Supplier Landscape: how to meet your resourcing needs

It is stated that life sciences companies can use more than 60% of their regulatory resource on activities such as post-approval maintenance. While little competitive advantage is gained from this it is still vital for maintaining sales and for the brand asset. Outsourcing is therefore a logical strategy utilized by the industry in this area. When performed right, benefits include cost reduction, process improvements and accelerated approvals.

It should be noted however, that there are many factors influencing the success of an outsourcing partnership, that can only be determined through a deep understanding of the project in hand. This is something that the team at Regulink ensure is fully mapped out for all our clients, ensuring a transparent starting point when work with the chosen partner begins.

Also, due to the increasingly globalized nature of the life science industry in terms of the full drug lifecycle from development (including pre-clinical and clinical) to registration and beyond, the suite of services offered really is as broad as the profession.

Service providers also understand the need for local or regional expertise to help provide the competitive advantage for its clients, so these relationships are generally well forged and integrated into their businesses.

A degree of segmentation can actually be seen in the market in terms of both the services provided and also the geographical areas covered. Service lines can be crudely split into:

And the global market appears approximately divided:

Of course the larger organisations will cover the spectrum of both services and regions, using its reliable links and affiliations that leverage local or niche technical experience through other consultancies and independents.

Of course the larger organisations will cover the spectrum of both services and regions, using its reliable links and affiliations that leverage local or niche technical experience through other consultancies and independents.

Benefits of outsourcing

Without doubt, using an external partner can help, but there is no single solution for all, the requirements will differ from company to company, and what must be considered is whether the benefits ultimately outweigh the costs and risks.

Scalability

An agile resource pool that can adapt to the often-changing programme of work is a clear benefit to the industry. The very nature of the work outsourced, especially initiatives in CMC compliance can routinely see scope creep as the project develops.

Defining and fixing the scope at the outset can help minimize the opportunities for this, to avoid missed outcomes, extensions to timelines and inaccurate and un-optimized resourcing. There may be a need for some level of change during the project of course, but change-control protocols established at the start would manage these effectively.

Irrespective, a workforce that can be flexibly up- or down-scaled by the service provider, with minimal impact (mitigated by for example a ‘reserve bench’ of on-boarded team members trained in systems, processes and project particulars), is a key desirable of the hiring company.

Best practices and specialism

An outsourcer should have expertise in regulatory best practices in terms of systems, processes, and software packages. They also provide a large pool of skilled resource quickly and efficiently able to pick up activities, thereby alleviating internal resource pressures, and reducing on-going maintenance costs. In addition, the specialist knowledge that is available – whether it be for a therapeutic type, filing route, legal basis, local specifics etc., can be harnessed by the client flexibly, compared to other methods using external consultants or contractors.

Cost Efficiencies

Outsourcing is well understood to be a cost-effective and flexible solution, when compared to the fixed business costs of salaries, employee benefits, office space etc., if the work was to be completed in-house.

Capacity

Outsourcing allows the separation of a department’s core and non-core activities, enabling its internal resource to be utilised more effectively on perhaps its more critical or innovative priorities, which are likely to be revenue-generating compared to routine maintenance tasks.

Risk management

Risk can be managed and mitigated through the larger and broader range of resource expertise, who are able to stay current with regulations, thereby reducing delays or recalls due to non-compliance.

Prolonging asset value

By utilizing the available resource from an outsourcing partner, a company can be more proactive in compliance, post-approval and LCM, which has the benefit of prolonging its assets commercial life. Additionally, with the specialist knowledge in global and domestic regulations, an outsourcing partner can further add value through post-market research and marketing.

Speed to market

In theory, by externally increasing regulatory resources should lead to faster approvals and therefore a greater share of the market.

With an ever growing range of possible vendors at a Companies disposal, they are increasingly looking for something more individual. Cost effectiveness, quality, efficiency, flexibility and expertise and all the benefits now expected as standard, and indeed one would expect it from most of the top tier outsourcing vendors.

So what is the ‘X’ factor? Well this can vary, and is in fact only more recently emerging as something that Companies are looking for. It can actually vary depending on the Companies exact set of circumstances, and could be anything from a tangible service or benefit that a bidding vendor can provide. It could be a specific set of skills that are not commonplace, or it may be due more to the actual character of a vendor i.e. how they do business, their language, their personnel and their attitude to the industry.

This is just one of many key aspects that our highly trained Consultants understand and work with as part of the client service.

The benefits may be clear and well lauded, but there are risks too. Many factors will be scrutinized by the pharmaceutical industry before embarking on outsourcing, and these are often dealt with through an request for proposal (RFP) and RFI process with a number of potential vendors.

Flexibility and scalability, continuity planning, staffing, reputation, competence and expertise, responsiveness and location are just a few aspects that will be reviewed.

The RFP will cover the perceived risks, which must be satisfactorily addressed by the outsourcing partner. From experience, we would expect data security and confidentiality, transparency of costs, professional experience and expertise of staff, on- or near-shore support, oversight, communication all featuring heavily in this information gathering process.

With an estimate from several years ago that 50% or more of outsourcing engagements end badly, it emphasises how crucial it is to do the appropriate research and have a robust tendering process, not to forget good management of the relationship once the contract has been awarded.

Some common problems that industry has highlighted during research and interviews we have conducted, include:

In utilizing the resources and expertise provided by specialist external sources there exists different levels of client-supplier engagement depending on a number of factors such as, for example, client size and budget. A larger client organisation might involve a reduced number of only the larger established providers in the vendor approval process.

The outsourcing engagement types broadly fit into the below categories:

Functional Service Provider (FSP)

An organisation may choose to outsource an entire regulatory speciality such as CMC/LCM/labelling/PV/publishing etc for tactical reasons, enabling separation of core and non-core capabilities to focus on its revenue-generating activities.

