Outsourcing simply refers to delegating tasks, functions or activity to an external body or third party. In the world of pharmaceuticals, it refers to the delegating of a part or the whole experiments involved in drug production to a CRO (Clinical Research Organization). Outsourcing is quite common for pharmaceutical industries all over the world but especially in the U.S and Europe. Access to quality experts, specialized regulatory documentation, lower costs, access to technological advancements like medical testing are some of the greatest benefits which are shaping the industry’s capacity for development of new drugs. This is because the development of one small-molecular drug might take 15 years on average, costing around US $2 billion and still may not reach the market after clinical trials. If it does get approved and reach the market, only an even smaller percent become a blockbuster.
Recently, pharmaceutical companies have turned to external sources of innovation to fuel their depleted R&D pipelines. Driven by the market need of big pharma to deliver innovative new products, this search included new models for open innovation, such as open sourcing, crowd-sourcing, public–private partnerships, innovation centers, science parks, and the wholesale outsourcing of pharmaceutical R&D. With their lower cost base, these new players, viewed as more entrepreneurial and less risk-averse than the established players, promised a new era of cheaper, more efficient, more innovative R&D.1
This article covers the different outsourcing models available today, the benefits and risks of outsourcing in this industry and the revolutionizing of different approaches to the outsourcing model. Drug discovery has also been revolutionized recently by different computational approaches like artificial intelligence (AI) because drug discovery and development was a prolonged process previously.
The outsourcing of pharmaceutical innovation was positioned as a response to the perceived failure of pharmaceutical research and development to innovate and improve R&D productivity. The sudden availability of softer, cheaper money from banks, governments, and institutions underpricing R&D risk have improved the outcomes. There have also been several high-profile success stories, namely those fabled unicorns capitalizing upon increased investment from these sources.2 Advances have also been made using Information from ChatGPT by pharmaceutical companies for drug discovery and development. These ChatGPT-derived pieces of information have triggered drug discovery and development processes to move more quickly. At the same time, it has also helped the pharmaceutical industry to develop more drugs that will benefit patients by reducing research time and manpower effort for drug research.
Types of Outsourcing Models
The top 10 CROs generated approximately $34 billion in revenue in 2022, representing an estimated 69% of total revenue spent on contract clinical services globally. Other estimates of the total global CRO services market report $76.6 billion for 2023 with expected growth of 10.7% CAGR to $127.3 billion by 2028.
During the last 10 years, two primary outsourcing models are common– Fullservice (FS) and Functional service provider (FSP). They have characterized the predominant approaches and have been the topic of much debate. Sponsors using full-service model outsourcing engage CROs to support a wide range of clinical trial activities; sponsors using functional service models outsource specific services for a given function (such as medical writing or clinical monitoring).
There are conflicting reports on which model FS or FSP delivers better performance. Recent articles in the trade press suggest that there has been a shift toward FSP model usage. A recent article in Applied Clinical Trials states that large biopharma company use of FSP outsourcing is growing at more than 13% annually. Wide variation in outsourcing practices suggests that FS and FSP distinctions are inadequate to capture the range.
Recently, Tufts Center for the Study of Drug Development (CSDD) and ICON devised a new framework to differentiate sourcing models based on type of contract services. Rather than using traditional definitions this novel approach uses the CRO’s infrastructure and processes for clinical trial conduct resulting in mixed models and combinations of sourcing models.
This classification was based on outsourcing orientation, infrastructure support, and accountability or contracting structure. The framework further accounted for outsourcing model variation and combinations currently in use and includes characteristics of managed services (including full service and single or multiservice), mixed models (or blended); functional continuum (embedded and FSP) and internal pharma managed or in-house models.
A major finding showed that FSP outsourcing is the primary model in use at this time, representing nearly half of all clinical trials in the sample. It also is the most common model for clinical monitoring and data management. This result is not surprising, given that clinical monitoring and data management require high relative study costs and are exceptionally labor intensive.
