The pharmaceutical industry is witnessing massive changes in recent years. With rising costs of drug development and intense competition, companies are looking at innovative strategies to stay competitive. One key strategy that has gained prominence is pharmaceutical contract sales outsourcing (CSO).
Emergence of CSO
Traditionally, pharmaceutical companies relied on in-house sales forces to promote their products. However, as the industry evolved, outsourcing non-core functions became more common. CSO emerged as companies looked to optimize promotional spends and launch new products faster. The first CSO deals emerged over two decades ago with limited scope. However, over the years the models expanded significantly. Today, CSO accounts for over 20% of total pharmaceutical promotional spend worldwide according to industry reports.
Key Factors Driving CSO Adoption
There are multiple reasons that have contributed to the rising popularity of CSO models globally:
Cost Optimization: Global Pharmaceutical Contract Sales Outsourcing allows companies to reduce fixed operating costs associated with maintaining large in-house sales teams. Contracting promotional activities to specialist provider firms delivers significant cost savings.
Focus on Core Competencies: Outsourcing sales activities frees internal resources to focus on core competencies like R&D, clinical trials and new product pipeline. It prevents disruption from non-core functions.
Speed to Market: CSO partners have the scalable infrastructure to launch new products quickly in global markets without the need to build in-house capabilities. This accelerates commercialization timelines.
Therapeutic Expertise: Specialist CSO firms possess niche domain knowledge and understanding of specific therapeutic areas. They can develop customized engagement and promotional strategies efficiently.
Flexibility: CSO models provide flexibility to ramp up or ramp down resources as per changing market needs without long-term fixed costs. Resources can be rapidly reallocated across portfolios.
Emerging Global Markets: It is difficult for companies to establish sales operations organically across diverse global markets in short timeframes. CSO facilitates faster penetration into high growth emerging markets.
Models and Structures
CSO arrangements can be customized as per client requirements. The common models adopted are:
Traditional Outsourcing: Select therapeutic areas or geographic territories are outsourced with the CSO taking over defined responsibilities like field force management, logistics etc.
Co-Promotion: The CSO partners with the client to jointly promote a product by integrating field forces. Responsibilities are shared.
Fully-Outsourced Model: For select older products, the client may transfer entire P&L responsibility and product rights to the CSO who then commercialize independently.
Additionally, various hybrid structures combining elements of above models also exist. Contract length can range from 1-5 years with performance-based payments. Multi-year evergreen agreements are also signed.
Expanding Scope and Globalization
Over the past decade, CSO models have expanded significantly beyond field sales activities. Many CSO firms now offer end-to-end integrated solutions covering functions like market access and consultancy, cloud-based platforms, patient support programs, medical marketing and more.
Another key trend is globalization of CSO. Major pharmaceutical MNCs are consolidating promotional operations across key regions under global contracts with large CSO providers. This allows standardized processes, data and resources to be effectively leveraged globally. It has resulted in large long-term global partnerships exceeding billion dollar valuations.
Challenges and Best Practices
While the benefits of CSO are driving its popularity, there are also challenges such as potential risks to quality of engagement, compliance and loss of control/knowledge retention which companies aim to mitigate. Key best practices include:
- Thorough vendor assessment and qualification process
-Clearly defined KPIs, accountability measures, compliance monitoring and audits
-Robust knowledge transfer and alignment of processes/tools with parent company
-Investments in training, certifications and career development for team members
-Strong governance oversight boards with cross-functional participation
-Incentives to promote collaborative behavior versus “principal-agent Issues”
-Periodic business reviews to recalibrate strategies based in market dynamics
Analyses by advisory firms forecast global CSO market to witness strong double-digit growth in coming years reaching over $50 billion spend by 2025. Major factors driving this include maturing biologics pipelines, evolution of speciality care delivery and expansion into emerging disease categories.
As innovative technologies around AI, cloud adoption, real-world data analytics mature, we will also witness greater integration of these into CSO solutions. Future models may move beyond sales activities to incorporate broader care coordination and therapeutic management responsibilities. Overall, CSO is firmly entrenched as a prominent part of the pharmaceutical industry landscape. With scope for further expansion, it will remain an important growth avenue for specialist firms.
The increasing adoption of CSO globally has delivered significant strategic and commercial benefits to pharmaceutical companies. Though challenges exist, industry best practices and optimization of sourcing models will see this outsourcing trend play a pivotal role in driving efficiencies and competitive advantage going forward.
For more details on the report, Read- https://www.marketwebjournal.com/global-pharmaceutical-contract-sales-outsourcing-size-share-analysis/
