Outsourcing In The Pharma Industry – Make Or Buy

PART I

Outsourcing in the Pharma Industry – Make or Buy

Yearly, outsourcing activities to external manufacturers are growing permanently in the pharmaceutical industry. This trend can be triggered by the attractiveness in terms of Profit & Losses (P&L) derived of labor cost optimization or due to lack of proper know-how internally among other drivers.

Main Reasons

A pharmaceutical company, the Company, could decide to outsource partially or totally some of its manufacturing or packaging or any other operative activities and entering in the outsourcing business motivated by some of the following reasons among others:

• Internal capacity constraints in the own sites
• Lack of appropriate technology and/or specialized know-how internally.
• Pharma-political or protectionist regulations to force the local production in countries where some international companies are present, but they do not have a manufacturing plant installed.
• Commercial and business considerations about strategic or tactical opportunities.
• Financial and taxation advantages.

Apart from the previous considerations, during the last two decades one of the main factors to increase the outsourcing have been related to corporate decisions in order to optimize their number of factories around the world and reduce network complexity, impacting obviously in the relocation of that productions sometimes into other…