Outsourcing for Competitive Advantage:
Balancing Core Competencies With Collaborative Partnerships

Presented by PDI
(As appeared in the May 2004 issue of Pharmaceutical Executive)

It is widely accepted that developing approvable and effective drugs takes time and money. According to PhRMA, in 2003 member companies invested approximately $33.2 billion in R&D — a whopping 17.7% of domestic sales, and the highest R&D-to-sales ratio of any industry. Given the $800 million required, on average, to bring a drug to market — not to mention the 10 to 15-year development timeframe — once a drug is approved, companies want to maximize the likelihood of success in the marketplace and minimize wasted time and capital.

More and more, biopharmaceutical companies are turning to outsourcing as a long-term strategy to increase efficiency and profitability. A strategy that was once embraced by an intrepid few, over the last two decades outsourcing has become mainstream in the industry — companies seeking next-generation solutions have shifted their focus from whether to outsource to how to outsource more productively. While two outsourcing options — R&D and manufacturing — have been implemented by many large pharma companies, a third — outsourced sales and marketing services — is rapidly becoming the third pillar of a successful outsourcing strategy. For industry insiders, "CCO" — Contract Commercialization Organization — is becoming as familiar an acronym as CRO (Contract Research Organization) and CMO (Contract Manufacturing Organization).

Pioneered in the industry by PDI, Inc., outsourced sales and marketing services have been available to the biopharmaceutical industry for nearly twenty years. Since their introduction, however, services have expanded from pure play contract sales and direct marketing to a comprehensive array of sales force solutions, marketing research and medical education. Large pharma companies who previously outsourced only dedicated sales teams now have a number of options for increasing a brand's profitability, including mirroring internal sales efforts, testing new specialty therapeutic areas, pulsing new product markets, deploying clinical teams to provide patient education for disease state management, and marketing seasonal products during their peak prescription periods. Emerging companies — many new to the idea of outsourcing — are using CCOs to help them plan the successful launch and marketing of their products while focusing internal resources on building their product pipelines. For many, CCOs have lowered the barriers of market entry, making their products more viable in a shorter period of time.

Industry leaders agree that outsourcing can offer strategic flexibility. But when to outsource and why?

Though cost-savings is a major incentive for considering outsourcing, it is only one part of the equation. In fact, in an article authored by Steve Bates1 in HR Magazine in April 2003, only 30% of surveyed decision-makers cited money as the reason they chose to outsource. More than 90% assert that they are satisfied with their outsourcing experiences to date, and 83% claim that the value of outsourcing is not quantifiable in strictly dollar terms. Nonetheless, the financial upside is undeniable: A Coopers and Lybrand report documented that companies that chose to outsource between 1993 and 1996 had a CAGR of 26.3%, compared with 20.9% for those that chose not to outsource. With those metrics, it’s not surprising that many biopharmaceutical companies are taking a critical look at their business functions to determine which are prime candidates for outsourcing. It's important, however, to draw the line carefully: some processes that are integral to the company but not proprietary (such as the work performed by CROs and CMOs) can and should be outsourced. Other differentiating capabilities — those both essential and unique to the company — may be better left as internal functions. Losing control of these processes can mean losing a company’s edge in the marketplace.

Sales and marketing functions represent a difficult challenge to many companies evaluating their outsourcing options, because the role of these business functions has evolved in the industry over the last decade. Ten years ago, for example, when the average sales call by a pharmaceutical rep to a physician was four minutes or more, many large pharma companies considered sales to be a differentiating capability. Now that the average call time has dropped below 90 seconds, the industry's outlook is changing: sales is an essential but less-and-less unique function. European pharma companies have led the way in this transition: outsourced reps make up more than 50% of the field force for the top ten European industry leaders.

A final consideration in biopharmaceutical outsourcing — once the critical tests have been met — is which partner to select. The process of ushering a promising molecule through drug discovery and then on to development, approval, launch, and marketing is highly complex and collaborative. Each of these steps requires phase-specific experience and expertise, profound therapeutic knowledge, and a broad understanding of the competitive landscape, as well as a keen awareness of the regulatory environment. Without the right partner, time and financial investments in research and development might not reach their full potential in a successful product.

Corporate Profile
PDI, Inc., a healthcare sales and marketing company, is an outsourcing partner to large and emerging biopharmaceutical and medical device and diagnostic companies, working in concert with their clients to ensure that years of time and effort translate into profitable brands. As the industry pioneer in sales and marketing services, PDI’s client-driven innovation continues to provide next-generation solutions to the industry. Services include dedicated sales, shared sales, clinical and combination teams; marketing research and consulting; medical education and communications; recruitment services; and product management.

For more information contact the PDI Business Development Team:
By phone: 1-866-311-8868
Email: TheBetterWay@pdi-inc.com