Magazine Article | June 1, 2009

Insourcing Is The New Outsourcing In Biopharma

Source: Life Science Leader

By Stephanie Wells

As patent expirations loom and economic and regulatory pressures increase, the pharmaceutical and biotech industries are looking for new ways to bring compounds to market quickly, safely, and cost-effectively. The amount of time and investment required to conduct, analyze, and document clinical trials has grown enormously in the past 25 years, and many pharmaceutical companies have chosen to focus on pure research, while contracting out development and regulatory work to contract research organizations (CROs).

Contract research already accounts for more than 17% of total drug development spending, according to the Tufts Center for the Study of Drug Development, and this number is likely to increase. With dependence on contract research increasing, CROs are finding new, creative ways to embed their expertise in R&D pipelines. One of these new outsourcing ideas is sometimes called “insourcing.”

Insourcing: Outsourcing Services In House
While outsourcing research has been used for years in the pharmaceutical industry, “insourcing” is a newer phenomenon where the outsourced service is typically done in-house. For example, a hospital could contract for a vendor to operate a laundromat within its facilities, or a hotel could contract for a Starbucks to operate a coffee shop in its lobby. The benefit in both cases is a win-win where the hospital and hotel don’t have to worry about inventory, turnaround, or quality. In the biopharma world, insourcing provides a great level of efficiency that helps the drug makers cope with the increasingly challenging environment they face.

“Depending on which report you quote, something like 50% of today’s blockbuster drugs are going off patent in 2011 or 2012, which is a truly serious challenge to big pharma’s possibilities as well as their revenue,” says Stephanie Wells, corporate senior VP for marketing and chief marketing officer at CRO Charles River. “Insourcing can help them get new products to the pipeline faster.”
Insourcing creates strong partnerships between CROs and the drug makers. Where outsourcing was often built on bids for lowest-cost services, insourcing requires a deeper relationship based on how much the CRO can provide.

In today’s environment of increased litigation, regulatory oversight, and focus on drug efficacy, the drug makers benefit from insourcing, with CRO employees working side by side with the pharmaceutical or biotech scientists to find the right, novel compounds.

Agility Is Key To Biopharma Success
Additionally, the mergers and acquisitions taking place in the industry force biopharma firms to define their core research capabilities as they try to assimilate not only resources and people, but also strategies and important cultural considerations. Insourced CRO services can readily flex as necessary to help in making those adjustments and achieve efficiency as quickly as possible.

A large CRO firm like Charles River can add a broader range of insourced services than might immediately come to mind. For example, the firm opened a 52,000-square-foot facility in 2008 for the National Cancer Institute (NCI) that splits responsibility down the middle. Half of Charles River’s work at the facility is for NCI research, while the other half is dedicated to an animal breeding facility — a vivarium — that matches the research needs of the NCI half of the building. This arrangement not only makes the research more efficient but also makes it easier to adjust to changes that come down from the regulatory environment. For example, with the FDA constantly moving the needle on what species they want tested, how early, and whether they want supplemental testing — having a first-class vivarium on-site is extremely helpful.

“The word is ‘agility,’” says Wells. “A CRO like Charles River can build and operate a vivarium meeting the specifications of the preclinical testing and shift those operations according to changing clinical needs much more efficiently than a pharmaceutical company can — while at the same time running the clinical side of the building with equal skill and efficiency.”

Blended Model Of CRO Use
The growth of insourcing means that the future of contracted work is likely to be a blended approach. In some cases, the CRO would provide traditional external services, like general toxicology studies or Phase II clinical studies. In other cases, when a client is working in a new area and has not yet developed the necessary infrastructure, partnership with a broadly capable CRO means that many necessary services in the new field can be performed on an insourcing basis, including the help of an insourced “navigator” group of ex-FDA personnel who can guide the new compound through studies that ensure it has the best chance of proceeding efficiently through the regulatory process.

Whether insourcing or outsourcing, the blending model assures critical operating efficiency. Few companies can afford to have a significant percentage of their resources on hold as the unpredictable nature of drug discovery disrupts their plans. Partnership with an insourcing CRO makes it much easier to “flex” resources to the immediate issues at hand. The CRO can ramp up or down with a level of scalability not possible for the biopharma firm.

“We have major resources, from hundreds of research professionals to hundreds of research rooms that can be adapted to multiple purposes,” says Wells. If a client wants to move beyond their in-house capacity in terms of space or people, or needs access to a room necessary for a particular type of study, we are there to help. This is especially important to companies who are changing their market strategy and are working on areas away from their traditional therapeutic focus.

Facilities are available around the world, operated at highly consistent standards, to provide rooms and employees to clients in need. These facilities, rooms, and human resources are available to clients much faster than a client could provide internally,”

Wells believes there will be a moving equilibrium between what work the biopharma firms want to do in-house — literally “on premises” — and what the firms want to outsource. Because of the benefits of blending, these firms are discovering creative ways to go beyond traditional boundaries that open up various types of insourcing and broad-faced business partnerships with the CRO industry.

“And the more capability the CRO has, working with a high level of flexibility, efficiency, and the trust of a deep relationship, the greater the chances for creating a win-win for both parties,” Wells concludes.

Stephanie Wells is senior VP and CMO at Charles River ( She has more than 25 years of international experience in the healthcare industry, including a clinical biochemistry background. Prior to joining Charles River in 2007, she held senior global marketing positions at Bayer and Johnson and Johnson. Wells holds the equivalent of a bachelor's degree in Medical Laboratory Sciences and Clinical Chemistry from Paddington College, London.