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Issue: November / December 2012, Posted Date: 12/3/2012
Industry Trends: Outsourcing Pharmaceutical Development & Innovation
By: Winny Tan, PhD and Jennifer Brice
INTRODUCTION
The successful business paradigm that began in the 1980s was the fully integrated pharmaceutical company (FIPCO) in which drug discovery research, development, manufacturing, and marketing were all conducted in-house. However, pharmaceutical companies are doing less of their drug R&D internally than they did decades ago. Today, the common business paradigm is the virtually integrated pharmaceutical company (VIPCO), or one that outsources much of drug development. Outsourcing is a necessary strategy to help offset the large number of blockbuster drugs coming off patent, competition from generics, and the low productivity of the pharmaceutical industry.
Contract research organizations (CROs), in vitro diagnostic (IVD) companies, clinical laboratories, regulatory consultants, and contract manufacturing organizations (CMOs) all support conventional pharmaceutical outsourcing needs. Pharmaceutical companies can engage external relationships upstream of these processes at the early drug discovery stage. Outsourcing drug discovery, or what the industry considers to be the innovation stage, has come about in the form of open innovation models in which pharmaceutical companies engage with government research institutes, universities, specialty pharmaceutical companies, and other external partners for the identification of promising drug candidates that match business interests. The following will highlight two dynamic pharmaceutical service segments: CROs and IVD manufacturers and how they are evolving to meet the growing preclinical and clinical trial needs of pharmaceutical companies. This brief will also discuss open innovation models for outsourcing the earliest stage of drug discovery.
A ROBUST & GROWING CRO MARKET REFLECTS THE HIGH DEGREE OF PHARMACEUTICAL OUTSOURCING
Contract research organizations (CROs) provide preclinical development and clinical trial services to the pharmaceutical industry. CROs have evolved from providing basic support services to providing a wide range of clinical, central laboratory, and analytical capabilities. Through CROs, pharmaceutical companies reduce operational costs by not having to maintain expensive R&D laboratories and scientists. CROs also bring strengths in patient recruitment for clinical trials and specialization in other disease areas. The CRO market is experiencing two-tiered growth from large pharmaceutical companies that want to lower fixed costs and specialty drug companies that lack of infrastructure. The $13.3-billion US CRO market is growing on average 8.4% annually through 2017.
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