ExEcutivE PanEl contract RESEaRcH ORGaniZatiOnS 18 cro s - focus on laboratories Bayer Healthcare s Global Alliance Manager Suzanne Besaw heads this discussion on the current trends in contract research organizations, specifically lab services. Together with three industry experts Rob Danziger of Medpace Reference Laboratories (MRL), Jody Fleisig of ICON Central Laboratories and Jeff Mayhew of LabConnect Suzanne examines this thriving area of Pharma.
Suzanne: With the trend of sponsor companies choosing one or two preferred strategic labs, how has this changed your business? Jeff: This trend makes it increasingly important for us to have a very clear understanding of the strategic and functional needs of each individual sponsor as it relates to lab services. We try to leverage our business model to offer services that are going to be a best fit for that sponsor s current requirement. In some cases we may be looking to provide traditional central laboratory services, while in other situations a custom package of lab support services and specialized testing may be more appropriate. An example from our perspective would be a relationship that we have with a top five Pharma company. What we have been retained to do is provide specialized support services for their early-stage ecologies program so we provide project management, specimen tracking, custom suppliers, logistical support and specimen management. I think an interesting take on this is it may be true that the top 20 or 30 Pharma companies are now choosing one or two strategic labs but I think it should also be noted that has always been the case with emerging and mid-sized clients. They may not call it strategic partnering but they typically choose one or maybe two laboratory service providers to work with, so there are a lot of labs to choose from and it is incumbent on all of us to earn their trust. Rob: I would build on that theme and add a bit about the trend that we are starting to see with some of the major Pharmas; they are going to a single sole source longer term contract and truly time will tell if these asset purchases, where they tie in services, work. It may make good sense from a business perspective but is it really providing the best lab options and the best science options to support development of those drugs. Time will tell as we see how these relationships evolve. One of the things we are doing is looking at how we can build on existing relationships to leverage our position to be one of those one or two preferred providers, which is really important for our business focus. We continue to manage those relationships both on a tactical and a strategic level. The more strategic niche provider options, in terms of a select service category or a certain type of testing by differentiating our testing capabilities and integrating scientific-consulting. For example, we are working as a sub-contractor to some of these large central lab organizations by providing the biomarker specially testing and this is something unique in the market today. Clearly the dynamics of outsourcing at large Pharma has shifted to a more consolidated base with fewer vendors being selected and we will see how that plays out over the next few years. Jody: I think those comments were pretty on point with what I feel about the industry today. I think ICON is in a very good situation because we already have global platforms established. We have been working, as Jeff said, with many of our clients over a long period of time and the relationship is not just defined as preferred provider relationships in some cases. But in order to deliver to the entire industry we have to remain in a model that is flexible and can be scalable. With the preferred relationships we have we put in some very nice oversight structures. We get a glimpse into the forecast of these companies pipelines and understand their testing needs better and where we are able to standardize our deliverables metrics reporting for these companies. I would agree that there is also interesting business opportunities outside of those preferred provider relationships because of the more esoteric testing needs we are able to actually gain opportunities outside of those relationships where they already have established preferred providers. So it has an interesting evolution in the central lab space where the type of testing that Executive Panel CONTRACT RESEARCH ORGANIZATIONS 19 Suzanne Besaw MODERATOR Alliance Manager for R&D Services Bayer Healthcare Procurement Bayer Suzanne joined Bayer Healthcare (then Miles Laboratories) over 20 years ago as a Research Scientist working in their core Oligonucleotide Facility and later performing Osteoarthritis Research as a Molecular Biologist. Throughout the years, she transitioned to clinical research where she was a CRA roadwarrior as well as a Project Manager for Bayer s Anti-infective Pharmaceutical division. After receiving her MBA, she was asked to lead the External Supplier Management group where she handled the US clinical outsourcing and contracting of various clinical research services. Today, she is the Alliance Manager for R&D Services in Bayer Healthcare Procurement. Suzanne works closely with Bayer s strategic clinical preferred partners to ensure innovation and efficiencies are utilized to enhance these important key relationships.
