The Survey Says Affordability … And More

By Louis Garguilo, Chief Editor, Outsourced Pharma

Life Science is an industry driven by data, with human lives depending on it at any moment of the day. For outsourcing providers hoping to keep on top of sponsor perceptions of CMOs, the data of record is the industry-leading surveyor firm, Nice Insight. Recently they have been helping the industry parse the results of their 2013-2014 Pharmaceutical and Biotechnology Survey.

The data from this survey is sliced and diced by pharma around the world to help them do some benchmarking (pun intended) of CRO and CMO partners. The Survey serves as a vital aid in helping select the right outsourcing providers, both from a strategic and tactical perspective for individual research programs as well as manufacturing projects. It can also assist with internal versus industry comparisons. For example, it can give insight into questions such as “Why was the experience that I had with a certain CRO different from that of another pharma firm?” And because we work in an industry where  by necessity information is kept confidential, the pharmaceutical sponsors and service providers are often protective of conveying too much information about their relationships (provided they are providing any information at all). The beauty of the survey is that it provides industry-wide data that is available for all of us to peruse and analyze.

As someone who worked in both business development and marketing communications for a global outsourcing service provider, I can attest to the fact the results are highly anticipated and of keen interest to professionals on both sides, and from top executive management to the scientists working at the bench. Although not quite the Academy Awards, the Pharmaceutical and Biotechnology Survey provides a customer-driven report card to CROs and CMOs to get an honest read on how they are viewed by the consumers of their products in any given year, and indeed, year after year. An added benefit for service providers is that these results, when benchmarked against internal customer surveys, can provide the added benefit of checking the veracity of internal data and hopefully gaining a greater understanding of how to better serve the pharmaceutical industry. (Note to pharma: We value your opinions. Please fill out those customer surveys from your providers!)

How finely do we parse the data? The analysis can be quite substantial, depending on the reader and their title. In the hours I have spent pouring over the data, I have even worried about the specter of the Hawthorne Effect. More clinically described as “reactivity,” this is when individuals alter their performance based on the fact they know they are being observed. Reactivity also sees individuals alter their behavior to conform to the expectations of the observer. One amusing example of this might be Lie Witness News, a man on the street interview segment featured on Jimmy Kimmel Live! When asked about noteworthy events that never happened or have not yet occurred, interviewees will nevertheless provide incredibly detailed reviews and analysis of it.  

Let’s take a close look at the 2013-2014 Pharmaceutical and Biotechnology Survey results. The biggest mover – four percentage points to the positive – was affordability (the other categories are quality, reliability, regulatory, productivity and innovation). Obviously, this should tell us that industry executives feel CROs/CMOs are viewed as becoming more in line with their budgets and expectations. Innovation and Productivity actually declined in favorability, which may be a red flag for some providers.

So, again according to the survey, we have outsourcing on the increase over the last two years by 7% and 9%, respectively, and pharma feeling that outsourcing is more affordable. However, and this is where my parsing starts, affordability actually ranks sixth out of the seven reasons to outsource (innovation was the category that came in seventh). A stronger emphasis on pricing seems to be lurking in the data as it rolls up.

Moreover, if we ask where the increase in outsourcing is occurring, reports from other sources (some of it admittedly inexact – see my previous column) indicate a good deal of it is going to the low-cost environments, particularly India and China. Therefore, if we take three factors into account (our theory of reactivity, a better ranking for affordability, and an increase in outsourcing to lower cost centers), it might just add up to pricing being more important to some in the industry than it appears at first glance.

So is the Hawthorne Effect having an influence on affordability? There is no question that quality is a primary concern to everyone involved in the pharmaceutical world. When your company creates a product that will be injected into humans, it has to be. In fact, two articles on Eli Lilly and Co. recently published on Outsourced Pharma (Lilly's Success Depends On Strategic Partnerships and Selecting Strategic Partners – The Lilly Way) each stress the importance of high quality, reliability, and honesty in the vendor selection process. And it’s also possible that affordability is ranking lower as a reason to outsource simply because it has become more affordable. But I also suspect it is not the first thing pharma execs would want to bring up when discussing outsourcing strategies.     

So thanks again to Nice Insight for providing the opportunity for this annual revelry into the relationship between pharma and its outsourcing providers. Both groups have little else to go on for direct comparison and understanding of this dynamic industry relationship.

Do you have any thoughts on the importance of these factors in your decision–making process? If so, please share them with us. You can email your comments to info@outsourcedpharma.com.