Point of View

The Pharmaceutical Industry Sourcing Landscape in 2011: Pharmaceutical Outsourcing Expands To Include Core Services

June 30, 2011

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The pharmaceutical industry provides essential support to the healthcare system by innovating, manufacturing, marketing and supplying drugs. Over the last few years, the most prolific change in the industry has been the expansion of focus, from primarily research and development to include, among others, sales and marketing and process re-engineering. The industry is not only re-examining the investment it makes in research and development, it is also attempting to move away from the traditional approach of direct sales.

In addition, on an average, it takes 8-16 years and costs between $800 million to $1 billion for a pharmaceutical company to develop a single drug. The expensive, lengthy drug development processes, especially those that do not produce results, are a big concern for the pharmaceutical companies, and the failure rates affect the profitability. To increase the efficacy of the R&D efforts and control the expenditure, pharmaceutical companies have begun working with other research companies. The reliance on partners, externalization, and collaboration with third parties is indicative of the new business model companies are adopting to stay afloat.

In the quest to develop innovative drugs, pharmaceutical companies have to be prepared for high capital investment and high risk. This is further accentuated by the pressure from generic drug companies and peer competition. The revenue generated from “blockbuster” drugs dominates the overall revenue of a firm and eventually decides the firm’s position in the market.

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