R&D management in the pharma industry: the strategic role of CROs

Purpose of the paper: In recent years, the Pharma Industry (PI) has undergone radical changes in R&D management. It is estimated that between 1/3 and 1⁄2 of every dollar spent on R&D from pharma companies now goes to Contract Research Organizations (CROs). The main purpose of our paper is therefore to interpret major features and changes underpinning the CRO’s role in the PI. Methodology: The starting point for our work is a literature review on structural changes affecting the PI. Then, by means of a structured questionnaire, key data on Italian CROs was gathered. Finally, we collected additional first-hand information to better define emerging CRO business models. Findings: Our study highlights that in the beginning, CRO development was mainly driven by large pharma outsourcing strategies. Currently, CROs also represent an ideal, ready-to-use technological infrastructure for small emerging biotech companies. Moreover, we have identified four business models that describe CROs’ strategic approach, i.e. a transactional outsourcing model, a functional outsourcing model and virtual outsourcing models mode 1 and mode 2. Research limitations: Further investigation will be useful to understand emerging business models in Italy and in other national innovation systems and to appreciate the changing role of CROs in the strategic management of biopharmaceutical innovation. Research and managerial implications: Results could indicate CRO’s next step towards so-called “virtual model”, to meet the expectations of the most dynamic open innovation approaches in PI. Originality/value of paper: The article, to the authors’ best knowledge, is the first study related to the strategy and structure of Italian CROs.