Clinical outsourcing limits innovation in bio Pharma – Research Study 2011

December 22, 2011: A recent research has found that offshoring of clinical research might hamper innovation and open up opportunities for smaller competitors.

Large pharmaceutical companies have intensified outsourcing to research organizations in an effort to cut fixed cost and enhance flexibility as the patents are due to expire shortly. This move to outsource drug development will have long term impact on innovation in the pharmaceutical companies.

According to researchers, the move towards outsourcing may be a rational response to the mounting pressure in the industry, but it will be a problem from an innovation perspective.  

Outsourcing of research activities will damage knowledge creation and learning opportunities that will otherwise happen in an in house developmental process, which is closely interconnected. In addition to this the organization will lose the opportunity to evaluate and reassess results that will lead to new clinical insights.

By loosening the hold on the development process, the large companies may also lower the entry barrier for smaller competitors. The outsourcing model has enabled the third party research organizations to enter into the industry and offer their service.

Such an outsourcing model will help the smaller to evolve and will also damage their development. Smaller companies often do not possess the required statistical and biometric expertise.

Even though there are concerns over innovation, the study has found no evidence of work being brought back in house and the observation of the study shows that the outsourcing activity is rising. The innovation process has moved from a closed system, which is internal to the organization to a new model of open system which includes a number of players scattered up and down the supply chain.

The organizations must learn to manage outsourcing. The most important requirement is to manage the probable knowledge losses from outsourcing within a complex matrix of interconnected developmental phases, technical functions and activities at project, program and system levels.

There are many possible ways to prevent the potential losses of knowledge companies. For that companies must consider the use of common Information Technology platforms, rewards for openness and transparency and the level of technical and background understanding when outsourcing to third party research organizations.

Cross functional teams and temporary job rotations will also help in the situation. In addition to this the experts in the subject from both the third party research firm and Pharma Company should be given access to each other which will lead to support knowledge sharing.

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