Pharmaceutical Outsourcing Expands To Include Core Services According to ValueNotes02 Feb 2012 • by Natalie Aster
The pharmaceutical industry provides essential support to the healthcare system by innovating, manufacturing, marketing and supplying drugs. Over the last few years, the most prolific change in the industry has been the expansion of focus, from primarily research and development to include, among others, sales and marketing and process reengineering. The industry is not only reexamining the investment it makes in research and development, it is also attempting to move away from the traditional approach of direct sales.
In addition, on an average, it takes 8-16 years and costs between $800 million to $1 billion for a pharmaceutical company to develop a single drug. According to the report “The Pharmaceutical Industry Sourcing Landscape In 2011: Pharmaceutical Outsourcing Expands To Include Core Services” by ValueNotes, the expensive, lengthy drug development processes, especially those that do not produce results, are a big concern for the pharmaceutical companies, and the failure rates affect the profitability. To increase the efficacy of the R&D efforts and control the expenditure, pharmaceutical companies have begun working with other research companies. The reliance on partners, externalization, and collaboration with third parties is indicative of the new business model companies are adopting to stay afloat.
The Pharmaceutical Industry Sourcing Landscape In 2011: Pharmaceutical Outsourcing Expands To Include Core Services
Published: January 2012
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Due to these challenges, outsourcing of business processes emerged as a strategic and viable option. The pharmaceutical companies are now outsourcing both core and noncore activities through a third party collaborative approach. These partnerships bring cost benefit as they help in reducing capital outlay for the latest technology. It also allows for faster turnaround rates and time to market. The industry has benefited from the use of modular outsourcing with most of the top pharma companies outsourcing clinical trials.
As companies outsource different services such as drug development, clinical trials, manufacturing, BPO services, and marketing and sales, each one of them allows a reduction in costs with a direct impact on the bottom line. R&D challenges can also be addressed through clinical data management (CDM) and analytics offerings that provide meaningful data insights. Flexibility to scale up and down according to requirement also ensures that resources are optimized. The service providers are capable of offering global delivery models. For instance, one service provider offers services from India, the Philippines, Mexico and the Czech Republic; while another one offers services from 10 global locations in 25 languages.
Flexibility allows companies to build front end capacity for essential sales and relationship building activities. Service providers offer an increase in efficiency for the repeatable processes. With the heavy focus on regulations and compliance across the healthcare segment, the need for this service is growing at rapid rates.
According to the U.S. National Institutes of Health (USNIH) data released in 2011, the U.S. hosted around 52,107 trials, while India and China have hosted 1,400 and 7,356 respectively. But the scenario is poised to change with the advantages that India and China offer. The array of disease profiles, drug naпve population, large gene pool and developing healthcare infrastructure make these locations very attractive as outsourcing destinations. The pharmaceutical companies are open to offshoring all the core functions like manufacturing, sales and marketing, and research. The shift in pharmaceutical companies' preference from onshore to offshore has also been driven by improvement in compatibility and coordination ease.
More information can be found in the report “The Pharmaceutical Industry Sourcing Landscape In 2011: Pharmaceutical Outsourcing Expands To Include Core Services” by ValueNotes.
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