Pharmaceutical companies outsourced $36.6 billion in global research and development expenses to contract drug developers in 2011, up 6.6 percent from 2009, according to healthcare research firm Kalorama Information.
In its report “Outsourcing in Drug Development: The Contract Research (Clinical Trial) Market,” Kalorama finds that pharmaceutical companies are outsourcing drug research more frequently, and when they do they are handing off larger portions of the operation than ever before.
The report also notes that drug development expenditures dedicated to in-house core activities declined from 74 percent to 62 percent in the past year.
“Drug development regulatory requirements have become increasingly complex over the last 20 years, requiring pharmaceutical companies to generate great quantities of more complex data to gain regulatory approval,” said Bruce Carlson, publisher of Kalorama Information, in a statement.
“Many pharmaceutical and biotech companies bring only a limited number of compounds to market and have relatively little experience dealing with the regulatory environment,” continued Carlson. “So they are outsourcing to companies that can take a drug through the regulatory process, and most importantly, reduce the time required to bring a drug to market.”
By outsourcing some of the R&D work, pharmaceutical companies are better able to handle the workload and labor expenses associated with bringing new products to market, noted Carlson.
"The positive side (of outsourcing) is that pharma can pursue a robust R&D schedule that they need to in order to prevent a decline in the industry due to lack of new branded products," Carlson told Healthcare Finance News. "Pharma has suffered over the past decade from a lack of ‘blockbuster’ drugs. Only in vaccines and monoclonal antibody categories has there been significant multi-billion-dollar new drugs. They need new products but in previous downsizing efforts they eliminated some R&D spending. Now they need to ramp up R&D, and they can’t handle that amount of work in-house either from a capacity or cost standpoint."