Pharmaceutical Industry Transformation Spawns Opportunities for Outsource Partners

By: Andrea Heslin Smiley - Senior Vice President of Strategic Marketing and Client Services, Virtual Marketing Strategies (VMS)

Category: Life Sciences

"The greatest re-think in our history," is how John Lechleiter, CEO of Eli Lilly and Company, recently characterized the massive transformation of the research-based pharmaceutical industry. He went on to describe how Lilly jettisoned its traditional business model in which it owned the entire value chain of drug development and marketing in favor of a more nimble business model in which it outsources all but the most proprietary business processes. This transformation, from Fully Integrated Pharmaceutical Company (FIPCO) to Virtually Integrated Pharmaceutical Company (VIPCO) is having a dramatic impact on the life sciences landscape in Indiana and around the world.

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The need to be nimble is driven by the convergence of megatrends such as the pressing need to control healthcare costs, the rigorous demands of the FDA, and the anticipated demise of blockbuster drugs due to the impending arrival of personalized medicine. The impact of these trends is not confined to major pharmaceutical companies. The orthopedics, medical device and diagnostics industries also are adapting to the rapidly changing healthcare environment.

Some aspects of the VIPCO model have been around for a while. The most mature examples to date have been in the drug discovery and development process, where pharmaceutical and biotech companies have partnered with domestic and international scientific service providers in areas like preclinical testing, toxicology and clinical trial management. For example, West Lafayette based Bioanalytical Systems was launched in the 1970s to conduct early stage research for pharmaceutical and biotech companies. And Covance's 2008 acquisition of Lilly's Greenfield research site and the simultaneous establishment of a $1.6B ten year service agreement is a good local example of the magnitude of opportunities that may be available for capable providers of key services in the VIPCO model.

Based on the positive experiences and financial impact in these R&D areas, pharmaceutical companies are also giving greater attention and priority to outsourcing marketing functions including the development and delivery of promotional programs as well as provider and patient education � all of which were previously considered core competencies in the FIPCO model.

If every change is both a threat and an opportunity, then the opportunity side of this equation is for entrepreneurial professionals with deep sector expertise to fill the gaps that are opening across the life sciences industry. To earn trust of life sciences companies, in order to take on broader responsibilities, strategic partners need to make significant investments in additional talent, training and infrastructure. Leadership teams need to include top health care and marketing executives with a sophisticated understanding of the industry. These partners need expertise on staff to offer strategic medical and legal counsel to define and execute solutions that impact business. Teams need to have a critical mass of staff with a depth of training and documented processes to ensure flawless execution of even the most complex initiatives in this highly regulated environment.

For the VIPCO model to work, vendor partners must provide dynamic and comprehensive solutions that seamlessly integrate. VIPCO is about reaching the ultimate goal in the life sciences industry�better products and outcomes for patients. No doubt, like any great idea or "re-think," VIPCO will cause some immediate pain during restructuring. However, VIPCO can and should mean great opportunities for positive growth in the Indiana life sciences industry.

As partners in the Indiana life sciences industry, we need to be ready to collaborate in a way that benefits all�the pharmaceutical, device and biotech companies who need our help, the local life sciences strategic partners, and the patients we work for every day.

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