Outsourcing by the Biopharmaceutical Companies

Background and Significance of the Study 

Outsourcing by the biotechnological companies has been in existence for an extended period. The act of outsourcing is of importance, especially in the competitive and globalized markets. Companies, including the biopharmaceutical firms, make an effort to become innovative to meet the customer requirements (Langer, 2012). Outsourcing is used as a strategy by biopharmaceutical companies to improve, evaluate as well re-engineer their operations to meet the demands of the consumer. Outsourcing can involve many sectors of a company including accounting services, human resources, research and development activities and a large percentage of information technology operations. 

The biopharmaceutical firms experience persistent changes in the field of development, and this can be challenging. As the empirical analyses and evidence point out, a significant number of biopharmaceutical companies are involved in a lot of operations including development and research. About 70% to 80% of finished product content is outsourced to the manufacturers. The driving force for the process of outsourcing is the pressure to improve the efficiency of operations and to speed up the process of innovation (Howells, Gagliardi & Malik, 2012). The initiatives involved in outsourcing enable the biotechnological firms to indulge in activities that they could not perform initially. Outsourcing requires the understanding of the core identity of the business. 

However, outsourcing may be associated with some disadvantages including contamination of products produced by the biopharmaceutical companies which can result from many aspects of outsourcing hence necessitating suitable measures to address the situation to maintain consumer trust. This research aims at investigating the effect of outsourcing on the quality of products produced by the biopharmaceutical companies and the possible ways of improvements. 

Literature Review 

Outsourcing as a Practice by the Biopharmaceutical industry 

Outsourcing can be defined as the act of engaging another entity to carry out services which can otherwise be performed by the company in-house. Biopharmaceutical companies usually involve contract companies which are independent organizations required to undertake particular activities, for example, research to develop new drug products. Clinical trials in the biopharmaceutical firms are also making use of outsourcing (Adobor, 2012). The clinical outsourcing is changing. A recent report released by Visiongain reveals that the practice of outsourcing by biopharmaceutical companies especially in the field of drug discovery is on the rise and will reach 43.7 billion dollars by 2026. This is in comparison to about 19.2 billion in the year 2016. According to a benchmarking study carried out by Vantage, reports by 80% of respondents in the biopharmaceutical sector indicate an increase in alliance activity compared to previous years. Seeking expertise and ideas from an external source is a practice that is well established in the biopharmaceutical industry. 

The statistics in addition to reports by the media demonstrates that the partnership between the pharmaceutical industry and contract research organization and academic institutions is a primary focus (David, Wolfender & Dias, 2015). For instance, AstraZeneca has developed an interest in partnering with Cambridge University to assist in scientific research and has therefore decided to change its headquarters to the United Kingdom. The company has a history of outsourcing partnership especially with regards to research and development with Academic Drug Discovery Consortium, Cancer Research UK, and Medical Research Council Laboratory of Molecular Biology. Pfizer has employed a similar strategy in the United States, and it has had its facilities used in research and development positioned where bioscience hubs are located, including San Francisco, La Jolla as well as Cambridge. Bristol-Myers Squibb has entered into a partnership with a group based in Boston known as Allied Minds which undertakes commercialization of activities of academic research. GlaxoSmithKline recently partnered with the University of Leicester to come up with a new drug for treating blood cancer. Actelion and a chemical research organization Enamine, have extended their agreement so that the pharmaceutical company can make use of its screening libraries and building blocks for drug discovery. 

Trends in Outsourcing by the Biopharmaceutical Companies 

Analysis of the outsourcing trends in the biopharmaceutical companies has been carried out since 2006. Data from the Annual Report and Survey of Biopharmaceutical Manufacturing Capacity and Production show that there is an increasing trend of outsourcing by the companies every year. For instance, in 2006, the percentage of biomanufacturers who carried out in-house mammalian bioprocessing was 57.6%, and this declined to 44.2% by 2007 (Langer, 2012). 

