Enhance R&D Efficiency

Strategic Procurement Solutions for the Pharmaceutical Industry

Amid rising R&D costs and complex supply chain dynamics, strategic procurement offers pharmaceutical companies a pathway to drive innovation, enhance operational efficiency, and reduce time-to-market. Discover how leveraging tailored sourcing and value engineering can transform your R&D processes and unlock sustainable growth.

R&D market environment

The biopharmaceutical industry is experiencing a transformative shift in Research & Development (R&D) strategies, shaped by evolving market conditions and a growing reliance on Contract Research Organizations (CROs). Over the past two decades, CRO’s are showing rapid growth with compound annual growth rates (CAGR) of 8-12%, contributing to revenues of $ 59.8 bn globally in 2024*, representing approximately 25% of total Pharma R&D costs.

While Contract Research Organizations have expanded their capacity, particularly in response to post-COVID needs, certain high-demand areas such as oncology and cell therapies still face resource constraints. However, this evolving landscape presents a strategic opportunity for biopharma companies to secure better terms and strengthen their strategic partnerships with CROs, gaining access to specialized expertise, innovative technologies, and competitive pricing.

As CROs continue to invest heavily in expanding their capacities, especially in key therapeutic areas, it’s crucial for biopharma companies to closely evaluate their R&D outsourcing strategies.
By selecting the right CRO partners, R&D organizations can streamline clinical trials without compromising on quality, flexibility, or timelines, while also taking advantage of competitive market rates. This enables companies to free up capital for reinvestment in innovation and new studies.

Smart sourcing strategies, combined with a well-managed supplier portfolio, can provide companies with the necessary flexibility to navigate this evolving environment and maximize the return on their R&D investments.

*Source: Contract Research Organization Market Size & Share, 2032

Relevant Procurement Categories in Drug Development

To unlock the full potential of procurement in R&D, companies should target efficiencies and optimization across key categories during both Pre-Clinical and Clinical Trials stages. Optimization efforts in these categories can significantly reduce costs for drug development while enhancing operational effectiveness and innovation.

Pre-Clinical

Bioassays: Provision of biological assays for evaluating the activity and efficacy of drug candidates

Cell line development: Supply and development of cell lines, including cloning services, drug testing and research

ADME/Toxicology/Pharmacology: Services related to drug ADME, toxicity studies, and pharmacology assessments

DNA/RNA synthesis & editing: DNA and RNA synthesis and editing services for molecular biology research in drug development

Protein sciences: Production, purification, and characterization of proteins, vital for drug target validation and research

Animal testing: Provision of animal models incl. species and strains relevant to specific diseases

Human Bio samples: Human bio. samples, such as tissues or fluids, necessary for studying drug effects and mechanisms

CMC & external MFG: Chemistry, Manufacturing and Controls (CMC), incl. external manufacturing of drug candidates to ensure quality & compliance of human bio samples (e.g., tissues or fluids, necessary for studying drug effects and mechanisms)

Other services: E.g., regulatory consulting, patient recruitment, clinical trial logistics, medical writing, bioanalytical services, etc.

Clinical Trails

Functional Service Outsourcing (FSO): FSO involves outsourcing specific clinical trial tasks, like data management or monitoring, to specialized external providers. This allows the company to focus on core activities while experts handle critical functions, enhancing efficiency and flexibility

Full-Service Provider (FSP): FSPs manage the entire clinical trial process, from design to reporting. They offer comprehensive services, ensuring consistency, quality, and streamlined operations, especially in complex or large-scale trials

Other / single services

Key Levers to Drive Value in R&D Procurement

To optimize R&D spend, cost-efficiency needs to be aligned with operational effectiveness, ensuring resources are used to their full potential. By focusing on both Commercial Levers, which streamline supplier management and pricing, and Technical/Process Levers, which enhance operational workflows, we aim to drive value beyond cost savings. This balanced framework allows biopharma companies to reinvest in further innovation and accelerate the development of new therapies.

Pre-Clinical Studies

Optimizing pre-clinical studies requires a strategic blend of supplier management and operational efficiency. By leveraging commercial levers, companies can negotiate better terms and consolidate services, while demand levers help refine workflows and standardize processes.

Leveraging scale: Consolidate and bundle pre-clinical services across different modalities to increase competition and secure better pricing, utilizing a preferred supplier pool of providers that meet strict quality and cost criteria.
Detailed RFPs enhanced by AI screening:Develop detailed RFPs that capture all cost factors, leveraging AI-assisted screening to highlight inefficiencies, identify opportunities for operational improvements, and ensure like-for-like comparison of supplier proposals, ultimately enhancing decision-making accuracy.
Tailored Negotiations and Pricing Optimization: Engage in strategic and structured negotiations with multiple rounds and multiple bidders, applying techniques like game theory, and optimize unit pricing grids to secure the most competitive rates for pre-clinical services.

