Exhibit 7: Vendor Value Model

Background: As the biopharmaceutical industry struggles with healthcare reform, escalating market demands for more cost effective, cutting edge therapies, the industry has been driven down a major restructuring pathway within their clinical research areas in search of the optimal clinical research model. As part of the industry-wide restructuring initiative, an increased outsourcing trend has developed with the belief that outsourcing is a more efficient and flexible approach. This trend is driven by new drug development timelines and costs which have trended in the wrong direction over the past decade indicating growing efficiency issues throughout the industry. It was recently reported that since 1996, the number of drugs in development has doubled while sponsor spending on research and development (R&D) has tripled, but the number of new molecular entities (NMEs) approved by the US Food and Drug Administration has dropped by half and the cost of developing a new drug has soared to more than $1 billion.1,2,3 In a more recent 2009 survey conducted by Tufts CSDD, it was reported that rising capacity demands combined with a difficult global operating environment are pressuring sponsors to derive ever-higher levels of performance and efficiency through the growing use of different relationship structures such as functional service providers and alliance relationships.4 In order to realize these efficiencies, a well written sourcing strategy that is properly implemented will be required. How: A logical sourcing strategy must be developed which provides flexibility in order to meet a variety of therapeutic study designs and compound development needs while also ensuring consistency, quality and timeliness of data and clinical processes, ultimately ensuring patient safety and the on time delivery of the therapeutic portfolio while controlling developmental costs. The strategy must include certain key components in order to realize the desired efficiencies. The typical “single trial, random, tactical sourcing approach” will no longer suffice as developmental timelines and budgets must decrease while quality is maintained. A portfolio analysis is the initial step which is needed to fully understand the upcoming work volume and to proactively plan for it. The work volume must be categorized by compound and trial type for each therapeutic area. The analysis should be probablized over a suggested three year time span in order to proactively set the sourcing plan and to ensure the proper number and types of vendors are selected to meet the projected work volume. In order to do so, critical trial criteria need to be determined in order to fully understand the true clinical and sourcing needs for each trial type. Trial types might include: Phase Ia (First Human Dose or FHD trial), Phase Ib, Phase IIa, Phase IIb, Phase III and Phase IV all dependent on the therapeutic area under analysis. The critical trial criteria might include: clinical expertise, operational expertise, access to patients, investigator connectivity, site interface, recognized areas of therapeutic expertise, geographical presence, service capacity, timeliness and strategic advantage. See exhibit 1 for an example critical trial criteria table. Once the probablized trial numbers and critical criteria have been determined, vendor and sourcing model analyses are the next key steps analyzing vendor models such as the larger, full service clinical research organization (CRO), the smaller specialized niche CRO, and the full service clinical network. Sourcing models such as full (or project) and functional (or process) sourcing also need to be compared, though some sourcing experts would argue that the sourcing model is less impactful than other key variables such as the vendor model (CRO, Network, etc.) or even the vendor pool in the overall sourcing plan since many vendors offer full and functional services. The detailed information needs to be collected using a Request For Information (RFI) process. It is crucial that a well designed RFI document with specific questions covering all of the critical trial criteria, cross-functional service needs, vendor capability, capacity and all categorized in logical sections be included so that an accurate vendor and sourcing model analysis may be done. Questions seeking the same information should also be placed in multiple sections of the RFI document to serve as an accuracy check. The RFI document should also include standardized definitions and data collection templates to ensure data entry consistency. The RFI data collection process should be a completely web-based process with data aggregation, filtering and reporting functionality. The RFI should be reviewed by a cross-functional analysis team to ensure that an accurate vendor model analysis occurs in order to ensure optimal trial – model alignment within the overall strategy summary. See exhibit 2 for an example vendor capability table. Analysis of the critical trial criteria and sponsor portfolio analysis data in comparison to the vendor capability data will allow for the preparation of a sourcing strategy summary including optimal vendor model types and target vendor pool numbers. The summary should be written