Biopharmaceutical companies today are involved in outsourcing a variety of activities and not just repetitive tasks as was the tradition (Langer, 2012).The activities that are currently being outsourced include bioprocessing design, process development, research and design, validation as well as the assay and testing services. The reports also indicate that there is a shift in the trends of outsourcing as the Contract Manufacturing Organizations are acquiring new technologies and skills to improve capacity and efficiency. The biopharmaceutical companies are now making use of outsourcing as a manufacturing strategy. Initially, outsourcing was only used to increase flexibility and reduce the overhead cost. 

Throughout 11 years, in-house manufacturing involving plant, yeast and insect platforms as well as the microbial fermentation has been on the downward trend. (Zhang et al., 2013). Analytical testing was the top activity outsourced by the biomanufacturers. Other activities that were highly outsourced included fill or finish operations and toxicity testing (Langer, 2012). However, the study established that there was little change in the general trend in outsourcing various activities since 2010, although the overall outsourcing increased. The reason for the trend is that outsourcing is still used to reduce the value and risk parts in each of these activities and not just to outsource the whole process or department. 

Reasons why the Biopharmaceutical Companies are involved in Outsourcing 

One primary goal is to reduce the cost of operation. This is aimed at increasing the profits which had been diminishing over the last ten years. A report named "Decline in Economic Returns from New Drugs Raises Questions about Sustaining Innovations" indicates that the newest drugs generate negative returns, and this involves the whole industry (Lowman et al., 2012). Activities such as drug discoveries is a venture that is very expensive and is estimated to cost between 0.8 and 1.7 billion dollars. Some biopharmaceutical products can fail at the final stages of the discovery process hence adding up to the overall costs (Howells, Gagliardi & Malik, 2012). Expiring of the patents for biopharmaceutical companies has also been blamed for the drop in the profits. It is estimated that sales worth 215 billion dollars shall be at risk should the patents expire by 2020 (Lowman et al., 2012). In most instances, outsourcing technologies from the external organizations are cheaper as compared to creating all the in-house infrastructure and employing people to carry out the research activities. 

The biopharmaceutical companies also seek innovations from academic institutions and other research organizations hence necessitating outsourcing practices (Lowman et al., 2012). Steward Lyman in states in his article The Innovation challenge: Assessing biopharma states that big pharmaceutical companies are becoming less efficient in inventing new drugs and therefore have to find ideas from different areas (Schuhmacher et al., 2013).Tufts study that was carried out in the year 2012 concluded that more partnerships are being formed between biopharmaceutical companies and academic or medical centers with the aim of researching the field of medicine to identify potential breakthrough therapies. Sanofi SA starting a partnership with Harvard University is an example benefits the Biopharmaceutical firms would get as a result of outsourcing academic expertise. The company was able to obtain antibiotic drug candidate from this collaboration. 

Dr.Jackie Hunter reports in her article Drug Discovery World that outsourcing models in the form of sharing resources, and big pharmaceutical firms utilize open innovation. GlaxoSmithKline established Scinovo, a research and development group as a way of sharing resources. Takeda, which is a research center located in Japan, came up with a system where biotechnological companies and academics can work together in by providing incubation facilities. 

Technologies and specialized knowledge are vital for any biopharmaceutical company (Schuhmacher et al., 2013).The firms frequently encounter shortages of the required expertise and in-house infrastructure to realize their technological potential fully. Therefore the companies very often outsource some programs to organizations that provide the state of the art expertise in the particular areas (Zhang et al., 2013). An example is the scientists of Pfizer Company making use of IBM's supercomputer to perform rapid analysis and testing of research hypotheses from data reports and medical literature. Merck, a large pharmaceutical company, collaborated with Atomwise to carry out a project. 

The biopharmaceutical companies may also seek to improve agility and speed. This is mainly due to rapid changes in technology, data that has exponential growth and interdisciplinary collaborations that is ever-increasing in nature (Diestre & Rojagopalan, 2012). Development of sophisticated in-house infrastructure and increasing the number of staff with expert knowledge in different areas can be both risky and costly to any biopharmaceutical company that wants to maximize its outputs. 

