After finding success investing in the more obviously lucrative corners of American medicine \u2014 like surgery centers and dermatology practices \u2014 private equity firms have moved aggressively into the industry\u2019s more hidden niches: They are pouring billions into the business of clinical drug trials.<\/p>\n

To bring a new drug to market, the FDA requires pharmaceutical firms to perform extensive studies to demonstrate safety and efficacy, which are often expensive and time-consuming to conduct to the agency\u2019s specifications. Getting a drug to market a few months sooner and for less expense than usual can translate into millions in profit for the manufacturer.<\/p>\n

That is why a private equity-backed startup like Headlands Research saw an opportunity in creating a network of clinical sites and wringing greater efficiency out of businesses, to perform this critical scientific work faster. And why Moderna, Pfizer, Biogen, and other drug industry bigwigs have been willing to hire it \u2014 even though it\u2019s a relatively new player in the field, formed in 2018 by investment giant KKR.<\/p>\n

In July 2020, Headlands announced<\/a> it won coveted contracts to run clinical trials of covid-19 vaccines, which would include shots for AstraZeneca, Johnson & Johnson, Moderna, and Pfizer.<\/p>\n

In marketing its services, Headlands described its mission to \u201cprofoundly impact\u201d clinical trials \u2014 including boosting participation among racial and ethnic minorities who have long been underrepresented in such research.<\/p>\n

\u201cWe are excited,\u201d CEO Mark Blumling said in a statement, to bring \u201cCOVID-19 studies to the ethnically diverse populations represented at our sites.\u201d Blumling, a drug industry veteran with venture capital and private equity experience, told KHN that KKR backed him to start the company, which has grown by buying established trial sites and opening new ones.<\/p>\n

Finding and enrolling patients is often the limiting and most costly part of trials, said Dr. Marcella Alsan, a public policy professor at Harvard Kennedy School and an expert on diverse representation in clinical trials, which have a median cost of $19 million for new drugs, according to Johns Hopkins University researchers<\/a>.<\/p>\n

Before covid hit, Headlands acquired research centers in McAllen, Texas; Houston; metro Atlanta; and Lake Charles, Louisiana, saying those locations would help it boost recruitment of diverse patients \u2014 an urgent priority during the pandemic in studying vaccines to ward off a disease disproportionately killing Black, Hispanic, and Native Americans.<\/p>\n

Headlands\u2019 sites also ran, among other things, clinical studies on treatments to combat Type 2 diabetes, postpartum depression, asthma, liver disease, migraines, and endometriosis, according to a review of website archives and the federal website ClinicalTrials.gov. But within two years, some of Headlands\u2019 alluring promises would fall flat.<\/p>\n

In September, Headlands shuttered locations in Houston \u2014 one of the nation\u2019s largest metro areas and home to major medical centers and research universities \u2014 and Lake Charles, a move Blumling attributed to problems finding \u201cexperienced, highly qualified staff\u201d to carry out the complex and highly specialized work of clinical research. The McAllen site is not taking on new research as Headlands shifts operations to another South Texas location it launched with Pfizer.<\/p>\n

What impact did those sites have? Blumling declined to provide specifics on whether enrollment targets for covid vaccine trials, including by race and ethnicity, were met for those locations, citing confidentiality. He noted that for any given trial, data is aggregated across all sites and the drug company sponsoring it is the only entity that has seen the data for each site once the trial is completed.<\/p>\n

A fragmented clinical trials industry has made it a prime target for private equity, which often consolidates markets by merging companies. But Headlands\u2019 trajectory shows the potential risks of trying to combine independent sites and squeeze efficiency out of studies that will affect the health of millions.<\/p>\n

Yashaswini Singh<\/a>, a health economist at Johns Hopkins who has studied private equity acquisitions of physician practices, said consolidation has potential downsides. Singh and her colleagues published research<\/a> in September analyzing acquisitions in dermatology, gastroenterology, and ophthalmology that found physician practices \u2014 a business with parallels to clinical trial companies \u2014 charged higher prices after acquisition.<\/p>\n

\u201cWe\u2019ve seen reduced market competition in a variety of settings to be associated with increases in prices, reduction in access and choice for patients, and so on,\u201d Singh said. \u201cSo it\u2019s a delicate balance.\u201d<\/p>\n

Dr. Aaron Kesselheim<\/a>, a professor of medicine at Harvard Medical School, called private equity involvement in trials \u201cconcerning.\u201d<\/p>\n