The 3E Principle & Outsourcing

By Dr. Chitra Lele , Chief Scientific Officer, Sciformix Corporation | November 9, 2016

Considerations in partner selection and outsourcing

Biopharmaceutical companies are facing new challenges and opportunities, caused in part by globalization as well as the growing and aging populations worldwide. Globalization increases the inter-dependence between countries and economic integration creating one market.1 As a result of this, outsourcing is growing in importance with reason to consider it going far beyond arbitrage.

Furthermore, the same companies are facing increasing pressure to simultaneously improve productivity and cost efficiency whilst improving quality and compliance in order to remain competitive in the market. Regulatory scrutiny throughout the product lifecycle has also significantly increased as regulatory authorities’ focus on product benefit versus risk profiles.2

Companies are also expanding their product portfolio and moving into new geographies, each with unique nuances. Drug discovery and development is becoming more complex and resource intensive despite technological innovations increasing automation of the processes. The result of these increased pressures and complexities is that the amount and types of outsourcing in the industry has dramatically escalated. The strategies adopted are diverse and can include captive centers, joint ventures with global outsourcing companies, expanded use of full service clinical research organizations (CROs), functional service providers (FSPs) as well as any other creative approaches companies can envision. An organizations decision to outsource is dependent on a great number of internal factors including its product portfolio, stage/phase in the product lifecycle, therapeutic areas, internal capabilities, expected case volume and complexity.

Considerations in selecting an outsourcing partner
When considering and selecting an outsourcing partner, three key areas should be analyzed, specifically in the context of outsourcing knowledge-based functions in drug development and post-marketing in the areas of safety and risk management, statistics and programming, scientific writing and regulatory affairs. Referred to as “The 3E principle” these include effectiveness, efficiency and economics. The three elements however differ in importance and priority for each company and by each function that is outsourced.

I. Effectiveness
Effectiveness comprises of delivering consistent and reliable services for quality and regulatory compliance. A significant challenge for the sponsor company to comply effectively comes from the sheer volume, magnitude and variety of the functions and tasks involved and the need to adapt processes to the evolving regulations. Outsourcing companies operating in niche specific areas, have the time and the resources to continually learn, adopt, evolve and comply with the changing environment.

II. Efficiency
Efficiency can be defined by the ability to manage the fluctuating workload with minimal impact of productivity and cost. Specialized outsourcing partners provide ‘just-in-time’ resources in fully outsourced or hybrid models. This can be done through streamlining processes and implementing lean methodology to drive process efficiencies leading to gains that are then transferred to the sponsors.

III. Economics
Cost reduction without compromising quality and compliance is a key principle when outsourcing and offshoring, therefore, labor arbitrage is an important reason. The outsourcing partner must be able to provide scale and skill by expanding the talent base available for the organization in a seamless manner while maintaining the economic advantage of outsourcing.

Globalization and outsourcing
Strict regulations, patient expirations and strong pressure on prices over the past decade have led pharmaceutical organizations to consider resource outsourcing and offshoring models.3 This allows companies to reduce costs, improve competitiveness, capitalize on external skills and increase their scale of operations.

As the amount and importance of the functions outsourced increases, partner selection decisions have become even more important. The globalization of CROs/CMOs (contract manufacturing organizations) offers significant cost advantages, particularly in regions such as India and China, which offer capable services at much lower costs. Furthermore, as outsourcing relationships develop and mature, many pharmaceutical companies are shifting their relationships to more strategic partner alliances. By streamlining processes and fostering trusted relationships companies can lower their risks in outsourcing.4

Safety and risk management
As patient safety is of paramount importance, in drug development and marketing regulatory reporting, compliance is critical for each reportable adverse event and each aggregate safety report. On top of this, conformance with company standard operating procedures (SOPs) is also critical.

Regulations are quickly evolving globally for safety reporting due to changes in the drug development process, globalization and the dynamics of collaboration in the biopharmaceutical industry. Pharmacovigilance tends to be under the most scrutiny from regulators, with noncompliance leading to serious consequences. Therefore, subject matter expertise and the ability to be on top of changing regulations are a key requirement of pharmacovigilance operations.

Effectiveness is particularly important and often a driving factor for outsourcing, and thus a mandatory requirement for any outsourcing partner. Therefore, for all sized companies this is the highest ranked principle. For small companies the lack of resources can prevent an in-house safety operations division. As small companies tend to be highly risk averse and only have a select portfolio of products they may be more likely to outsource to established near-shore providers rather than selecting an offshore delivery or they may use one outsourcing partner to minimize the number of partners they deal with.

Within mid to large pharma companies cost reduction is a major consideration when making the decision to outsource safety operations, particularly in post-marketing spontaneous reporting, due to the high volumes needing to be processed. Over the past decade the increasing pressures of R&D and cost reduction have meant the once core function of safety operations is increasingly being outsourced. The risk of this can be minimized by retaining strategy in-house and outsourcing safety operations. 

