It’s widely reported that as of 2023 over 49% of clinical trial expenditure was allocated to outsourced services, demonstrating a trend that biopharma companies are increasingly relying on outsourcing for clinical trials. However, this practice comes with its own set of complex considerations, particularly regarding risk management. Tom Lazenby, Founder and CEO of Mayet, provides valuable insights into understanding and managing the total cost of risk (TCOR) in clinical trial outsourcing.

Understanding Total Cost of Risk

"Total Cost of Risk refers to the sum of all costs associated with managing and mitigating risks involved in working with external vendors, such as CROs and labs," Tom explains. "This includes direct costs, like contractual fees, and indirect costs, such as the financial impact of delays, quality control expenses, and reputational damage."

This comprehensive approach to risk assessment enables biopharma companies to develop more informed, proactive decisions regarding vendor management and risk mitigation strategies.

The Changing Risk Landscape

Outsourcing clinical trials fundamentally alters a company's risk profile. As Tom notes, "While it reduces certain operational risks by distributing tasks like data collection, patient recruitment, and trial monitoring to experts, it also introduces risks related to vendor performance, regulatory compliance, and quality assurance."

Key contributors to TCOR include vendor costs, potential negative risk outcomes, quality assurance investments, administrative expenses, and various indirect costs. Tom emphasises that these indirect costs can be particularly challenging, encompassing "hidden costs such as trial delays caused by recruitment issues, reputational harm, or regulatory non-compliance penalties. By understanding outsourcing risk management, Sponsors can positively impact indirect risks, and increase control over the unknown unknowns as their projects progress"

Regulatory Compliance: A Critical Consideration

The impact of regulatory compliance on TCOR cannot be understated. "With the incoming updates to ICH E6 GCP Revision 3, there is increasing stringency on how risk management intertwines with service provider management" Tom warns. Organisations will need to adapt processes and determine how they will be achieve compliance to the updated GCP Guidelines, feeding into the Quality Assurance cost in the TCOR framework.

Data Integrity and Management

Data management is and always has been a crucial component of clinical trial risk assessment risk assessment. If data is compromised, inaccurate, or incomplete, trials may need to be repeated, increasing both time and cost. According to Tom, “Sponsors need to ensure adequate oversight of data management processes and the complexity of this increases depending on the number of service providers that this is delegated to.”

Effective Risk Mitigation Strategies

To address these challenges, Tom recommends several key strategies for biopharma companies:

1. Negotiate strong contracts that include performance metrics, clear responsibilities, and penalty clauses for non-compliance.

2. Conduct continuous vendor risk assessments through performance reviews and regular audits

3. Invest in vendor management technology for real-time tracking

4. Maintain open communication channels with CROs

5. Implement robust quality assurance protocols

6. Establish strong data integrity controls

These strategies have key levers and associated metrics that can be pulled to ensure effectiveness.

Vendor Assessment and Selection

When it comes to selecting Clinical Research Organisations (CROs) and Functional Service Providers (FSPs), Tom advocates for a comprehensive approach. "Selection is an ongoing process, Sponsors need to consistently assess and compare the risk profiles of different CROs and FSPs through vendor audits, performance benchmarking, formal risk assessments, and regular performance reviews" he states.

Looking Ahead

As the pharmaceutical industry continues to rely heavily on outsourcing for clinical trials, understanding and managing TCOR becomes increasingly crucial. The insights provided by Tom Lazenby underscore the importance of taking a holistic approach to risk management, one that considers both direct and indirect costs while maintaining focus on quality, compliance, and data integrity.

By implementing robust risk management strategies and maintaining vigilant oversight of outsourced operations, biopharma companies can better position themselves for successful clinical trials while minimising their total cost of risk.