Big pharma’s 40-year love affair with outsourcing everything, must end

otherwise investors will take their money elsewhere

Trialsite News Interview from 2 years ago

About two years ago, I was interviewed by Megan Redshaw, here:

Drug Development Expert Sounds Alarm Over Rushed-to-Market COVID-19 Vaccines

The hypothesis was that Big pharma’s 40-year love affair with outsourcing everything must end, otherwise investors will take their money elsewhere.

Why—three main reasons

• Pharma manufacturers divested their physical storage, logistics and distribution skills and assets to the wholesaler network. Through consolidation, this network is now dominated by three major corporations – McKesson, Cardinal, and AmerisourceBergen. Pharma manufacturers’ crucial link with the users of its products has been lost.

• Outsourcing drug development and commercialization activities to Contract Research Organisations (CROs) and Contract Development and Manufacturing Organisations (CDMOs) has created a highly complex network of third-party contractors working on a fee-for-service basis. These tactical, arms-length relationships have resulted in the following:

  • Clinical trial sponsors and product license holders must pay cash for any innovations they may want to introduce into their products, putting a drag on innovation.

  • Time-to-market is in the hands of the contractor network, as lead-times are stipulated in contracts, and they are conservative, to say the least.

  • The high contractor switching costs and disruption involved in changing supply sources means clinical trial sponsors and product license holders become locked-in and hostage to price escalation.

  • Each contractor involved is a different company, and some are even in competition with each other.

Outsourcing early-stage development of drugs has resulted in:

• Early-stage development deprived of the investment needed to create a sound platform on safety, efficacy, and quality.

• These small companies do not have the skills, funding or critical mass required to develop new drugs.

• The small companies have to depend on convincing investment analysts that they have a wonder drug, so that a big pharma company buys or partners with them - BioNTech and Moderna fit the mould.

Do investors know the issues?

I suspect the investors familiar with the outsourced model think it was always a good idea to reduce risk and save costs. They should think again.

As demand has dropped, Moderna’s supplier of the drug substance, Lonza, is going to see a big hit on its projected profits. Their investors will not be happy as orders are cancelled and profits drop - see the account of the demand drop here:

WATCH: Moderna tosses 30 million COVID-19 vaccine doses because 'nobody wants them’

If it happens with Pfizer too, as Lonza also supply them, it is going to be a big argument between them, don’t you think?

Sit tight folks, the tide is changing!!!

Best, Hedley :O)