in a user friendly manner listing out the primary and secondary options or models by therapeutic area (if applicable), trial type along with a brief justification explaining the benefits and reasoning of the suggested options. In exhibit 3 an example strategy table is listed. To optimize use, the strategy summary needs to be converted into a very simple, user friendly tool. Exhibit 4 illustrates an example of a user friendly, logical decision tree. In order to optimize the impact of the sourcing strategy, collaborative clinical/technical interactions between the select vendor pool and the sponsor need to occur. These interactions need to occur at the portfolio, compound and trial levels in order to ensure optimal trial designs and trial placements occur for each compound that make up the overall sponsor portfolio. Most sponsors only interact with their vendors at the trial level. In order to allow for proactive resource planning, the vendor - sponsor interactions need to occur at the portfolio and compound level. Exhibit 5 illustrates both the typical and proactive interaction models. Communication Flow is also extremely important to ensure that the trials are implemented and managed in an effective and streamlined manner leading to optimal trial performance. Many sponsor’s communication flow models rely upon the project management area to facilitate all vendor communication and oversight. But, an optimal communication flow would need to involve all applicable functional areas to ensure compliance with functional process requirements. The communication flow must also ensure detailed communication from sponsor to vendor and from vendor to vendor, if process sourcing is being utilized. The flow must also be coordinated and facilitated by one primary area, though all functional areas will have partial ownership. Exhibit 6 illustrates an example sponsor – vendor/vendor – vendor communication flow model. In order to properly track vendor performance and thus ensure the vendor is performing at a level to justify continued inclusion into the select vendor pool, standard performance metrics which are well defined with set calculations and logical target values must be determined by the sponsor with collaborative input from the potential vendors. Metric categories might include site selection, regulatory readiness, enrollment to plan, financial, dataflow and compliance. The overall value model must also be analyzed and tracked on a periodic basis looking at not only vendor performance metrics, but CRO service fees and sponsor FTE oversight which all impact the overall vendor value to the sponsor. The actual CRO service fees may be easily monitored by tracking the vendor invoices while the actual FTE oversight may be tracked using a time entry process (ie. database, excel sheet) by service categories. The goal of the value model analysis is not to pick the least expensive vendor model, but rather the vendor model with the best overall value. Exhibit 7 illustrates the typical vendor value model. Looking Forward: In summary, as the biopharmaceutical industry is facing increasing healthcare reform and escalating market demands leading to major internal restructuring within their clinical research areas, sponsors are now more than ever in search of a more efficient clinical research model where sourcing is quickly becoming an essential and strategic component. Utilization of a tactical, non-collaborative, single trial, large vendor pool approach will no longer suffice. Sponsors must take a logical, cross-functional approach in collecting and analyzing portfolio needs, critical trial criteria and vendor capability data ultimately leading to the development of a sourcing strategy which includes a select vendor pool, that will ensure overall optimal value. Having a well defined, flexible and logical sourcing strategy which includes a select vendor pool is now essential to stay competitive in these changing times. References:1 Tufts CSDD Impact Report (Sept./Oct., 2007)2 Tufts Center for the Study of Drug Development, Outlook 2008 (Tufts CSDD, Boston, 2008).3 PhRMA 2008 Biotechnology Report Sept, 20084 K. Getz, J. Vogel, “Successful Sourcing: Tracking Global CRO Usage,” Applied Clinical Trials, (8) (2009).Jeffrey S Kasher, PhD, is Vice President of the Development Center of Excellence of Eli Lilly and Company, Lilly Corporate Center, Indianapolis, IN 46285, 317-276-5486, email: Kasher_Jeffrey_S@Lilly.comLee Scheible, RPh, CA-AM, is a sourcing consultant within the Development Center of Excellence of Eli Lilly and Company, Lilly Corporate Center, Indianapolis, IN 46285, 317-276-8405, email: Scheible_Lee_S@lilly.com.Mr Scheible will speak about the importance of relationship management in clinical research a at OncologyTrialsOutsourcing , a virtual conference on outsourcing in cancer drug trials, that will be held by Outsourcing-Pharma.com on July 12.The even will bring together experts from contract research organisations and Big Pharma companies to share their thoughts on the role outsourcing can play in cancer drug trials and to highlight the emerging trends.Sign up to "attend" our innovative, online event for free here .

Exhibit 7: Vendor Value Model

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