Nice Insight


Life Science Leader August 2011 Written By Kate Hammeke Research Manager Nice Insight	Each time a medical product or prescription drug recall makes the news headlines, we are reminded of the importance of cGMP (current good, manufacturing practice) guidelines. However, they are just that � guidelines. Rather than a set of prescriptive instructions to follow, guidelines allow businesses flexibility to determine the most cost-effective means to manufacture a quality product while observing the principles established by the regional governing agencies. This flexibility is essential to the free market, ensuring healthy pricing competition. Yet, even with specific instruction, there is room for error. In the drug development outsourcing environment, the stakes are high. The future of the business or the life of a patient may be on the line. Building a long-term outsourcing partnership should start with a foundation based on a solid regulatory track record. When reviewing a prospect�s compliance history and visiting its facilities, consider its ability to adapt to changing regulatory measures as the partnership grows. Because of its importance, many CROs and CMOs have made it a priority to stay abreast of changing compliance guidelines and provide regulatory support services as part of their offerings. Of the 400+ companies covered in the Nice Insight Brand Index, roughly half offer regulatory support services. We compared the average customer perception scores across companies that provide regulatory consulting with those that do not, to see if this was a good indicator for selecting a prospect. As it turned out, these groups averaged the same perception score for regulatory support (74%), which instills confidence in the system but doesn�t provide insight into the partnership selection process. Curious as to whether there were differences within this subset of companies, we separated them by region and found North American/European companies scored eight percentage points higher on regulatory compliance perceptions than Asian businesses. In fact, regulatory perceptions rated highest among North American/European businesses but came in third for Asian businesses. North American/European companies also scored six percentage points higher in productivity and accessibility, while maintaining small advantages in quality, reliability, and affordability. Thus, when selecting a partner for projects with restrictive regulatory constraints, it makes sense to focus the search in established rather than emerging markets. Next, we focused on the difference in customer perception scores between companies that provide high potency compound services and regulatory consulting and those that just offer the former. We found that companies offering both services scored higher on average for each outsourcing performance measure, with the exception of productivity, where there was a tie between the two categories. This finding suggests that one should opt for a partner that offers regulatory support when outsourcing a project with complicated guidelines or inherent hazards.

	CMOs VS. CROs Lastly, we further narrowed our scope to concentrate on the customer perception scores for all CROs and CMOs that offer high-potency compound and regulatory support services. Interestingly, CMOs stood out as the preferred option across all measures except affordability (where there was a tie) when compared to CROs. The largest differences appeared in quality and reliability ratings, where CMOs lead by eight and six percentage points, respectively. On average, CMOs also scored three percentage points higher in regulatory compliance. A quick look at the top ten companies (with respect to potential market share for high potency compounds) confirmed our respondents preferred CMOs, which comprised 90% of the group.

	As federal regulatory agencies continue to create and enforce more strict compliance guidelines for medical products and pharmaceuticals, the risks grow exponentially. Considering a prospect�s regulatory knowledge, capabilities, and track record as a foundation for future collaboration is integral to successful partnerships. To narrow the partnership search while maintaining high standards for regulatory compliance, follow Nice Insight�s research findings and opt for companies in well established markets such as the United States or EU, where unannounced inspections are authorized. Selecting a partner that offers regulatory support services in addition to the specific service (or services) planned for outsourcing is also likely to be beneficial in the long run. Lastly, consider following the advice of your peers, who ranked CMOs higher than CROs among companies that offer high potency compound and regulatory support services.


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