ROLE OF RAPIDLY DEVELOPING ECONOMIES IN PHARMA OUTSOURCING
Outsourcing a process offshore does not rewrite the rules of outsourcing. Rapidly developing economies (RDEs) such as India
and China offer sizable advantages and are underused by most companies. Many CSOs are increasingly using RDEs in their innovative
processes. The general arguments for doing so are as follows: access to a vast pool of high-quality, low-cost technical talent
(the labor-cost differential is large); round-the-clock, 24/7 workdays; potentially faster product development times; and
better access to local markets—for example, India and China are the fastest-growing sources of demand in the world.
Although many multinational companies have focused on India and China, other regions also being considered include Eastern
Europe and Latin America. In a survey conducted by the Boston Consulting Group, approximately 45% of respondents indicated
that their companies planned to increase research and development investments in China and India.7 The study also points out that although companies have planned allocations in RDEs, most firms are taking a cautious approach.
The most popular target for increasing innovation spending in 2006 was North America; fully 60% of respondents said their
companies planned to increase investments there. Western Europe, at 48%, was the second most popular location for increased
As with any project, whether in- or outsourcing, good project management is vital. Effective business process and project
management tools must be established. Quality standards also must be established and implemented at every step in the workflow.
Typically, KPO will involve a high degree of information sharing and knowledge sharing; therefore, confidentiality, security
infringement, intellectual property, and employee credibility are major concerns.
One challenge in KPO management involves defining performance criteria. As KPO services involve deliverables for which it
may not always be possible to assign exact specifications, managing expectations is critical. In addition, the following are
essential: agreed-upon communication venues, avenues, and frequency; a balanced range of performance-assessment metrics; and
the recognition that, at least initially, there may be a productivity lag until specific process knowledge is gained.
Process ownership and task ownership together form another area for which clarification and upfront discussion are needed.
Specifications for this area are typically included in the outsourcing contract. For example, for outsourced cell-line development
and target protein-optimization projects, it is necessary to identify who owns the processes.
The following case studies illustrate the importance of some of these concepts.
CASE STUDY 1: HARMONIZING ASSAYS
A Japanese pharmaceutical firm acquired rights to develop and license a biopharmaceutical product in Japan while the product
was entering Phase 1 testing in the US. As most of the analytical methods had not yet been fully developed when the license
was granted, both companies worked together to develop characterization techniques. For the majority of the methods, the two
companies pursued the same course and arrived at nearly identical procedures. However, in the case of the bioassay, the Japanese
group used the cell line that had historically been used by researchers in the field, while the US company moved to a new
cell line that had been reported in the literature as being more robust. The assay was complicated by the presence of a preservative
in the drug product that caused cell death at high drug concentrations.
Both groups were successful in developing an effective assay that measured the biological activity of the drug. Although either
firm could have insisted that the other firm use its method, in the end good science prevailed and both methods were validated
after demonstrating comparability. The take-home message here is that sound scientific methods should take precedence over
CASE STUDY 2: OUTSOURCING SPECIALIZED SKILLS
Years ago when a company wanted to develop a master cell bank, it had to obtain the starting DNA for the specific protein
from a natural source. To change the amino acids or to improve expression, the development scientists would start with this
gene and make point mutations to alter specific sites (today they almost always start with a synthesized gene). In addition
to providing exact control over the sequence of amino acids to be produced, the increase in synthesis capability allows the
company to optimize the sequence for other reasons. For example, they often choose to express a protein in a host different
from the one in which they obtained the original DNA sequence; the desired host may favor certain codons for expression that
differ from those found in the native sequence.8