The State of Clinical Outsourcing: Managing Risk in Outsourced Clinical Trials Interactive Discussion Based on Data from Avoca’s 2013 Industry Research DIA Forum June 24, 2013

1. The State of Clinical Outsourcing
Managing Risk in Outsourced Clinical Trials
Interactive Discussion Based on Data from
Avoca’s 2013 Industry Research
DIA Forum
June 24, 2013

2. 2
Panel Members
Denise Calaprice-Whitty (Forum Chair)
Senior Consultant, The Avoca Group
Andy Lee
Senior VP, Deputy Head of CSO Platform,
Genzyme, a Sanofi Company
Mitchell Katz
Executive Director, Medical Research Operations,
Purdue Pharma L.P.
Alistair Macdonald
Chief Operating Officer, INC Research

3. 3
Today’s Discussion
Presentation of Data Highlights from Avoca 2013 Industry
Survey, and Interactive Discussion
Avoca 2013 Industry Survey Topic:
Management of Risk in Outsourced Clinical Trials
• Part One: Risk Sharing Models
• Part Two: Risk Assessment
• Part Three: Risk Management

4. 4
2013 Avoca Research: Questions Explored
• Risk-sharing models: What kinds of models are most often used? Under
what circumstances? What are the magnitudes of the incentives/
penalties? Have they been successful? In what ways? What have been
the downsides?
• Risk assessments: How often are these conducted, and by whom? Are
they just qualitative, or also quantitative? On what types of risks do they
focus? Do stakeholders generally agree about risks? Have these
approaches been successful? In what ways?
• Risk-based management approaches: To what tasks have such
approaches been applied? Have they been successful? In what ways?
What have been the downsides? How has this work been viewed by
regulators?

5. 5
2013 Avoca Research Respondents
237 Respondents
• Sponsors: 113 Respondents from 70 companies
– Approximately half in top 20 in terms of revenue
• 66% Pharma
• 26% Biotech
• 5% Device
• 3% Combination/Other
• Clinical Service Providers: 124 Respondents from 66 companies
– 60% in top 20 in terms of revenue
• 86% CROs
• 11% Niche
• 3% Laboratories

6. 6
Part One: Risk Sharing

7. 7
Types of Risk-sharing Between
Sponsors and Providers
• Provider bonuses for achieving milestones or targets
• Provider penalties for missing milestones or targets
• Guarantees of continued work/revenue stream in exchange
for provider commitments
• Provider stake in outcome of study (e.g., company stock)

8. 8
Prevalence of Risk Sharing: Sponsors
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Strategicpartnerships/
alliances(N=28)
Preferredprovider
relationships(N=43)
Trasactional
relationships(N=37)
Bonuses Penalties Guarantees of continued work/revenue Provider stake in outcome
For each of the types of outsourcing relationships listed, which of the risk-sharing
models listed has your company used?

9. 9
N=33
Magnitude of Bonuses and Penalties
3%3%
27%
61%
6% >20% of
contract value
11-20% of
contract value
6-10% of
contract value
2-5% of
contract value
<2% of
contract value
Sponsor Data:
When bonuses are used, what is
generally the magnitude of the
maximum possible bonus?
3%3%
26%
61%
7% >20% of
contract value
11-20% of
contract value
6-10% of
contract value
2-5% of
contract value
<2% of
contract value
Sponsor Data:
When penalties are used, what is
generally the magnitude of the
maximum possible penalty?
N=31

10. 10
Experience with Risk-sharing by Sponsors
54%
35%
14%
41%
56%
41%
6%
9%
45%
0% 20% 40% 60% 80% 100%
Guarantee of continued work/revenue stream
in exchange for provider commitments
Provider bonuses for achievement of
milestones/targets
Provider penalties for failure to achieve
milestones/targets
Primarily positive A mix of positive and negative Primarily negative
N
54
57
58
To date, my experience with each of the below risk-sharing outsourcing models
has been…

11. 11
Experience with Risk-sharing by CROs
58%
46%
24%
40%
48%
47%
2%
7%
29%
0% 20% 40% 60% 80% 100%
Guarantee of continued work/revenue stream
in exchange for provider commitments
Provider bonuses for achievement of
milestones/targets
Provider penalties for failure to achieve
milestones/targets
Primarily positive A mix of positive and negative Primarily negative
N
61
51
53
To date, my experience with each of the below risk-sharing outsourcing models
has been…

