An investigation into the outsourcing of research and development in the pharmaceutical industry and its impact on conventional thinking about R&D organisation.
The pharmaceutical industry is passing through a very challenging period in its evolution with the traditional approaches to pharmaceutical research and development constantly expanding. Successful pharmaceutical organisations have come to recognise the need to leverage resources, and as a consequence, they have come to increasingly rely on the wealth of expertise provided by specialist external sources. The concept of outsourcing or the practice of contracting to external organisations the services and tasks normally performed by internal departments has become increasingly common across the pharmaceutical sector. Essentially, the two fundamental drivers for the outsourcing of R&D in the pharmaceutical sector is the need to access sources of innovation in pharmaceutical research, and to reduce the excessive costs of conducting the many activities associated with R&D process. Yet despite its growing occurrence, the outsourcing phenomenon represents a radical departure from the previously held philosophy of many of the large pharmaceutical companies, which have traditionally concentrated on maintaining a lead in as many areas as possible. While most authors have identified the rationale for, advantages and disadvantages, and critical success factors required for implementing a successful outsourcing strategy, very few have studied the cause and effect of outsourcing on organisational processes. In terms of the pharmaceutical industry, no academic study pertaining to the impact of outsourcing on R&D organisation has yet been identified. Accordingly, the principle aim of this research is to examine the nature of outsourcing, its effect on managerial policies and implementation techniques, as well as to investigate the impact outsourcing has had on conventional thinking about R&D organisation within the pharmaceutical firm. The evidence that has emerged points to a number of strategic imperatives. Although it is clear that pharmaceutical firms have begun to appreciate the necessity of concentrating on the elements of their business that adds value, outsourcing is still very much conducted on an ad-hoc basis, directed to provide increased flexibility through the supplement of extra resource. The move toward a level of ‘strategic outsourcing’ is still in its infancy since the evidence suggests that a formal, planned approach to outsourcing does not as yet fully exist. To this end, the Strategic Sourcing Model, based on the concept of core competencies, has been proposed as a means for strategically implementing and managing the outsourcing relationship. However, if pharmaceutical firms are to successfully reap the benefits of a strategic sourcing programme, then a fundamental change in traditional ways of thinking must also take place to complement the changes to the ways in which R&D is managed. In looking to the future, it is clear that outsourcing will have an important place in the pharmaceutical industry. It is the extent to which companies can concentrate on their core activities, while working in partnership with specialist providers that will be the determinant of future success.
Pharmaceutical R&D outsourcing, Strategic sourcing, Core competencies, Innovation management, R&D organisational change, Pharmaceutical industry strategy
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