Another from the same study explained that in-house sourcing is the most prevalent model for study start up, project management, statistics and programming, and medical writing. There are, however, many other models being used for these functions, ranging from four to six different models per function. This study also found that full-service outsourcing was primarily used for oncology clinical trials while functional service provider outsourcing was the predominant model for non-oncology trials.
It is also interesting to note that embedded and staff augmentation were the least-reported outsourcing models used. There was no usage of embedded for five of the six functions, with the exception of medical writing, and was never reported as the main model. In the embedded model, also referred to as FSP 2.0, the vendor takes on additional levels of responsibility compared to FSP and augmented models. Perhaps biopharmaceutical companies have not yet adapted to this approach for a majority of functions.
But outsourcing is not a trouble-free solution. The outsourcing strategy has proven to be an effective way to reduce the cost and shrink the time-to-market but brings with it significant quality risks that must be recognized and properly managed.
Cost, quality and time to market are three main factors for outsourcing management. A game theoretic model is used to design optimal outsourcing contracts including these three factors for a buyer and a supplier under full information case and asymmetric Information case where the buyer does not share her internal variable cost information with the supplier.
Outsourcing risks are one of the challenges big pharma industries have to cope with in the evolving globalization of today’s world. Also identified mistakes that increase outsourcing risks as defined by Barthelemy. (Barthelemy, 2003)10. These mistakes include; wrong choice of external executor, inadequate coverage of risks with provisions in contract, elimination of subjectivity in perception of situation, loss of control over outsourced activity, not comprehending hidden costs of outsourcing and failure to develop an alternative strategy
Conclusion
While the pharmaceutical sector is also suffering an economic crisis like many other sectors, leading to limited profits on new drugs development. The different models of outsourcing R & D used in the biopharmaceutical industry to improve drug production and standard before competing in the final market. There are still challenges, but despite these challenges, outsourced R & D approaches have improved outcomes for drug discovery and production.
Recommendation: To choose an outsourcing model, it's ideal to explore a model that fits into not only a pharmaceutical R & D but their business goals and market solutions. Each model has various personalized pathways. So this way, benefits are better achieved and risks are minimized.
References
1. Schuhmacher, A., et al., 2019. The art of virtualizing pharma R&D. Drug Discovery Today, 24, pp.2105-2107.
2. McMeekin, P., Lendrem, D.W., Lendem, B.C., Pratt, A.G., Peck, R., Isaacs, J.D. and Jones, D., 2020. Schrödinger’s pipeline and the outsourcing of pharmaceutical innovation. Drug Discovery Today, 25, p.483.
3. Chakraborty, C., Bhattacharya, M. and Lee, S.-S., 2023. Artificial intelligence enabled ChatGPT and large language models in drug target discovery, drug discovery, and development. Molecular Therapy: Nucleic Acids, 33, p.866.
4. Vecchione, A., 2023. CRO Industry Report. Contract Pharma.
5. Henderson, L., 2020. The rise of FSP outsourcing in drug development. Applied Clinical Trials.
6. ISR Reports, 2021. Clinical development outsourcing models. 4th ed.
7. Getz, K., Shah, S., Luithle, J. and Travers, M., 2022. Redefining CRO sourcing model terminology to optimize outsourcing strategies. Applied Clinical Trials.
8. Lambarti, M.J., Smith, Z., DiPietro, M., Barry, J. and Getz, K., 2023. Outsourcing Model Usage and its Relationship to Clinical Trial Performance. Applied Clinical Trials.
9. Zhu, X., 2016. Managing the risks of outsourcing: Time, quality and correlated costs. Logistics and Transportational Reviews, 90, pp.121-133.
10. Kikekov, I., Salinka-Miceska, M., Pavlovska, K. and Arsovska, A., 2020. Strategic outsourcing in the pharmaceutical industry. Knowledge – International Journal, 50(4), p.440.
Assessed and Endorsed by the MedReport Medical Review Board