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Global Outsourcing and Vendor Management: Key Influence Factors and Strategies

Few would argue that global outsourcing is accelerating at an increasingly rapid pace. But what does outsourcing really mean to business, and what is it worth?

By far the fastest-growing area of R&D spending is outsourcing. Exceeding $60 billion in 2016, sponsor company spending on contract R&D services is growing at six times the annual rate of spending on internal staff, infrastructure, and technology support. Clearly, pharmaceutical and biotechnology reliance on outsourcing is high and increasing. Sponsor companies have continued their push to lower their operating costs while leveraging expertise to help manage growth in drug development pipelines.

In the pharmaceutical industry, about one-third of all drugs in the pipeline of the top ten pharmaceutical companies were initially developed elsewhere. Astra Zeneca, for instance, has been in the process of moving its global headquarters to Cambridge to harness the university’s scientific knowledge. Pfizer has undertaken a similar strategy in the United States, having positioned many of its research and development facilities close to major bioscience hubs. Bristol-Myers-Squibb has collaborated with Allied Minds, a Boston-based group on the commercialisation of academic research to scour American universities for innovative drug discovery ideas, and GlaxoSmithKline has recently teamed up with the University of Leicester to develop novel drugs against blood cancer, showing that the outsourcing trend is an international phenomenon.

Why do companies outsource?

• Pharmaceutical companies are increasingly outsourcing different activities to vendors as a strategy to stay competitive and flexible in a world of exponentially growing knowledge, new technologies and an unstable economic environment. Globally, the pharmaceutical industry is facing strong pressure to contain costs and therefore the expense is largely being directed towards outsourcing.

• Because of frequent interaction between sponsors and vendors, the topic of vendor oversight is at the centre of attention. Because of the outsourcing strategies employed, the question arises if vendors are doing what they were hired to do and if they are adhering to the quality necessary. With the growing use of contract research organisations (CROs) and other vendors, leaders in the field raise their concerns about increasing speed on pharmaceutical matters, like the increasing complexity of clinical trials, rapid recruitment of patients, or finding the best vendors or investigators for one’s own trial, and quality, while trying to adapt the vendor oversight processes per International Council for Harmonisation (ICH) Good Clinical Practice (GCP) E6 (R2) guidelines.

• Companies use outsourcing to enter the market to avoid delays in hiring and infrastructure development, as well as to prevent internal resistance to new ideas. A pressing question for pharmaceutical companies is how best to organise the R&D activities to improve productivity and flexibility: which activities to keep in-house and which to outsource to CROs? Processes that are usually outsourced include medical writing, submission planning and publishing, regulatory data and information management, local regulatory affairs, pharmaceutical-chemical writing, labelling, agency liaison, regulatory strategy, translation, administrative documents, dossier conversion, and literature searches, etc. The regulatory affairs function most likely to be outsourced include labelling, electronic core technical document (eCTD) assembly, training and submission tracking, indexing, and archival.

• In practice, this means that a CRO can provide quick assistance in a task that is urgent and can be outsourced, or that would otherwise burden the company’s personnel. Anyway, getting ideas and expertise from external sources is a well-established practice.