Hit by a perfect storm of heightened regulatory scrutiny anda tougher business climate, life sciences companies are scrambling to find waysto cut costs and expand revenue. This has led to a growing trend across thelife sciences industry as all departments, including research and development,are no longer considering if and when they should outsource, but how much.
In a supercharged business and regulatory climate, lifesciences companies large and small are turning to outsourcing vendors to managetactical tasks and help them adopt best practices. In a constrained businessenvironment, companies are finding that good partnerships bring addedefficiencies, the potential for greater market share and the skills andcapabilities that enable products to be brought to market more rapidly andmaintained well in diverse markets.
There are many reasons why companies turn to outsourcingpartners: additional capacity, resource flexibility, cost savings, developing anew capability, process improvement and process standardization, to name a few.Given that regulatory submissions have quiet and busy periods, outsourcingoffers a cost-effective and flexible way to manage the peaks and valleyswithout the need to retain a large in-house staff.
The growth of electronic submissions has encouragedcompanies to turn to outsourcing partners more frequently to manage productsubmissions. In part, this is a response to the need for additional resourcesto support affiliates, but it is also a result of electronic submissionstandardization that has allowed for greater consistency in how submissions arehandled across geographies. It means regulatory practices that once were quitefragmented are more streamlined, allowing vendors to step in and manageclients' submissions quickly and consistently.
While staff at pharma companies frequently handle such tasksas regulatory submissions, vendors do so day-in and day-out for variousclients, thereby developing a level of proficiency that no pharma company couldhope to emulate.
What's in and what'sout
Regulatory outsourcing is now fairly well-established, witha large number of companies turning to partners to manage operational tasks,including report publishing and submission publishing. A smaller number haveengaged partners to assist with submission planning and regulatory datamanagement, and while only a small percentage are using outsourcing partnersfor regulatory information management, many plan to do so in the future.
Acrossthe industry, companies are waking up to the plethora of regulatory data thatneed to captured and updated, and more are assessing whether this may be besthandled by an outsourcing partner.
The one constant in outsourcing is change. While companieswere once reluctant to outsource anything other than back office tasks, that'sno longer the case.
In a survey on R&D outsourcing conducted by KPMG of 12pharmaceutical companies, less than half keep analytics in-house, with theremainder outsourcing this to some degree. All companies, however, retain theirgenomics entirely. Whether that will change in the coming years remains to beseen, but as Vicki Phelan of KPMG notes, many areas that are now beingoutsourced would not have been just five years ago.
Regulatory leaders from several major companies note thatalmost all aspects of regulatory operations, with the exception of dossiermanagement, are likely to be outsourced in the near future. Almost all,however, say establishing the regulatory strategy and managing the interactionwith the agency will remain in-house.
But how much a company is willing to outsource and the wayit chooses to partner varies significantly. While one leading pharma companyhas chosen to outsource regulatory functions to a significant degree, anotherhas taken a shared-services approach, a third is still trying to find itscomfort zone with outsourcing and a fourth is constantly changing its vendorpartners. The trend in outsourcing, therefore, is that companies are doing it,but how and why is far from cohesive.
The pros and cons ofoffshoring
Life sciences companies are accustomed to partnering withlocal vendors and contractors, but with the growth of emerging markets andsenior management eager to cut costs, many are looking farther afield. Withreduced overheads and access to highly skilled personnel, offshore outsourcinghas a lot to recommend it.Salaries and overheads are substantially lower in emergingmarkets, allowing companies to realize dramatic cost savings.
Equally appealingis the promise of follow-the-sun capacity, meaning submissions can be worked onaround the clock and thus delivered to agencies far more rapidly. As thetraditional markets of Europe and the North America diminish, the need toexpand into emerging markets has become a central plank in the business plan.Having an offshore partner in some of those key emerging markets, therefore,gives companies access to local expertise and knowledge of how regulators inthose countries like or expect to receive submissions.
Despite the benefits, several lingering concerns remain.Data security is high on the list of concerns, as is providing systems accessto a third party in a secure way.
Companies also worry about the reliability ofoffshore partners, the seamlessness of handing over critical tasks, as well ashow that relationship will be managed from afar. While offshoring promises extensivecost savings, companies do worry whether these savings are sustainable overtime, particularly as jobs markets tighten.
Offshoring also raises concerns around business continuityand disaster recovery. For example, if a company has outsourced document submissionsto a China-based vendor and that partner is affected by a natural disaster thatcauses a business interruption, companies need to know what programs andpolicies are in place to ensure timelines can be met. Before signing a contractwith a vendor, life sciences companies need to ensure offshore partners havethe infrastructure in place to manage disruptions or disasters, and know thatthey can trust that partner to follow through.
As some companies are finding, it is imperative to do fulldue diligence when contracting with an offshore partner. If a vendor has a highstaff turnover, problems with consistency are inevitable. It is also importantto ensure the vendor partner is trained in the company's systems and processesand that good relationships are established between the groups that will worktogether.
A pervasive problem in pharmaceutical outsourcing,particularly within R&D, is fragmentation. Rather than taking a cohesiveapproach to engaging outsourcing partners or developing a strategy that cutsacross departments, each function has turned to its own preferred vendors tomanage various aspects. However, there is a heavy cost implication to thissiloed approach. Instead, companies need to take a broad look at theirpartnerships and determine how best to streamline their use of vendors.
Recognizing the cost and time-saving potential of a single-source solution forsubmission management, one leading biopharmaceutical company has chosen tooutsource its entire document publishing process to a trusted partner, thoughwhat it refers to as dossier management, or the broader oversight of the entiresubmission, will be retained in-house.
Increasingly, companies are looking for partners that canprovide end-to-end support, including the technology, the processes and thepeople. Process improvement is a critical need for companies, so partners thatcan deliver that capability are keenly sought.
Managing the relationship
While almost all life sciences companies are outsourcinglarge parts of their business, many are dissatisfied with their vendorrelationships. A Business Insights report notes that 35 to 55 percent ofsponsors are dissatisfied with projects. This high rate of disapproval suggestsfar too many partnerships are being entered into without due process.
Beforeembarking on an outsourcing partnership, companies need to establish somecritical parameters.First, an appropriate governance structure that is properlyfunded and staffed is vital, as is setting and defining expectations. Next, regulatory leaders say a relationship manager needs tobe appointed to ensure there is cultural consistency, and to step in whenissues need to be resolved. That person needs to be adept not only at dealingwith the executive level, but also must be in tune with what's happening at anoperational level and be able to bridge gaps between the two groups.
Aproactive way of managing feedback between the partners is also regarded asvital to successful outcomes.
Success also requires the involvement and buy-in of seniormanagement and all the stakeholders. Equally, it is imperative to establish andstick to parameters, be those cost, process or timelines, and create atransparent environment for collaboration. Given the high percentage of dissatisfaction,it also makes sense to prepare for possible failure and be prepared to makecontingency plans.
Lastly, experts say partners need to establish how outcomeswill be measured relative to the client's needs, be that service-level metricsor deliverables. These parameters are all the more important because of thegeographical distance that is likely to exist between client and vendorpartner.
The future for regulatory outsourcing is bright andexpansive. Life sciences companies have a lot to gain through goodpartnerships, but rushed and ill-considered collaborations potentially couldcost organizations more than they save.
Paul Chung is director of CSC Life Sciences' RegulatorySolutions Group practice, where he oversees all aspects of the company'sresearch and development, quality management and global regulatory servicesdelivery functions, as well as CSC's offshore operation in Tianjin, China.