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The opportunities and challenges for Health and Pharma outsourcing

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By Martin Conboy

PillsOrganisations in the healthcare and life sciences industry are experiencing significant opportunities as well as challenges. The industry in OECD countries is expected to be worth $US10 trillion by 2020. Pharmaceutical companies are facing times of unprecedented challenge; expiring patents, generics competition, clogged pipelines, pricing pressures, huge R& D costs which all contribute to major revenue losses. They face escalating costs, stricter regulatory controls and new and disruptive business models.

Is outsourcing the “pain killer” for this highly regulated industry? Outsourcing, in all its various forms, has a key role in shaping these developments and the future evolution of the industry.

Over the last few years pharmaceutical companies have significantly increased their presence in Asia. According to PWC this move reflects the increasing importance of Asia as an end-customer market, as well as companies tapping into an ever growing pool of quality and economical human resource capital.

The reasons to build direct or outsourced capacity in the region are compelling. China and India’s rising middle class, economic growth, as well as the growth in South East Asia, has created major markets for healthcare and pharmaceutical products. After all quality healthcare is a sign of increased affluence.

Though there are significant opportunities the drug companies also face some significant challenges. Recent research from http://www.researchandmarkets.com/ highlights that the escalating operating costs for every drug company compounded with pricing and regulatory controls mandated by governments have forced the drug companies to seriously revise their business models .

This combination of disruptive and legacy factors are driving these companies to adopt new technologies and to remodel their existing systems and processes. Streamlining internal operations and employing external resources have become mainstream core strategies.

A new R & D environment has emerged alongside a raft of new technologies in the development and testing of new pharmaceuticals. To stay competitive, drug companies need to develop better drugs with high success rates and low costs.

Research into disease biology, including target discovery and validation, is a new priority of all drug companies. Collaboration with biotech companies and other external resources is seen as a key method for bringing new and therapeutically sound products to market while controlling research and development costs. The process for clinically trialling new products is also being outsourced. According to the study from http://www.researchandmarkets.com/, the increasing complexity of clinical trials matched with the rapid emergence of new technologies has forced drug companies to work with external resources. And by locating clinical trials in lower cost territories such as China and India can potentially save up to 60% on costs and reduce patient enrolment time by as much as 30%. This has proven to be an effective approach for a number of drug companies.

Asian territories provide a significant cost advantage with manufacturing savings that can range from 50-80% of the cost that would be incurred if the manufacturing was performed in western geographies. Asia is where the knowledge and talent base is growing. The number of PHDs in natural sciences and engineering have flattened or declined in the US, UK and Germany since the late 1990s. Conversely, supported by government policies, it has been rising steadily in Asia. Outsourcing clinical trials is required because there are no regulatory agencies with enough trained people and resources to actually monitor drug trials.

The rise of Asia as a force in the research, clinical development and manufacture of pharmaceuticals will continue. It’s potential as a market for these products matched with its growing scientific base and capability will see greater engagement and investment from pharmaceutical and drug companies.

http://www.pwc.com.au/industry/healthcare/assets/PharmaOutsourcing_Oct08.pdf.

http://www.prnewswire.com/news-releases/global-pharmaceutical-outsourcing-market-report-2015—new-trends-on-the-horizon-300064158.html
August 6, 2015
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