Sourcing Pharmacovigilance

An effective approach to realizing a sourcing solution

By Chris Albani, Greg Meline, and Bryan Katz

Pharmacovigilance (PV) is essential to the success of any pharmaceutical company. The traditional view of PV as just another “cost center” has changed dramatically over the last several years, as PV has become a critical issue in keeping products on the market — and avoiding huge potential liabilities. While many firms have increased the number of qualified staff to comply with increasingly strict reporting requirements, more cost-effective approaches are needed to manage the increasing business of pharmacovigilance.

In the first quarter of 2008 alone, the number of reported prescription drug-related incidents soared to 4,825 deaths and nearly 21,000 injuries, a threefold increase from the previous quarter¹. The surge in adverse events was not caused by an increase in prescription volume; reported adverse events grew four times as fast as prescriptions between 1998 and 2005.

Whether these increases can be attributed to improved collection and reporting practices, inherent drug safety issues, or even increased patient awareness, it is clear that global pharmaceutical companies have been challenged with increasing workloads in drug safety (the business function responsible for the collection and reporting of adverse events). At the same time, economic pressures have been forcing the executives and heads of drug safety departments to scrutinize their operating costs. The twin forces of increased workloads and shrinking budgets demand that the leaders of drug safety operations develop effective strategies to “do more with less.”

One proven approach is to adopt a sourcing strategy. Recent forays into outsourcing clinical data management, coupled with increasing numbers of strategic sourcing partnerships, suggest improving prospects for pharmaceutical companies to source PV operations. In fact, a number of sourcing models exist for today’s drug safety leaders. Selecting the “right” option for your business will depend on specific organizational needs. The primary sourcing mechanisms addressed in this article include:

Outsourcing: An organization employs a contract service provider to perform services that could be performed in-house. Outsourcing is typically pursued by organizations seeking to reduce fixed costs (i.e., permanent headcount), secure additional capacity, increase resource flexibility, or augment the performance of an activity that isn’t considered a core area of the business.

Offshoring: Outsourcing work to lower-cost countries in order to reduce labor costs. Internal (captive) offshoring: Similar to offshoring, but operations in low-cost countries are owned by the sponsoring company. In other words, the business is able to capitalize on the labor arbitrage opportunity without outsourcing activities to a contract service provider.

Given the dramatic disparity of labor costs between different labor markets (e.g., India and China versus the U.S. and western Europe), an offshoring or internal (captive) offshoring solution represents the most cost-effective solution over the long term. However, the advantages and disadvantages of these sourcing models should be considered carefully. In the area of drug safety operations, non-financial criteria, such as quality and compliance, factor heavily into the decision. Not surprisingly, success is not guaranteed and is largely determined by how well a sourcing strategy is executed. To that end, a drug safety organization needs to properly identify, evaluate, select, and implement the “right” sourcing solution for its operations.

Identify Sourcing Opportunities

Given the two potential scenarios for long-term, cost-effective sourcing solutions — offshoring and internal (captive) offshoring — the sponsor company needs to determine, early in the process, whether an internal (captive) offshoring solution exists. For a large pharmaceutical or biotech entity, large clinical data management centers that already handle data from clinical studies in high- and/or low-cost markets typically represent the most attractive alternative among internal sourcing options. Depending on the corporate strategy for outsourcing clinical development-related activities, these internal organizations may already enjoy a long-term, strategic commitment from senior management. However, these internal organizations may represent key candidates themselves for current or future sourcing. Either way, senior management may find it difficult to evaluate and agree on an outsourcing solution in which the recommendation is misaligned with the corporate strategy.

Figure 1: The landscape of contract service providers for PV-related activities

Offshoring solutions, on the other hand, are represented by a collection of third-party Clinical Research Organizations (CRO) and Business Process Outsourcing (BPO) firms (Figure 1). CROs and BPOs differ in their offerings and experience. While CROs enjoy a stronger pedigree in the life sciences, BPOs seek broader ownership beyond traditional CRO services and greater economies of scale. Regardless, the top players among both types offer sourcing capabilities in both high- and low-cost markets. As such, the sponsor company will want to evaluate vendors from each segment in order to gauge the attractiveness of their offerings.

