Outsourcing in Pharma

BY- HARISHANKAR SAHUMBA PM07

DEFINITION

Key Drivers

Types

Advantages

Disadvantages

Conclusion

Outsourcing Value

DEFINITION of 'Outsourcing'• Outsourcing - the current mantra of pharmaceutical

industry .• A practice used by different companies to reduce costs

by transferring portions of work to outside suppliers.• Outsourced activities can be in various fields’ right

from the drug discovery till manufacturing of the products.

• Outsourcing process is basically contract based.

Key Drivers of Outsourcing

• Focus on core strengths.• Reduced operational cost.• minimize ownership cost.• Decrease time to market.• Enhance service portfolio, etc.

Type of Outsourcing…

• Outsourcing in pharmaceuticals is broadly divided into

Research & development outsourcing.

Clinical trials outsourcing.manufacturing outsourcing.Packaging outsourcing.Sales & Marketing outsourcing.

Research & development outsourcing

• Area covered-– All development process.– Development of production process.– Development of drug delivery system.– Development of standard technologies. Example Divi’s Laboratories offers services like development of

process design for new drug candidates as well as impurity profile studies, process validation to MNC’s like Pfizer etc.

Nicholas Piramal outsourcing for Siegfried of switzerlands for development of P’ceutical products.

Clinical trials outsourcing• Clinical trial outsourcing services involves obtaining clinical

study data of molecules in the pre launch stage.• Outsourcing of clinical trials is done by CRO’s – CONTRACT

RESEARCH ORGANISATION• A CRO is an organization that provides support to

the pharmaceutical industries in the form of research services outsourced on a contract basis.

• They conduct whole phases of clinical trials as well as single phase also like pre-clinical study, phase III study.

Clinical trials outsourcing• Examples– Biocon’s , Clinigene division conduct clinical trails for Vithal

Mallaya Foundation, for Cuban firm- testing of monoclonal antibodies for head and neck

cancer. And Testing for novo Nordisk, glcoxylated haemoglobin in

diabetes patients.– Suven, offers services like in-vitro testing , pharmaco-kinetics

and even toxicology studies upto preclinical development. In therapeutic category like antidepressant, anti AIDS, anti-cholestrol and anti-hypertension, it serves the clients like Hoechst, Du Pont, Degussa and Abbott.

manufacturing outsourcing• Manufacturing outsourcing involves the supply of active

pharmaceutical raw materials, API ingredients, formulation as well as intermediates.

• Outsourcing in manufacturing process is basically contract based.• In India majority of the companies are looking towards the

outsourcing process.• Recently the bulk drug contract manufacturing contributes to 77%

and API manufacturing contributes 55% of total contract manufacturing .

• world market for contract pharma manufacturing will reach $79.24bn in 2019. It will rise from $54.54bn in 2013. (According to Pharma outlook report).

manufacturing outsourcing• Examples

– Glaxo India is producing ranitidine bulk for Glaxo Wellcome.– Ranbaxy outsourcing Cefachlor manufacturing for Eli Lilly.– Lupine outsourcing D2 amino butanol for Cynamid.– Kopran Research Laboratories Ltd. Outsourcoing for Synpac

laboratories for supply of Penicillin-G bulk. Other outsoucing manufacturing company-

• Kremoint Pharma Pvt.Ltd• Mackur Lab Pvt Ltd• Parnax Lab Ltd• Maxheal manufacturing Pvt.Ltd etc

Indian company CRAMS partner CRAMS products

Lupin Labs

DMS (United States)

Fujisawa (Japan)

Apotex (Canada)

API for Cephalosporins

Cefixime

Cefuroxime, Axetil, Lisinopril

Nicholas PiramalAllegran (United States)

Advanced Medical Optics (United States)

Pfizer (United States)

Bulk drugs and formulations

Eye products

APIs & formulations for veterinary products

Wockhardt Ivax (United States) Anti-ulcer

Dishman Pharma

GSK (United Kingdom)

AstraZeneca (Sweden)

Merck (Germany)

Intermediates and APIs

Nexium

Losartan

Source: Assocham, Frost & Sullivan analysis

Contract Research and Manufacturing Services Deals

25%

15%20%

55%

15% 15%

0%

10%

20%

30%

40%

50%

60%

Discovery API development

Dodage development

API manufacturing Dosage manufacturing

Packaging

Extent of Outsourcing in Each Area of the Value Chain 2013

Ext

ent o

f Ou

tsou

rcin

g

Outsourced Core Functions

Outsourcing Value

Source : www.frost.com• Late life-cycle outsourcing – API manufacturing represents the highest share Drug discovery, development activities and dosage manufacturing – potential future areas

Advantages of Outsourcing

• Outsourcing reduce the overall costs by 30% to 35%.• Its Faster and cheaper.• Reduces drug development cost.• Reduces problems faced during the regulatory processes

around the world.• Improve manufacturing efficiencies.• Reduce excess production capacity by divesting facilities.• Minimize investments in capital-intensive facilities.• Improve net earnings and cash flow.• Divert resources to focus on other competencies like

marketing .

Disadvantages of Outsourcing

Managerial control loss. Vendor relationship management risk. Internal talent loss.

Conclusion

It’s a great challenge to successfully manage the outsourcing relationship and generate value.But Outsourcing solves the problems for the pharma companies and allows them to exploit the potential of new drug discovery technologies.

Reference

• http://www.investopedia.com/terms/o/outsourcing.asp#ixzz3kOhXn0Q5 .

• http://www.businesswire.com/news/home/20150130005621/en/Research-Markets-2015-Trends-Global-Clinical-Development#.VcjeC_mqqkp

• https://www.kpmg.com/Ca/en/IssuesAndInsights/ArticlesPublications/Documents/Outsourcing-pharmaceutical-industry.

HARISHANKAR SAHUMBA PM07