A structural change in clinical trials is underway as the life sciences industry shifts toward virtualization and decentralization.
Three primary trends are driving this shift:
- A new group of companies has entered the contract service provider market. These newcomers are virtual trial platform companies that typically provide a software as a service (SaaS) clinical trial management system (CTMS) to contract research organizations (CROs). Over $700 million has been invested in this market in the past seven quarters, and we expect this number to grow significantly in the coming years.
- Clinical trial starts have rebounded from the pandemic-induced lull, and currently exceed historical levels as investors continue to pump capital into the ecosystem during this life sciences renaissance. At the same time, there is a major shortage of labor and trial duration continues to increase. Many companies are looking to virtualize and digitize their trials to minimize cost, maximize efficiency and reduce the likelihood of delay.
- Contrary to the current narrative, virtualization often does not lead to cost reductions in telehealth, including when telehealth serves as a proxy for a clinical trial. Clinical research executives note that patient-centricity, not necessarily clinical trial cost, remains the key objective in execution of virtualized clinical trials.
New entrants: Virtual trial platform companies
“Decentralized” and “virtual” are ubiquitous buzzwords in current descriptions of clinical trials; however, the meaning of these terms within the industry can be confusing. Clinical trials are designed to fall within a spectrum of virtualization. On one end of the spectrum, all trial procedures are performed virtually; on the other, all trial procedures are conducted physically at a research site. Trials typically do not fall at the extreme ends of this spectrum but instead comprise a mix of virtual and on-site procedures—a design commonly referred to as hybrid.
The number of clinical trials utilizing virtualization is on the rise. In a recent ERT survey, 33 per cent of clinical professional respondents indicated they were incorporating virtual components into their trials prior to the COVID-19 pandemic, while 82 per cent indicated they are currently doing so.
With this changing landscape, several new players have entered the arena. These companies are primarily service providers to large CROs and assist with clinical trial virtualization through some sort of SaaS CTMS. In its Decentralized Clinical Trial Products PEAK Matrix® Assessment 2021, the Everest Group ranked several companies based on their vision and capability related to decentralization. The leaders—Medable, Science 37 and THREAD—fall into this bucket of SaaS CTMS providers. A few companies fall outside this bucket, such as ObvioHealth, which markets itself as a virtual research organization and aims to provide fully virtualized clinical trial administration to trial sponsors.
Partnerships between decentralized trial companies and CROs are increasing, and so is investment in virtual trial companies. According to PitchBook, there have been 14 disclosed investments into these organizations over the past seven quarters, totaling $719 million. We expect that capital will continue to flow into these organizations as partnerships expand. We also expect established CROs to look into acquiring these organizations as they grow their in-house virtual trial offerings.
On Oct. 7, Science 37 completed a reverse merger with LifeSci Acquisition II Corporation to go public under the ticker symbol SNCE. Further highlighting the growing demand for related services in the clinical trial industry, the deal valued Science 37 at $1.05 billion, a significant increase from its $250 million valuation 12 months prior, according to PitchBook data. This transaction is not reflected in the accompanying chart.
Clinical trial activity and duration
We analyze clinical trial starts and average years to study completion as indicators of opportunities in the clinical trial space. These metrics can signal opportunities for efficiencies that virtual trial models could address.
Clinical trial starts
Phase 3 clinical trial starts have rebounded to their pre-pandemic levels. Quarterly phase 3 clinical trial starts totaled 152 and 193 during Q1 and Q2 2020, respectively, but then averaged 245 through Q3 2021, surpassing the historical average of 220 pre-pandemic. As the volume of trials increases without a corresponding reduction in study duration, the industry will continue to feel productivity pressures, exacerbated by the highly competitive labor market.
Average years to industry-funded study completion
The average phase 3 trial duration was approximately two years in 2009, compared to 3.25 years so far in 2021, with the COVID-19 pandemic serving as a delaying factor. We expect to see a reversal of this trend beginning in late 2022 or early 2023 as early adopters of increased virtualization complete their trials. For the time being, this upward trend highlights the opportunity to increase efficiencies in the clinical trial process.
The cost of virtualization
The industry has provided limited information on the cost savings of a fully decentralized trial versus a fully on-site trial. In last quarter’s outlook, we described several large CROs and their progress toward decentralized trials. We noted PPD’s commentary that fully virtual trials have a completely different cost structure than legacy models. While the number of sites and travel to those sites are reduced in a fully virtual trial, there is an increase in point-to-point solutions to serve patients in their homes, as well as a much more decentralized supply chain. To quantify potential savings we looked at telehealth’s impact on costs in the health care industry overall.
In parallel: Telehealth in health care and life sciences
In an article published in the Journal of Medical Internet Research, Determining if telehealth can reduce health system costs: Scoping review, researchers found that while telehealth does benefit patients and increase productivity for many services, it does not routinely reduce the cost of care delivery for the health system. Telehealth cost savings were identified in 53%, 50% and 32% of cost-minimization, cost-effectiveness and cost-utility studies reviewed, respectively. Savings were predominant in studies where historical health system-funded patient and clinician travel was replaced by telehealth. In the remaining studies, telehealth improved patient care while simultaneously increasing cost.
Important to note is that subsidizing of patient or clinician travel is most prevalent in the public health system versus the private health system—which helps explain why researchers found that the public system realized higher cost savings with telehealth than the private system did. The public health system model is similar to most clinical trial models, which may reimburse patients or clinicians for their travel to a physical site. If we assume the two models are analogous, we can also assume that clinical trials may realize cost savings with telehealth.
One of the most critical points made in the research is related to cost minimization versus cost-effectiveness and cost utility. While telehealth may not be the best tool to minimize costs in the clinical trial process, it has proven to be very effective in improving overall health and reducing morbidity and hospitalization. In 32 per cent of studies reviewed for cost utility, cost savings were demonstrated while simultaneously increasing quality-adjusted life years of patients. In the remaining 68 per cent of studies reviewed, telehealth increased health care costs while simultaneously increasing quality-adjusted life years. As we speak with biopharma and CRO executives, who measure cost while also focusing on data quality and patient-centricity, we believe these metrics strike a chord with them.
Discrepancies in the data and industry anecdotes
As we’ve mentioned, “decentralization” and “virtualization” are industry buzzwords. The industry sentiment is that these trial models will improve patient-centricity and reduce clinical trial costs; however, we haven’t seen extensive data to support that conclusion. Various articles and discussions with executives point to an estimated 30% in cost savings as the industry continues to implement virtual components; however, this figure is anecdotal for the time being.
While the overall savings remain to be quantified, specific tasks clearly will benefit from virtualization and result in reduced costs. The Association of Clinical Research Organizations highlighted a case study with Covance—now known as Labcorp Drug Development—which cited $10,000 to $25,000 as the cost to recruit a new patient, without consideration of the cost of trial delays. Telehealth undoubtedly makes patient retention and recruitment easier; less clear is the net impact from cost savings on patient recruitment and retention and the cost to implement a telehealth solution.
In short, we remain torn on this topic. We look forward to the improvements in patient-centricity that decentralization and virtualization will bring to the table. Hopefully these improvements will result in meaningful reductions in clinical trial costs that will be passed on to patients through reduced drug pricing. We look forward to seeing that hope turn into reality, while remaining keenly aware that it may not.