Kenneth A. Getz

Recently, several large commercial IRBs noted a higher relative number of investigators exiting the enterprise. A survey conducted among 150 sites found that a greater percentage is writing off some sponsor grant obligations as bad debt. In addition, a rising number of investigators have reported that study suspensions and terminations, and slow grant payments from sponsors, have contributed to a more difficult operating and financial environment.

A shake-out may not be unwelcome. Through consolidation and a weeding-out of poorer performing and less stable sites, the investigative site landscape may be better positioned to offer higher levels of efficiency and effectiveness as the economy recovers. A look at the structure of the site landscape, current economic conditions, and sponsor/CRO strategies sheds some light on this speculative yet plausible scenario.

Grant spending on FDA and NIH-funded clinical trials topped $9 billion in 2008 with the majority, 85%, coming from industry. But growth in spending has been slowing down. Between 2001 and 2004, sponsor spending on clinical trial grants grew 11% annually. NIH-spending during that time period grew 7.5% each year. This compares with industry funding growth of only 5% annually between 2005 and 2008 and flat growth in NIH-funding during the latter years of the Bush administration.

Data on 2009 industry grant spending is not yet available though it is expected to be as much as three percentage points lower than that observed in the prior three-year period.

Of the 27,000 FDA-regulated investigators conducting at least one clinical trial each year, the majority (75%) are in private, community-based settings. Of this latter group, a whopping 90% are single sites, most of them part-time investigators juggling clinical practice simultaneously. Why hasn't the landscape consolidated over the past decade? Why aren't there more site networks offering scale economies and centralized infrastructure?

Arguably, economics are a primary culprit. Due to high levels of turnover, the landscape receives many new investigators each year as one-third of those active in the prior year drop out. This pool of novice investigators and those with minimal clinical trial experience and infrastructure tend to undercut the more mature and established sites for clinical trial grants. Experienced site networks and high volume investigative sites have invested in infrastructure. They are not able to compete with novice sites on cost.

Historical site selection practices are another primary culprit. Many sponsors and CROs have largely viewed study conduct services as a commodities business where the lowest bid providers are often favored. As a result, sponsors and CROs have rewarded novice investigators and inadvertently stifled the growth of managed site networks and high volume dedicated and part-time sites.

Economic forces

All measures of the drug development economy are bleak. On the commercial side, total global pharmaceutical sales are expected to grow less than 1% in 2009 compared with 11% historical annual growth rates. Companies are facing what has been dubbed a Patent Cliff: Nearly $60 billion in patent protected sales is at risk of generic erosion during the next three years.

First-in-class drugs entering the market have only about one year of sales exclusivity before the next drug in that new class begins to compete. And only 20% of all approved drugs recoup their total development investment—a proportion expected to decline as more drugs in development are now targeting smaller markets.

Global drug development spending continues to rise by 11% as the rate of drug approvals is declining. Despite 7.6% annual growth in the number of new molecular entities in the development pipeline, success rates have not improved: Only 16% of all drugs entering Phase I ever make it through approval. And an increasingly restrictive regulatory environment is prompting industry to gather more clinical data pre- and postapproval.

All of these conditions have compelled sponsors to seek more ambitious and resourceful initiatives to drive faster drug development speed, and control development costs while improving data quality.