Challenges associated with Outsourcing 

Outsourcing can lead to reduced in-house capabilities because the biopharmaceutical companies have to seek the services of Contract Manufacturing Organizations to mend some problems that the in-house staff could formally handle. Issues can also arise pertaining protection of intellectual property which was a significant concern by the majority of manufacturers (Lowman et al., 2012). There is a concern that the Contract Manufacturing Organizations may adopt the products of the manufacturer. Cross-contamination arising from the ineffective handling of the products and compliance with the required quality standards can also be a challenge when it comes to outsourcing. 

Ethical issues are also bound to arise when some activities are outsourced to the biopharmaceutical companies (Adobor, 2012). An example is clinical trials where it is appropriate for the participants to be informed of the risks associated with clinical trials and failure to give the vital information can result in tragic results. For this reason, the Foods and Drugs Authority under 21 CFR 312.120 ensures that the safety of the human participants is the priority when conducting clinical trials. Other challenges of outsourcing include the risk of regulatory requirements non-compliance, reduction of in-house manufacturing expertise with regards to process knowledge and resources. 

Both the Biopharmaceutical companies and the Contracted Organization have legal responsibilities and roles as defined by the Foods and Drugs Authority. The obligations are specified in the Code of federal regulation 21 CFR 610.13 and 21 CFR 600.3. The sole responsibility of manufacturing drugs lies with the license holders who are required to oversee the whole process. The license holders also ensure that the Contacted firms comply with federal regulations. 

The Significance of the Study 

Outsourcing by the biopharmaceutical company can cause a reduction in the quality of the products. For instance, contamination has been known to occur when the company contracts another firm to carry out the manufacturing activities. It is, therefore, necessary for biopharmaceutical companies to come up with ways of ensuring the safety and the quality of the products are maintained. This research aims at identifying how outsourcing of the manufacturing services cause contamination of the products and the possible preventive measures. 

Research Objectives 

Broad Objectives 

To assess the impact of outsourcing on the quality of biopharmaceutical products. 

Specific objectives 

To determine the incidences of product contamination caused by outsourcing manufacturing services. 

To investigate the causes of product contamination due to the outsourcing of the manufacturing services. 

To identify the possible ways in which the contamination of the products can be prevented. 

Research Methodology 

Study Design 

The study will be a descriptive cross-sectional study carried out with the aim of identifying the instances of products contamination. 

Study Area 

The Study will be carried out in three different areas, in the biopharmaceutical companies, the contract production firms and the pharmacies that serve a large number of customers who have come to purchase medications and other biopharmaceutical products. 

Study Participants 

The study participants in the pharmacy will be the pharmacists involved in the trade of the biopharmaceutical products. In the biopharmaceutical industry, the study participants will be the heads of departments of the biopharmaceutical companies whose activities are primarily outsourced. The leaders of the Contract Manufacturing Organizations will also be involved as study participants. All the subjects participating in the study were randomly selected. 

Data Collection 

The data collection method will mainly include interviewing the participants, which was done in different days over a period of two months. At the pharmacy level, five pharmacies shall be visited, and the pharmacist in each pharmacy interviewed. The interviews shall seek their opinions on the incidences of product contaminations in their pharmacies and the specific brands involved. At the industry level, the five employees from each of the biopharmaceutical companies Amgen, Alexion Pharmaceuticals, Briston-Myers Squibb and Genzyme companies shall be interviewed with the aim of getting their opinions if the outsourcing of critical services has led to the contamination of the products. The data regarding the outsourcing activities of these companies will be obtained from the biologics operation sites which include West Greenwich, RI for Amgen, Devens, MA for Briston-Myers Squibb, Allston and Framingham, MA for Genzyme, Smithfield, RI for Alexion Pharmaceuticals. 

Data Analysis 

By the end of the research, the data shall be analyzed by thematic analysis that includes familiarization with data obtained from interviewing different subjects both in the pharmacies and the four industries. The codes that identify essential features of the data that are of relevance in providing answers to the research objective shall be generated. The collating data, as well as the codes, will be examined with the aim of identifying potential themes that are of significance, reviewing, defining and naming the themes, and writing up whereby the data extracts and the analytical narratives were weaved together, and contextualization of the narrative carried out about the literature. The choice of thematic analysis shall be because of its flexibility and the potential of providing a detailed account of the data. 