Service Categorization and Standardization: Create a holistic category structure to standardize service requirements and contract terms, categorizing services based on type, cost drivers, and risk. This standardization improves procurement consistency, making it easier to manage and compare service providers.
Demand and Specification Management: Enhance resource efficiency by critically evaluating the necessity of specific tasks and refining service specifications (e.g., streamlining study protocols), reducing redundancy, and aligning activities with optimal execution strategies to achieve significant cost savings.

Clinical Trials

To maximize cost efficiency in clinical trials, pharmaceutical companies must integrate commercial and demand levers in a cohesive strategy. Strategic Sourcing drives vendors to deliver maximum value, while Value Engineering refines study execution, ensuring an optimal balance of efficiency and cost-effectiveness

Strategic Sourcing of CROs

Leveraging Scale: Bundling clinical categories (e.g. FSP and FSO) and involving at least three vendors to increase competition
Harmonization and standardization: Simplify clinical trial budgets and enhance comparability between vendors.
Comprehensive RFPs: Develop detailed RFPs that cover all budget-influencing variables (hourly rates and # of hours per task considering different factors such as location and seniority of roles) ensuring transparent CRO proposals.
Tailored Negotiations: Leverage structured, multi-round negotiations with multiple bidders, applying game theory and providing tailored feedback to refine commercial terms and SLAs, including bonus/malus schemes, with preferred CROs.
Award Scenarios: Develop and select award scenarios with Clinical Operations, balancing quantitative and qualitative criteria.

Study value engineering

Task Management: Challenge the need for the number of units for certain tasks (e.g., reduce frequency of meetings or reduce overlapping tasks).
Specification Harmonization: Challenge how activities are delivered (e.g., reduce hours required for a monitoring visit or virtual vs. in-person meetings.
Unit Price Reduction: Challenge existing pricing in unit grids to ensure the most competitive price

Together, Strategic Sourcing (Commercial Lever) and Value Engineering (Demand Lever) reinforce each other: while the former motivates vendors to deliver maximum value, Value Engineering shapes the study’s operational structure, achieving an ideal balance of efficiency and cost-effectiveness in clinical trial execution.

Beyond Cost: Maximizing Value in R&D Procurement

While cost control remains essential, R&D procurement offers strategic advantages that go far beyond savings. Adopting a forward-thinking procurement approach enables biopharma companies to drive innovation, reduce development timelines, and enhance quality, delivering a competitive edge. Here’s how:

Driving Innovation: Through targeted partnerships with Contract Research Organizations (CROs), companies gain access to advanced technologies like AI, which can significantly accelerate drug discovery and development.
Accelerating Time-to-Market: Effective supplier management and performance-driven contracts reduce clinical trial timelines, facilitating faster product launches and more rapid regulatory approvals.
Ensuring Quality and Compliance: A rigorous, strategic approach to supplier selection ensures that R&D processes adhere to high-quality and regulatory standards, safeguarding the integrity of research and clinical outcomes.

Building Agility and Resilience: A diverse supplier network and flexible contract structures allow biopharma companies to adapt quickly to changing R&D needs, enhancing resilience in the face of industry disruptions.
Supporting Sustainability and Ethics: Modern procurement practices prioritize eco-friendly and ethical sourcing, aligning with corporate responsibility goals and strengthening the company’s reputation.

5 Key Factors to Maximize Procurement Impact in Pharma R&D

Cross-functional collaboration between Procurement and Clinical Operations, supported by senior management (e.g., through dedicated sourcing councils), ensures alignment and effective decision-making
A holistic sourcing approach that leverages all value levers—commercial, technical, and process—optimizes procurement outcomes and enhances overall efficiency
Systematic analysis and management of all cost categories, combined with deep expertise in both procurement and R&D, maximizes value delivery and cost-effectiveness
Establishing long-term partnerships with suppliers fosters continuous improvement, driving consistent quality, innovation, and sustainable value over time
Regular, informed dialogues between senior leadership and providers strengthen alignment on key objectives and promote ongoing optimization efforts

Acknowledgements

We would like to thank Philipp Polterauer – Managing Director at the Inverto office in Vienna and Lead of the Digital & AI practice for his valuable insights and contributions to the article.