Outsourcing or Insourcing: What’s the Right Choice?

Introduction

For years, pharmaceutical companies have reached outside their organizations to contract service providers for help with discovery, development, and manufacturing. Contract research organizations (CROs) and contract development and manufacturing organizations (CDMOs) have their own facilities, personnel, and resources to perform the services of the pharma company. The reasons to use CROs and CDMOs are many, but the main goals have been to help the pharma companies focus on core competencies and reduce cost.

In its 2017 Annual Outsourcing Survey1, the online magazine Contract Pharma found that for more than a third of respondents, focusing on core competencies remains the No. 1 reason to engage a third-party service provider. The second-ranked reason was because companies are virtual, lacking the facilities or internal resources to perform certain tasks (26%), while temporary lack of capacity was selected third most often (16%). Other reasons included lifecycle management (13%) and reducing company size (9%). Important reasons not directly stated among the survey choices: to gain expertise not available in their own organizations, and flexibility.

Lowering costs, while always a goal, is no longer a primary driver when selecting a CRO, according to a survey by the online resource hub Pharma IQ.2 Quality of service was most important to nearly 58% of respondents. Reputation and level of expertise was a distant second (16%). Pharma IQ notes that while the global $36.2 billion market for outsourcing is expected to grow an additional $20 billion over the next five years, the downsides of these engagements include “intensive communication management, confidentiality concerns, and regulatory considerations.”

One way you can attain the benefits of using third-party services without the drawbacks of moving operations offsite is insourcing, where services are performed by a service partner embedded within your facility. Many pharma companies find this model offsets some of those concerns associated with outsourcing, specifically communication management and confidentiality.

Because work is not sent offsite, it’s easier for you to monitor insourced work. The communication is face to face, rather than via conferencing and site visits. There are no challenges with different time zones, as the service partner is embedded in your facility and able to communicate in real time. Not only is communication easier, but it also faster and enables more efficient decision making.

All work is also performed within your IT infrastructure and firewalls, improving your control over IP. Your own quality systems and protocols can be followed by the insourcing partner, rather than recreated – and revalidated – by the CRO/CDMO.

Insourcing also contributes to better utilization of your equipment and resources. As the pharmaceutical industry consolidates, there’s been excess capacity in some locations. Insourcing can absorb that excess, making better use of capital. While outsourcing relieves you of capital expenditures – you use the CRO’s instrumentation and equipment – the same can be said of some insourcing arrangements. Even if you use your own instruments, those costs can be moved from capex to opex when an insourcing service provider is involved. These attributes of insourcing can save time, money, and risk.

How to Choose

Even before choosing between outsourcing or insourcing, it’s important to determine what activities will be contracted out. Very often, the decision is made to initiate contract services for noncore activities, preserving the internal resources for essential – or core – activities. The thinking is that essential activities – typically the high-value and IP-related scientific work – are better performed and managed internally, while noncore activities can be more efficiently performed by a third-party that’s skilled in accelerating timelines, maintaining quality, and lowering costs.

Once the specific work to be contracted out is identified, it’s important to understand the timelines you need for results and to determine what level of control you’d like to maintain. The answers to these questions can definitely point to outsourcing or insourcing:

• Less need for control, fewer IP concerns, and less need for quick turnarounds are more suitable for outsourcing
• Greater need for control, IP risk reduction, and tight timelines are better suited for insourcing

Outsourcing with a CRO or, depending on phase, a CDMO, can be an excellent solution if you’re seeking help with:

• Routine, established workflows
• Less complex sample/results work
• Less time-sensitive results

These types of lab environments benefit from the flexibility and certainty in terms of expertise and technology that comes with outsourcing approaches.

Insourcing with a services partner who can perform services within your facility offers benefits when you need:

• Greater degree of control, using internal quality systems and protocols
• IP protection through internal oversight
• Immediate access to results
• Reduced time managing third parties
• Optimization of excess laboratory space
• Improved and timely communication of project deliverables
• Flexibility

Another factor to consider is the hidden costs involved in the management oversight for outsourcing. It’s less costly to manage a partner embedded in the organization than one that might be on another continent. In effect, the insourced partner becomes an extension of your laboratory environment.

