The Outsourcing Market – A Plethora of Choices

 

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The Outsourcing Market – A Plethora of Choices

Contributor:  Cristina Falcão
Posted:  08/01/2011  12:00:00 AM EDT  |  2  

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Tags:   Cristina Falcão | pharmaceutical outsourcing | outsourcing | pharmaceutical manufacturing | offshore outsourcing | In-House CROs | CMOs | contract pharma | contract organisations | insourcing 

Globalisation’s growth and prevalence of the pharmaceutical market, calls for proactive approaches to manage its risks, namely the size and complexity of value chains and the increased labour market competition. In the networked economy of the 21st century, Big Pharma looks for a new world of collaborative sourcing strategies to exploit the cost advantages of R&D facilities serving global operations.

Overall Review of the Outsourcing Options and Countries, the Labor Market and the New Pharmaceutical Business Model

Outsourcing Options

Onshore Outsourcing 

The U.S.A. has a pioneering domestic sourcing alternative– rural sourcing. The concept involves finding a rural location, close to a good College with quality graduates in the pharmaceutical field. This innovative solution is cost-effective and avoids several problems associated with oversea outsourcing.

Nearshore Outsourcing

Relatively new, is used by companies that seek the advantages of neighbor countries (proximity; same time zone; similar culture /language; frequent- visiting; cost-effectiveness). Pharma companies working with genetics choose countries in Latin America, especially  Brazil (the third largest drug market in the Americas), to conduct clinical trials; CROs handle the complex process of data collecting and processing, since those countries  have not yet established a reputation in this field.

In-House CROs and CMOs

When pharma companies started outsourcing offshore and working with contract organisations, many local (home-based) facilities gained excess plant capacity. The idea of In-house CRO or CMO is to set up an operation in such a way as to benefit from the advantages of working with contract organisations and eliminate the disadvantages. The CRO/CMO is local and works in the facility and with the equipment of the parent company. Some examples: Merk (outsourced development of biosimilar drugs toCRO Parexel) Eli Lilly and Sanofi-Aventis (outsourced to CRO Covance).

This outsourcing option offers additional advantages:    

• Provides local access to skilled labor coming from former Big Pharma companies
• Allows the drug business to maintain  focus on innovation with  reduced system costs 
   

Insourcing

Although outsourcing and offshoring are often associated neither implies the other.

• Outsourcing -  relocation of processes to external providers regardless of the provider’s location
• Offshoring - relocation of jobs and processes to any foreign country, without discerning whether the provider is external or affiliated with the firm;
  • If between firms → outsourcing- one company commits to another company (located abroad) some of its activities or services, through a subcontract.
  • If within firms →insourcing- one company transfers some of its activities or services to a foreign affiliate of its own group.
  • Both cases have an international dimension.

Insourcing consists in hiring external expertise that works remotely or on-site, as a natural extension of in-house resources. In- sourced employees belong to a third-party staffing, supplier or CRO that supervises their work;it is mostly used for manufacturing because it allows better control over the project and reduced transportation costs. Insourcing co-exists with outsourcing (UK and US outsource and insource work equally).

Some Big Pharma companies are insourcing in offshore countries, through an in-house direct investment by establishing their own research and innovation centers in Asia (GSK‘s neuroscience research centre in China)

Offshore Outsourcing:

The first pharma offshore outsourcing model was the business process outsourcing (BPO) to India. Soon, the evolution and maturity of the Indian BPO sector resulted in a shift from BPO to KPO (Knowledge Processing Outsourcing). KPO’s provide typical domain-based processes, advanced analytical skills and business expertise, rather than just process expertise; KPO professionals are qualified in pharmacy, science, biotech, research and analytics, have communication and analytical skills, and are English proficient.

Although India has been the outsourcing country of choice, India’s pharmaceutical industry is  confronted with a talent crunch;  other emerging low-cost countries such as Ukraine, the Czech Republic, Belarus, Romania, China, the Philippines, and Malaysia are the next candidates to KPO outsourcing; countries like Russia, Ireland, Israel, and Canada are also likely candidates. 

INTERESTED IN LEARNING MORE ABOUT THIS TOPIC?
		Contract Manufacturing for Pharmaceuticals and Biologics Asia In 2011, Big Pharma is all about strong collaborations & working with a few strategic CMOs that can guarantee supply & quality.

Labour Market

Developed economies, such as the U.S.A. and Western European countries are facing an immense talent shortage of highly trained and specialised professionals in some knowledge-intensive high-skill sectors, such as R&D, IT, medical services, legal services, etc., as well as manufacturing.

The pharmaceutical business model is moving away from a fully integrated company organisation towards a network configuration, to ensure efficient competitiveness and innovation in the global market place.

 

Contributor:   Cristina Falcão

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