When laboratories are a part of business operations, business leaders face the dual challenge of extracting maximum scientific value from their labs while also managing or reducing costs for an environment they may not understand all that well.
The contract outsourcing model grew out of this challenge, with contract research and contract manufacturing organizations (CRO/CMO) stepping up to take on activities that pharmaceutical companies like yours wanted to offload in favor of focusing on core competencies. The thinking has been that it’s more efficient and less costly for you to outsource certain technologies, workflows, and research to CROs than to build the required infrastructure and hire staff.
But with pharma R&D growing less productive1, executives are examining new ways to propel their companies forward. The market has responded with a variety of options, including:
- More insourcing via third-party service partners
- Greater collaboration through technology, joint ventures, and even shared spaces
- Technologies to bring the lab to intelligent enterprise status
Hybrid approaches to lab management are available to aid in the more efficient, optimal operation of labs. These approaches range from staffing services that provide qualified workers to holistic engagements that deliver better outcomes. Among the models, we see:
- Traditional/straight staffing
- Managed services/insourcing
- Lab as a service/lab in a lab
- Contract outsourcing
Traditional staffing models involve staffing and temporary hiring agencies you can use to quickly identify qualified people to fill your employment needs, particularly short-term engagements. Staffing agencies deliver contingent or permanent workers, typically as contract, contract-to-hire, or direct hire candidates. The agency can either hire the worker and administer HR functions, or your company can make the hire – but either way, it’s the customer that manages the employee’s work. This model saves on recruiting time but doesn’t solve in-lab management responsibilities. Plus, local regulations or even company policies may limit the amount of time that contingent workers can remain under contract, such as 12 or 24 months, leading to issues with retraining and turnover.
As labs evolve into intelligent enterprises, staffing agencies must be able to produce candidates with the necessary scientific and technical skills to work with your connected instruments and systems.
A managed services model delivers an outcome, not just a service. Managed service providers promise to solve problems and add value in areas from strategy and business process optimization to technology evaluation and selection. In addition, professional services, from asset management and scientific support to informatics and compliance services, can be included, too.
A managed services staffing model, for example, can provide your lab with on-site scientists, technicians, and analysts. Because the managed services provider retains the employment of the people it places and takes responsibility for their performance, training, ongoing education, evaluations, and so on, the outcome is not a worker, but a result – the product of that person’s work.
This model relieves you of the internal HR burden and external CRO oversight, which can reduce costs as lab workers can be efficiently engaged for specific projects, time periods, or volumes of work at peak periods. It provides maximum flexibility.
What’s more, the people hired can range from lower-skilled lab technicians for routine assignments to the highly trained, skilled, and expert scientists you need for a critical period or project. Because managed service providers typically specialize in servicing particular industries, they have the resources on hand to fill highly specific needs.
For software or hardware, managed services providers can take ownership of your systems and equipment to keep them running optimally and in compliance. This could include on-site or remote support. As responsibilities transfer from you to the provider, the goal is to control costs, reduce risk, remain flexible, and improve performance.
Things for you to consider when selecting the managed services model include available space, scope of work, and change management. Managed services are typically delivered on-site, meaning you must have adequate space for the provider’s personnel to carry out the work. This may not be an option for you if your lab is in the process of consolidating and divesting of excess space. However, it may be an option when divesting of excess space is not possible, like when the excess space is an otherwise fully occupied building. What can be done to maximize the space occupancy? Bring outside services in-house through a managed services provider.
And because managed services providers agree to a scope of work, the services to be provided must be clearly defined and articulated within the service-level agreement. The managed services provider must adhere to your protocols, processes, and SOPs, for example, but has flexibility in service delivery to maximize efficiencies. This way of working must be communicated to your personnel so they understand the endgame to which the managed services provider has committed. Careful change management can help all your people adapt to how managed services may differ from historic practices and norms.
Lab as a service (LaaS) is an emerging model that’s designed to cater to your needs from a holistic viewpoint. Expanding beyond a managed services contract, LaaS incorporates the people, instrumentation, consumables, and other factors that go into running a lab. LaaS can, in effect, be considered an internal CRO – one that simplifies the process by adhering to your SOPs and protocols.
The ownership of the services, the people, and even the equipment remains with the service provider, who is accountable for a predetermined outcome as stated in a service-level agreement. Therefore, one major differentiator when compared to a managed service model, is that with the inclusion of instrumentation, the spend profile changes from a capital expense (CapEx) model to an operational expense (OpEx) one. And that provides an additional tool for you to manage budgets without burdensome capital expenses.
Like managed services models, LaaS can cover the full range of lab operation needs – from staffing to proactive instrument care and maintenance to science advisory. The LaaS partner becomes an extension of the pharmaceutical client, working in consultation to arrive at a desired result, yet retaining the responsibility for delivering on its portion of the service-level agreement. This frees you to focus your energy and expertise on scientific discovery, development, and achievement.
