Pharma Explores Uncharted Territory

Chris Paddison
Chris White
Carol Cruickshank

In an industry in which one incorrect data point can lead to grave consequences, pharmaceutical companies have not been eager to jump on the global outsourcing bandwagon. The risk is too great, the perceived reward too small. Today’s push and pull dynamics, however, are changing attitudes and strategies.

On the push side, a trio of pressures is weighing heavily on the minds of senior executives. Between 2003 and 2008, blockbuster drug launches will drop from 14 to just four, drugs accounting for US$72 billion in sales today will be off patent, and the annual number of new drug launches will be nearly halved, dropping from 60 to just 34.

On the pull side, global outsourcing cuts costs. Conservative estimates suggest that by outsourcing various general and administrative functions, the top 10 pharmaceutical companies could save from US$5 to US$8 billion in the coming years.

But as the authors discuss, the bigger opportunity lies in R&D. As low-cost countries, particularly India, offer more sophisticated services and a secure environment in which to operate, leading pharmaceutical companies are finding that the riskier option is in not stepping beyond old boundaries.