The Next Generation of Outsourcing

How collaborating for downstream commercial activities can drive value, agility and optimize business operations across the biopharma commercial organization.

In the coming years, biopharma companies will face increasing pressure, both financial and through the pace of technological change, to adopt commercial operations outsourcing to maintain competitive advantage.

For decades, all industry segments have taken advantage of outsourcing. By tapping the infrastructure and expertise of external partners, companies are able to cut time and cost from their production processes, optimize the business, and more rapidly adapt to shifting customer and market needs. It also frees them to focus more resources on their core expertise, which drives innovation and makes the brand more resilient.

The biopharma industry has achieved many of these benefits, particularly through the outsourcing of clinical development, manufacturing, and basic IT functions. Though we have only just begun to harness the full value these services can bring to the table.

From improving sales to streamlining analytics and regulatory affairs, outsourcing has the potential to significantly increase efficiencies across the development lifecycle, with the greatest potential benefits achieved in downstream commercial functions. In a recent study, co-led by QuintilesIMS and pharmaphorum, researchers found that along with cutting costs, commercial outsourcing can help pharma companies more effectively manage the pace of disruptive change in commercial functions through flexible models that blend internal and external resources as a way to combine long-term shared knowledge with a more liquid short-term workforce.

As the strong growth of contract manufacturing (CMOs), contract research (CROs) and contract sales organizations (CSOs) demonstrates, the ability to rapidly scale resources up or down as needed and offer immediate access to specialist knowledge, without a long ramp-up or expensive ramp-down, is a critical factor for successful commercial efforts. This flexibility is particularly important where internal restrictions on headcount or external factors, such as labor laws, are rate-limiting.

Overcoming Obstacles

Despite these benefits, 44 percent of pharma companies don’t yet outsource any of their commercial activities, and those that do, they often take a fragmented approach. Primary market research is the most commonly outsourced commercial function (59 percent), followed by analytics (40 percent) and market insight (32 percent). Outsourcing bits and pieces can limit how much value companies can derive from outsourcing commercial activities, and may lead to miscommunication that limits opportunities for outsourcing synergies. This risk grows when companies use multiple outsourcing vendors, each working in isolation with no clear view of the broad project goals or stakeholders.

Biopharma leaders cite many reasons for their caution in outsourcing commercial activities, including a desire to retain control of this process, fears about data privacy, and uncertainty about the process. They are particularly concerned about outsourcing commercial functions that sit close to the strategic core of the business or that involve critical intellectual property.

However, executives interviewed for the report could see a path to embracing commercial operations outsourcing if certain criteria were met. They want more transparent pricing from vendors, demonstrable ROI, and clear case studies and evidence of successful engagements.

All of these goals can be achieved if companies chose a strong partner and communicate their expectations up front. Though it is also important to set realistic goals and to work with outsourcing partners to identify areas where they can see the most value and set viable timelines for ROI. In the study, for example, 64 percent of executives expect to see a return on investment in a year or less, which may not be realistic depending on the sales cycle and product strategy. We also found that executives prefer a fee for service pricing model, even though we have seen greater value derived through outcomes-based payment models that are built around risk-sharing and strategic alliances.

No Time to Waste

Executives who are interested in pursuing commercial outsourcing should evaluate their current commercial operations, to identify opportunities to gain efficiencies. Setting goals and charting a roadmap for a partnership-based approach to global outsourcing will set them up to generate the greatest return on these efforts.

Outsourcing transformations do take time, and the sooner companies begin this journey the better. Rapidly evolving market dynamics are driving pharmaceutical companies to broaden the scope of outsourcing across their commercial activities – a shift given further momentum and urgency by the explosion of big data emerging from an almost endless stream of sources, such as electronic medical records, insurance records, healthcare providers, and social media.

This is the time for the industry to accelerate outsourcing activities and learn from the experience of other industries, including aerospace, automotive and high tech. In the coming years, even the laggards will face increasing pressure, both financial and through the pace of technological change, to adopt commercial outsourcing to maintain competitive advantage.

Vishal Khanna, COP-BD, COP-GOV, is Vice President, Commercial Outsourcing Services, QuintilesIMS.