Staffing agencies offer a most basic form of insourcing in that they can provide qualified personnel for short-term needs to augment your staff for a specific project, or find talent with a specific skill or area of expertise. Typically, companies set limits on the tenure of contract workers; therefore, this solution often lasts no longer than 24 months. This results in constant turnover of employees and significant training requirements each time a new employee is onboarded.

A managed services delivery model can last indefinitely, as you’re not receiving “bodies doing experiments,” but instead work with a partner who’s accountable for results. In this model, the service partner brings its own people to provide services to achieve a guaranteed outcome — number of samples or experiments per day, for example. This is established through a comprehensive statement of work that includes a service-level agreement.

An emerging model is the lab as a service (LaaS) approach. This goes beyond managed services, in that LaaS brings everything required to deliver on the service-level agreement – from people and processes to consumables and instruments. Onsite LaaS is a turnkey solution, somewhat of an internal CRO. In fact, some of the larger CROs are shifting their models to incorporate some use of their pharmaceutical sponsors’ facilities and taking over priority projects.

One Vendor

Whether outsourcing or insourcing, there are benefits to aggregating as many services as possible with a single vendor. Managed services and LaaS insourcing models afford you a greater range of services that can be brought in-house. When one partner is responsible for and owns services – from the management of assets to the oversight of IT to the harmonization of standards – it achieves a holistic view of your organization. The partner can use that insight to recommend ways to improve productivity or maintain compliance, for example. It also creates much greater flexibility in the deployment of resources to execute the agreed-upon services. The synergies of a single partner, with its teams working across an organization, reduces finger pointing and encourages problem-solving. If multiple vendors are involved, the accountability for any problem can often be time consuming and difficult to discern.

A single-vendor solution greatly simplifies the engagement for the pharmaceutical sponsor – from creating a single point of contact to simpler processes and easier management oversight and communication.

OneSource

OneSource Laboratory Services from PerkinElmer is a portfolio of integrated services that enable and accelerate scientific and manufacturing outcomes. Among the many types of services available, OneSource provides:

• Asset management – for multivendor care, maintenance, and lifecycle management of laboratory instrumentation and equipment
• Scientific services – for technicians who are qualified to perform tasks from instrument inspection to calibration

The integration of services delivered from a scientific-specific provider makes OneSource an ideal partner for insourcing. OneSource can deliver on agreed-upon outcomes in an environment that maintains control, simplifies management oversight, and is protective of IP, while offering immediate access to personnel and results.

As the services arm of PerkinElmer, OneSource brings the full force of PerkinElmer’s leadership in scientific instrumentation and laboratory equipment to bear in the servicing of pharmaceutical customers.

By engaging OneSource, you receive integrated services that can generate insights only a holistic perspective can reveal:

• A single point of contact and onsite personnel for ease of communications and faster turnaround times
• Use of internal systems such as quality and protocols, which reduces reinvention and maintains greater control
• A scientific partner with resources and expertise to further their scientific mission
• A commitment to an outcome, not just a delivered service

Built on Six Sigma and lean best practices, OneSource programs ensure continuous improvement throughout a program. For forward-thinking pharmaceutical companies like yours, insourcing provides a unique solution to challenges that require outside help, but internal control that’s experienced, flexible, and responsive.

References

• ¹T. Wright. 2017 Outsourcing Survey, Contract Pharma, May 9, 2017. Retrieved from https://www.contractpharma.com/issues/2017-05-01/view_features/2017-outsourcing-survey
• ²C. Henry. Top 10 Clinical Research Organizations in the Pharmaceutical and Biotech Industry, PharmaIQ. Retrieved from https://www.pharma-iq.com/pre-clinical-discovery-and-development/articles/top-10-clinical-research-organisations-in-the