The past decade has seen a marked increase in preclinical outsourcing to Asia and other parts of the world. Tough economic times have led to worries among U.S.-based CROs that this trend will accelerate. Instead, biotech companies and mid-sized pharmas are looking back to the U.S for more efficiently managed relationships.
Outsourcing preclinical research provides significant advantages over conducting the research in-house. Companies are able to avoid the start-up costs associated with ramping up in-house capacity, as well as recruitment costs associated with bringing in the right people. Outsourcing provides access to experts in the pertinent field, and allows companies to move forward more rapidly with the preclinical phase of their research. During this research phase, companies do not bear the costs of any unused capacity, and there are no shutdown costs required to scale back capability after the research is complete. As companies come under increasing pressure to control R&D costs, outsourcing is a logical choice.
Overseas CROs, particularly those in China, have gained increasing market share in recent years. Growing levels of technological proficiency, the development of state of the art facilities, and lower overall costs have sent many companies scrambling to take advantage of these new markets. The soft U.S. economy has been predicted to push more business away from domestic CROs, but in some cases the opposite has proven true. The reason: the cost of managing overseas relationships.
While direct costs associated with preclinical research are typically lower when outsourcing to overseas CROs, these savings are often insufficient to offset the increased costs of managing the overseas relationship. Travel expenses and time dedicated to evaluating and selecting an outsourcing partner are typically greater when dealing with overseas markets. Once the relationship is established, ongoing costs include those associated with communications, oversight of the CRO, and the legal costs of dealing with international issues.
Small to mid-sized companies are discovering that the extra costs associated with managing the overseas relationship exceed the difference in direct research costs between foreign and domestic CROs. In tough economic times, under great pressure to reduce costs at every turn, many firms have concluded that outsourcing preclinical research to a domestic CRO is the logical way to go.