Outsourcing is not without its risk, but if you get it right the rewards for your business can be significant
Outsourcing is an increasingly common activity in the pharma and biotech industry, particularly in the area of regulatory affairs and pharmacovigilance.
Outsourcing services to organisations that are specialists in the provision of the services in question can lead to many benefits, including lower overall costs and access to expertise.
Outsourcing in the regulatory area may save you money, help your department or company be more flexible and manage the growth of your company effectively. It will also allow your business to gain access to external expertise which you do not have in-house.
However, you should always consider carefully whether the benefits of outsourcing outweigh the costs. When making the decision to outsource and subsequently selecting the consultancy or supplier, you should remember that anything done on behalf of your business will reflect directly on it.
Unsurprisingly, the regulatory support needs of companies vary depending on size and their product portfolio. For example, a small-to-medium enterprise (SME) may not have any in-house regulatory, pharmacovigilance or quality assurance functions or expertise. Moreover, such a company may not have an EU-based subsidiary. As there are some key obligations to meet when placing a medicine on the EU market, outsourcing is the solution. Activities requiring an EU presence include:
SMEs may therefore contract out a full business function, such as regulatory affairs or pharmacovigilance.
In contrast, larger companies may outsource a particular project, task within a project or process to a third party. In all cases, the third-party organisation takes control of the outsourced activity and becomes responsible for its success. Examples could be a compliance project such as consistency between national SmPCs and Core Company Safety Information or manufacturing and compliance information in national dossiers versus what the manufacturing site does.
Both areas are important for compliance and the success of future health authority inspections, but they are, in our experience, often the last projects to be given internal priority and resource.
The decision to outsource
Questions to ask…
There are risks associated with outsourcing. These can include confidentiality not being respected and can lead to clients providing minimum information. In this situation however, there is a danger that the consultancy is being asked to work without full disclosure, making it much tougher for it to deliver high quality support.
Changes in technical staff or management at the outsourcing company can also lead to problems. Understandably, companies put foward the best staff to win work, but subsequently more junior staff take on the project. If these staff don't have sufficient experience to handle the project at a technical level, this may result in service delivery falling below expectations.
If you are dissatisfied, you should speak with the company, present your reasons and give it a timeframe to correct matters. Any consultancy worth its salt will deal promptly and professionally with such a complaint as reputation is king!
In the worst case, the outsourcing company might go out of business, so you should always have a substitute for legally required positions and a Plan B, just in case the worst happens.
Across all industries, it has been estimated that as many as 50 per cent of outsourcing deals end badly. This is not a reason to reject outsourcing, but proves how important it is to choose very carefully who you work with and how you manage the relationship.
Choosing a partner
Outsourcing is about creating a successful partnership. Choosing a company to outsource to is very different from choosing an ordinary supplier. You're embarking on a long-term relationship, so take time to look in detail at potential service providers. Even if you plan to outsource a short-term project or tasks within a project, once you have found and worked successfully with a company, you are likely to want to use its services again.
Track record – ask yourself:
Good relationship management is critical to your business so you should ask:
When outsourcing remember that distance and time zone differences may make control and interaction more challenging. Language barriers and different business cultures can also present problems and, particularly in the current global economic circumstances, you will need to be aware of the impact of exchange rate fluctuations on your predicted costings.
It is ideal when someone whose judgment you trust recommends a service provider to you. When this isn't the case you must ask for references. While issues of confidentiality can make customer references hard to obtain, you should request them. You should try to find out if any past or existing customers have a similar industry profile to yours, how satisfied these customers are and how did the provider deal with any problems.
If possible, visit each potential service provider. Look at its working environment and ask about staff retention and turnover. If a face-to-face meeting isn't possible, hold a video or teleconference with them. Check out the website, but remember it is easy to create a professional website! Check the IT systems and equipment, management processes and quality assurance procedures. Ask for an audit report and/or consider conducting an audit in the future, especially if pharmacovigilance services are being engaged.
Ask your potential service provider if it plans to subcontract any of your work and if so, how it selects the sub-contractor. You should be aware that there is a big difference between consultancies and agencies!
Check that your potential provider is financially stable. If possible, you could consider obtaining copies of its recent accounts.
Check that your potential provider has public liability and professional indemnity insurance in place and that the sums insured are reasonable for the functions or tasks being performed.
Service level agreements
A service level agreement (SLA) sets out what services the supplier is to provide and to what standards. The SLA forms part of the contract between you and your outsourcing partner.
Typical SLAs include:
Does the service provider demonstrate commercial awareness in the modus operandi. Regulatory as a function has, in the past, been seen as the 'police' that says “no” to commercial and marketing plans. There is scope for creativity within regulatory and you should ensure that there is commercial thinking in the mindset of your potential provider.
Value for money
Are the costs competitive and in line with market rates. You can't expect something for next to nothing, but nor should rates be ridiculously expensive.
Most companies are willing to provide a reduction in fees for a long-term relationship. Short-term, one-off projects usually command a higher fee.
Overall, you must satisfy yourself that the supplier is fit for purpose and choose a company with capabilities that match the project needs. It is not 'one size fits all!'
How to make it work
As a client, there are steps and actions you have to take when outsourcing to ensure success.
Steps and actions include:
You are likely to get the best results if you can stay with your supplier for several years. Switching suppliers can be disruptive, so it pays to commit to building a long-term relationship from the outset.
You may need to renegotiate the contract before the end of the term. A flexible contract benefits both parties, allowing the supplier to innovate and you to react to changing circumstances.
In this regard, we find the best approach is to have a main contract with a Schedule that details the projects. The Schedule is then easily amended by letter when changes are required.
There should be financial benefits to outsourcing but other reasons for outsourcing in regulatory might include speed to obtaining an MA and thus, speed to market, meeting legal requirements and ensuring compliance.
Putting outsourcing in context
A company was facing an Appeal in the UK for a new indication for an established product and needed some additional resource and expertise to manage the issue. A decision was made to provide extra support by using an outsourcing company specialising in regulatory affairs. The requirements were identified as the company having the necessary experience in handling Appeals and in dealing with the MHRA, and the ability to be flexible in the levels of support provided as part of the team either at the client's or outsourcing companies premises.
An outsourcing company was recommended and, following a face-to-face meeting, engaged to provide the required support. The company was ultimately successful in its Appeal and has no doubt about the value added by using the outsourcing company stating: “Well done to everyone involved in this. Your management of the panel at the meeting was an example of how such an Appeal should be undertaken and the Committee could not have failed to have been impressed by the professional, expert manner of your own chairmanship. “
Kim Wharton is managing director and senior consultant at Regulis Consulting