Shreekant Karmarkar, PhD, is president, DAT Pharma Consulting, Inc., skarmarkar@DATPharmaConsulting.com, 1-224-383-4493

Shreekant Karmarkar

Pharmaceutical and biopharmaceutical companies have been extensively using contract research organizations (CROs) to meet their challenging needs in R&D and standard work for several decades. A noticeable shift occurred in outsourcing research and clinical work when Big Pharma R&D costs skyrocketed. For example, in 2012, approximately 33% of drugs in the pipelines of the top 10 pharmaceutical companies were initially developed elsewhere (1). 

	Sponsor companies engage CROs either on a transactional basis or on a strategic basis. In either case, stakes are high for pharmaceutical and biopharmaceutical companies to make sure CRO work is successful. Neither selecting a reputable CRO, micromanaging CRO work, nor throwing the work over the fence leads to a successful CRO relationship. Key strategies that can lead to a win-win relationship include a relationship on a solid foundation (CRO selection, quality management, and clarity in expectations), soft factors (build the trust and empowerment), and project management excellence (simplifying the complex, metrics, and continuous improvement). This article discusses these strategies as well as FDA guidelines on quality agreements for the contract manufacturing arrangements for drugs.

					The four commonly found “Cs” in contractual work are as follows:

	The strategies on win-win relationship were developed and implemented for CROs. The concepts, however, can be applicable to all outsourced contracting work with long-term strategies in mind.

	Transactional vs. strategic relationships

	Transactional relationships are favored for short duration and limited scope projects, (e.g., verification and validation studies and synthesis of organic compounds). Such a relationship merely augments the sponsor company’s internal resources during the crunch time. 

	Strategic relationship exists when sponsor and CRO actively work together to help each other achieve their respective objectives (2). Strategic relationships help both parties benefit from long-term commitments on infrastructure, continuous improvement, and innovations. The sponsor company is able to leverage in-house resources for business- critical projects. In addition, the sponsor company may realize opportunities to penetrate into a new market segment when the CRO is from a location where the sponsor company currently lacks any presence. 

	Typically, sponsor companies form strategic relationships with CROs to take care of standard work (e.g., on-going commercial stability studies, manufacturing of generics, compendial testing, remediation projects, and reference standards) and clinical studies. Examples of such strategic relationships include alliances of Syngene International with each of Amgen, Baxter Healthcare, Bristol-Myers Squibb, GSK, Herbalife, and Novartis, and that of Parexel with Eli Lilly.

	It is necessary to comply with FDA’s guidance document on quality agreements (3), which is a major step in an alliance formation. FDA’s regulations recognize that owners commonly use contract facilities to perform some drug manufacturing activities. Although the guidance is for CMOs, many of the principles described in this guidance could be applied in pre-commercial stages of the pharmaceutical lifecycle. Key highlights from the guidance document include:

		The owner’s quality unit is legally responsible for approving or rejecting drug products manufactured by the contract facility, including for final release. The quality unit’s responsibilities and procedures are required to be in writing and followed.

		Owners can use a comprehensive quality system model, in the form of a quality agreement, to help ensure compliance with cGMP.

		Owners are required to evaluate contract facilities to ensure cGMP compliance for specific operations.

		Key elements of the quality agreement include:

		Clearly described materials or services to be provided, quality specifications, and communication mechanisms between the owner and contract facility

		Explanation of how the CRO will report manufacturing deviations and how the deviations will be investigated, documented, and resolved in compliance with cGMP

		Definition of each party’s manufacturing activities in terms of how each will comply with cGMP. 

		It is recommended that quality agreements be separate documents, or at least severable, from commercial contracts such as master services agreements or supply agreements. Quality agreements may be reviewed during inspections.

		The buck stops with the sponsor. No matter who tests the products, the owners’ quality units are ultimately responsible for ensuring that the products are manufactured in accordance with cGMP. FDA could cite the owners for failing to evaluate, qualify, audit, and monitor their contract facilities.

		International Council for Harmonization (ICH) 

(4) states that, as part of a pharmaceutical quality system, the owner is ultimately responsible for ensuring that “processes are in place to assure the control of outsourced activities and quality of purchased materials.”

	The importance of a strong quality agreement was also emphasized in a CASSS organized chemistry, manufacturing, and controls strategy forum in 2014 (5).

	Key steps in the formation of a strategic alliance with a CRO are shown in 

. The win-win strategies can be grouped into three categories: strategies that can drive a solid foundation, soft factors, and excellence in project management (

Quality track record, firewall policies, depth and breadth of capabilities, resource pool in the local area, CRO financial situation, and the current management team are some of the important considerations in a CRO selection process. Clarity in statement of work (SOW) and work packages is of paramount importance to ensure a successful relationship. Meeting cadences and transparency at operational and management levels, feedback sessions, accountability on both sides, and an open-book work environment can lead to building trust. Steps such as coaching and mentoring CRO employees and providing them with a big picture can lead to a CRO feeling empowered. Finally, excellence in project management is also essential to a win-win relationship (e.g., templating standard work, acting on potential failure modes, strategic and tactical level metrics, and implementing Green Belt and LEAN projects to improve efficiency). Undoubtedly, the partnership will have to navigate through challenging situations. Illustrative scenarios describing issues and ways to resolve them are detailed in 

	It is often helpful to visualize how success and failure may look (

). A collaborative approach, instead of finger pointing and defensiveness, is evident in the successful alliance. A CRO is empowered instead of being micromanaged. Finally, continuous improvement tools are employed to improve efficiency in a successful CRO partnership.

	Partnerships with CROs can indeed deliver substantial benefits. However, a successful CRO relationship, even with a reputable CRO, is not a given. Beyond the obvious requirements, such as defining the outsourced work, due diligence in CRO selection, and the quality agreement, a significant investment of time and effort to build and maintain the CRO relationship is required to drive it to a success. By jointly following the strategies outlined in this article, the sponsor company and the CRO can maximize their odds of success.

	1.  J. Rockoff, “Pharmaceutical Scouts Seek New Star Drugs for Cancer, Diabetes,” 

, March 9, 2014.
	2.  J. Hughes and S. Price, “The Perils and Promise of Strategic Partnering with CROs,” 

Guidance for Industry, Contract Manufacturing Arrangements for Drugs: Quality Agreements 

(Rockville, MD, Nov. 2016).
	4.  ICH, Q10 Section 2.7, 

Management of Outsourced Activities and Purchased Materials

(2008).
	5.  A. Mire-Sluis et al., “Effective Management of Contract Organizations: Keeping the Product Pipeline Moving, Compliant, and Available,” 

	Shreekant Karmarkar, PhD, is president of DAT Pharma Consulting, Inc., 


	Supplement: Partnering for Bio/Pharma Success
	February 2020
	Pages: s20–s23

	When referring to this article, please cite it as S. Karmarkar, “Building Strategic Relationships with CROs,” in 

Pharmaceutical Technology Supplement: Partnering for Bio/Pharma Success

Articles

How to adopt win-win strategies and understand quality agreements for complying with cGMP when building strategic relationships with pharmaceutical contract research organizations.