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When should you outsource drug development

Copyright © DrugPatentWatch. Originally published at When should you outsource drug development

For pharmaceutical companies in flux, contract services are playing a pivotal and more diverse role in the drug development process. The rapid growth of the contract research organization or CRO industry in the last decade has been accompanied by a surge in the amount of outsourcing, both by pharmaceutical and biotech companies in the same period. Representatives of CRO, contract manufacturing (CMO) and contract development and manufacturing organizations (CDMOs) discuss business, technical and other important challenges that influence outsourcing practices for drug development.

These CROs understand the value of being a research partner to the companies and have succeeded by identifying that it’s their knowledge and not simply their technology or data that make them crucial allies throughout the phase of drug development.

According to a recent report titled Drug Discovery Outsourcing Market Forecast 2016-2026  by Visiongain, a business intelligence provider based in London, the drug discovery outsourcing industry will grow over the next decade and will reach $43.7 billion by 2026. More than 80% of bio-pharma experts have reported a growing alliance activity compared to what it was five years back. Getting expertise and ideas from external sources is a highly established practice in the drug industry, with over 33% of all drugs in the pipeline of the world’s top 10 pharmaceutical companies being initially developed elsewhere, according to a Wall Street Journal article by Jonathan D. Rockoff in 2014.

In fact, AstraZeneca recently shifted its global headquarters to the UK at the heart of the Cambridge Biomedical Campus (CBC) to harness the scientific might of the university. Between 2013 to 2014, the company established a handful of R&D outsourcing partnerships with top academia organizations like Medical Research Council Laboratory of Molecular Biology (MRC LMB), Cancer Research UK (CRUK) Cambridge Institute and Academic Drug Discovery Consortium (ADDC).

Pfizer has adopted a similar strategy in the US by positioning many of its R&D facilities close to important bioscience hubs like La Jolla in California, Massachusetts and Cambridge.

Why Should Companies Outsource to CMO Pharma Companies?

The decision to outsource has to be based on strategic, long-term goals that address and overcome any glitches in internal capabilities. Outsourcing reduces financial risks by restricting a firm’s capital investments like real estate and lab equipment, while transforming rigid costs to variable costs since researchers are CRO employees and do not belong to the pharmaceutical company. It can also work well for biotech companies as it permits them to hold back from partnering with major companies and retain a larger chunk of the ownership of the original drug.

A lot of money and time is saved in the drug approval process if a company decides to outsource part of its work. For instance, when a drug is delayed in getting to the market, it can result in an estimated revenue loss of over $1 million. Speed and quality are issues here, with sponsors agreeing to outsource to get a study completed in a short time. And because of the complexity of the studies, companies are also willing to pay a fat amount to ensure attention to detail and accuracy.

The stringent regulatory environment is another reason for outsourcing. For instance, approval time for New Molecular Entities (NMEs) went up to 15.6 months in 2000 from 11.6 months in 1999. Also, the rate of approval for newer drugs is on the decline, with just 21 NMEs being approved in 2010 compared to 56 in 1996. Considering the huge amount of data and growing complexity required for the drug approval process, it’s sensible for companies to consider CROs with significant experience in assembling NDAs that will get through regulatory oversight.

Things To Know Before You Outsource

The question that follows whenever a drug manufacturer wants to work with third party companies is which company should you work with? The solution lies in the specifics of your drugs and current capabilities.

What type of drug you plan to roll out and what’s the market potential? The drug class will determine the technology and technical expertise needed for effective development and outsourcing. The size of the market is an important factor to gauge your requirements and select the partner with the space you require. The perfect contract manufacturing company will be able to support you right from the clinical trials to the commercial scale.

What’s the state of your in-house capabilities? Based on your requirements, you may be on the lookout for an exhaustive manufacturing and development solution, or seek out a strategic partner who may be able to fill in the gaps in your competence. The phase of your drug is equally relevant; your requirements in a manufacturing partner may vary during clinical trials and commercialization.

At the end of the day, you’d despise the idea of working with a CMO who lacks the capabilities you require. Having an idea of your outsourcing requirements and timeline up front permits rapid identification of CMOs who can work on your project.

Important Considerations

Some typical outsourcing issues that have to be considered by sponsors are:

  • When to outsource
  • Selection of the right vendor
  • Cost-effectiveness
  • Retaining in-house expertise
  • Ethical and regulatory issues
  • Patient recruitment

While cost is an important factor for selecting a third party manufacturer, it normally ranks at or close to the bottom of survey responses for outsourcing selection criteria, especially unassisted responses. If assisted, it can rank higher. Important selection criteria include elements like competence in a specific therapeutic area, a strong reputation and speed, and the ability to deliver study participants.

Late Kishin Kripalani, Ph.D. once propounded the “decision tree” theroy for companies looking to outsource drug development. Dr. Kripalani used cost-effectiveness as a benchmark for outsourcing and emphasized that companies should ask the following questions:

  • Are in-house resources available to us?
  • Will these resources be used on the project?
  • Is it economic to do the project in-house?
  • Can it be done fast enough?

If the answer to all the questions is “yes,” it indicates that the work has to remain in house while a “no” to any of the questions would translate to outsourcing.

Jane Malek of Ernst & Young fame has some guidelines for establishing a close outsourcing relationship:

  • Establish measurable objectives and goals
  • Maintain mutual respect and readiness to learn from each other
  • Ensure both the parties equally benefit from the relationship
  • Take the help of leading management support
  • Track and measure performance continually and provide feedback
  • Set up a progress review process
  • Define communications and conflict escalation/resolution process

The overall objective while choosing a CRO is to develop a relationship that is mutually predictive and productive. There are many benefits of maintaining such a relationship like reduced drug development timelines, better compound quality and significant cost-effectiveness.

The Fundamental Considerations


Is the business financially sustainable and viable? A thorough analysis of the fundamentals of the business allows companies to find out whether the CRO will be a growing concern for the study duration. Apart from that, sponsors will like to know if the CRO will be there for the next five or six years, when the regulatory body comes to inspect. It’s easy to get the financial information for publicly traded CROs, but if it’s a privately held company, there needs a bit of scrutiny.


Does the CRO understand and comply with the regulations no matter where they are operating from? Important questions include: Do they have a remarkable archiving system? Do they have the proper quality assurance in place so that FDA regulations are met?


Are they capable enough of handling the project at hand? It’s best to study the CRO’s current workload to determine if they have the required resources and expertise to handle the project.


Do they have the capacity to adapt to changing situations? Find out if they have the resources to deal with the project. For instance, if a study suddenly demands reanalysis of data, can they respond appropriately and swiftly?


Does the CRO of your choice has the necessary expertise and experience in the area of your need? The sponsor has to ensure that the CRO has a proven track record whether it’s in clinical trials, assay development or any specific therapeutic area.


How effectively does the CRO measure quality and does it have any powerful processes to continually check for quality? Quality essentially relates to how adept the CRO is when it comes to identifying its flaws, how fast it is at reporting them and the procedures adopted to prevent such errors in future.


Companies developing a new medical device or drug should consider the benefits of focusing on what they do best-development- and use the services of external experts to their utmost potential. Doing so will result in budget clarity and high value counsel and advice, which reduces the time to market and the cost of getting there. Companies looking to outsource to CROs need to first address some of the challenges and questions before partnering with them. Finally, outsourcing drug development can prove to be a boon as it accelerates the development process with minimum risks and pitfalls

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Copyright © DrugPatentWatch. Originally published at When should you outsource drug development
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