ExEcutivE PanEl contract RESEaRcH ORGaniZatiOnS 20 you are taking on sometimes is really coming out of an outsourced model that wasn t planned. Some of those really esoteric testing that would normally be done by a laboratory inside a Pharma company would never be transferred over to a central laboratory in the past, but is now something that clients are looking at doing in all different types of models. Suzanne: What are the specific advantages that this kind of strategic partnering can offer a sponsor company outside of volume pricing? Rob: Some of the things are obvious in terms of process and system integration, getting to know the defi ned process and setting up unique processes between the central lab and the sponsor company. Clearly an integration of systems and linking not only the data transfer aspect of things but creation of the web portals for viewing real-time live data. Some other benefi ts include the dedicated team approach to working with each other s teams on a regular basis, which creates that knowledge base of knowing how to work with each other and becoming more of a seamless integrated team. And as mentioned earlier, the relationship management aspect of setting a strategic direction as well as managing the escalation process, and certainly the ability to look at future planning not only in geographic regions needed but in the type of testing, and allowing a true partnership in terms of working together to be able to provide solutions based on what those pipelines look like. Jeff: One key thing you mentioned is a relationship aspect. Strategic partnering is simply a relationship. It is a relationship between two parties and like any other type of relationship good communication that leads to understanding is really the key to success. We always attempt to foster relationships that move the relationship beyond just buyer and seller. We believe both parties benefi t from that, so the more we know and understand the sponsor s needs the more effectively we can create 8 One major benefit to working with the preferred provider relationship or a strategic relationship is it allows standardization & measurement. Jeff Mayhew chief DEvElOPMEnT OfficER labconnect Jeff is primarily responsible for the oversight of LabConnect s new business and network development activities. One of LabConnect s founding partners in 2002, Jeff has more than 20 years of operations and business development experience within the healthcare industry. In particular, Jeff brings LabConnect more than sixteen years of international business experience. Prior to starting LabConnect, as Founder and Director of Nexus Health Management International he was involved in the development of inpatient behavioral health services in Southeast Asia. Prior to Nexus Health Management, he served as Vice President of Strategic Alliance Development for Charter Behavioral Health Systems and Vice President of Operations/Development at Option Care, Inc.
Executive Panel CONTRACT RESEARCH ORGANIZATIONS 22 solutions that are going to address those needs. As Rob mentioned earlier a few of the more obvious benefits are a reduced product start-up time lines, a dedicated project manager relationship, a client driven data management and reporting capabilities. You need an open model; at LabConnect we are able to customize lab locations and analytical capabilities to meet client requirements. What that means is we may include regional labs in markets with more challenging logistics or perhaps the addition of a specialist laboratory with some unique analytical capabilities. We can either do this for specific projects with particular needs or for the entire program. Jody: One of the major benefits to working with the preferred provider relationship or a strategic relationship is it allows standardization and measurement. Over time you can look at the way you are working together and try to harmonize and improve those relationships. You also understand how to get better at what the deliverables are and how you work together. I think one of the problems that occurs sometimes when working in a situation where you are only working on one project is that you never get to see anything but that baseline. Therefore as you move on to the next project there is not a lot of room for consistency and improvement. As I pointed out in the earlier question some of the things we normally do in our preferred relationships is to put an oversight structure in place to manage the overall relationship. Typically we have a dedicated individual who oversees a portfolio of work and then we also do things like reserve project managers ahead of time when we know projects are coming down the pipeline. Again when we have an understanding of what kind of work we are going to be seeing we can obviously add to our test menu, appropriately resource staff to the needs of our relationships and this makes things a lot more streamlined in our deliverables. Suzanne: With some current trends that are happening now I am interested to know how the effect of rising fuel costs has impacted shipping and your couriers. Will sponsors see a huge difference in pricing this summer? Jody: The rising cost of fuel is definitely impacting the cost to the courier companies but at ICON we negotiate rates with our providers for transportation upfront and they have ceilings so we try to manage that proactively. There are situations in which we do expect to be hit by minimal increases to fuel charges over the next coming months because of what s going on in the industry, but we do believe it will be much more controlled than a large peak. The one thing that we really can t control is some of our local couriers using airlines for transportation and the security charges airlines have, so unfortunately those types of things do get passed on to our clients. Jeff: I don t think we are going to see another major increase this summer as we have seen over the last six months an additional two to three per cent in fuel charges. Right now I believe they are in excess of 15 per cent with most of the major couriers and that is the highest they have been in recent memory. We are hopeful that will stabilize somewhat over the coming months. One of the ways we address a logistic cost is to utilize our regional laboratories and local courier services so we are not trying to ship things across borders and that helps us to mitigate some of the associated logistics costs with the study. Rob: The fact of the matter is I just saw an article today saying fuel surcharges are up 41 per cent over the same period in 2010 on passenger airline tickets. Like Icon, MRL negotiates flat rates that are