Define Sourcing Activities

Equally important in the assessment of a sourcing solution is the identification of those activities within drug safety operations that are candidates for sourcing. Every drug safety organization shares a similar set of basic steps in adverse event handling and reporting, including the receipt and registry of information, routing or triage according to established criteria, data entry, assessment, review, and reporting. Each of these major steps represents a potential candidate for sourcing. However, the different skill levels and competence required — along with the different level of resources needed to perform each step — make the prospects for sourcing vary considerably, depending on the activity in question. For example, the receipt of incoming information, though considered to be a transactional activity, requires far fewer resources than other activities and presents formidable challenges to any type of internal or external sourcing outside of one’s region.

In addition to the identification of targeted activities for sourcing, the sponsor company must also consider the scope of the work itself. For a global pharmaceutical firm, the drug safety organization receives cases from both domestic and foreign sources, as well as from licensing partners and subsidiaries. Work may be segmented by product groups, therapeutic areas, and product maturity (i.e., newer vs. older drug products). Each of these sub-categories introduces unique handling characteristics that can impact your PV sourcing strategy.

Evaluate Sourcing Solutions

Once potential sourcing solutions are identified and defined, evaluating their respective advantages and disadvantages will prepare senior management to make a well-informed decision. At the highest level, all sourcing solutions can be evaluated based on their impact to the bottom line (i.e., cost) and contribution to risk. A transparent, crisp quantification of costs is essential. Risk, on the other hand, requires identifying the factors that represent risk to your company and how they vary among your options. For PV operations, these factors are typically quality and compliance.

A. Cost

Cost savings play a paramount role in evaluating competing sourcing solutions. These savings derive from any positive differential between the sponsor company’s estimated future costs, given the existing cost structure and the projected costs for the sourcing partner(s) to perform the sourced activities during the same time period. Therefore, it is imperative that the sponsor company properly estimates current annual expenditures for drug safety operations in order for all potential sourcing opportunities to be evaluated fairly against the sponsor company’s current cost structure.

While a drug safety organization’s annual expenditure is likely known (or, at least, obtainable), identifying the proportion of spend likely to be impacted by any particular sourcing strategy is not. In general, companies need to exclude known costs that are applicable to both the current operating model and any potential sourcing solutions. Resources assigned to internal compliance monitoring, for example, will not likely be reduced. Conversely, the cost of salaries and benefits for internal resources directly responsible for the sourced activities is always relevant. The facilities space occupied by drug safety staff, for example, also represents a cost that may translate into savings if space is freed up for other uses. In addition, infrastructure costs and supporting services, such as the cost of a new AE system and maintenance, should also be considered.

Another cost-related advantage that may be quantifiable is the often-understated value of shifted headcount (from adverse event case processing to other higher-value skill sets). For many organizations battling fixed headcount costs, the opportunity to hire clinical scientists, key managers, or subject matter experts (in the place of internal case processing or data entry positions, for example) could represent much-needed relief. In this scenario, the value of these new positions should be reflected in the financial analysis, lest a sourcing decision be made strictly on the cost differential between existing resources and those of the sourcing partner, whether internal or external.

In the final analysis, not all sourcing solutions will be universally less expensive. Depending on the level of efficiency, the maturity of your organization, and the complexity of the sourcing solutions under consideration, an over-simplified sourcing strategy could actually represent a more expensive solution than your existing one. For example, certain regulatory restrictions might prohibit or frustrate your attempts to simply set up shop in the lowest-cost market (for example, EU data privacy requirements for PV data will likely complicate your attempts to process EU data elsewhere). Furthermore, hidden costs, due to immature or ill-defined processes, could add to the duration of the ramp-up and impact your return on investment (ROI).

