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Outsourcing your commercial function: How to reap the rewards and avoid the pitfalls

As commercial outsourcing becomes more sophisticated, it allows for greater innovation as small and ambitious biotech companies are given the strategic power to bring to market needed healthcare solutions.

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Outsourcing is not new in biopharma; contract research, drug manufacturing, and sales organizations have been around a long time. When working well, it can be a way to increase operational efficiencies and reduce cost—but when not, it can cause considerable challenges, increased risk, and decreased profit. Beyond just sales, what is new is the outsourcing of broader commercial functions by both big pharma companies and smaller biotech companies. With increased optionality, the capabilities are exciting and growing. However, there are pitfalls to avoid in order to maximize the potential of this new terrain.

The current frontier that outsourcing commercial functions finds itself in includes a broad selection of offerings that seek to support commercial operations to include marketing and sales operations, marketing, and market access (either entirely or partially). These offerings can be a la carte, or more recently, serve as a one-stop-shop, with vendors pulling together all the functions of a big pharma commercial organization and offering it as a package to smaller companies. Though there are pros and cons to both, the fact remains that outsourcing, overall, offers a variety of benefits to companies both big and small.

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Large pharma companies have already tapped the benefits of outsourcing to include patient and reimbursement hubs, contract sales for additional support of major brands or to focus on a non-core product, and digital promotion for mature brands. Smaller biotech companies are just beginning to tap the wealth.

Traditionally, when emerging biotech companies planned for commercialization, they had two options: build it themselves, which is highly resource-intensive and complex but you retain all the potential upside of revenue, or license it out, which simplifies and reduces spend but significantly decreases profitability. Today, several vendors offer a third approach that provides emerging biotech a plug-and-play array of products typically found within the domain of the larger pharma companies.

The benefits include expertise at the ready, speed to scale, and the ability to right-size at the drop of a hat with all back-end systems and processes designed, pre-tested, and already launch tested. This will emulate, if you like, the launch of a new product in a big-pharma company where the people, processes, systems, and functions are all up and running and the product fits right in.

Instead of thinking, “If you build it, they will come,” think, “If you buy it, it’ll be faster (and better) than building it.” Essentially, small agile companies can tap into much-needed expertise in half the time it takes to acquire it, and if they’ve done their due diligence, they know exactly what they’re getting and that it’s guaranteed to work.

In addition to providing the much-needed expertise, outsourcing brings speed to scale, giving smaller companies the capability of a 300-person organization in weeks. Reducing lead time so dramatically can significantly reduce cash burn as systems, processes, and people can be optimally timed to be in place much closer to launch.

The third boon of outsourcing is that it gives small companies the ability to right-size on a dime without the hiring (or firing) of FTEs (and the subsequent HR, IT, and infrastructure needed). The ability to pivot quickly is key for small and innovative biotech companies to remain innovative and grow sustainably.

So, what are the pitfalls?

Outsourcing is not a one-and-done solution. Companies can’t outsource vendor selection or vendor management. Like any relationship, it requires discernment, commitment, alignment, and care (i.e., management.) Here we can learn from our clinical colleagues on the oversight needed for CROs. Outsourcing commercialization execution is not outsourcing commercial strategy. Experienced senior marketing, market access, and sales and operations leads still need to be hired as FTEs to ensure strategy fits the company and product.

Just like on any frontier, there are the good and the bad. Finding the right vendor is critically important. To do this, companies need the internal talent with the requisite expertise to know what to look for in a vendor. A marketing expert will know what a good digital marketing vendor can offer. The same goes for sales, access, and other functions. Successful companies make the investment up front to understand what questions they have and what they need from their vendors so that the relationship is functional and there is an alignment of incentives.

Once the vendor is selected, it is critical to make sure that the right processes and governance are in place to manage the relationship successfully. Investment is essential, particularly since vendors are often the face of the company. Therefore, treating the relationship as an alliance and partnership and tapping the right expertise internally to manage and foster the relationship is key. The same skills needed to oversee an internal team are not the same skills to oversee a virtual one. The importance of culture as well as hiring and motivating teams are still critical. Though brand decisions still reside within a company’s purview, company talent needs to be able to explain and sell those decisions to gain buy-in.

Finally, measuring success is critical, both to celebrate the success and to course-correct where needed. Necessary metrics will be both qualitative and quantitative. Targets and metrics for sales or access need to be built in and negotiated contractually, and internal expertise will determine qualitative standards. Some vendors offer risk-sharing for profit-sharing, providing sales forecasts and other measurements. The key is to remember that knowing which targets are essential for a brand’s success is crucial. They may be unique to the company and cannot be outsourced.

It is an exciting time. As commercial outsourcing becomes more sophisticated, it allows for greater innovation as small and ambitious biotech companies are given the strategic power to bring to market needed healthcare solutions. Companies, big and small, can pick and choose which capabilities they want and need to develop internally while outsourcing the rest. The vendors that deliver these solutions will continue to evolve and grow, ensuring a healthy market where size will not be a hindrance or a barrier to new ideas.

Photo: elenabs, Getty Images

Andrew Parratt is a senior pharma/biotech executive with more than 25 years of Commercial, Strategy and Operations experience. He is currently the Vice President of Commercial Planning and Operations for Karuna Therapeutics. Andrew has built his career turning great science into commercial success, orchestrating cross-functional collaborations to identify synergies and enable organizations to scale and commercialize. He develops long-term roadmaps and corporate strategies that define how individual functions are interdependent in their efforts to move promising compounds from Phase I to maturity.
Andrew holds a Postgraduate Diploma in Marketing from the Chartered Institute of Marketing in London. He earned a First Class Honors Bachelor of Science in Chemistry for Europe (French) from the University of Surrey, UK / Ecole de Chimie, France.

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