transparently passed through to the sponsors and unfortunately there are surcharges that occur, which are outside of our control but those are passed through in transparent basis. Things we look at when dealing with a central lab with a standardized platform across a number of limited locations is how to get those samples to the lab in the most cost effective way. We are doing consolidation of sample shipments, we are looking at shipping samples that can be sent ambient and frozen as opposed to sent frozen and looking at unique courier options that allow us to minimize the impact of multiple shipments through either consolidation or batching of samples to try to minimize those costs that have such a large impact on the total central lab budget. Jody: We do a lot of consolidation and look at batch testing if it is appropriate for our clients. We also look at our transportation requirements in terms of what the most efficient and best way to maintain our specimen integrity is. We actually have a fit for purpose courier solution so that we use what we believe to be the best courier for that location and within countries it could actually be multiple couriers. It doesn t have to be just one courier we look at when we are trying to understand the overall logistics of the needs of our clients. We take a look at what the overall requirements for the specimens are and the best way to manage through all of the transportation needs to maintain specimen integrity and get the results we need back to our clients. Suzanne: Speaking of specimen requirements and couriers, what parameters have you put in place for how your labs deal with natural disasters such as the recent flooding in the United States tsunamis and earthquakes? Jeff: Those are very challenging situations at LabConnect and I am sure at Icon and Medpace too. Everyone has well developed disaster recovery plans that try to consider the impact of these types of possible disasters and things that are unpredictable in nature. I 8
Executive Panel CONTRACT RESEARCH ORGANIZATIONS 24 think going forward, as all of us move away from brick and mortar models to more global strategic partnerships, there are some new capabilities that are emerging to address how you handle these large scale disasters. Some examples would be moving some critical IT solutions to secure data centers, building applications which utilize cloud and web services all of these things increase our ability to respond to crisis quickly with minimal disruption by allowing operations to quickly shift to new locations. Rob: It is very true that we have all of the necessary disaster and contingency plans in place. I think there are two categories here that we need to look at: recoverable disasters and unfortunately unrecoverable disasters. The situation with the earthquake and tsunami in Japan is just a horrible situation that is a catastrophic, unrecoverable disaster. Unfortunately the impact of that natural disaster destroyed any chance of recovery of those samples. The flooding and some of the other ice storms etc are certainly recoverable disasters and organizations should have contingency plans for, like moving samples from one lab location to another lab location or notification of the sites with what to do and how to stabilize, and manage those samples until they can be shipped out. This is obviously a very serious part of all of our businesses and how best to minimize the impact on the study is really an element of the type of disaster that we are dealing with. Suzanne: Do you have back up plans in place when a study is started or basically is it just a general disaster plan that you may have? Rob: At Medpace we have a general disaster recovery plan for natural events for all our locations including our secure work data centre, which is an offsite location. Certainly as we look at study specific recovery plans they fall under the umbrella of the general plans that we have in place. Jody: We have a robust contingency plan. We have a disaster recovery plan for our entire IT infrastructure as well. If you take the volcanic ash situation that happened, I would call it nightmare for central laboratories, patients and Pharma companies who were trying to conduct research while the volcanic ash storm presented itself last year. We always have contingencies for every possible situation, such as back up laboratories that are local and have been audited and various other options for our couriers to use. We had a very robust communication plan for all of our clients, we mass emailed everyone about what to do with their specimens, delaying collection, and how to transport them. But we tried to do everything we possibly could to ensure we did not interrupt the course of the study and made sure we got those valuable results to our client. It takes a full-time logistics group, a very large team of project managers and pretty much the whole organization to deal with a lot of these weather conditions. We were talking about snow a little earlier, as you know we had major storms of snow in Europe and the US this year so we were diverting specimens to different laboratories because we can do that. But then the other locations were getting hit with snow, so you are constantly managing through that process. Whether you have a contingency plan in place or not, it really has to be dealt with as it is happening. I think the biggest thing that needs to be in place is the team that is going to deal with the plan. Suzanne: That s really interesting and actually what you are saying is something that I think really goes unnoticed from a sponsor company because all these things are expected but not seen and heard in day-to-day clinical trials. I would like to change the subject a little bit and talk about emerging markets. With the ongoing trend of companies moving into emerging markets, what are some of the hurdles of obtaining, shipping and testing lab samples in these regions? Rob: It is interesting as some of the new regions come into play where patients are located and the desire to run trials there. There is an after the fact of what is required to set up the study and I think so much of this falls on Rob Danziger Executive Director, Business Development Medpace Reference Laboratories (MRL) Rob has 20 years of experience working in the CRO industry for various organizations. Most recently he headed US Business Development for PRA s Phase I group. Previously he was the Executive Director of Business Development for PPD s Global Central Lab division with responsibilities for a global BD team. Over the years he has been involved with a number of industry groups including ASCPT, ACRP and DIA.
