In recent years, emerging markets have been touted as an affordable and attractive labor pool for the outsourcing of pharmaceutical and biotechnology projects. Industry research shows that growth of pharmaceutical markets in E7 countries (Brazil, Russia, India, China, Mexico, Turkey and Indonesia) outpaced growth in mature markets in 2010, and is predicted to increase its market share through 2015.??
According to results from Nice Insight’s most recent Pharmaceutical and Biotechnology Outsourcing survey, 33% of respondents indicated their company would outsource clinical research services in 2012. Forty-eight percent of respondents indicated their company outsources Phase I development, which is primarily designed to examine the safety of a drug. While 39% indicated they outsource Phase II services – which further assess safety and evaluate efficacy in humans over the short-term, and 33% outsource Phase III services to ultimately prove the efficacy and confirm the safety of a drug.
Increasingly, there has been talk of a shift by Big Pharma companies towards outsourcing clinical research in established markets in the U.S. and Europe, which is likely related to the language barriers and cultural differences often associated with emerging markets. According to Nice Insight’s survey results, of the 35% of Big Pharma companies that outsource clinical research, 49% indicated a preference for established markets in the U.S., Western Europe and Japan. Whereas, only 19% of Big Pharma respondents indicated emerging markets (Argentina, Brazil, China, Indian, Korea, Thailand) were their preference when it comes to outsourcing clinical research. Somewhat surprisingly, market did not factor into outsourcing decisions for 32% of this segment.
With regards to the Specialty Pharma segment, 37% of respondents indicated they outsource clinical research services. As was the case with Big Pharma respondents, this segment also indicated a strong preference for outsourcing companies in established (66%) rather than emerging markets (19%). However, only 16% of Specialty Pharma respondents reported market does not factor into their decision when considering outsourcing clinical research. Not surprisingly, only 18% of respondents from Emerging Pharma companies reported they outsource clinical research services. However, 71% indicated they preferred established markets to emerging markets (at only 15%), which is the strongest preference for established markets amongst all of the different segments. Market was not considered a factor for only 14% of respondents from Emerging Pharma.
Looking at the Biotech and Emerging Biotech segments, 30% and 39% respectively reported that their company outsources clinical research. As was the case with the other segments, providers in established markets were preferred (at 61% and 69%) over providers in emerging markets (at 18% and 28%). However, 21% of respondents from Biotech companies indicated that market does not influence their decision when outsourcing clinical services, as compared with only 3% of Emerging Biotech companies. This is likely due to the fact that Emerging Biotech companies have more on the line when making partnership decisions than their larger, more established counterparts.
Given that 31% of overall survey respondents indicated they outsource clinical research services, and 60% prefer providers from established markets, it is possible that perceived stability of established contractors is more appealing than perceived affordability of providers in emerging markets. Of note, 56% of respondents indicated that communication – language barriers specifically – presented challenges when partnering with overseas clinical research providers. Pharma and biotech companies may also be wary of compliance issues associated with less-developed regulatory systems in these countries. Other possible concerns include political instability and the aforementioned cultural differences that have the potential to disrupt the flow and efficiency of work.
Survey Methodology: The Nice Insight Pharmaceutical and Biotechnology Survey is deployed to 40,000 outsourcing-facing pharmaceutical and biotechnology executives on a quarterly basis/four times per year [Q4 2011 sample size 2619]. The survey is comprised of 1200+ questions and randomly presents ~30 questions to each respondent in order to collect baseline information with respect to customer awareness and customer perceptions on 300 companies that service the drug development cycle. Over 1600 marketing communications, including branding, websites, print advertisements, corporate literature and trade show booths are reviewed by our panel of respondents. Five levels of awareness from “I’ve never heard of them” to “I’ve worked with them” factor into the overall customer awareness score. The customer perception score is based on six drivers in outsourcing: Quality, Accessibility, Regulatory Compliance, Pricing, Productivity and Reliability; which are ranked by our respondents to determine the weighting applied to the overall score.