Outsourcing about cost reduction more than anything else says Deloitte

By Gareth Macdonald

- Last updated on GMT

Related tags Pharmaceutical industry Pharmacology

Outsourcing mainly for cost reduction
Outsourcing mainly for cost reduction
Drug companies still outsource to make fixed costs variable rather than to try and improve their public profiles through sustainable sourcing according to a Deloitte analyst.

This week ​experts told us that, while cost reduction remains the primary motivations, sponsors are beginning to take contractors' environmental impact into consideration when making outsourcing decisions.

Jim Miller, president of PharmSource Information Services, told us e​nvironmental concerns are also a factor Miller said, adding that: “Pharma companies definitely try to minimize the impact of drug production.

For instance, synthesis of intermediates during manufacture of small molecule APIs can often result in toxic by-products. Process chemists work to refine or change processes to lessen or eliminate those toxic by-products as much as possible​.”

Cost reduction

While this may be true, outsourcing really is still about cutting cost according to Doug Plotkin from Deloitte Consulting LLP.

He told us “Organizations in the pharma industry may well consider environmental impacts in their outsourcing decisions, though ultimately cost savings and the other primary drivers still take precedence​.”

While pharmas have a direct interest in drug development, and component sourcing via a clean supply chain given the environmental, economic, and reputational benefits of green chemistry, the link to green ‘outsourcing’ is less direct and less common​.”

That said, Plotkin suggested that working with greener contractors could help reduce drug company costs.

Choosing sustainable suppliers could lead to reduced costs in the long run as the return on innovation is realized, and reputational risks – with their own costs – are mitigated.”

Aside from cost reduction - “if costs aren’t going down deals rarely are completed​” – Plotkin cited access to scientific and business skills not available internally, acceleration of the development process and regional markets as the other key drivers for outsourcing.

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