns for protection of intellectual property. However, each lab is aware that their business reputation would be severely damaged by even the appearance of misappropriated information. In addition, sponsors should be aware that global partners can have widely different standards for matters such as how much insurance they carry, dispute resolution procedures, and methods to make parties whole in the case of unsatisfactory work. For these reasons, it is important to spend ample time making sure each of the clauses are clear in the contracts such as the master service agreement and the statements of work. For example, if the sponsor finds the work of the laboratory unsatisfactory and wishes to reclaim the cost of the study, it can be important to clarify how that recoupment relates to currency exchange rates. A given currency can value or devalue over time and a thorough contract will consider this in its terms.

Sponsors may choose to hire a local attorney to consult to them on regional legal issues. For example, contract laws and intellectual property laws in foreign jurisdictions can be substantially different from corresponding laws in the United States so the choice of governing law for the contracts will be an important aspect of contract negotiation. The relationship between the sponsor and the contract lab can be an important factor in guiding the conduct of the business relationship. In many cases, the ability of the sponsor to bolster the reputation of the contract laboratory is as valuable as the money paid to the global partner laboratory. If sponsors can find a way to give this value to the contract lab, it has the potential to ensure that the relationship between the parties proceeds with few complications.

Logistics and Shipping

Shipping for pre-clinical studies internationally requires a knowledge of foreign countries import and export laws, practices and policies. The sponsor should establish early on that the global lab has extensive experience navigating the national policies for import of reagents, active pharmaceutical ingredients, and animals if necessary. The sponsor must also allow for extended timelines when shipping is complicated. For example, if it is necessary to ship a series of candidate compounds for screening in a foreign facility, the sponsor should consult with the lab on how to describe the contents of the shipment to conform with the global laboratories' national import policies. Delays can be significantly extended when the sponsor describes the contents with terms that require clarification, consult with the global lab on the specifics to be used. For example, when shipping chemicals, descriptions such as the chemical name (e.g., quinoline derivatives) versus biological research compounds should be vetted for the possibility that the shipment could be held up in transport.

Monitoring

Because studies done with global partners can be geographically remote from the sponsor, it is necessary to allow extra time and to be very thorough in the planning stages for a monitoring visit. Before the visit it is important to ensure that the laboratory has people who can speak the sponsor’s language and also that their documentation, standard operating procedures, organizational structures, training records, etc., have been translated into the sponsor’s language. If the sponsor has a foreign national that is bilingual in its employ, he or she can lead the trip and it can ease the interaction between the monitoring team and the laboratory. Another option is to hire a local consultant in the country to work as its liaison. Many labs will keep their records and lab notebooks in the native language and in English, but there are several that keep them in the foreign language which can be translated on request. This is an important point to clarify before a visit as this can add time and cost to the monitoring trip. Of particular importance is the animal health status for in vivo studies. Assuring that animal welfare meets the sponsor’s standards is critical to getting quality data from studies. Animals should be sourced from reputable vendors with fully traceable health records. It is suggested that animals come from reputable international vendors that have a local source of animals in-country. Before conducting toxicology studies, a sponsor should inspect the historical values for a similar study and compare it to other studies that have been done in a facility that has already been established for quality by the sponsor. The infection status of the animals should be recorded as it could be an important factor in explaining unexpected findings in the animals. There are several regulatory bodies that set the standards for the conduct of studies as well as inspect the labs in foreign countries. While there are many similarities between what the foreign regulators and the U.S. Food and Drug Administration (FDA) expect, there are differences as well. If the sponsor is doing non-GLP work, local accreditation of the labs can serve as assurance for the sponsor. For example, in China the labs should be certified by the SFDA or in India by the NGCMA, in the United Kingdom by the MHRA while still other countries may have OECD status. However, for GLP work that is intended to be submitted in the US, it is best to look for global laboratories that have been inspected by the FDA.

Conclusion

In order to capture the most value from pre-clinical studies conducted abroad, it is important that the sponsor think critically about the status of their projects, the willingness of their organization to accept risk and their own sponsorship style. The stage of the project will influence the negotiations on price, aspects of quality as well as structure of the contract. If the sponsor is willing to take on some risk by sending studies abroad, the sponsor must also recognize that although there are advantages in terms of cost, expertise and capacity, the challenges that are inherent in global outsourcing can lead to complications such as timeline delays. Importantly, the employee who is the sponsor representative must assess their own style as relates to study sponsorship. A study representative for a global study must be diligent in their preparation for the study, clear in their communications about the study, and highly flexible when faced with challenges due to language differences or communication styles. In our experience, global outsourcing is an effective way to increase capacity and realize cost advantages at the same time; however, as with many worthwhile endeavors, it takes time, patience and an attention to detail to ensure the success of pre-clinical programs that are outsourced beyond national borders.

References

1. Oshri I, Kotlarsky J., Willcocks L. Outsourcing Global Services: Knowledge, Innovation and Social Capital p58, 2008.