Strategies in Outsourcing: Insourcing Emerges as an Alternative Model

AMRI, a contract research and manufacturing organization, discusses its adaption of an insourcing model with Eli Lilly. This article is part of a special issue on outsourcing.
Aug 01, 2012
Volume 2012 Supplement, Issue 4

The practice of outsourcing development and manufacturing services is not new in the pharmaceutical industry. The traditional outsourcing model involves a sponsor company outsourcing particular projects to a contract services provider, which performs the agreed-upon services at the CDMO's or CMO's facilities. Other variants of this model can be adapted, however, as in the case of an adaption of an insourcing model. Although the term "insourcing" typically refers to taking functions back in-house to perform internally with in-house staffing and resources, a hybrid of insourcing and outsourcing can also be employed. Such is the case with an insourcing relationship between Eli Lilly and the contract research and manufacturing organization AMRI for chemistry services. Christopher Conway, vice-president of business development with AMRI, discusses the partnership with Patricia Van Arnum, executive editor of Pharmaceutical Technology.

Basis of the relationship

PharmTech: In late 2011, AMRI formed an insourced partnership with Eli Lilly for chemistry services to support Eli Lilly's drug-discovery programs. Can you describe the nature of the partnership in terms of the resources (staffing, expertise, services) that AMRI is providing and the related infrastructure and support that Eli Lilly is providing as part of the partnership?

Conway (AMRI): In November 2011, AMRI entered into a six-year collaboration with Eli Lilly based on an AMRI insourcing model. As a result of the experience gained in establishing operating infrastructure at several remote locations in India, Singapore, and Europe, AMRI's knowledge of the logistics, legal ramifications, human resources needs, information technology and infrastructure demands, and finances associated with the insourcing model has enabled a smooth establishment and ramp-up.

AMRI announced in November 2011 that it would employ more than 40 synthetic chemists in Indianapolis in 2012 to support Eli Lilly's drug-discovery programs. This team is anchored by a core of experienced AMRI employees, who had been based in Albany, New York, and who have relocated to Indianapolis to assume various leadership roles. The remaining employees are new hires, the majority of which are being recruited from Indiana and surrounding states.

Comparison with traditional outsourcing models

PharmTech: How does an "insourced" relationship differ from a traditional "outsourced" relationship? What are the advantages of such a relationship compared with a traditional outsourcing relationship?

Conway (AMRI): An insourcing relationship has the potential to accelerate a customer's drug-discovery, drug-product development, or manufacturing efforts by maximizing the real-time exchange of scientific information and the resulting ability to rapidly adjust research priorities in response to breaking results. Working closely together, AMRI's scientists can rapidly adapt to changing project needs, leading to faster turnaround response times and yielding reduced cycle times in lead-optimization programs. Co-location brings such benefits in sharp contrast to having synthesis support at a remote location in Asia, for example.

An insourcing relationship is an ideal option when the sponsor may have significant unoccupied laboratory facilities and equipment available because of prior downsizing initiatives. These are already paid for or are being depreciated anyway, and utilization of an insourcing opportunity derives the most value from these assets.

Customers/sponsors can take advantage of AMRI's intellectual capital because the insourced scientists still have access when needed to AMRI's global network of knowledge and experienced problem-solving in drug discovery and development. In addition, working with hundreds of companies across the industry exposes AMRI to best practices that the company can bring to the table. From a human resources (HR) perspective, the insourced scientists are AMRI employees, and this increases the flexibility of these resources while also relieving the burden of HR support, recruiting, and providing employee benefits, which remain the responsibility of AMRI and are already baked into the research agreement.

Pharmaceutical companies are looking for CROs and CMOs that can use their expertise in more strategic ways. Insourcing sets the stage for true collaboration. In a traditional vendor–client relationship, the vendor's scientists work at their own site, often far removed from the client. With insourcing, a core team of scientists is located at the customer facility. This close proximity allows for constant communication, idea sharing, and joint problem-solving, ultimately creating a real-time collaboration with increased project productivity.

From the provider's perspective, an insourcing relationship is a prime opportunity to demonstrate the value that the provider can bring to the relationship, In Darwinian fashion, providers that can demonstrate real contributions and value create opportunities to cement and grow a relationship. Those that do not will see these relationships ending or being transferred to someone else. In this fashion, both the sponsor and the provider evolve for the better of both.

lorem ipsum