the sponsor s shoulders, in terms of understanding the regulatory requirements for the market in that country and proactively planning for the appropriate permits to set up for the trial. The second part of that comes into play with what we talked a little bit about in terms of courier costs and defining which courier is the best solution for that environment. Looking at things like cut off times and transit times are some of the factors that certainly come into play. There are times when we as central labs need to actually challenge the sponsor and say why in the world are you going to a country where we have to use a donkey to a train to a plane to consolidate shipments? And what is the financial impact of this? There are situations where we have looked at certain countries and said you have got half a million shipping costs related to these countries. I can t tell you why you are there, what are the regulatory reason? Is this for a market for approval? Is this being driven by your medical folks for patient s access? Are those patients available in other markets at a lesser cost of doing business? There are things to consider besides just the lab shipping transportation costs. There are other ramifications on the monitoring, the study set up; are these people in areas that they really speak English and are going to comply with good clinical practice and the conduct of the study? These are questions outside of the central lab, but certainly working with the sponsor to define the requirements, selecting the best courier and proactively applying for the appropriate permits are really critical success factors when looking at foreign and emerging markets. Executive Panel CONTRACT RESEARCH ORGANIZATIONS 25 Jody: I think again it goes back to a couple of things, you need to have a very robust logistics team internally to manage through getting those samples in and out of the countries you are going into. If you take China for example, there are some samples you just won t be able to really get out of China so you have to look at having a laboratory in China potentially a full service laboratory with all kinds of esoteric testing. Icon currently has a laboratory in China, but I am sure all of us are evaluating what we should be doing from a strategy perspective with that market. I also think you have to look at the sites and make sure that the sites know how to collect and maintain specimens for integrity, so just like in a CRO with CRAs who are trying to help a site get ready for a clinical trial, the same kind of training needs to be in place for those sites for laboratory specimens. Sometimes those specimens are the primary endpoints for studies and again I would agree that Pharma companies need to go where patients are. That is why we are seeing more and more studies going into more emerging markets. But you have to plan for every possible contingency upfront especially for laboratory specimens because the transportation is so critical and the integrity has to be maintained in order to get the appropriate results. I think having samples done locally gets away
Executive Panel CONTRACT RESEARCH ORGANIZATIONS 26 from the whole purpose of a central laboratory so it is absolutely critical for the integrity of these studies to make sure that everything is in place to be able to get the samples in the same respect as you would for any other part of the world. Jeff: As you can tell this is obviously one of the major challenges that all of us face today, not just in central lab but in the entire clinical research industry. I think it is the combination of two things. It is the expansion into different types of geographies combined with the explosion of esoteric analysis within the study protocols. The types of tests we re performing as central laboratories are vastly different than it was five years ago. From my perspective I think it becomes very difficult to effectively support the study from a single site. How we have responded to this is through the continued geographic development of our network. Right now we have 17 qualified central laboratory facilities that can either serve a broad region, like our lab in Poland that serves all of Europe or one that we can bring on board for specific projects, so we might utilize a lab in the Republic of Georgia or one in Ukraine for a specific project. From our perspective there are some advantages to this; local market expertise, site support, turnaround time, cultural compatibility and logistics costs can be reduced as well. Overall I think for all of us in the central lab industry we would like to be involved earlier in the process. As sites and countries are being selected we need to have the ability to look at the protocol and look at the types of tests being asked of us and be able to share information with the sponsors about how it is going to go and the feasibility to do that. Jody V. Fleisig Senior Vice President, Global Business Development ICON Central Laboratories Jody joined ICON in June of 2010 and moved into her current role in December 2010. Jody has more than 20 years of experience beginning her career in Microbiology at Johns Hopkins Hospital and then moving into business development selling reference lab services, diagnostics, hospital information systems, and capital equipment to hospital laboratories. She has spent the last 12 years of her career working in the CRO industry in Strategic Business Development her position prior to joining ICON as Senior VP, Global Business Development was for a top 10 CRO where she managed a portfolio of strategic clients. Jody holds a BS, Medical Technology from the University of Pittsburgh, Pittsburgh, PA and a MBA, Information Technology Management from Johns Hopkins University, Baltimore, MD.