12. 12
Sponsor Data: All Respondents
Overall, how satisfied are you with the work that has been done for you by Clinical
Service Providers (including but not limited to CROs)?
5%
50%
60%
71%
100%
50%
30%
24%
10%
0% 20% 40% 60% 80% 100%
>10% of contract value
6-10% of contract value
2-5% of contract value
<2% of contract value
Very satisfied Generally satisfied
Neither satisfied nor dissatisfied Generally dissatisfied
Very dissatisfied
N
2
10
21
2
Magnitude of the maximum
possible penalty

13. 13
Comments on Experiences
• “These relationships require absolute clarity in roles and
responsibilities and up-front planning assumptions that we
have not always had, which has caused difficulties along
the way.”
• “The inclusion of provider bonuses and penalties has had a
detrimental affect on study team morale. OK when the
target has been reached outright, but
lots of 'extra' negotiating when a
negative outcome.”

14. 14
Comments on Experiences
• “In my opinion a CRO doesn't perform better only because
they have a bonus or a penalty. The bonus is a way to show
them appreciation at the end but never a motivational
factor. Aligning with the CRO at the beginning on
deliverables and sharing risks and pitfalls before signing the
contract will increase the trust level and consequently the
commitment.”

15. 15
Comments on Experiences
• “CRO must have complete decision-making authority on the
operational aspects of trial execution (minimal handoffs/
decisions by sponsor). CRO must be compensated for a
thorough feasibility assessment and allowed to select the
suppliers they believe will deliver (without sponsor imposing
non-producing investigators in the mix). Also, sponsor
company must be willing to provide both the penalty as well
as the reward. In my experience, penalties were never
applied because there were always mitigating factors
(sponsor impacted operational success due to slow
response or non-response to needs or due to sponsor
mandate of key requirements- such as SOPs, KOLs, etc.).”

16. 16
Part Two: Risk Assessment

17. 17
39%
19%
26%
13%
3%
N=31
Prevalence of Systematic, Formal Risk
Assessments in Outsourced Trials
38%
18%
16%
14%
14%
For >75% of
outsourced
clinical trials
For 51% - 75% of
outsourced
clinical trials
For 25% - 50% of
outsourced
clinical trials
For 1% - 24% of
outsourced
clinical trials
Never
N=50
Sponsors CROs
Most sponsors and clinical service providers reported that a
systematic risk assessment process was used for the majority of
their clinical trials.

18. 18
Sponsor Use of Systematic Risk Assessment Processes:
Is there a difference based on size of company?
50%
32%
13%
21%
19%
15%
13%
15%
6%
18%
0% 20% 40% 60% 80% 100%
Yes
No
For >75% of clinical trials For 51% - 75% of clinical trials For 25% - 50% of clinical trials
For 1% - 24% of clinical trials Never
N
16
34
Top 20?

19. 19
N=63
CRO Involvement in Systematic Risk Assessment
32%
47%
16%
5%
Sponsor Data:
For outsourced clinical trials, to what
extent is the CRO generally involved in
the systematic risk assessment?
Provider Data:
To what extent is your company
generally involved in the systematic risk
assessment?
48%
39%
5%
8%
N=66

20. 20
What Risks are Assessed?
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Patientenrollmentrisks
Vendorperformance
risks
Dataqualityrisks
Othertimelinerisks
Sitecompliancerisks
Costrisks
Clinicaltrialsubject
safetyrisks
Drug/devicesupply-
relatedrisks
Riskstorightsof
clinicaltrialsubjects/
ethics
Other
Sponsor (N=70) Provider (N=75)
When a systematic risk assessment is performed for projects conducted by your
company, which of the following risks are typically formally assessed?

21. 21
N=68
Risk Assessment:
Qualitative or Quantitative?
43%
9%
41%
7% Primarily
qualitative
Primarily
quantitative
Approximately
equal mix
across trials
It depends
Is the risk assessment process primarily qualitative (e.g. risks identified and
discussed), or quantitative (e.g. probabilities and consequences of specific risks
estimated quantitatively)?
32%
15%
53%
Primarily
qualitative
Primarily
quantitative
Approximately
equal mix
across trials
N=66
Sponsors CROs

22. 22
Part Three: Risk Management

23. 23
How often does your risk assessment
process lead to the introduction or
refinement of proactive measures designed
to reduce risk?

