Pharmaceutical Industry Hooked Up by the Outsourcing Boom

The pharmaceutical industry has been slower than other sectors to adopt outsourcing, largely due to concerns over protecting valuable intellectual property. Rising costs and decreasing margins are leading more pharmacy companies to outsource.

According to an Outsourcing-Pharma.com., ten of the largest pharmacy companies, and four of those, have announced major initiatives to outsource manufacturing activities last year. The announcement identifies the increase as one of the top 10 strategic issues currently facing the pharmacy industry.

This transition towards outsourcing of manufacturing is likely to be followed by other functions within pharmaceutical companies, including some elements of R&D.

Actually, the movement of pharmacy R&D offshore already appears to be happening.

The continuous increase of outsourcing may help pharmacy companies gain business benefits other than cost reductions; this includes faster time-to-market for new products, entry into emerging markets, and an enhanced focus on brand-building activities.

Of course, a due amount of risks is present, that’s always a common factor in outsourcing. While pharmaceutical companies appear less concerned than before about the loss of intellectual property, it could well come back to haunt major pharmaceutical companies as the true cost and complexity of manufacturing becomes transparent. It’s also possible that contract manufacturers could develop enough expertise to compete head-to-head with former clients.

Though it’s not likely a direct concern of the pharmaceutical companies because removing jobs from the U.S. and Europe will affect those economies. Pharmacy accounts for 640,000 jobs in the European Union, including 100,000 in R&D, and a €34 billion (U.S. $53.4 billion) trade surplus. Because pharmacy drives so much economic activity, regulators may possibly attract their attention by outsourcing industry.