Because LaaS is an extension of the managed services model, selecting it means being able to provide adequate physical space, as well as clearly defining the scope of work, communicating well, and managing change effectively to make the program successful. Because the LaaS provider is responsible for instrumentation as well, cultural compatibility can be important – the LaaS partner should attempt to mirror your preferred style of operating instruments, following protocols, and so on.
The partnership that develops between you and your provider means the LaaS provider is in a position to offer insights and recommendations based on their involvement and access to information across your organization and from its own data and experience. As an extension of your on-site organization, LaaS providers work within your quality systems and follow your protocols, while you retain control over all IP. Taking the LaaS model a step further, or giving it a twist, any “as a Service” (XaaS) models can place value-add lab services within your laboratory. This serves the purpose of providing on-site, timely services necessary to your scientific mission, while wholly entrusting responsibility with a third-party partner who performs the work and hands off the results. In healthcare, lab-in-a-lab models can be found where service partners take on entire screening operations and deliver patient results for healthcare providers to make therapeutic decisions.
Contract research organizations remain a viable option for pharmaceutical efficiency. The CRO market was estimated to reach $43.7 billion by 2026, up from $19.2 billion in 2016, according to a report on drug discovery outsourcing by Visiongain2. Professional services firm KPMG states that resource-constrained pharma turned to CROs to as “more natural, external owners for assets and activities that were previously handled in-house, much as the airline industry did during the 2000s.”3 CROs, which externalize the work by performing services at their own facilities, assist with clinical trials, as well as performing lab-specific procedures such as testing and analytics. While CROs have their own quality policies, methods, and protocols, they can adapt to your methods and protocols – which may add some time. The insourcing trend is affecting CROs too, as some are offering to use excess capacity in their sponsors’ facilities to complete necessary work.
How to Choose a Model
Each model has its purpose, but finding the best one – or perhaps deciding on a hybrid approach – takes the assistance of a trusted and knowledgeable advisor. Such a partner can help to point out new approaches that other labs are finding successful or to expose hidden costs. This can take into account even small details like the effect of shipping expenses and the cost of time lost to shipping samples, determining whether there’s value in changing your financial budgets from CapEx to OpEx, or the inconvenience and impact of off-hour business meetings for global participants.
Four Steps to the Right Model
Determining the most appropriate lab management model takes four basic steps.
Step 1: Determine Core and Noncore Activities
An analysis of which lab activities are core to the scientific mission can begin to reveal the noncore activities that can potentially be offered to a service partner. Maintaining the focus of skilled, highly paid scientists and technicians on value-added activities, while engaging service partners to provide noncore activities, reduces cost. Note that noncore does not always mean easy or routine work; even scientific workflows can be sourced to a third party. The more engaged the service partner is, the more visibility they have to the organization, which increases their ability to spot trends, recognize inefficiencies, make recommendations, and deliver value.
Step 2: Determine Level of Control
With noncore activities identified, it’s time to determine the level of control that should be retained by your company. Will the activities require hands-on or hands-off oversight? Is intellectual property risk a concern? Is the activity time sensitive and need to be performed onsite? Are extra hands needed, or seasoned expertise that can be counted on in the long term? Would there be financial benefits from shifting from CapEx spend to OpEx? Is the goal to reduce management responsibility, but retain ownership of the outcome? Or to shift accountability to a third party?
Step 3: Evaluate Models
It’s easier to select a model, or hybrid of models, once the level of control and engagement is known. Staffing agencies can quickly and reliably bring talent to the lab, but it often doesn’t alleviate pressures after the recruiting stage. CROs are a solution for certain activities, but when project timelines are tight and communication is critical, then insourcing through managed services can help curb management oversight, reduce costs, and improve productivity. The model leaves room for partner insights to influence decisions, and the LaaS model provides more comprehensive coverage and commitment to an outcome.
Step 4: Source a Partner
Providers of lab management services come in many varieties. They offer versions of these models, making it difficult to determine how their services match your needs. Clarity of needs makes it easier to compare against the providers’ service offerings. You can visit industry events to meet with service providers and learn about their offerings, or talk with colleagues and peers to learn from their experiences. Very often it’s the reputation of the provider that, in the end, matters most when selecting a service partner.
- 1Big Pharma’s Metabolism Is Slowing Down. Retrieved from https://www.bloomberg.com/opinion/articles/2018-07-16/pharma-earnings-nvs-bmy-celg-jnj-big-growth-may-be-over
- 2Pharma R&D Outsourcing Is On The Rise. Retrieved from. https://www.biopharmatrend.com/post/30-pharma-rd-outsourcing-is-on-the-rise/
- 3CROs Can Be Indispensable As Pharma Companies Focus On Value. Retrieved from https://www.clinicalleader.com/doc/cros-can-be-indispensable-as-pharma-companies-focus-on-value-0001