Big Data and Technology Increasingly the Focus of Clinical Trial Service Providers
The media buzz last week on reported layoffs at IBM Watson Health ranged from calling it a “bloodbath” to something more surgical. Eventually, IBM Watson Health confirmed the layoffs at some of its acquired businesses, but wouldn’t say how many, and said it was continuing to hire in other new areas.
The volatility was a bit of a surprise as IBM Watson Health has become a major player in the healthcare space over the past couple of years, focusing on combining its artificial intelligence capabilities with acquisitions and partnerships with healthcare Big Data services.
In March, Watson announced that a venture with the Mayo Clinic for matching patients to clinical trials helped increase enrollment by an average of 80 percent in studies of systemic therapies for breast cancer. Over 11 months of the project, the time needed to screen an individual patient for clinical trial matches also fell when compared to traditional manual methods, they said in a joint press release.
The business mergers of technology and Big Data firms in healthcare mirrors a trend in the clinical trials space, as many large CROs have dramatically transformed themselves to provide more services on both fronts.
This is especially pronounced among the top seven largest CROs, which all have more than $1 billion in annual revenue. Data from the Tufts Center for the Study of Drug Development (CSDD) shows that a whopping 72 percent of the transactions (mergers, acquisitions, strategic partnerships) in the upper end of the CRO space since 2015 were “nontraditional” —buying or merging with entities that are not other CROs, or being acquired by organizations outside the space.
The driver? Competition.
It’s fierce, said Doug Peddicord, executive director of the Association of Clinical Research Organizations (ACRO), so CROs are now aggressively “stacking vertically” to provide as many services as possible in an effort to stand out.
And, said Neal McCarthy, managing director of investment banking firm Fairmount Partners and close watcher of the CRO space, many of these unusual acquisitions have been designed to take better advantage of Big Data.
“Among the potential benefits is squeezing value out of the data that is already being collected,” said McCarthy.
Peddicord agrees. “All those mountains of data, which previously were just mountains of data, now can be used.”
Here are key examples of odd bedfellows now in the space:
- The lab company LabCorp bought the CRO Covance in 2015. At first, this one was a head scratcher, said Ken Getz, founder and board chair of the Center for Information and Study on Clinical Research Participation (CISCRP) as well as associate professor and director of sponsored programs at Tufts CSDD. “It baffled the market, but eventually it was realized that it’s a pretty shrewd move because it gives Covance access to a lot of de-identified patient data and the use of the blood monitoring services of LabCorp.”
It also works well for LabCorp, which can now reduce its reliance on government and large insurance companies, and add a group of giant customers who will pay top dollar for speed and great service — in an industry that’s seeing prices increase, said McCarthy.
- Quintiles, the biggest CRO in the space, “merged with” but essentially was bought by market and sales research services company IMS Holdings in 2016, essentially pairing a commercialization company with a huge CRO. The new entity became IQVIA.
Peddicord said this was “one of the more unusual combos” at first blush, but it soon became clear that the focus was on capturing real-world evidence to drive innovations and fill out the vertical stack.
- The CRO PPD bought two very large site groups, CRA/Radiant (in 2015) and Synexus (in 2016). And CRO ICON bought the robust site group PMG Research in 2015.
A few CROs tried a similar strategy about 15 years ago, buying up site groups, but back then the efforts crashed and burned, said Peddicord. Now, though, technology has evolved to make a move like this actually make sense.
“Technology now has the potential to allow sites to be a part of the CRO business based not on people services, but on data services,” said Peddicord.
The evolution of the CRO space is permanent. That is reflected in changes at ACRO, which recently altered their bylaws to allow in not just companies that conduct clinical research on behalf of sponsors, but companies and organizations that “support the conduct of clinical research.”
How are CROs’ customers reacting? Do sponsors favor these greatly expanded CROs?
It’s too soon to tell. Said Getz, sponsors are still in the process of trying to understand these new animals in the marketplace, and uptake could be slow as the biopharma industry is typically very conservative and squeamish about adopting anything new.
Peddicord said the jury is still out, for now, on how sponsors will react. But he added that he eventually expects to see these massive vertically and horizontally expanded CROs — with their very robust data offerings — become very popular among sponsors in this age of value-based drug pricing.
“Ultimately, drugs’ cost will be based on the value they create in the healthcare system, and in order to get to value pricing, you have to do value contracting between payers and pharmaceutical companies,” he said. “In order to get to that, you have to do value-based development as well. I think there’s where the data revolution really is a necessary condition because it’s the mountains of real world evidence and outcomes data that will drive the value conversation between providers both of services and manufacturers of drugs, and the payers.”