Dr Emma Modrate, business development manager for Bodycote Health Sciences" Pharma division, looks at the key issues to consider when outsourcing laboratory-based analytical work
Today, outsourcing product testing to an independent laboratory is normal practice for most pharmaceutical companies, both large and small. It makes commercial sense for smaller companies with limited space and without the financial resources to invest in the latest equipment. For larger pharmaceutical companies, outsourcing a basic but essential activity, such as stability testing, can free up scientists to work on projects that will reap a better return, as well as resulting in more effective use of in-house lab space.
Market reports continue to show growth in the global pharmaceutical industry and this is being more than matched by growth in outsourcing, as companies try to maximise their profits and efficiency. The global contract research market is expected to grow to US$47bn (Euro 34bn) by 2011 (Frost & Sullivan 2006).1 Indeed, outsourcing of analytical chemistry is on the increase with a compound annual growth rate of 25% between 1998-2003 (Frost and Sullivan 2004).
The growth of outsourcing should mean that customers are now well versed in the protocol of sourcing a laboratory. Companies outsourcing strategically will have carried out a full analysis of their own costs and structure, and will ensure that contract laboratories understand their particular requirements at tender stage in order to avoid disputes at a later stage.
The company will need to consider its own resources and how the contract laboratory can assist it in terms of financial resourcing (cost saving), physical resources (equipment and laboratory space) as well as human resources (people to do the job) and their knowledge.
By considering all of these aspects the company can evaluate how using a contract laboratory ties in with their needs and gives them the flexibility or speed to market that they cannot meet themselves.
The reality is that in many instances, even when large organisations are looking to outsource, the basics are sometimes overlooked, causing budgetary, service and quality issues that result in tension between customer and supplier. Outsourcing analytical work, particularly in the pharmaceutical industry, can be complex so it is vital to get all the components in place right from the start and planning is essential.
Having one contract provider for the lifecycle of a development project should also result in a lower cost over time, so it pays to get the initial planning right first time.
When looking for a long-term partner it is useful to take a commercial strategic view of your needs, but taking into account the softer aspects of relationships between you and your contract lab can also pay dividends.
which lab?
Once a company has decided to outsource, searching for the right kind of laboratory to suit its needs is the starting point and it can be like looking for a needle in a haystack! First, consider the "scope" of the contract lab: does it carry out the services required?
There are a few contract research organisations that offer a full range of service from pharmaceutical development to finished product, while others may have an expertise in a particular technique. A company may want a full service provider, a broad analytical laboratory or a niche service provider. The important factor is to ensure they have the capability required and understand the quality implications.
Does it operate in the required geographical area? More and more large pharmaceutical companies are seeking laboratories with a global capability, allowing regional or global contracts to be managed by approved suppliers.
Being part of a group of laboratories means additional resource in more than one country, which, as well as providing emergency backup, can be vital when testing turnaround needs to be fast or extra resources are required.
Does it offer the skills and capacity required? This is where a company must undertake a detailed audit of capability. Is equipment sufficient for the project in mind? As well as looking at the basics such as the company's business track record and scientific expertise, it's important also to consider the laboratory's responsiveness and flexibility to changes in demand.
Does it work to the right quality and service levels? Can your team work effectively with theirs? Audit the Quality System to ensure it meets your requirements. Check the laboratory - does it have a sound service record? If in doubt, ask for good references from other companies with which the contract lab deals.
Outsourcing isn't just about sending out some batch testing, but about building a long-term relationship based on the key ingredients of quality, service, knowledge, culture and cost. It is important to consider how these ingredients can all impact on the total cost of the project.
When outsourcing long-term projects such as stability testing, it is important to look at the Total Cost of Ownership to predict realistically how much the project will actually cost overall. Beware of low upfront costs that may hide higher costs later on. Don't dwell on the headline cost. Remember the aim of outsourcing is to save time (internal resource) and money. Estimate how much time it would it take in-house staff to manage the contract laboratory and consider whether all the staff will be able to work well as a team.
When choosing a contract laboratory for outsourcing, look for a company that is suitably qualified and committed to teamwork.
Inevitably there will be out of specification results and analytical errors. How will the contract laboratory team deal with these issues if they arise? Realistically no project is ever 100% error free. If you can rely on the contract lab to handle these properly within a robust quality management system, it will reduce the management resource you need to allocate.
Can the laboratory understand the company's business in order to predict problems in advance and does it have the knowledge to give suggestions on how these problems could be solved? Specific industry experience is a good indicator of this.
Can the contract laboratory provide a flexible response when issues outside of the contract arise? Good service is key, and in most cases long-term relationships are built as a result of this. It can take a long time to change suppliers, so time and money invested at the outset to establish a relationship based on good service can pay dividends.
Take references, if possible, and although it is subjective, also consider whether the laboratory personnel give confidence.
Evaluating the Total Cost of Ownership can bring up some difficult issues. Companies need to be as objective as possible but there will always be elements of subjectivity. For instance, staff at the company outsourcing the work can also sometimes feel that they are losing control of a project. This is where building good customer relations and appointing a laboratory that instils confidence is essential.
Auditing the laboratory and speaking both to the people who will actually be handling your business and those who will be making the key decisions is an important element of the process. You need to feel confident in both management and bench analysts to do the job effectively.
For complex projects, ongoing communication and working in partnership is vital. Although from an internal resource viewpoint it should be minimised, face-to-face meetings with the project team plus telephone and email updates are essential.
In time, developing relationships between client and contract laboratory will build understanding that will be the best strategy for ensuring good results.
At a higher level, always remember to keep control, starting with a sound quality agreement, aligned with an audit team to ensure that targets and agreements are being met.
In reality, finding a perfect contract laboratory to meet exactly the drug developer's needs is quite a challenge. But thinking about the real needs, in terms of resources and total cost, is more likely to achieve positive results all round.