The insourcing model, where a vendor-managed laboratory service team oversees a scope of work directly at the client site, has gained momentum and become a strategic drug development option in the biopharmaceutical industry. This model can not only assist organizations to cope in today’s increasingly challenging R&D landscape, but can also provide a more flexible and cost-effective route to putting in place teams of specialists that can help companies meet the current demands for shorter development timescales.

This article will offer insights on the current insourcing landscape and assesses the key drivers for the adoption of the approach. The article will also consider the important factors for organizations in selecting the ideal insourcing partner.

The temporary workforce quandary
In today’s unpredictable economic environment, more organizations are choosing to refrain from adding employees to their payroll and are instead turning to external sources to meet the demands of their expanding pipelines. Biopharmaceutical companies typically rely on three staff types to ensure the proper use and management of external workers that would be offering services at their sites: temporary staffing, consultants and contractors, and external service providers or managed service providers. The first category of temporaries are co-employed and managed by the client; the second two categories are exclusively managed by the vendor.

However, history has shown, the use of a temporary workforce poses several challenges. Organizations that employ temporary workers face many restrictions in avoiding co-employment concerns, including turnover and continual training. They are also subject to strict Internal Revenue Service (IRS) guidelines, such as the 20 Factor test, which are used to determine whether or not a contingent worker should really be considered as an employee. Temporary staffing also does not provide security for long-term needs, as there is typically a limit of tenure for temporary employees.

The insourcing model
While outsourcing of laboratory services in the biopharmaceutical and pharmaceutical industries is a long-established resource strategy, insourcing has grown exponentially as a phenomenon during the past 15 years. The model enables a client to collaborate with a strategic partner who would hire, train and manage their own highly skilled team that can perform managed laboratory testing services in the client’s own laboratories and under its own quality systems. Adopting the approach means that organizations can benefit from the expertise of an outside team, while affording them the security associated with keeping projects, proprietary methods and analytical techniques in house. 

Clients may choose to adopt an insourcing approach for multiple reasons. One of the main reasons is that many may find it a challenge to get their own headcount approved. As publicly-held companies favor variable non-labor costs, this is where insourcing can prove invaluable. Insourced employees aren’t managed by the client; they are supervised by the professional scientific services (PSS) on-site leadership and typically are allocated through an outsourcing budget; meaning they aren’t added to a client’s headcount and are not co-employed.

Another reason is that often organizations have the space and laboratory equipment, require immediate turnaround time and scientific collaboration, but do not have the vital headcount. With quality system including processes and standard operating procedures (SOPs) already in place, all biopharmaceutical organizations need is the necessary expertise to manage and drive programs.

Key drivers for insourcing
There are several factors that are driving the insourcing trend, ranging from the high value nature of the work and the preference to manage risk on-site, to more technical decisions based on the timelines in which the activity must be completed.

Insourcing can build a truly collaborative work environment. Traditionally, client/partner relationships have involved the partner team working remotely at their own site. Insourcing involves a core team of qualified, experienced individuals   located at a client’s facility. By bringing partner companies and their clients together in close proximity, a greater emphasis can be placed on constant communication, idea sharing and joint problem solving, creating a real-time approach that serves to boost productivity.

This approach means that the insourcing provider is responsible for all of the recruitment, developing work schedules and managing productivity and performance. This not only reduces costs and time burdens, but frees up client time and resources to focus on core areas of their business.

Adoption of an insourcing solution also solves potential issues associated with hiring traditional temporary staff and avoids the turnover rate that these staffing programs routinely face by offering employees benefits and career progression. Accessing scientists on a long-term basis, as opposed to using temporary workers, can help to build expertise and keep talent inside the organization.

PSS is an efficient program with enormous emphasis on client service, ensuring value to the client’s processes. This becomes even more apparent when the costs associated with training and retraining are factored in. Insourcing gives clients the flexibility to build their resources quickly in the face of escalating workloads, while also allowing headcount to be scaled back in the event that projects dissipate.

Insourcing relationships also present a welcome option for organizations that may have disused laboratories and equipment available as a result of prior downsizing initiatives. Utilizing the opportunity presented by insourcing can ensure the most value is derived from these pre-existing assets.

The right insourcing partner
Once an organization has decided to embrace an insourcing model, identifying the right partner to collaborate with will be paramount to success, especially as the selected team is going to play such a fundamental and visible role within the client’s business.

Critical to success will be the partner’s tried-and-tested expertise of setting up and managing laboratories, as well as validating equipment according to a client’s SOPs and lean laboratory practices as needed. Organizations should work closely with prospective partners to understand their previous success in translating their capabilities into the client environment. It is also important that a partner company has a reputation for retaining talent long-term. Finding a company that can demonstrate a history of low staff turnover and focus on taking care of employees should be a prerequisite. 

It is also important to identify partners that are willing to agree upon quality and productivity metrics upfront. Governance meetings should take place on a regular basis so that the provider can give a detailed update on the effectiveness of the program and can demonstrate that they are delivering on their promises of high quality, safety and compliance.

Look to the future
Biopharmaceutical companies are constantly evaluating their strategies for more efficient and cost-effective drug development. Embracing the insourcing of professional scientific services enables organizations to leverage internal capacities by collaborating with full-time highly qualified scientists from experienced backgrounds, without any co-employment issues.

By maximizing the real-time exchange of scientific information and enabling high performing scientists to be engaged in a customer’s facility, the insourcing approach encompasses the best elements of external outsourcing and in-house R&D activities. It should be noted that insourcing can form a long-term strategy in supporting pipelines as well as providing the flexibility required in this sector. Trust and security in the partnership can provide strategic flexibility in meeting a client’s scientific needs for many years to come.

As the industry comes under increasing time and cost pressures, we will no doubt see continued growth of the use of insourcing programs. Their ability to offer direct control while enabling clients to tap into a much-needed pool of expertise will continue to prove key to long-term development success in today’s complex manufacturing climate.