Within risk management and other resource intensive yet knowledge based elements such as writing periodic safety update reports, effectiveness and efficiency are the two most important selection factors above economics. The evolving regulatory landscape and growing constraints cause the availability of the right skills and expertise to be critical to operations. Therefore, organizations that make it their business to deliver domain-intensive services in safety surveillance and risk management, have led to the outsourcing and offshoring of some of these activities as well.

Scientific writing
Scientific writing encompasses clinical writing, which includes safety writing, regulatory writing and preparation of medical communications marketing literature. When considering outsourcing scientific writing, efficiency is the main criterion in partner selection as often resourcing considerations can cause more problems for compliance than the evolving regulations.  In today’s environment, economics comes in second and effectiveness is the third principle to be considered due the need for cost reductions.

Regulatory affairs
This focuses on regulatory strategy, regulatory operations and product labeling. The increasing focus on emerging markets, which often have poorly defined and evolving regulations, means that it is essential for organizations to have intelligence into the nuances of the markets. Hence, in large organizations effectiveness is the most important consideration, with economics and efficiency believed to be second and equally important. Whereas, efficiency is most important in process oriented activities such as dossier compilations, submissions and product labeling, followed by effectiveness and economics.

Within small companies access to the required expertise and knowledge is the main requirement in regulatory affairs. Therefore, effectiveness is most important, followed by efficiency and then economics.

Statistics and programming
Statistical services for the purpose of this article comprise of statistical contribution to study design, planning, oversight and the conduct of the statistical analysis of clinical trials and any other related data. The requirements for statistical resources have significantly increased in recent years as trial designs seek to be more efficient. Acquisitions and portfolio rationalization has caused the fluctuations in workload to become accentuated. Regulators also often provide new guidance documents concerning the direction for new statistical methodologies required to make design and analysis more efficient. Therefore, outsourcing partners need to stay attuned to the developments to have up-to-date, comprehensive knowledge of the subject matter. In comparison to the total budget and volume of clinical development expenditure, outsourcing for statistical work is relatively low and cost reduction isn’t a key factor for outsourcing these activities. Therefore, efficiency is the most important factor, with effectiveness second and economics trailing behind.

Within this article the areas of safety programming and mapping have been separated from efficacy programming. Efficiency is also the main driver in outsourcing domain-intensive efficacy programming work as the primary consideration is similar. However, due to the higher costs, because of the volume of work and amount of resources required compared to statistical work, effectiveness and economics are of equal importance.

In safety analysis and mapping data between standards, the volume of work for mid-to-large sized companies than smaller companies. Larger companies, however, do tend to have established libraries of programs and macros that can be used repeatedly. Hence, economics tends to be the primary driver for the selection of a provider for outsourcing, with efficiency second due to the fluctuating workload, and finally effectiveness.

Whereas, in small biopharmaceutical companies effectiveness is the most important principle for outsourcing decisions for statistics and programming, as typically they do not have in-house capabilities, with efficiency second followed by economics.

The three principals of effectiveness, efficiency and economics encompass the ‘whys’ of partner selection in outsourcing. The priority of these differs between organizations and between the functions being outsourced. Once these priorities have been defined by the organization, it is important to evaluate the outsourcing vendor’s ability to deliver these key elements. Particularly as the trend to outsource Pharmacovigilance functions looks set to continue, to enable organizations to meet the increasing volume and complexity of regulatory requirements, add scalability and create economies of scale to help achieve aggressive cost targets.

The collaboration between organizations and outsourcers is driving further specialization within provider organizations and creating a more proactive approach to PV, improving the safety of products. 

  1. Wadhwa, V., Rissing, B. A., Gereffi, G., Trumpbour, J., & Engardio, P. (2008). The Globalization of Innovation: Pharmaceuticals: Can India and China Cure the Global Pharmaceutical Market.
  2. Centerwatch (2013) Global regulatory affairs – role in the biopharmaceutical industry. 31 – 35.
  3. G. Festel, M. De Nard and T. Simmen, “Outsourcing of pharmaceutical manufacturing – A strategic partner selection process” Issue October 2014, Journal of Business Chemistry
  4. PWC, “How can pharmaceutical and life sciences companies strategically engage global outsourcing?” PWC, 2015.

Chitra Lele is chief scientific officer at Sciformix Corporation with over 20 years of experience in the healthcare industry. She has been part of the company’s leadership from its inception and has been instrumental in establishing and growing the organization. Prior to Sciformix, Chitra was executive director responsible for Indian operations of Pfizer Global R&D. With a Ph.D. in statistics from Stanford University, her prior experience includes work as a biostatistician in cancer epidemiology at both Stanford and University of California. Contact Chitra at chitra.lele@sciformix.com.
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