The huge cost and complexity of testing potential new medical products - a forbidding burden for fledgling Silicon Valley biotech firms - has given birth to an army of entrepreneurs offering to do the tests for others. Hundreds of contract research organizations have cropped up over the past two decades around the world, creating a multibillion-dollar industry that many people say provides an essential service and is bound to expand. But some say the trend has a troublesome side, according to The San Jose Mercury News.

“There has been tremendous growth in the industry,” Brad Zaro, who runs Clinimetrics, a CRO in San Jose, tells the paper. Unfortunately, he adds, many of those jumping into the field “are unqualified.” The FDA has found cause for concern, too. In recent months, the agency has alerted at least two Bay Area biotechs about problems with some of their tests in which CROs were involved. Yet CRO critics say no one - including the FDA - knows how often CROs cause problems because they operate with little government oversight.

The FDA inspected just 1 percent of the estimated 350,000 sites where studies involving human subjects were done during the 2000 to 2005 fiscal years, the federal Office of Inspector General reported in September. Moreover, the report found that an increasing number of such studies are being done in foreign countries, where the FDA has limited authority, the paper writes.

This worries Greg Koski, president-elect of the Academy of Pharmaceutical Physicians and Investigators, who says the dearth of regulatory oversight means biomedical companies have to keep an especially vigilant eye on the CROs they hire. “If the company is not doing a rigorous job in overseeing the work the CROs are doing and the FDA isn’t doing it, that leaves a gap that could be a potential problem,” he tells the paper.

“CROs are just out there kind of doing their thing,” Arthur Caplan, who heads the BioEthics center at the University of Pennsylvania, tells the Merc. “They need to be the object of more regulatory attention partly just to establish how well they are doing. It will take a scandal a la Chinese lead paint in toys for that to happen.” He contends the FDA barely keep tabs on companies now, given its limited resources.

Although the FDA reviews the study data companies submit when seeking approval for their products, the agency wants to make sure CROs also are properly monitored, Rachel Behrman, an FDA deputy director, tells the paper. “The FDA is looking at modernizing its regulations to better reflect the emergence of all these different parties now participating in clinical trials with human subjects to make sure they all are fully accountable,” she says.

One of every five dollars biomedical firms spend on R&D goes to outside experts - particularly CROs, which number at least 700 in North America and Europe, according to CenterWatch, which tracks such studies, the paper writes. That adds up to a lot of money. Frost & Sullivan says CRO revenues in the US topped $7 billion in 2006 and are expected to exceed $19 billion by 2013.

The popularity of CROs stems from a variety of factors. They can do studies quickly, in part because many maintain worldwide networks of researchers who can participate on short notice, experts tell the Merc. And when the Tufts Center for the Study of Drug Development examined several dozen CRO studies in 2006 - in an analysis partly financed by a CRO association - it concluded they were well done.

After years of laboring in their labs, many biotechs have developed drugs to the point where they are now ready for testing. But the companies often can’t afford their own study staffs, and find the increasingly complex federal rules for such tests bewildering. “We see an explosion in biotech, and somebody has to do that work,” Zaro tells the paper.

The San Jose CRO has also experienced explosive growth. Over the past two decades, Clinimetrics - now a division of Omnicare Clinical Research - has added about 300 employees, acquired scores of customers and helped with more than 1,000 biomedical studies, often commanding multimillion-dollar fees per test, the paper writes.

Large, highly profitable biotechs such as Gilead Sciences rely heavily on CROs - last year, about $66 million was spent after shelling out $30 million in 2006 and $21 million in 2005. Norbert Bischofberger, Gilead’s chief scientific officer, says hiring someone else to test his company’s drug candidates makes sense, given how much work is required. “If you want to do that all by yourself, you need an unbelievable infrastructure that we’ve never had,” he tells the paper. “It’s just too expensive.”

Overall, he adds, Gilead has been happy with CROs. But problems cropped up last year. In February 2007, Gilead reported to the Securities and Exchange Commission that the FDA had found “certain irregularities” in studies a contract research outfit had done for it. Bischofberger identified the contractor as MDS Pharma Services, and said the problem occurred in studies intended to check how some of Gilead’s drugs - including its widely used HIV treatment, Viread - reacted with other meds, according to the paper.

Although the irregularities wouldn’t pose major difficulties for Gilead, Bischofberger tells the Merc, the wording on Viread’s label regarding the interactions may have to be modified if the FDA rejects the study results. After a series of inspections at two MDS sites in Canada, the FDA last year also warned an undisclosed number of other companies, saying the agency’s checks of MDS studies “raise significant concerns about the validity of the reported results.”

MDS representative Charlene McGrady wouldn’t comment on how many companies got the FDA notice or whether MDS was at fault. But she emphasized that the advisory didn’t affect all MDS studies and that MDS is working to resolve the problems.

Theravance, another Bay Area biotech, revealed to the SEC in March that the FDA had questioned the “data integrity” of one of its CRO-managed studies. The company didn’t identify the CRO and Theravance’s Allison Parker tells the paper, “We’re not going to have any comment on that.”