Contract research organizations (CROs) have undergone significant changes in recent years, and more changes are on the horizon. Some of the new and established trends in CRO are the result of technological advances, while others have arisen in response to market pressures or the COVID-19 pandemic. Experts say R&D spending has continued to grow over the past 15 years, even as the pandemic sent biotech stocks tumbling.

How Do CROs Work?

However, CROs continue to face a variety of challenges, from competitive pressure to commoditization to evolving patient engagement models. Market stratification puts pressure on smaller CROs to localize or subcontract as larger organizations capture more of the market. As CROs navigate a post-pandemic future, there will be opportunities to implement lessons learned from COVID-19 and adopt new technologies that can improve data management, alleviate staff shortages, or facilitate better patient monitoring and engagement.

The CRO market is in a state of flux, and navigating changes in the industry will require improvisation and good planning. Here are some of the latest trends and new challenges for CROs.

M&A creates a David vs. David dynamic. Goliath

The CRO space has seen a flurry of mergers and acquisitions in recent years. In 2016, IMS Health merged with Quintiles, resulting in the birth of IQVIA. In February 2021, ICON entered into an agreement to acquire PRA Health Sciences. In December 2021, instrument and software supplier Thermo Fisher Scientific completed an agreement to purchase CRO PPD.

While these deals have helped the industry's biggest players expand services, they are also putting pressure on smaller CROs.

Ken Getz, MBA, is director and research professor at the Tufts Center for the

in Drug Development from Tufts University in Boston, MA. Getz says these and other deals have allowed large CROs to consolidate expertise and resources.

“In commodity services, scale is important because it gives you the depth of business development and market sales coverage,” explains Getz. “It's more difficult for niche players to operate because without scale they can't reach the price points and power that larger companies can put into each project. Some of the smaller CROs are squeezed out, while others become subcontractors to larger CROs.

Getz says some small CROs may be able to withstand this competitive pressure, provided they can specialize in well-differentiated niche services, such as a specific type of biostatistics. However, lower also places smaller CROs further away from the end client; these specialized CROs, says Getz, would sell themselves as subcontractors to industry Goliaths. Still, there may be a middle ground for small and medium-sized full-service CROs.

“Some of these smaller CROs will say they want to offer outsourcing that provides vendors similar in size to the client they are serving,” says Getz. “It's called right-sizing. Historically, right-sizing has been a successful strategy, but only for select companies - and it's hard to predict who those companies will be.”

CROs research

John Kreger, an equity research analyst at William Blair in Chicago, IL, says the pharmaceutical industry's source of innovation has shifted aggressively from big drug companies to small biotech startups. This change is forcing CROs to rethink their client engagement model to better target young, aggressively driven startups. The next two years, he says, will see the industry embrace more innovation.

“CROs will either lead innovation efforts or be driven by their clients,” says Kreger. “A tangible example would be decentralized studies (DCT). Under the old clinical trial model, a patient would visit the doctor's office once a month for two or three years. But now, with technology like Zoom and wearables, we can do patient visits from home.”

Kreger says technology-enabled CROs are growing and more broadly deploying technologies that were tested during the COVID-19 pandemic.

Could work give way to technology?

Emerging new technologies could reshape clinical trials in the long term. Kreger says the adoption of the technology will become more pervasive over time; while CROs are just now beginning to embrace new technologies such as artificial intelligence (AI) and machine learning, Kreger says that this decade will see CROs continue to incorporate more of these technologies. As technology adoption increases, CROs will become less dependent on manpower.

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