Vicki Phelan, Managing Director, Pharmaceutical and Life Sciences Practice
with Stan Lepeak, Managing Director, Global Research

The first blog in this series assessed the key drivers for the increased adoption of pharma research and development outsourcing (RDO). The second analyzed the benefits buyers seek from RDO efforts. This third and final blog in the series examines RDO risks and mitigation strategies.

Many pharma buyers understandably feel that the risks associated with RDO are higher than with in-house R&D because getting a drug to market in the most cost-effective and timely manner is a major contributor to the success and growth of any pharmaceutical company, and it is a strategic “core competency.” This, in part, explains the conservative manner in which many pharma firms approach RDO. As we outlined previously, the siloed approach pharma companies use in independently sourcing various R&D areas allows each functional area to have visibility into and control of only its own scope. While this strategy feels safer, from an overall corporate benefit standpoint the organization is leaving significant dollars on the table, and failing to leverage potential process improvement and end-to-end performance enhancements.

With this in mind, what is the best way to mitigate risk to ensure RDO success? There are four major risk categories that pharma firms must account for when undertaking RDO.

RDO Risk Mitigation

Risk Types	Mitigation Strategies
Execution	Ensure appropriate control, ongoing monitoring and communication Start with small projects and expand base on success and lessons learned Leverage SG&A outsourcing experience, teams and models and where practical consider expanding work in existing service provider relationships
Contractual	Develop strong  business terms focusing on intellectual property protection, privacy, compliance and indemnity clauses
Employee	Communicate strategy and plans clearly Focus on change management requirements, especially related to the transition process
Provider	Test a few providers, geographies and service models (onshore, offshore, nearshore) Monitor dynamics of large players expanding into RDO markets Monitor dynamics of smaller, specialized provider growth and market consolidation

Since many pharma companies have started with multiple small projects, almost all of which are distinct and separate from the other RDO initiatives, it is time to deploy a more overarching and integrated RDO strategy. There are several benefits to this approach:

• Better potential maximization of cost savings
• Employment of a select group of providers with consistent, measurable and tracked metrics to maximize accountability
• Development of partnerships with providers with demonstrated successes both onsite and offsite
• Establishment of a service provider landscape that provides for collaboration with the client and among the service providers

Words of Caution
Successful outsourcing of any kind requires ongoing communication between stakeholders and providers, as well as well-defined governance structures and processes. Additionally, there is certainly no room for a one size fits all strategy within RDO. A more orchestrated sourcing strategy will provide benefits that many pharma firms are not achieving.

Finally, pharma buyers must recall and leverage all the wisdom they have gained with their other outsourcing efforts. From involving key senior management to getting all stakeholders on board early to striving to maintain a transparent and fact-based process, these practices are as critical to RDO as to any other type of pharma outsourcing.

For the latest on the Pharmaceutical industry from EquaTerra, visit www.equaterra.com/pharma.

Filed under: How to..., Offshore & Captive Centers, Outsourcing, Pharmaceutical Industry by EquaTerra