These are challenging times for pharmaceutical companies as investors lose confidence in the outlook for the industry. This change in sentiment is largely based on the shrinking pipelines. It was demonstrated graphically in the share price fall of GlaxoSmithKline following the fanfare presentation of their pipeline in December 2003 and by the 11 per cent share price fall in Merck & Co., Inc. when they ceased development of their diabetes drug in November 2003.
According to Lehman Brothers, big pharma firms launched, on average, 59 drugs per year between 1998 and 2002. However, they estimate that, in the period 2002 to 2006, only 50 drugs will be launched in total. In the face of this situation, pharmaceutical companies will be forced to consider many new initiatives including, of course, reviewing value for money in their operations.
One way that many corporate operations are achieving this is looking to offshore business process outsourcing, which can deliver 40 per cent to 60 per cent cost savings. This article considers the example of clinical trials data management and then looks generally at what the challenges are, how they can be addressed and what key points need to be considered in moving any work offshore.
In research and development (R&D), the pressure is always on. Pharmaceutical companies worldwide are struggling to be first to market and so first to profit from new products. Faster and more accurate clinical trial results to clear the way are a mission critical issue, especially when generic competition is coming in more and more rapidly. Speed and accuracy are not all, however.
R&D budgets are becoming tighter, while the workload continues to increase. The quest is also under way for a way to achieve no-compromise quality clinical data in the most cost-effective way.
Clinical trials are the most expensive and critical part of drug development, so what are the alternatives to decrease time to market, decrease clinical trial costs and improve quality? There are two main options.
The first is to use technology to speed up the process. The second is to improve the current process to increase the responsiveness and reduce costs significantly.
Investing in electronic data capture technology to enable data capture at the point of collection by doctors and nurses is often proposed as the best way forward in speeding up clinical trials. The benefits are that the information is gathered as speedily as possible with minimal time delay enabling rapid analysis and submission of data. The cost reduction available is estimated to be around 20 per cent according to PriceWaterhouseCoopers.
The concerns are the investment required and the need to re-engineer the whole process. This includes training nurses and doctors in the new technology and winning them over to the new way of working. In summary although the rewards are potentially high, realizing them requires a significant investment in behaviour change and this represents a significant risk. The significant and risky nature of this approach has limited its take up to date.
An alternative approach is to look at improving what is currently done in terms of data capture in order to increase responsiveness and reduce costs significantly. This can be done by using quality offshore business process organisations that work 24/7. This will deliver a responsive service at 40 per cent to 50 per cent of the current cost base. Increasingly, business organisations are using this approach for improving key processes with minimal changes required in the field or front office. For pharmaceutical companies, the use of offshore organisations for data capture is a proven service.
Outsourcing is a well-trodden path for R&D departments within the pharmaceutical industry. Over the past few years, many have begun to license more of their technology and products from outside companies, especially biotechnology start-ups.
However, what needs to be considered in outsourcing critical business processes offshore? Clearly there are key issues that need to be addressed:
Reasons for Outsourcing Offshore
Offshore outsourcing is an option major global companies are now looking at to deliver immediate and substantial cost savings, the key drivers being:
- to respond to increased competition;
- to concentrate on core activities;
- to reduce fixed and variable costs; and
- to make processing more efficient.
The opportunity is more attractive today given the reduction in telecoms costs, improvements in reliability, and the growing maturity of third-party providers.
Over the last six years, this industry has grown by over 85 per cent per annum and now employs over 80,000 people in India and the Philippines, although this number is expected to increase significantly over the next few years.
Key Success Factors in Moving Work Offshore
Getting the start-up phase of the project right is key to a successful option, initially assessing through a diagnostic by which activities can and should be remotely located offshore. Addressing fundamental issues such as whether the process can be successfully performed offshore and what will be the bottom-line impact to the organisation. What is the ease of training and transition of work and what are the technology and infrastructure requirements?
Significant time should be spent in upfront planning and transition for any migration offshore, clearly defining standard operating procedures, processes, expectations and deliverables both internally and with your service provider. The focus should be on efficient transfer of processes offshore with a minimum loss of production and without compromising productivity and quality deliverables. Process flows should be clearly documented to show step by step what needs to be delivered, when and by whom. In working with a remote service provider it is critical that communications are clear and that processes and documents are concise and accurate.
It is important to focus on quality from day one. Across the industry, some projects never get off the ground due to inadequate planning and implementation. However, producing a well defined transition strategy that is managed by a combined project team and setting key activities, clear milestones and expectations is critical to success. Delivering quality during migration is essential; however, quality should also be structured to bring continual improvements once the process is offshore.
- WNS Global Services