Over the last decade outsourcing has become an important strategic issue for pharmaceutical companies; rising pressure to reduce costs and time-to-market has led to outsourcing not only of traditional non-core functions such as manufacturing and clinical trials, but also increasingly of technically demanding areas such as drug discovery and biotech R&D. Pharmaceutical Outsourcing Strategies is a new report which provides a comprehensive and up to date review of contract research and manufacturing, in addition to key strategies for pharmaceutical companies to optimize their relationships with contractors. Emerging trends are evaluated and offshore outsourcing opportunities are analyzed in the rapidly growing markets of Eastern Europe, China and India. Use this report ’s best practice case studies and unique examination of future outsourcing trends -including cutting edge technologies and novel contract alliances to ensure that you implement the optimal strategies for your company ’s needs.

Table of Contents
Pharmaceutical Outsourcing Strategies
Executive Summary 10
The pharmaceutical outsourcing market 10
Drivers of pharmaceutical outsourcing 11
Emerging fields of outsourcing 12
Offshore outsourcing 13
Optimizing the outsourcing process 14
The future of pharmaceutical outsourcing 15
Chapter 1 The pharmaceutical outsourcing
market 18
Summary 18
The concept of outsourcing 19
Approaches to outsourcing 21
Outsourcing research and development 23
Services offered by CROs 24
The role of CROs in clinical trials 27
The role of CROs in pre-clinical trials 28
Outsourcing manufacturing 29
Services offered by CMOs 31
Sizing the CRO and CMO markets 34
Overview of the CRO market 35
Sizing the CRO market 37
Overview of the CMO market 38
Sizing the CMO market 39
Conclusion 41
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Chapter 2 Drivers of pharmaceutical
outsourcing 44
Summary 44
Introduction 45
Outsourcing research and development 47
Drivers of outsourcing research and development 47
Increased complexity of clinical trials and regulatory submissions 47
Rising data requirements 49
Cost savings 50
Minimizing time to market 51
Advantages and disadvantages of using CROs 53
Long term cost savings vs. high short term expenses 54
Personnel customization vs. CRO high staff turnover 55
Flexibility vs. loss of control 56
Outsourcing manufacturing 57
Drivers of outsourcing manufacturing 57
Cost savings 57
Increased supply of contract manufacturing services 58
Advantages and disadvantages of using CMOs 59
Long term cost savings vs. high short term expenses 60
Lead time savings vs. relationship management time losses 62
Access to expertise vs. quality control 63
Conclusion 63
Chapter 3 Emerging fields of outsourcing 66
Summary 66
Introduction 67
Drug discovery 68
Specialized discovery service providers 69
Case study: WuXi PharmaTech 71
Contract research organizations 72
Contract manufacturing organizations 72
Biotech 73
Biotech contractors 73
Contract research organizations 74
Contract manufacturing organizations 75
Case study: Ortho Biotech Products 77
Distribution 79
The mechanics of pharmaceutical distribution 79
Wholesaler distribution 80
Direct distribution 80
Agency distribution 80
v
Mail order 81
Self-distribution 81
Parallel importing 82
Pharmacy benefit management 82
Outsourcing distribution 83
Conclusion 84
Chapter 4 Offshore outsourcing 86
Summary 86
Introduction 87
Offshore outsourcing of contract research 89
Offshore outsourcing of contract manufacturing 89
Eastern Europe 91
Contract research in Eastern Europe 92
CRO developments in Eastern Europe 94
Contract manufacturing in Eastern Europe 95
CMO developments in Eastern Europe 95
India 96
Contract research in India 96
Patent issues in India 99
CRO developments in India 99
Contract manufacturing in India 100
CMO developments in India 101
Early stage collaborations 102
China 102
Contract research in China 103
Patent issues in China 105
CRO developments in China 106
Contract manufacturing in China 107
CMO developments in China 108
Offshore outsourcing market 109
Case study: Wyeth 111
Conclusion 112
Chapter 5 Optimizing the outsourcing
process 114
Summary 114
Introduction 115
Outsourcing agreements 115
Contract research agreements 116
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Case study: Pharmaceutical Product Development (PPDI) 117
Contract manufacturing agreements 120
Assessing sourcing needs, opportunity and difficulty 121
Assessing quality vs. cost savings 123
Strategic management of outsourcing 128
Selecting outsourcing partners 128
Managing partnerships 130
Timelines and preventing overruns 131
Risks and mitigation 133
Confidentiality and intellectual property risks 133
Personnel risks 134
Company volatility risks 134
Production risks 135
Case study: Novartis 136
Conclusion 137
Chapter 6 The future of pharmaceutical
outsourcing 140
Summary 140
Introduction 141
Pharmaceutical contract research alliances 141
eTechnology 143
Internet-based recruitment of clinical trial patients 144
Electronic data capture, storage and retrieval 145
Clinical trial data 145
Central laboratory data 146
In silico technologies 147
Case study: Entelos 147
Virtual drug development companies 148
Non-profit virtual drug development groups 153
Big pharma virtual drug development groups 153
Case study: GlaxoSmithKline 154
Conclusion 156
Chapter 7 Appendix 158
Index 158
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List of Figures
Figure 1.1: Degree of outsourcing to be conducted by pharmaceutical outsourcers in 2006 20
Figure 1.2: Importance of contract organization characteristics to pharmaceutical outsourcers 21
Figure 1.3: In-house versus outsourced expenditure on R&D and manufacturing, 2000-2005 ($bn)
34
Figure 1.4: Contract research revenues by segment, 2005 ($m) 36
Figure 1.5: Revenues of leading CROs, 2005 ($m) 37
Figure 1.6: CRO market growth, 2005-2010 ($m) 38
Figure 1.7: Contract manufacturing revenues by segment, 2005 ($m) 40
Figure 1.8: CMO market growth, 2005 - 2010 ($m) 40
Figure 2.9: Drivers of CRO and CMO usage, 2005 46
Figure 2.10: US R&D spending versus new drug approvals, 1995-2004 52
Figure 2.11: Potential advantages and disadvantages of using a CRO 53
Figure 2.12: Potential advantages and disadvantages of using a CMO 60
Figure 3.13: Importance of different characteristics in biotech CMO selection, 2005 77
Figure 4.14: Relative pharmaceutical research and manufacturing capabilities in India, China and
Eastern Europe, 2005 90
Figure 4.15: Contract research revenues by region, 2005 ($m) 109
Figure 4.16: Contract manufacturing revenues by region, 2005 ($m) 110
Figure 5.17: Outsourcing difficulty vs. opportunity 123
Figure 5.18: Impact of low prices on outsourcing outcomes 125
Figure 6.19: Characteristics of different contractor relationships 154
List of Tables
Table 1.1: Summary of drug testing objectives by phase 26
Table 2.2: Recent drug recalls, 2000-2006 48
Table 3.3: Capabilities of leading CROs and CMOs in emerging areas 67
Table 3.4: Selected specialty drug discovery contractors 70
Table 4.5: Advantages and disadvantages of international outsourcing 88
Table 4.6: Eastern European operations of leading CROs 94
Table 4.7: US FDA new drug application data generated from India 98
Table 5.8: Typical opportunities and difficulties of outsourcing 122
Table 5.9: Selected pharmaceutical manufacturing violations 127
Table 5.10: Reasons for time and budget overruns 132
Table 6.11: Relationships between virtual pharma sponsor and contractors 150
Table 6.12: Selected virtual drug development companies 152