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Turning frustration into new business Small CRO stays ahead with a strict pricing model, cost-savings plan

When she started her own contract research organization in 2003, Darlene Panzitta developed her strategy with a scientist’s carefully calculated approach.



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Darlene Panzitta, founder and president of DSP Clinical Research, says she started her company as a way to improve pricing and service for small pharmaceutical companies.
“It was always control growth, be careful with the staff you bring on, build it based on support staff rather than executives,” Panzitta said. “I was a cautious person, and I think it was because my background is science … I wasn’t really thinking like a businessperson would think.”

Her approach has paid off. Today, her company, Parsippany-based DSP Clinical Research, is a $20 million CRO with 35 full-time employees. And having ridden out the recession, Panzitta’s ready to accelerate the company’s growth.
DSP primarily manages late-stage clinical trials for small and midsize pharmaceutical companies. Panzitta said she built the company precisely for small and midsize clientele. She decided upon that niche after working for a small pharmaceutical company and being frustrated by its giant CRO partners, which seemed to be built only for large pharma clients.

“Managing CROs was my job, and I was at a small pharma — and it wasn’t working out,” she said. “The pricing wasn’t working out and the customer service wasn’t working out.”
In 2003, Panzitta turned that frustration into a new business, founding DSP Clinical Research. Today, the company manages about 12 to 15 clinical trials per year, she said.

On one hand, Panzitta said her company is successful because its small size and small focus match the size and culture of its client companies. But DSP also thrives, she said, because it offers clients cost savings.
DSP uses a unique fixed-rate pricing model. Instead of charging a standard per-unit rate — which Panzitta said is similar to an hourly rate — used by nearly all of her competitors, DSP charges its clients a fixed monthly fee.
One reason a fixed rate is preferable, Panzitta said, is that clients often must make mid-course changes to their trials. Under a per-unit pricing model, the cost of those changes can quickly add up.
“What we’re doing is we’re charging you a fixed monthly fee, so you pay that fee regardless of what you’re adding to that study,” she said.

That model has served the company well, but Panzitta said during the height of the recession in 2009, competitors started lowering prices and clients became more and more cost-conscious.
“I did get a little nervous and thought for the first time the bigger CROs were actually competing with our pricing,” she said. “We had been one-third less (on price), and then in 2009, we were actually neck-and-neck with them.”
Panzitta got nervous, but she didn’t panic. Nor did she change her pricing. Her persistence seems to have worked. As 2011 unfolds, the company is back in growth mode. One change she has made has been to add additional services to meet a growing demand for CROs to offer their clients one-stop shopping.

In the past year, she said the company grew from 20 employees. Panzitta is looking to double the company’s staff in the next couple of years.

Panzitta says the risk associated with growth doesn’t bother her as much now because she feels the company enjoys a good reputation among its clients and the pharmaceutical community. She believes maintaining that reputation will ensure that DSP continues to thrive, no matter the shifts in the industry or the economy.
“Outsourcing has a bad reputation,” she said. “I think that word is spreading that (our clients) don’t have a bad taste in their mouth.”

E-mail to:  jkaltwasser@njbiz.com

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