24. 24
Reducing Risk: Sponsor Data
51%
50%
34%
34%
31%
29%
29%
28%
28%
24%
12%
15%
31%
28%
19%
20%
31%
21%
12%
22%
26%
25%
27%
34%
40%
39%
36%
32%
47%
41%
12%
10%
8%
4%
10%
11%
4%
19%
12%
13%
0% 20% 40% 60% 80% 100%
Review plan for performance data
Capture of performance data (i.e. not clinical trial data)
Changes in numbers of sites selected
Training additions/enhancements
Personnel additions/enhancements
Protocol amendments
Procedural additions/enhancements
Changes in locations of sites selected
Decisions regarding CROs/other vendors used
Addition or removal of specific sites
For >50% of clinical trials For 25% - 50% of clinical trials For 1%-24% of clinical trials Never
N
43
48
49
50
42
44
45
47
49
46
How often does your risk assessment process lead to the introduction or
refinement of each of the following proactive measures designed to reduce risk?

25. 25
Reducing Risk: Provider Data
How often does your risk assessment process lead to the introduction or
refinement of each of the following proactive measures designed to reduce risk?
47%
45%
38%
34%
31%
23%
21%
18%
16%
14%
22%
19%
32%
36%
35%
33%
27%
33%
19%
13%
26%
30%
30%
23%
33%
35%
48%
43%
56%
50%
4%
6%
7%
2%
9%
5%
8%
9%
24%
0% 20% 40% 60% 80% 100%
Review plan for performance data
Capture of performance data (i.e. not clinical trial data)
Procedural additions/enhancements
Changes in numbers of sites selected
Training additions/enhancements
Changes in locations of sites selected
Addition or removal of specific sites
Personnel additions/enhancements
Protocol amendments
Decisions regarding CROs/other vendors used
For >50% of clinical trials For 25% - 50% of clinical trials For 1%-24% of clinical trials Never
N
46
47
44
44
46
43
44
40
43
38

26. 26
N=50
Use of Risk-related Information to Determine
Oversight of CROs
24%
22%
20%
14%
20%
For >75% of
clinical trials
For 51% - 75% of
clinical trials
For 25% - 50% of
clinical trials
For 1% - 24% of
clinical trials
Never
Sponsor Data

27. 27
Satisfaction with CROs
9% 73%
56%
9%
41%
9%
4%
0% 20% 40% 60% 80% 100%
For >50%
For <50%
Very satisfied Generally satisfied
Neither satisfied nor dissatisfied Generally dissatisfied
Very dissatisfied
How often do your
teams use risk-related
information to
determine the level
and/or type of sponsor
oversight that you will
employ for your CRO
partners?
N
23
27
by Use of Risk-related Information
to Determine Oversight

28. 28
Satisfaction with Risk Assessment and
Management Performance
Scale of 1 to 5; 1=Very dissatisfied, 5=Very satisfied

29. 29
Opportunities to Enhance Understanding
38%
13%
9%
23%
54%
36%
31%
23%
45%
8%
10%
9%
0% 20% 40% 60% 80% 100%
Executive
Management
Middle
Management
Project
Management
Very strong understanding Good understanding
Fair understanding Poor understanding
N
13
39
11
How would you rate your understanding of best practices in risk assessment
and management in clinical trials? (Sponsor Data)
While executives generally reported a strong understanding,
operational teams may benefit from more training.

30. 30
Are risk-based approaches leading to greater
efficiency and higher quality?
14%
32%
38%
34%
23%
6%
25%
28%
0% 20% 40% 60% 80% 100%
more efficient use of resources
for your company and/or
your CRO partner?
increased quality?
Yes Sometimes No Don't know/too soon to tell
N
65
65
In general, have your risk assessment and management approaches resulted in…

31. 31
Thank you!
www.theavocagroup.com

32. 32
Definitions Included in Avoca Survey
Risk is defined as "the combination of the probability of occurrence of harm and the
severity of that harm" (ISO/IEC Guide 51).
RISK ASSESSMENT AND MANAGEMENT (taken from FDA Guidance for Industry Q9:
Quality Risk Management).
Risk assessment: A systematic process of organizing information to support a risk
decision to be made within a risk management process. It consists of the identification of
hazards and the analysis and evaluation of risks associated with exposure to those
hazards.
Risk management: The systematic application of quality management policies,
procedures, and practices to the tasks of assessing, controlling, communicating, and
reviewing risk.