Don’t skimp on quality – maximising quality to reduce costs

It has been said that life is easier with a friend, a partner, someone who will watch your back and help you when things get tricky. In business, that is even truer. Its cut-throat nature, with profit margins and revenue expectations, means that seeking new trading partners, investment opportunities and ways to lower costs – without cutting corners – is more important than ever.

Companies have been outsourcing services for years, and they have always been looking for a partner that is able to mirror their own goals, working culture and aims, but at the same time be able to provide the quality service for which they are known – and, of course, save them money.

As drug development costs continue to rise, pharmaceutical and biotechnology companies must find ways to conduct clinical trials efficiently. Consulting with a central laboratory helps achieve this goal.

“What are you looking for? Is it cost flexibility? If yes, you need to consider that by having flexibility you are increasing the level of your costs,” says Lidia Cappellina, head of outsourcing for Italian pharmaceutical company Chiesi. She has been working in outsourcing for over 20 years, first in the food industry and then in pharma for some of the biggest brands, before finding her current role at the start of the millennium.

“I’m not a scientist,” Cappellina says of her career in pharma. “I am a statistician by training. I graduated with a degree in economic statistics.”

She says that it is important to determine what aspects of a trial need to be outsourced or whether a company is better served outsourcing the whole trial. “Outsourcing might provide cost reduction,” she says.

Cappellina is, however, reticent about whether outsourcing can deliver results across the board. She says that it must be targeted to specific areas as part of a company’s long-term commitment to a holistic approach. Her doubts stem from her experience that a company’s desire for flexibility usually ends up meaning higher costs.

Stop butting heads

“Flexibility implies, on average, higher costs. This is because, in very general terms, there is a wider pharma culture of outsourcing that has begun. It is because, at a certain time, we were obliged to transform our variable costs to fixed costs. The reason we started to transform to variable costs is because we have to hit certain economic targets. So, the first line – the safe line – had become more uncertain.”

Outsourcing, as a cost-saving measure, is practical, but it is, in some cases, forced upon pharma companies. Cappellina, however, sees it as a belt-tightening measure, which can also stop managers and scientists butting heads over grand ideas and unprofitable trials.

If a clinical trial director is looking to outsource, there are several ways that they can avoid a spike in costs. Cappellina says that the most important consideration affecting financial implications is to look at where there might be a problem managing all the costs as a whole. Even when this is done, there are areas of the trial that are renowned for being problematic and end up being more expensive no matter what precautions are taken.

“For problem areas, the first point you need to evaluate is if you want to make or buy a strategy,” she says. “Every time you decide to buy, it’s because, in a certain sense, you decided not to make – and that for me is important in terms of planning long-term financial benefits.

“I think that the first – and core – point is that if you decide to outsource permanently, then you’ve decided to buy permanently in a certain area, or simply decided to source because of need – for example, you needed pharma capability or had a peak need.”

Cappellina is a firm believer in looking at the forecasts to determine what is necessary for a particular trial.

“Logically, the general concept that outsourcing may provide economic benefit is sound,” she says. “In reality, however, the decision to outsource comes from the fact that outsourcing simply provides cost flexibility – something that does not necessarily provide cost reduction.

“So, when you think about outsourcing in clinical trials, the point is that quite often the decision to outsource is driven by economic convenience. The decision is driven by the need to have flexible costs instead of fixed costs. Fixed costs come from your manpower, but when you outsource, you are paying for flexibility. You are buying. If you do your own monitoring, it costs less than if you do your own management or inventory.”

If it seems like a half a dozen of one and six of the other, that’s because it probably is. Cappellina’s view on cost reduction is less about deciding to outsource, but more about the finer details once outsourcing has been decided on. “You can outsource so many different parts: the regularity part, the management part,” she says. “But how much do you control the study? Will it be based near to where it’s being managed?”

Cappellina, in the past, outsourced to a company in China and spent hours on daily telephone conferences, often in the evening because of the time difference, in an effort to resolve seemingly endless problems. She says that there is no point in deciding to outsource a trial to another company if there is no trust in the team tasked to run it.

Clash of cultures

One of Cappellina’s most ardent beliefs is that if a company’s culture does not mesh with a potential outsourcing partner, then conflict will arise as problems occur and costs rise. She says that to get the best out of outsourcing partners, it is important to respect each other’s company culture, which fosters a sense that members from both teams feel like they are being heard and are contributing to the task.

“I think there are going to be issues if you have a very high percentage of outsourcing, or make outsourcing decisions to fulfil a tactical need, without being sure that it is needed long term,” she says. “I think that you need to try to select a supplier and establish a long-term relationship with them. In order to do this, both parties must be extremely focused on the relationship to create value for each other.

“I believe that the mutual creation of value is a possibility. The way to do this is to base the contract on principles the companies agree to.”

Cappellina says that defining principles for supply management will improve the relationship between the company and the supplier. “That principle is the core concept,” she says. “When working with your supplier, your objective is not only to engage but also to manage the relationship, agree to contractual elements such as KPIs, create a clear communication plan and governance structure – such as meeting with senior management, setting agendas and reviews with suppliers to try to understand why something that hasn’t been met or achieved, and how to work together to improve the performance.”

Cappellina’s advice is to avoid cutting corners, spend more on better service and choose outsourcing as an equal partnership, not as a quick fix to save time and money. “If you look at cost, procurement is important, but this should be considered after other elements such as assurance of supply – the company is capable – and assurance of quality,” she says.

“There is no sense in spending less if the supplier can’t meet the required parameters. The final element is ensuring a high level of service. If these elements are not met, there are going to be hidden costs. The cost must always be evaluated. “You must always look at these things at the bidding process, because everything looks the same on paper.”

What are the benefits of central labs?

A central lab tests samples collected during a clinical trial. These facilities align technology with standard global operating procedures to provide consistent and combinable data.

A central lab builds on its experience from previous trials and uses that knowledge in later trials to ensure efficiency is maximised and finances are controlled.

Most labs offer the same project manager across different trials to maintain relationships that rest on trust and support, which enable smart decisions to be made regarding the company’s budget, and the trial’s medical and data requirements.

Lidia Cappellina shares her views on the value of a central laboratory: “I think what’s important in each trial is to distinguish between your need and your wish. In a large trial, for instance, a central lab is necessary to collate and optimise the data so it can be intergrated with your systems.

“You need to be able to manage the regulatory areas, and a central lab provides a certain level of guarantee: clean data that is well traced and easy to use.”