After years of painfully diminishing return on investment (ROI) from discovery and development (D&D) programmes, pharmaceutical and biotechnology companies are taking a calculated risk at the heart of their businesses with the production of their most valuable asset—intellectual property. Within the last decade, outsourcing to contract research organisations (CROs)—companies that offer the industry a wide range of research services—has grown to such an extent that it now encompasses over 40% of the entire sector’s D&D. More than one-half of drug makers conduct their Phase I, II and III trials primarily through CROs.
This is no longer outsourcing at the margins, but a fundamental shift away from the industry’s tradition of strong vertical integration. In making this change, however, biotechnology and pharmaceutical companies are betting on a model that is not only unproven, but is still being defined. The ability of this approach to deliver improved innovation at a reduced price will require strategic vision rather than simple cost cutting.
Finding Alignment: Opportunities and Obstacles in the Pharma/CRO Relationship, an Economist Intelligence Unit report sponsored by Agilent Technologies, draws on a survey of 251 senior executives from the life sciences industry, as well as in-depth interviews with corporate leaders and industry experts