The burden of employment and day-to-day management requirements are lessened for the organisation. However, it maintains strategic control over the outsourced area, which when implemented well, would be as directly integrated within other functions of the business as were it retained in-house.

Large pharma may use the FSP outsourcing model to address their capacity issues by supplementing their existing internal capability. This of course benefits in terms of cost and resource flexibility.

An example of use of such a model would be the large-scale multinational compliance programme. Critical for business in achieving successful health authority inspections and reduced recalls, stock-outs etc., they are however often lowest priority on the internal organisation horizon due to their cost versus revenue to the business. We have seen massive growth in these sorts of initiatives over the last decade or so, with some of the largest biopharma companies urgently striving to get their portfolios and registrations in order.

Where these projects are outsourced, either fully or partly (often in ‘waves’ determined by client priority), the provider always has responsibility for its success. Rarely would this be undertaken without close oversight from a client’s stakeholder team.

For smaller organisations with perhaps limited in-house capabilities, outsourcing services may be needed on an end-to-end basis (full business function such as RA or PV). This can be advantageous for clients needing to access a flexible, scalable, high quality resource pool as required. A provider with a deep experience in the full drug development lifecycle would partner well in such an instance.

Examples of this operating arrangement would be SMEs without internal regulatory, QA, PV. Or indeed an organisation without EU presence might consider this model (e.g. national or EU MAHs, wholesale distribution, QP, QPPV).

Hybrid

For those clients embarking on large programmes, outsourcing may be sought on a task or project basis. Hybrid models could for example employ FSP for domestic markets and E2E for international markets, leveraging the service providers presence and experience in those markets/regions. These partnerships can be long term, which is attractive to both parties as resource can be consolidated and competitive rates provided.

With decades of experience in outsourcing, the Industry is beginning to question the real cost effectiveness of outsourcing to off-shore locations. The problems with operating in different time-zones coupled with language and business culture differences can be a challenge, as well as the lack of client control over staffing (often with high turnover rates), all can negatively impact timeliness and quality of output.

Certain organisations have met this concern with a near-shored outsourcing model as an alternative to augment or even replace their more ‘traditional’ off-shore centres. Ireland, Latin America, Eastern Europe are becoming more recognizable hubs for the life science outsourcing industry. This is argued as being able to resolve the problem with a more controllable, stable and synchronized partnership, but delivering the same level of cost effectiveness to the clients. It is debatable whether an Irish-base (with its low tax regime) could actually compete with an off-shore centre in Hyderabad however.

Financial variants

In addition to the various operating structures available, a client Company may also choose from a number of financial models, or a combination, to maintain flexibility and/or budget control depending on their needs. Examples of these models could be milestone based, fixed cost, project based, unit priced, full time equivalent (FTE) etc.

The trend to outsource within the regulatory affairs function is evident, but what are the observable sub-trends within this movement?

Demand

The demand for regulatory services has increased for all company sizes. Small or mid-size companies, without established regulatory affairs departments and who are expanding in different regions are particularly contributing to this growth. Additionally, emerging and specialized areas such as biosimilars, personalized medicine and orphan drugs are fuelling this upward movement.

A rise in the quality of the services provided, which perhaps directly correlates to the increase in competition, will certainly lead to further growth. As will the improvements seen in another of the key vendor evaluation parameters – IT infrastructure and reliability, particularly in emerging regions where many of the service providers have their hubs.

Segmentation

The regulatory affairs outsourcing market is segmented very generally into pure regulatory consulting (and strategy), legal representation, authoring and publishing, product registrations and clinical trial applications and other services. There are of course global providers who deal with most of all of the regulatory spectrum, however they will still have areas of expertise.

Authoring and publishing dominates and is expected to remain as the major share due to the rising trend of outsourcing its non-core function. The expectation is that this area will account for over 35.0% of market share by 2025.

Consulting and legal representation is a fast-growing segment also, expected to grow 13% from 2014 to 2020. Representation is required where companies without established centres in its target markets need legal representation there to obtain their Marketing Authorisations. Growth can be attributed to evolving regulations and a need for consistent direct client-Agency interactions.

Product registration and CTA services is also growing significantly, through globalisation of marketing authorisations and clinical trials, seen especially in regions such as Asia pacific and Latin America.

Diversification

Opportunities for diversification of product portfolios can result from outsourcing too, through leveraging of knowledge and expertise in both product types and markets from the service partner company. The savings realized in finances and resource for the in-house regulatory department can then be re-directed to the client’s expansion plans.

Region

AsiaPac is expected to be fastest growing region where there is a highly skilled workforce available, at much lower costs compared to the US or Europe. Many of the larger outsourcing providers have established bases in this region and conduct the majority of their authoring and publishing activities here.

North America holds the largest share of the regulatory outsourcing market, estimated at more than 30%. Europe also typically has high ranking, like the US, partly accounted by their world-renowned regulatory bodies.

But with globalization of products, much is expected for the emerging markets countries such as Japan, Thailand, India and China. Growth upwards of 15% is expected here, fuelled by abundant skilled local resources and relatively smooth access gateways to their markets.

Competition and Partnerships

The number of service providers is increasing to meet the rise in demand, which encourages further growth. Strategic acquisitions are increasingly becoming commonplace as outsourcing providers are bolstering their service lines in line with the evolving regulatory landscape.

Also, the move from outsourcing isolated projects or parts of the regulatory process to the majority or the function has led to strategic partnerships being formed. This also is expected to increase, perhaps unsurprisingly since a close partnership is essential to effectively manage the complex nature of the function and provide continuity to the business, not to mention a neat way of spreading risk and accountability.