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An Examination of Risk & Outcomes in Outsourcing A Study To Help You Consider Your Options
DIA Webinar 10 December, 2015
Steve Herbert Senior Vice President, Cytel Inc.
What You Will Learn
A coherent way to categorize risk in the context of pharmaceu7cal development
How outsourcing can effect risk, cost & outcome in both good and bad ways
Why you need to pay closer aAen7on to your biostats & data management provider
How to use outsourcing to reduce risk
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The Father of: “Do what you do best… …and Outsource the rest”?
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Source: www.biography.com/people/adam-‐smith, (c) 2015
Biopharma R&D $150bn
Discovery $45bn Development $98bn
Formula7on, Product
Development $43bn
IT $5bn Other Clinical $25bn
Outsourced Clinical
Development $25bn
$25bn Outsourced Breakdown of the Biopharm R&D Spend
Data compiled and interpreted by Steve Herbert from Parexel Handbook of Pharmaceu7cal R&D Sta7s7cs, 2014 and other sources
Why a great biostats & data management provider is important “Ridding science of shoddy sta7s7cs will require scru7ny of every step, not merely the last one,” Jeffrey T. Leek and Roger D. Peng, Associate professors of biosta7s7cs at the Johns Hopkins Bloomberg School of Public Health in Bal7more, Maryland, USA. 612 | NATURE | VOL 520 | 30 APRIL 2015 COMMENT © 2015 Macmillan Publishers Limited. All rights reserved
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Different framing of the same quesMon produces different, someMmes irreconcilable, results
Not all risk is easy to iden7fy or manage
Thomas Davenport & Jinho Kim © 2013 Harvard Business School Publishing
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A (Broad) Defini7on
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RISK The possibility that something bad or unpleasant will happen
Such as an injury or loss
© Webster
Risk Categories in Drug Development
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Efficacy and Safety profiles Technical • The unknown outcome of the trial • NCE safety profile
Uncertainty of approvability Regulatory • Changing and challenging regulatory environment
Execu7ng the protocol Opera7onal • Programming • Enrolment & randomiza7on
Assump7ons affec7ng ROI over life of therapy Commercial • Uncertain reimbursement prospects • Compe77ve risk from new therapies • Managing the expira7on of exclusivity
Assump7ons & Design decisions Decision • Efficacy, target popula7on, end-‐point & other protocol assump7ons of trial • Investment decisions • Timing assump7ons of trial end, etc.
Inspira7on & sources: Op7miza7on of Pharmaceu7cal R&D Programs and Pornolios, Antonijevic, 2015, Springer
98% of the return : 50% of the Investment
10 Dynamically Op7mizing Budget Alloca7on for Phase 3 Drug Development Pornolios Incorpora7ng Uncertainty in the Pipeline, Patel & Ankolekar, 2015
“Guessing is always risky. In general, you should mistrust intuiMon.”
Thomas Davenport & Jinho Kim
© 2013 Harvard Business School Publishing 11
What is the riskiest mode of transportaMon?
Automobile
Plane
Walking
Train/Subway
Cycling
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StaMsMcal risk is NOT what we perceive as “risky” You need a team who can help you perform data analysis in the real world. Realize that some circumstances set them up for success, and some for failure …
© The Economist, Danger of death! Feb 14th 2013 13
To MiMgate Risk You Have to Know its Source
1. Unpredictable fluctua7ons • You don’t know when pa7ents will arrive nor when events will occur • You don’t know how to staff in prepara7on for a study or program because the 7ming, and poten7ally sizing and progress are unknown
2. Peak flows which are large mul7ples of normal workload • When a big study gets going you need all hands on deck. If another big study does not immediately follow, you have a lot of heads and hands twiddling their thumbs
• You need staged staffing to provide biostats & programmers at the beginning, clinical research associates during the enrolment, data managers, clinicians, etc. each at the right 7me
3. Assump7ons about unknowns • The study protocol itself: probably embodies the major sources of risk in any study in its implicit and explicit assump7ons about unknowns: effect size, enrolment rates, and/or event rates.
