However, pharmaceutical outsourcing is leading to many complex issues such as shared patent portfolios, exclusivity, confidentiality, and so on. Outsourcing in these areas is also leading to the development of many critical skills and technologies in developing countries, helping them raise their technological capability with relatively modest investments.
Another significant area is healthcare BPO services. They are emerging into the market with increased visibility beyond the traditional back office functions. The market for outsourced services from the healthcare industry alone is estimated to be worth $3.6 billion in 2004 to $ 24 billion in 2008. Healthcare and its managed care organisations is a late entrant into a global sourcing market, observed a recent report by First Consulting Group (FCG)
The US managed care industry is highly fragmented with aggregated US hospital/physician and health insurer healthcare IT spending close to $26 billion in 2004, according to Data Monitor. Hardware and software both account for around 35 per cent of the total US healthcare IT market, while services amount to 30 per cent.
By 2008 forecasts exceed $34 billion with health insurer spending amounting to $7.5 billion and hospital/physician spending at $26.7 b. During this period services will have caught up with hardware with 33 per cent market share.
Impact to the India sourcing market is estimated to be a total BPO ranging from $3.6 billion in 2004 to $24 billion in 2008. Healthcare would comprise an emerging subset of that market potential.
Although most US managed care organisations tend to be risk averse and conservative decision makers, global sourcing to support BPO and ITO and joint related services remains a high potential growth area.
It is also clear that BPO emergence significantly increases the potential technology services market size. Today, about half of US Health Insurers use sourcing tactically or strategically.
Healthcare service providers now must have in-depth knowledge of key products to serve hospitals end-to-end needs from front-end applications to back-end integration and managed services.
The market focus appears to be shifting away from traditional "best of breed" end to end solutions vendors to partner closely with service providers to insure overall integration focus and business operations improvements.
BPO's critical success factors require more areas of expertise than traditional ITO. In fact, the needs to re-engineer, transform and consolidate healthcare operational areas represent new requirements and differing management approaches. New firms from India have already entered this market to provide niche services in the US.
With the global healthcare industry increasingly under pressure due to regulations and the need for cutting cost, there is a huge potential for Indian IT companies to tap this market, particularly in the more advanced areas of healthcare such as imaging, disease management and claims processing, say experts.
While at present there are customers mainly from the United States and United Kingdom, industry players say, of late, demand for healthcare outsourcing has also been seen in European countries like Germany and France.
Besides India's inherent strength of quality human resource pool, the Indian companies have an edge as they can offer a large number of value added services like diagnostic analysis by highly qualified medical professionals at a much cheaper cost.
The healthcare outsourcing market can be primarily divided into four major blocks of providers (hospitals and physician groups), payers (healthcare insurance companies, third party administration, etc), drug manufacturers (clinical research and bulk drug outsourcing) and pharmacy chains.
Several Indian companies are presently providing solutions such as customer management systems, maintenance of electronic medical record services, etc. to healthcare service providers, health insurance companies and lifesciences and medical equipment firms.