Contract research looks East
pharmafile | June 24, 2004 | Feature | |Â Â Â
Contract research organisations (CRO) have benefited from the pressure on the pharmaceutical industry to maintain a flow of blockbusters at a time of increasingly dry pipelines and generic challenges to its current top-sellers. The CRO industry's growth may have slowed from the galloping increases of around 20% seen in the mid-1990s, but the more solid low double-digit growth now seen would still be the envy of many a pharma company.
Unsurprisingly, the US forms the largest part of the global CRO market, following on from its position as the world's largest single pharmaceutical market. In fact, the US CRO market was last year estimated to be worth $4.2 billion, compared to its $2.6 billion European counterpart.
Analysts Frost & Sullivan predict year-on-year growth for the European CRO market of 10.4% up to 2007, when it will be worth an estimated $4.3 billion. The driver behind this predicted growth is the increasing attractiveness of Eastern Europe to drug developers in both the US and Western Europe.
Frost & Sullivan say the dominant companies in Europe – Quintiles, followed by Covance, PPD and Ingenix, have prospered by offering a full range of services from pre-clinical to clinical and into commercialisation, harnessed to entrenched pan-European operations. These companies are also among the largest of the global CROs. But analysts expect competition in the European market to intensify as more companies look to offer this sort of range to their services.
Central and Eastern Europe
Behind this expansion of locations lies a growing awareness of the importance of Eastern Europe within the continent's CRO market. The larger global firms have for some time looked to Eastern Europe for their expansion – last year Covance added to the Polish office it opened in 1998 by setting up a new full-service phase II-III clinical development office in Budapest.
By moving into Hungary, Covance believes it will also gain access to investigators in bordering countries, such as Slovakia, Ukraine, Romania, Croatia and Slovenia. The company said that since establishing its Warsaw office it had found that more than 20% of proposal requests for the region included a Hungarian component.
"Opening an office in an economically and politically stable country like Hungary allows Covance to offer better patient recruitment solutions when targeting cardiovascular, oncology, and infectious disease compounds," explained Dr James Bannon, president of clinical development, periapproval, and central diagnostics at Covance.
PRA followed suit earlier this year by opening an office in Budapest, adding to its existing presence in Poland and Russia. Again, part of the rational for moving into Hungary was the access it allows to neighbouring countries in Central Europe.
Over the last decade the number of multi-centre clinical trials in the Central and Eastern Europe (CEE) region has been growing on average at an annual rate of 30%. Mid-sized CRO Chiltern International, which recently opened offices in Poland and the Ukraine, expects to see further expansion in the number of trials in the CEE region. "With a population in excess of 270 million, Eastern Europe has a huge potential for clinical trials," says Chiltern's clinical development manager for CEE, Dr Boris Golubtsov.
CROs operating in Eastern Europe are able to offer a beneficial climate in which to conduct low-cost clinical trials. There are low patient reimbursement costs in the region and trials there tend to produce high quality data due to their relatively under-medicated populations, reducing the risk of patients using competing medications and thus compromising the integrity of the final data.
In addition to Poland, Hungary and Russia, the first wave of countries in Eastern Europe to benefit from outsourced clinical work includes the Czech Republic. But it is Russia in particular that represents an untapped market with vast potential, according to Frost & Sullivan. The next wave of development looks set to see companies establish facilities in Bulgaria, Romania and Serbia.
Western Europe
Compensation of volunteers and medical personnel in Western Europe is now reported to have reached similar rates to those seen in the US and clinical development that would otherwise have been conducted in Western Europe has been pushed eastwards.
The persistent drive for CROs to expand their operations in Eastern Europe, as mentioned above, is evidence of this trend. This is helped by the fact that clinical trial centres in the region tend to bill only for costs incurred over and above their standard operating expenses, rather than routinely charging for all expenses incurred, as can happen in the West, according to Frost & Sullivan.
The future for clinical research undertaken in Western Europe still looks promising. The region may not benefit from its eastern counterpart cost advantages, but there are several points in its favour.
"Linguistic and cultural similarities with the US, qualified physicians and proven quality of trial centres are likely to underpin Western Europe's continued relevance in the market for outsourced clinical research," says Frost & Sullivan.
Although European and US markets may share many of the same competitive factors, Europe's multicultural geography creates several other key points of differentiation for CROs.
"Firms with a wide geographical reach and the resources to navigate different languages, business cultures, and regulatory regimes, will have an advantage over those that can operate in just one or two jurisdictions," concludes Frost & Sullivan research analyst Alison Sahoo.