• Marke7ng assump7ons probably are the other largest risk source risk: market size, ROI, compe77on
4. Assessment of risk from a Too narrow or Sta7c point of view 14
98% of the return : 50% of the Investment
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With no budget limit the maximum possible ENPV of $13,6M is achieved at a budget of $114M
But a budget of $57M (50% of$114M) with op7mal alloca7on gives ENPV of $13,4M (98% of $13,6M the max with only 50% of the investment) Dynamically Op7mizing Budget Alloca7on for Phase 3 Drug Development Pornolios
Incorpora7ng Uncertainty in the Pipeline, Patel & Ankolekar, 2015
SimulaMons-‐Assisted Decision-‐Making Input Poten7al True Values; Compute Opera7ng Characteris7cs for Decision Rules (Probability of: Go / NoGo / “need further assessment”)
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Go
NoGo
Risk: Modeling the Future “All models are wrong, but some are useful”1
Risk
“The possibility that something bad or unpleasant (such as an injury or a loss) will happen” (Webster)
Future “Coming awer the
present 7me: exis7ng in the future”
(Webster)
Modeling
“The process of genera7ng a conceptual representa7on” (Webster)
17 1 George Box in Empirical Model Building, Box & Draper, Wiley, 1987 Photo from Wikipedia by "GeorgeEPBox" by DavidMCEddy at en.wikipedia. Licensed under CC BY-‐SA 3.0 via Commons -‐
hAps://commons.wikimedia.org/wiki/File:GeorgeEPBox.jpg#/media/File:GeorgeEPBox.jpg
Outsourcing: a Defini7on
Capability
Advice • 2nd opinion
ExperMse • Buy exper7se which doesn’t exist in-‐house • Access outside reputa7on or rela7onship
Capacity
Capacity not in-‐house • Permanent or temporary increase in capacity
Peak-‐flow smoothing • Control staff by limi7ng to average level
Risk management • Reduce structural cost
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1. Reduced costs (53%) 2. Improved quality (43%) 3. Improved efficiency in use of internal staff (43%) 4. Access to operational expertise (43%) 5. Process improvement (30%)1
Why do sponsors actually say they outsource?
1 Avoca: Strategic Partnerships Under Scrutiny: Are They Working and How Long Does It Take? Executive Summary of The Avoca Group’s 2012 Industry Survey Research, hAp://www2.theavocagroup.com/content/documents/files/Execu7ve_Summary_-‐_2012_Industry_Survey.pdf
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Quality is the constant companion of outsourcing
Rework and quality: 22% of sponsor companies surveyed by Avoca reported having discon7nued strategic rela7onships ... because of poor quality of deliverables.
hAp://www2.theavocagroup.com/
1 Avoca Consortium of Quality, Quality Summit Report, 2012, hAp://www2.theavocagroup.com/the-‐avoca-‐quality-‐consor7um/consor7um-‐news-‐and-‐updates/the-‐avoca-‐2012-‐quality-‐summit-‐report
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What do sponsors think a^er they’ve tried outsourcing?
1 Avoca Consortium of Quality, Quality Summit Report, 2012, hAp://www2.theavocagroup.com/the-‐avoca-‐quality-‐consor7um/consor7um-‐news-‐and-‐updates/the-‐avoca-‐2012-‐quality-‐summit-‐report
59% of sponsors said after 3yrs they were getting worse quality than in-house 1
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The value of a biometrics focus
“… educa7on is not enough. Data analysis is taught through an appren7ceship model, and different disciplines develop their own analysis subcultures. Decisions are based on cultural conven7ons in specific communi7es rather than on empirical evidence.
