Do It Lean: What CROs Tell Us About The Evolving Healthcare Landscape

By Tom Schramski, PhD, CMAA and Glenn Lippman, MD, DLFAPA

Volume 3 Issue 3, February 2, 2016

tt152-3c214e77-197f-46b9-8c8a-edc96243814c-v2At a recent meeting we were discussing a life science company that was affiliated with a CRO when one participant asked, “What’s a CRO?”  It’s not an uncommon question despite the fact that CROs have become a significant force in today’s healthcare marketplace.

Contract Research Organizations (CROs) are entities that provide outsourced research services to pharmaceutical, biotechnology, and medical device companies in both the private and public sectors.  Typical offerings include biopharmacology/assay development, preclinical and clinical research, clinical trials, and other related services.  Revenue for the more than 1,200 international CROs in existence was more than $25 billion in 2015, with at least 10% annual growth predicted by ISReports for the next decade.

Although the CRO market is fragmented, 10 companies command just over a 50% share and are working to increase their consolidation through innovation and acquisition.

CROs demonstrate how disruption can create a positive market in a classic manner, offering increased accessibility and affordability to customers, who are often small pharmaceutical companies, venture capital-backed start-ups, and other biotechnology businesses.  Here’s how they do it:

  • CROs understand their customers’ needs and take a customer-facing approach to the marketplace.  With this knowledge they can adapt their marketing and contracting strategies to the unique needs of pharmaceutical and biotechnology companies, whether start-up or institutional. This approach also facilitates identifying new unserved potential clients.
  • CROs adopt a start up mentality much like their clients.  Lean, start-up companies must be relentlessly customer-centric in the deployment of financial and human resources.  CROs understand this mentality and are able to ramp up or down based on their customers’ needs.
  • CROs encourage innovation. Launching a new drug is an arduous and expensive process.  CROs offer cost-effective possibilities for startups and mid-sized companies, helping them complete this journey and allowing them to focus on further research and eventual production.

To see how far this has already evolved, there are now companies devoted to CRO staffing!  That’s right.  There are now entities that provide a la carte staffing services for CROs, which are themselves a la carte in strategy.

CRO’s impact for healthcare is significant.  They offer start-ups and institutional pharmaceutical and biotechnology companies the flexibility – and support – they need to bring new products to the marketplace.  They are evidence of the value of disruptive innovation in our marketplace.  The winners (leaders and customers) will be those who embrace them with an optimistic spirit.