B. Risk

In evaluating sourcing solutions, the sponsor company needs to understand the degree to which each potential solution introduces greater or lesser risk across the critical dimensions of quality and compliance. Moreover, the impact to PV’s core deliverable — enabling the company to make optimal decisions over the safety of its products — must be thoroughly analyzed. To this end, avoiding any perceivable drop in quality or compliance trumps cost savings. In an agency-regulated environment, risk (of lower quality or compliance) cannot simply be transferred by the marketing authorization holder to a third-party service provider. Both quality and compliance must be managed collectively by both parties, the vendor from a contractual standpoint and the sponsor company from a regulatory standpoint.

Thus, the sponsor company needs to carefully consider how, and to what degree, sourcing solutions affect risk and how easily or, conversely, how difficult these risks may be to manage or mitigate. The bar is set rather high. Historically, drug safety organizations evolved with an eye towards delivering high-quality PV and perfect compliance, while cost efficiencies were considered retrospectively within the existing organizational structure or largely overlooked altogether. Sourcing, however, removes existing organizational barriers and costs, as existing operations are transplanted to other markets. The challenge, then, is to maintain previous levels of quality and compliance, at a minimum, in a cost savings-driven sourcing solution.

1) Quality

The quality of case reports may suffer as newly employed resources must overcome their limited experience and lack of knowledge of the sponsor company’s internal policies and handling processes. In addition, the global centralization of data entry activities (and possibly the coding of adverse events) will likely require the segregation of those translating foreign case reports (in subsidiaries or branches) from those performing data entry. On the other hand, greater standardization and consistency may be achievable from the centralization and consolidation of formerly decentralized activities. The sponsor company will need to consider the degree to which the different sourcing solutions introduce greater or lesser risk to quality relative to each other.

2) Compliance

In addition to quality, significant challenges exist with compliance. Internationally, each regulatory agency imposes different reporting requirements. The more stringent reporting requirements and timelines present operational difficulties in avoiding late reports or disparate datasets, across multiple markets or regions where the intake, registry, or case processing of AE reports has been centralized. Furthermore, companies that employ exceptions and country-specific variations to standard operating procedures for particular compounds or protocols further complicate transferring this work to a single global site or vendor.

3) Resources

The need for resources is a frequently overlooked aspect of planning a sourcing initiative. Budget related to travel (training, oversight, inspection, etc.), contingency costs, and variations in foreign exchange rates need to be considered in the planning process. Furthermore, investing in an experienced and dedicated project manager with significant sourcing expertise limits any cost exposure caused by ambiguity in project leadership. A project team, led by an experienced project manager, comprised of a small dedicated team of process specialists and available on-demand subject matter experts should be established in advance to drive the initiative.

Final Analysis

The evaluation of sourcing solutions begins with understanding each one’s contribution to cost savings and risk (both quality and compliance). Given the differences among firms — in terms of cost requirements, current global requirements, capabilities, and risk profile — the optimal solution will differ by company. As illustrated in Figure 2, the sponsor company will likely need to decide between a solution that offers a further reduction in costs (i.e., greater savings) but with greater risk (Point B) and one that offers less risk with less cost reduction (Point C). The sponsor company’s preference will reflect the aggressiveness of its overall strategy in meeting organizational goals — such as significantly reduced costs or measured cost savings — while preserving quality and compliance.

Figure 2: The evaluation of sourcing solutions

Selection Decision

Given the significant amount of effort devoted to identifying sourcing solutions, estimating future costs, and evaluating the impact on quality and compliance, it is imperative that a clear, persuasive analysis be reflected in the recommendation. A proper recommendation typically includes each of the following:

• a list of key assumptions
• a clear delineation between the different sourcing solutions
• a breakdown of the advantages and disadvantages (whether quantitative or qualitative)
• any additional impacts or implications that are tied to any of the solutions

The focus of the recommendation, however, should be on the key drivers behind the recommended solution and how the recommendation differs from the other solutions.