For example, economists call data measured over 7me ‘panel data’, to which they frequently apply mixed-‐effects models. Biomedical scien7sts refer to the same type of data structure as ‘longitudinal data’, and owen go at it with generalized es7ma7ng equa7ons.”
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Ridding science of shoddy sta7s7cs, NATURE, 520: 612, 30 APRIL 2015, Jeffrey T. Leek and Roger D. Peng
References & Credits
Dr Ni7n Patel, Zoran Antonijevic, Jim Bolognese, Yannis Jemiai & Mike Weitz: for guidance in the prepara7on and for specific slides on ENPV & G-‐N-‐G
Danger of death! Feb 14th 2013, 18:27 BY ECONOMIST.COM
Avoca: Strategic Partnerships Under Scru7ny: Are They Working and How Long Does It Take? Execu7ve Summary of The Avoca Group’s 2012 Industry Survey Research
VALOR, Sunesis (promising zone adap7ve trial, met secondary end point); ADVENT, Fuluzaq, Napo Pharmaceu7cals (seamless dose finding-‐III, approved 2013). Procysbi, Raptor (SSR, Rare disease approved 2014)
Dynamically Op7mizing Budget Alloca7on for Phase 3 Drug Development: Uncertainty in the Pipeline, Patel & Ankolekar, in Op7miza7on of Pharmaceu7cal R&D Programs and Pornolios, Ed. Antonijevic, 2015, Springer
Early Development Go/No-‐Go Decisions Using Posterior Distribu7ons, Devan Mehrotra, Robin Mogg, Jared Lunceford, Biosta7s7cs and Research Decision Sciences, Merck Research Laboratories, May 30, 2012
Go No-‐Go v1.0: User Guide Charles Liu, Jim Bolognese, Jaydeep BhaAacharyya, Ni7n Patel, 2012, Cytel, Inc.
P values are just the 7p of the iceberg, Ridding science of shoddy sta7s7cs, NATURE, VOL 520, p 612, 30 APRIL 2015, Jeffrey T. Leek and Roger D. Peng
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Summary
1. The offshore/outsourcing model brings benefits that are here to stay: i) Cost savings, ii) More labor flexibility, and iii) Access to specialized skills
2. Don’t outsource for cost benefit alone because the short-‐run benefits may be reversed by economic or poli7cal challenges quicker than it takes to realize true gains
3. Don’t expect ROI calcula7ons to tell the truth The reali7es of start-‐up costs, bridging the experience chasm, true managerial overhead, large rela7ve regional produc7vity differences, rework or non-‐tangible drawbacks such as customer service, staff turn-‐over, cultural barriers …. are much more nuanced
4. Use a common-‐sense approach to balance outsourcing and offshoring that works for your situa7on
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References & Credits
Keeping Up With the Quants, Your Guide to Understanding + Using Analy7cs, Thomas H. Davenport, Jinho Kim, Harvard Business Review Press, 2013
Data Management Vendor’s Error Causes Cytokine7cs to Revaluate ALS Trial, Zachary Brennan, 09-‐Jul-‐2013 Programming errors in a vendor's EDC system meant some pa7ents were mistakenly given placebo during a trial of an ALS (amyotrophic lateral sclerosis) drug candidate being developed by Cytokine7cs. hAp://www.outsourcing-‐pharma.com/Clinical-‐Development/Data-‐Management-‐Vendor-‐s-‐Error-‐Causes-‐Cytokine7cs-‐to-‐Revaluate-‐ALS-‐Trial
Prospect Theory: An Analysis of Decision under Risk, Daniel Kahneman; Amos Tversky, Econometrica, Vol. 47, No. 2. (Mar., 1979), pp. 263-‐292, hAp://links.jstor.org/sici?sici=0012-‐9682%28197903%2947%3A2%3C263%3APTAAOD%3E2.0.CO%3B2-‐3
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Thank you. Your comments or questions?
10th December 2015 Steve Herbert
Senior Vice President, Cytel Inc [email protected]
