The Rhetoric of “Risk Sharing”

Derek Lowe’s observation about AstraZeneca’s bracing for change also applies to the pharma industry as a whole: “…things can’t go on the way that they have been.”

AstraZeneca is not alone in failing to get enough new drugs approved to sustain their business model, but they’ve made themselves the poster child for that dilemma. Somehow it’s hard to have confidence that AstraZeneca’s decision to bring in the executive who restructured a truck manufacturer is going to fill the world’s medicine cabinets with successful new products, particularly when he suggests that AstraZeneca’s strategic alternatives are costing cutting and acquisitions. That biopharma in general should look outside the industry—to manufacturing, no less—is probably good, as we have many lessons to learn from other industries, but in the case of AZ it will be surprising if they get new drugs from this strategy.

Cost cutting isn’t getting more drugs approved. Acquisitions of particularly promising drugs and biologics that have achieved Proof of Concept may help, but sponsors still face the challenge of productive use of significant post-PoC development costs, along with the risk of late recognition of development failures that can come after PoC. The same serious risks stand between preclinical development and regulatory approval. We have discussed some of these specific risks in previous blog posts, such as the risk presented by lack of timely information, and will continue to examine different risk mitigation strategies in the future. But the point still remains that there’s been lots of talk about risk-sharing agreements between pharma companies and CROs, but no indication, even preliminary, that sponsors are faring better.

Sponsors can and should demand risk models that hold CROs responsible for what they promise, incentivize cost savings and allow sponsors to share those savings. Even more important, sponsors should understand that getting optimal results from clinical programs requires forming real partnerships in which CROS and sponsors share not only risks, but also rewards. With so much talk about risk sharing and so little to show for it, the industry thinks of “risk sharing” as CROs simply “taking responsibility for their promises” and delivering on them, as Maxine Gowen of Trevena dryly pointed out in LifeScience Leader’s recent “Expert Insight on Selecting a CRO.” That kind of basic responsibility is a step forward from CROs bidding low and then hitting sponsors with one change order after another. However, it’s not real risk sharing and it’s certainly not anything resembling a true partnership.

Sponsors would get better results if they formed partnership agreements that are worthy of the name. We’ll look at frameworks for such partnerships in a future post.

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