Pharmaceutical companies at pains to diversify their drug portfolios

“We are really in a sweet spot for the pharmaceutical industry (in that) we are providing them exactly what [they are looking for) with regard to discovery research,” he said.

The hope in these new strategies is that by refocusing on the science, instead of on marketing, companies will once again start churning out effective drugs.

It’s a huge gamble, but pharma firms have little choice.”All of this is very different, very unusual,” Blumberg notes. “When outsourcing first started popping up in all industries, one of the general maxims was that you don’t outsource what’s strategic, what’s core to your very being.... These guys are outsourcing what look like significant aspects of research and development.”

Large pharmaceutical companies will need to analyse outsourced R&D relationships differently than they do other functions — like information technology — that other firms have taken on for them, Blumberg adds.

“There is a level of risk that feels different and bigger.” In the old R&D model, a single scientist or small team may have taken a drug from initial discovery through clinical trials to product launch. Those employees are very invested in getting their idea to work.

The downside is that they may not be able to let go of an idea that didn’t work early enough.

But the upside is that they are passionate and committed, and they understand, for example, that a mistake in data could cost the company millions.

Outside researchers, who could have many different clients, may not care as much, Blumberg notes.

“These relationships have to be carefully thought through and navigated to be successful,” he says. “You can’t just dump everything on an outsourcing partner. You have to create the right incentives. If they’re just incented to get the job done on time, does quality suffer? If they are just incented on cost, do time and quality suffer?”

According to Wharton management professor Larry Hrebiniak, the cultural and organisational issues in creating new partnerships can prove almost as difficult as the science.

“What makes it difficult is that you’re dealing with very educated people —research scientists who want to be left alone —and it’s impossible to try to bureaucratise or commoditise innovation, to develop rules,” he says. “You can run into trouble.

The outside partner may just start doing its own thing and not fit with your organisation’s strategic needs.

You want to somehow have your people working with their people, but you need to give them all some autonomy.”Sharing secrets

New strategies

Among the more radical experiments, according to industry analysts, is Eli Lilly’s decision to allow outside contractors to test the company’s promising molecules.