Implementation

Once a decision is reached on a sourcing strategy, the hard work begins. The new solution will undoubtedly impact every facet of PV operations, from organizational roles and responsibilities to processes, technology, and metrics. In our sixth annual survey on operational strategy globalization in life sciences companies, only 13% of participants reported achieving most or all of the anticipated benefits from the globalization of operations. Selecting the most attractive sourcing strategy is important. However, successfully implementing that solution is paramount. A number of key practices should be leveraged to ensure efficient and effective installation of these changes:

• Staged transition of sourced activities
• Centralized technology
• Program governance
• Performance management
• Change management

Staged Transition of Sourced Activities

The transition of the targeted activities to the sourcing partner, whether internally (e.g., clinical data management center in an offshore location) or externally (i.e., third-party service provider), should occur in stages in order to ensure an orderly launch. The alternative approach, a strict “cut-over” from one entity to another, is more suitable for IT implementation, where data is migrated from one system to another. As the transition progresses, management oversight may decrease as direct involvement becomes less critical and execution of the new model takes hold. For example, an initial 100% review of the sourcing partner’s activities can be gradually reduced to random sampling at headquarters and potentially reduced to random sampling by the sourcing partner.

Centralized Technology

On the technology side, all practical attempts should be taken to enable the sourcing partner to perform all data entry for all applicable regions in one system. All industry-leading safety databases allow for the centralization of case processing, leveraging Web-based interfaces to provide user-friendly access without unnecessarily slow performance, given the long distances between servers and users. In addition, the implementation of fully functional document imaging at local sites will enable the centralized processing of reports from regions with patient privacy restrictions (requiring that patient-identified information be inaccessible by individuals outside those regions).

Program Governance

From an organization/decision-making standpoint, establishing a sourcing partner management position or function at headquarters is critical to sustained success. This individual can address and resolve any issues that inevitably arise, requiring collaboration with appropriate people within the organization. The individual (or group of individuals) can also be responsible for reporting the performance of the sourcing partner. From a training perspective, a mentor program can be established to allow the transfer of knowledge and experience from the sponsor company to the sourcing partner.

Performance Management

Essential to the performance management of the sourcing partner is a service level agreement (SLA). For an internal sourcing partner (such as a data center in a low-cost country), the SLA serves to document expectations. For the external partner, the SLA allows both parties to further detail expectations outside of the fixed, legal framework of the contract. The SLA may include many aspects of operational expectations, such as periodic performance reviews, operational assumptions, service requirements, service availability, and a section for tracking changes or exceptions as the relationship evolves.

Change Management

A lack of an organized effort to enroll and engage the organization increases the costs of the implementation and erodes the solution’s potential return on investment. The broad impact from sourcing initiatives demands agreement on the sourcing initiative across all levels of the organization. Engaging the entire PV organization in the change along with proper communication increases the potential for success. Leadership will also be required to provide guidance within the organization and manage the inevitable changes resulting from the sourcing solution.

Outsourcing or offshoring (whether internal or external) provides a real opportunity for PV organizations to manage ever-increasing workloads with reduced costs. The identification of sourcing solutions, definition of activities to be sourced, and evaluation and implementation of a realistic solution all represent a daunting task. Furthermore, outsourcing PV-related activities presents unique challenges in quality and compliance. With a proven, methodical approach, these challenges can be and have been successfully overcome, resulting in a new operating model that enables a dramatic reduction in cost with increased capacity, as well as new capabilities in areas like signal detection.

Chris Albani is a partner at PRTM, a global management consulting firm. Greg Meline is a principal at PRTM. Bryan Katz is a manager at PRTM.

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Reference

1 Tracy Staton, “Adverse event reports hit record high,” FiercePharma Newsletter, October 23, 2008. http://www.fiercepharma.com/story/adverse-event-reports-hit-record-high/2008-10-23