Expected Research Results 

At the pharmacy level, it is expected that all the pharmacists will admit that there are instances where they have received contaminated products in their pharmacies. At the level of the industries, the employees of Amgen, Alexion Pharmaceuticals, Briston-Myers Squibb and Genzyme companies shall admit that the companies do not coordinate the contracted activities closely and this causes contamination of the products. 

Discussion 

From the results, the biopharmaceutical companies that outsource most of its activities cannot ensure 100% quality of its product and services. Very often, outsourcing has led to the production of contaminated products because the procedures and materials used in confirming the level of contamination can be limited, and coordination of the activities of the contracted firm may not be adequate. Compliance with the regulatory requirements have also proven to be a challenge for the biopharmaceutical firms and well as the contracted manufacturing companies, and this can have adverse effects on the quality of the products. Poor communication between the biopharmaceutical firm and the Contract Manufacturing Organization, especially in international outsourcing, have the potential to cause contamination of the product. 

Recommendations 

Biopharmaceutical manufacturing companies should ensure that the outsourced activities that directly affect the quality of products are carried out at their premises to make supervision of these processes more manageable. The regulatory body, for instance, the Foods and Drugs Authority should restrict outsourcing of services that can lead to a reduction of quality of products and undertake more frequent inspections to ensure counterfeit products of biopharmaceutical companies do not reach the market. The biopharmaceutical companies should adopt In-house services involving critical areas directly affecting the quality of the products. 

Future Research Ideas 

International outsourcing continues to be a venture of many biopharmaceutical industries. Regulation becomes a challenge when many biopharmaceutical firms engage in the global outsourcing of most of its activities. Research is necessary for developing a standard international regulatory framework that outlines the procedures of outsourcing the services of a firm in a different country. 

Conclusion 

In conclusion, outsourcing has the potential to cause a reduction in the quality of the product. Services such as toxicity testing, validation, product characterization, analytical testing when not appropriately monitored by the manufacturing companies can cause contamination of the products from the biopharmaceutical companies. Inadequate regulation and communication can also lead to the contamination of products. There is, therefore, need for developing strategies that will ensure products attain high standards to meet the needs of the consumer. Adequate regulation is vital, and the concerned agencies should continuously monitor the outsourcing activities of the biopharmaceutical firms to ensure they are protected from contaminated products. 

References 

Adobor, H. (2012). Ethical issues in outsourcing: the case of contract medical research and the global pharmaceutical industry. Journal of business ethics , 105(2), 239-255. 

David, B., Wolfender, J. L., & Dias, D. A. (2015). The pharmaceutical industry and natural products: historical status and new trends. Phytochemistry reviews , 14 (2), 299-315. 

Diestre, L., & Rajagopalan, N. (2012). Are all ‘sharks’ dangerous? new biotechnology ventures and partner selection in R&D alliances. Strategic Management Journal , 33 (10), 1115-1134. 

Howells, J., Gagliardi, D., & Malik, K. (2012). Sourcing knowledge: R&D outsourcing in UK pharmaceuticals. International Journal of Technology Management , 59(1/2), 139-161. 

Langer, E. S. (2012). Pharmaceutical Outsourcing Trends: The Next Decade. Outsourcing Special Issue Journal: BioPharm International , pp1-3. 

Lowman, M., Trott, P., Hoecht, A., & Sellam, Z. (2012). Innovation risks of outsourcing in pharmaceutical new product development. Technovation , 32(2), 99-109. 

Schuhmacher, A., Germann, P. G., Trill, H., & Gassmann, O. (2013). Models for open innovation in the pharmaceutical industry. Drug discovery today , 18(23-24), 1133-1137. 

Zhang, M., S. Pawar, K., Shah, J., & Mehta, P. (2013). Evaluating outsourcing partners' capability: a case study from the pharmaceutical supply chain. Journal of Manufacturing Technology Management , 24(8), 1080-1101.