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Pharmacos feel the squeeze, says consultancy

Written by Lautaro Vargas
Wednesday, 02 April 2008
Krishnan Rajagopalan of PA An often misguided and antiquated perception of the capabilities of the outsourcing industry is preventing a global pharma industry showing signs of decline from relieving much of the pressure it is under according to local technology consultancy, PA Consulting. PA’s Krishnan Rajagopalan says 9,000 pharma jobs have been lost worldwide in the last six months and significant revenue losses are forecast for many pharmacos as they feel the squeeze of near-term patent expirations, shrinking ‘blockbuster’ pipelines, increased competition from the generics industry and a trend towards personalised medicine. A trending down from double digit growth in the industry is also forecast and cost pressures remain intense with customers, shareholders and regulators requiring increased customer service and compliance and reduced operational costs. According to Rajagopalan, however, innovative outsourcing can play a major role in successfully lowering costs while maintaining the rigorous standards demanded by relevant regulatory bodies, though the pharma industry would first need to undergo something of a cultural shift in attitudes towards outsourcing. Following an address at leading Life Sciences products and services conference, INTERPHEX 2008, Rajagopalan said: “Companies should be ready to talk so they can be more open. For example many are worried about the regulatory aspects and just don’t do the risk analysis. “If they did, they would see that many of the companies are capable of meeting all the necessary regulatory requirements. The second that the pharma industry feels some revenue pressure, they put more money into marketing and R & D. They also try to in-license from other companies and have looked at the acquisition of small firms to give themselves a more robust drugs pipeline.” A prime example of this is AstraZeneca and its acquisition of CAT and MedImmune. Not only has it given AZ a whole new pipeline of drug candidates, but it has given it expertise in a completely new market – biologicals. “Every pharma company is trying to develop a new strategy, e.g. diversifying into generics as that is where the industry is heading,” said Rajagopalan. “Some are going into biologicals, but they are all thinking ‘where can I go?’ and these discussions are happening at the very top level. Once cost saving trend is cutting the workforce. In the last six months almost all pharma companies have had to lay off people, 9,000 have lost their jobs in the sector in the last six months worldwide. A second trend is a more aggressive outsourcing policy is being pursued.” Rajagopalan said that while outsourcing – including offshoring – has become an established approach for many large and small organisations to assist in driving profitable growth from a manufacturing perspective and is starting to become more widely adopted for services as well, many firms have been disappointed by the results of outsourcing. Typically, outsourcing strategy and deals are poorly designed or executed and the governance organisations put in place to manage the outsourced functions or processes after the deals are signed, are ill-equipped or lacking the key competencies needed to drive significant value creation from outsourcing. Also, many firms implement one-off deals, often in disparate areas of the business, without considering the impact on “value creation or destruction” at an enterprise level. The net business outcome is that there is often significant ‘value leakage’ and unfulfilled expectations from outsourcing. Rajagopalan believes that to overcome these kind of issues companies need to take a closer look at outsourcing specialists and once they do, they’ll appreciate just how much the industry has moved on how wide its competency range has become. “Outsourcing today not only provides cost savings, but is better also for a competency advantage. The industry has matured and companies rather than just saying ‘do this’, are now beginning to ask ‘how can we collaborate?’” The increasing opportunities available from offering truly world class outsource solutions is evident at the Institute of Food Research (IFR) in Norwich which has just launched a new service to provide solutions to the short-term problems of companies in the food and pharmaceutical sectors, offering expert consultancy, training, research and analysis. The aim is to provide high quality service to industry with a rapid response time. Speed of response will play a major factor in growing the industry and has been identified by the UK government as one of the factors needed to achieve its goal of making the UK a world centre in medical research. The Government’s pharmaceutical industry competitiveness task force identified speed of trial initiation and data delivery, data quality, and cost as the principal factors pharmaceutical companies use in deciding where to conduct clinical research. Set as favorite Bookmark Email This Hits: 499 Trackback(0) TrackBack URI for this entry Comments (0) Subscribe to this comment's feed Show/Hide comments Write comment Show/Hide comment form This content has been locked. You can no longer post any comment.