Clinical outsourcing a threat to biopharm innovation; study
Large pharma companies ramped up outsourcing to CROs (contract research organisations) to cut fixed costs and increase flexibility as the patent cliff approached. However, the move to an outsourced drug development model could have long-term implications for pharma innovation.
“The move away from the integrated in-house model may have been a rational response to pressures in the industry but is problematic from the innovation perspective”, researchers wrote in the journal Technovation.
Outsourcing may cut knowledge creation and learning opportunities that arise in a closely integrated development process. Also, when third-parties handle summarisation of results biopharm firms can miss opportunities for evaluation and reassessment of data that can lead to new clinical insights.
By loosening their grip on drug development large pharma companies may also have lowered the barrier to entry for biotechs. “The new emerging network model with a fragmented development process has enabled CROs to enter the industry and offer their expertise”, the researchers wrote.
While the outsourcing model may help smaller biopharm companies emerge it could also harm their development. Smaller companies “often lack statistical and biometrical expertise”, the researchers wrote, so struggle “to critique and challenge what the CRO has delivered”.
Large and small biopharm companies that rely on third-parties for innovation may benefit from using niche CROs. The researchers found that at smaller CROs “greater operational autonomy is used to stimulate innovations in service provision” whereas some larger providers follow “strict parameters”.
Managing outsourcing
Despite innovation concerns the researchers found no evidence work is being brought back in-house and evidence from surveys, such as this from RW Baird, suggest outsourcing penetration is rising.
“The process of innovation has shifted from one of closed systems, internal to the firm, to a new mode of open systems involving a range of players distributed up and down the supply chain”, the researchers wrote.
Companies must learn to manage outsourcing. The researchers wrote: “Most important is the need to manage the potential knowledge losses from outsourcing within a complex matrix of inter-related development phases, technical functions, and activities at project, programme and system levels”.
To cut the potential for loss of knowledge companies “need to consider use of common IT platforms, incentives for openness and transparency, and the level of technical and contextual understanding when outsourcing to CROs”, the researchers wrote.
Cross-functional teams and staff secondments can help. By giving functional experts at the CRO and pharma company access to each other relationships can develop to support knowledge sharing.
