A should cost model is an all-important technique for deriving and forecasting the actual cost of a product/service over the forecasted period. It serves as a competitive edge for supplier negotiations by determining the actual price for the cost components. The outcome helps procurement leaders to understand detailed fact-based cost drivers for the category.
In the CRO Category Intelligence study, we have estimated and forecasted pricing for the key cost components while availing services from CROs. Clinical procedures (Drug logistics, medical writing, project management, quality control, drug safety management, etc.) are the largest cost component of CRO services. It accounted for more than 50% of the overall cost of CRO services. The cost of clinical procedure services is majorly driven by the salary of key personnel and therapeutic area. For instance, clinical procedure cost of the respiratory system and oncology is 60% -80% higher than dermatology and anti-infective therapeutic areas.
Every organization and its procurement team wants to negotiate the best deal while procuring a set of products or services. Rate benchmarking uses price/cost comparison of more than one set of products/services to analyze the most efficient combination that will help the procurement team to get the optimum rate.
The geographic location where the clinical trial is been conducted plays a major role while analyzing the rate benchmarking of a CRO service. In our research, we have analyzed the rates of oncology clinical trials, as it is the most common type of clinical trial across the globe. For instance, breast cancer phase 3 clinical trial cost in India and China is 90% lower than the clinical trial cost of the U.S and the U.K. Conducting clinical trials via CRO in Western European and North American countries needs double the cost of conducting clinical trials in APAC. However, for the clinical trial of critical diseases, the trial majorly happens in developed countries of Western Europe and North America, as the APAC region lacks the number of skilled professionals to conduct these types of clinical trials.
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Labor is one of the key cost components incurred while offering a product or service. Understanding the pricing structure of salary is important for organizations in selecting the appropriate supplier and building a good negotiation strategy. It is also an important factor in determining whether the category under focus should be outsourced or built in-house.
Our research indicates that Principal Investigators and Clinical Research Co-coordinators of IQVIA earn 10%-15% higher salaries than Principal Investigators and Clinical Research Co-coordinators of Covance and Syneos Health. However, Syneos Health and Covance have a 10% YoY increment compare to IQVIA’s 7%-8%. We have also found that IQVIA and Covance offer 36% higher bonuses to principal investigators compare to Syneos Health
It is cumbersome for any organization to continuously track the latest developments in their supplier landscape. Our newsletter service helps them remain updated, to avoid any supply chain disruption which they may face, and keep a track of the latest innovations from the suppliers. Outsourcing such activities help clients focus on their core offerings. Our research on the CRO market has identified the following developments:
In July 2021, Parexel announced that it will be purchased by Goldman Sachs Asset Management and EQT Private Equity for USD8.5 billion. This acquisition will not change the overall business of Parexel, rather the acquirers will invest in Parexel’s real-world evidence, decentralized clinical trials, biostatistics, and data management systems.
In February 2021, ICON announced the acquisition of its rival PRA Health Sciences for USD12 billion. Before this deal, ICON ranks as the sixth-largest CRO measured by revenue while PRA is the fifth largest. This deal made the combined company the second-largest CRO, trailing the approximately USD5.8 billion that IQVIA generates from contract services.
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Component wise cost break down for better negotiation for the client, highlights the key cost drivers in the market with future price fluctuation for different materials (e.g.: steel, aluminum, etc.) used in the production process
Offering cost transparency for different products / services procured by the client. A typical report involves 2-3 case scenarios helping clients to select the best suited engagement with the supplier
Determining and forecasting salaries for specific skill set labor to make decision on outsourcing vs in-house.
A typical newsletter study by capturing latest information for specific suppliers related to: M&As, technological innovations, expansion, litigations, bankruptcy etc.
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