Regulatory Affairs Outsourcing: What to Expect

My March SmarterCompliance newsletter posted an analysis of results of a 3-month survey of medical device, biotechnology, and pharmaceutical firms on regulatory affairs outsourcing trends.  Concurrent with this survey - but unbeknownst to me - Tufts University was also conducting a survey of regulatory affairs workloads in mid-sized to big pharma firms.

Tufts found that workloads on regulatory affairs professionals in these mid-sized to big pharma firms is increasing, with RA departments now handling almost 100 various projects over the course of the year, most of which are in the clinical stages.  As a result, some commentators have argued that this is cause for regulatory affairs to receive more resources and for management to staff up their RA departments.

Our study - of small to large firms both in devices and in the biopharma industry - found that outsourcing of regulatory affairs is on the upswing.  Almost 7% of firms now have no internal RA departments whatsoever, and 22% of firms now outsource significant activities within their RA departments.

In looking at the two studies, here's what I suspect is going on:

1. Small firms - startups through those approximately 100-people in size - have to watch the bottom line carefully and tend to outsource various RA project or other task-focused (e.g., label creation or submission assembly) activities.  Thus, their RA department might just be 1 person inhouse.
2. Mid-sized firms - anywhere from 500 to 2,000-3,000 employees - have a larger, more "usual" RA department make-up.  Outsourcing is likely to be very task/project-oriented (e.g., dossier assembly or individual clinical trial oversight from an RA standpoint).
3. Large firms - these are the big boys and they used to have very traditional RA department.  These are the ones that are really changing and increasingly outsourcing various RA functions, activities, and projects.

So why do I suspect the large firms are the ones starting to really do (or at least plan) a lot of outsourcing?

Beyond conversations with my clients big and small, there are four reasons:

1. History of other support functions who had to deal with increased workloads
2. Economic realities
3. Consulting industry changes
4. Regional regulation growth

A quick, informal look back at other support functions - computer departments, accounts payable departments (including payroll), human resources, legal, and so on - is pretty damning for those who'd argue that increased workload means RA is going to get more staffing and more money.  At a bare minimum, despite the 100% reliance of businesses on IT to even function, a look at the vast multitude of IT skills, software, and hardware now available (versus back in the 1980s) should give you serious pause for thought:  have your IT departments ramped up staffing and spending to accommodate it all, or do you now outsource significant chunks of IT?  The same holds true for legal - do you have all sorts of patent, tax, human resources, litigant, corporate, etc. attorneys on staff...or do you outsource most of those?

Economic realities are simple:  compliance costs money; the more rules and regulations a firm has to abide by, the greater the cost in terms of staffing, salaries, and overhead.  The only way to dramatically cut these costs is to outsource where possible ... or simply not comply.

Consulting industry changes are interesting.  Did you know that Accenture has recently built an entire new wing of its consulting services just for regulatory affairs in pharma and devices?  I'd bet dollars to donuts that a big firm like Accenture did not just decide to develop a regulatory affairs consulting services division on a whim.  They see the changes coming and plan to take advantage.

Regional regulation growth is another challenge.  Basically, it was okay to have several different RA groups when you had several distinct regulatory regions to deal with - the US, the EU, UK, Canada, Japan, and Australia (all members of the ICH and GHTF, incidentally).  But suddenly, with countries from Thailand to South Africa, Brazil to United Arab Emirates, adopting pharma and device regulations more and more similar to the FDA and the EMA, companies simply cannot keep 270+ RA label and submissions specialists on staff for the handful of submissions or labels they might do in that region.

Thus, IMHO, the deck is stacked against increased staffing and money for internal regulatory affairs departments.  I simply don't see it as long as RA continues with a task-oriented, regulation-enforcer mentality.

Instead, RA professionals need to become more strategic-thinking, more holistic in their roles, more focused on how their companies can grow their bottom line while still comply with regulations.

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