The Times Are "A Changin"
Posted on Sat, Jan 21, 2012
BioWorld Today, the newspaper of record for the biotechnology industry, is read by biotechnology professionals worldwide for its hard-hitting, objective news reporting.
In an article written in 2010 by Glen Harris, BioWorld Today Managing Editor, titled "We Need Uniforms to Tell Who Is Who in the Changing Biotech World", he writes, "There was a time not long ago when the players in the life sciences game didn’t need uniforms. We all knew that big pharma wore the suits and went to work in giant towers of steel and glass, or massive campuses with lawns manicured nicer than the elite golf courses to which they belonged."
Times have changed quickly in that last several years and it's hard to discern if a company is a biotech or a specialty pharma or a contract research organization or some kind of hybrid lab.
A number of high profile pharmaceutical companies have announced significant job cuts and many pharmaceutical professionals feel uncertain about their job stability in 2012. In a recent global study by Pharma IQ entitled “The Big Pharma Recession Survey 2011”, nearly half of the survey participants 44.4 percent said that they were worried that their role might be made redundant in the next 12 months.
In addition to reducing the workforce, pharmaceutical companies are also increasing their outsourcing and offshoring activities to reduce development costs.
This outsourcing trend also applies across the entire life science ecosystem. Recently, Business Intelligence Solutions was approached by a manufacturer of medical devices (Original Equipment Manufacturer - OEM) to manage the regulatory compliance needs and information technology services for the OEM's own clients because their clients no longer wanted to conduct these services in house.
Graphic Provided by Pharma iQ - The Big Pharma Recession Report
There are several well known reasons why companies are outsourcing at an increasing rate.
Erosion of Blockbuster Sales
Eroding blockbuster revenue is another challenge facing the industry. In the short-term, currently marketed blockbuster drugs are expected to fuel growth, however in the-long term, sales from current blockbusters, which have been declining since 2005 as products lose patent protection, will leave revenues exposed to erosion from generic competition.
Increased Generic Competition
A major challenge facing the industry is the impact of generic competition. The generics industry is roughly $60 billion and growing at about 12% per year. Drug patent expirations are expected to grow and as patent expirations of lucrative prescription products going over the counter erode blockbuster drug revenues, generic drugs are gaining significant share in the pharmaceutical market.
Generic drugs make up over 57% of the prescription drug market. Further growth is expected in the generic industry over the next 10 years as a large number of blockbuster products lose their patent protection.
Pricing Pressures
The cost of prescription drugs is under attack from consumers, local governments and courts around the world. In the US, the pressure for less expensive drugs is coming from consumers and local governments. More than ten US states are exploring ways to purchase reduced cost prescription drugs from Canada, even though such importation remains illegal.
What does the future hold for these new players in life sciences; well "Strategic Outsourcing" is a business strategy that is being integrated into the core operations of these blended companies. Today outsourcing is a strategic imperative that can provide not only a cost effective alternative, but also improved efficiency, speed and flexibility.
The outsourcing paradigm is not new in the industry; it has been utilized on a small scale for decades and is expanding to include the outsourcing of what were considered essential in-house functions marked the beginning of utilizing outsourcing as a strategic imperative.
