Financial performance of large innovative pharmaceutical companies in 2010 indicated a gloomy prospect for these well-established leaders in their domain. This trend is expected to grow as many drugs are going off-patent in time to come, and with very few blockbusters drugs entering to market due to strict FDA regulations.
For instance, Pfizer, stands to lose huge revenue when its patent on Lipitor, the blockbuster cholesterol drug, expires. This will impact the sales and profit of these companies. Interestingly, these changes are giving opportunities to generic drug companies to boost their profit. For example, Teva, an Israel-based generic manufacturer recorded a 67% growth in 2010 as compared to previous year.
These trends in pharma market pose a great challenge for innovative companies in terms of cost reduction in R&D and bringing new drugs to market. With dwindling R&D budget, patent expiries and increased competition in generic business, contract research organisations have flourished.
The CRO concept was created to control the cost of in-house R&D and maneuvering the budget of big pharmas to improve their core skills and expand capacities. Seeing these prospects, CROs started offering services at all levels in value chain of drug discovery. They built their capabilities from early to late stage of drug development with emphasis on partnership, collaboration and fee for service models.
The selection of these CROs providing various services becomes critical in evaluation before outsourcing.
How these CROs present themselves to safeguard their needs and protect the interest of customer, depends on the business acumen of leader. Talent retention, avoiding brain drain from the organisation, upgradation of knowledge and bringing new technology is a healthy confrontation for the success of CROs.
For every challenge, there is an opportunity to grow and demonstrate their skills, knowledge, experience and capabilities. In present scenario big pharma is cutting the R&D budget and always keeping M&A strategy open to achieve top line growth. They are under tremendous pressure to bring new products to market at low cost, and maintaining the faith of stakeholders and patient community.
Various parameters which governed CRO’s choice
- Trust factor: In order to build any collaboration or business, it is really critical to have admiration for each other. This can put together by mutual understanding of cultural differences between partners and effective communication. Respecting each other requests and demands for commanding the relationship for fruitful outcome.
- Service and Price: The mode of service delivery and payment model become crucial in selection process. Whether the service being offered is at appropriate price and have infrastructure to bring the cost in control. How fast is the response time to address any urgent needs? How the reports are being generated and shared with customer. What are the IP protection techniques and security system in place for securing confidential data?
- Quality: The major risk which generally alerts anybody before outsourcing is ‘quality’. What are the tools, techniques and mechanism in place to supply the quality product? What standards are maintained in terms of GRP/GLP/GMP, how the documentation process is being implemented, what is the internal or external audit process, etc.
- Stakeholders: Investors acceptance and ethical considerations are important in making the bond stronger. There should not be any conflict of interest between the partners.
- Experience and expertise: Knowledge and skills of technical and non-technical team is vital to meet any kind of requirement. Learning new techniques, sharing knowledge and experience among themselves is important for building a successful team. Familiarity and proximity with technology is crucial for differentiation with respect to competitors. Success in new product development, exposure to new disease targets and excellent track record builds confidence in collaborators
- Infrastructure: It should be adequate enough to meet the current demands, and should have the capacity and capabilities for expansion. There should be strong back-up mechanism to handle/oppose any kind of eventuality that might deter the business process.
- Human capital: Aptitude and skill of people in-charge is key for success of any business. Human resource techniques/policies, recruitment process, talent attraction and branding of company is important for retention and magnetism. It is also critical to have employee engagement and development program to address current and future needs of employees to handle any upcoming challenges and responsibilities.
- Culture: The culture of any organisation speaks about the attitude, behaviour, approach and dynamism of the team. Environment in the company should be conducive for learning, innovation and performance of the employee.
- Supply Chain: For any service industry, it is important to have excellent supply chain department as it constitute backbone for organisation. Vendor management and sourcing of raw materials at reasonable price, helps deliver the service at low cost and quality.
- Information Technology: IT, which is really a backbone of any business today, drives all the process and systems in maintaining, securing and transferring the information from one end to other. Compatibility of IT infrastructure and their willingness to expand to new direction drives the business in positive direction and improve the relationship with customers.
In addition to these factors, it is really important to deploy the environment, health and safety protocols according to national and international standards. Customers really feel good when they are associated with Organisations that too have high standard of safety of employees and environment.
About the Author
Somesh Sharma has over 12 years experience in Medicinal chemistry and Drug discovery. He has formerly worked in Ranbaxy Research laboratory and Piramal Life Sciences. He is currently engaged in managing international outsourcing projects in Medicinal Chemistry domain.
