Lately, I’ve been blogging a lot about the U.S. Presidential election and its impact on Big Pharma. I’d like to continue this thread for a while and today blog about the election’s possible effects on one of Big Pharma’s most important strategies in trying to remain competitive – offshoring.
Interestingly, none of the big three candidates remaining, Obama, Clinton, and McCain, have taken a strong position here. I’m using their websites and what I’ve read and heard on other media and nothing has leapt out at me. Obama talks of new jobs in green industries. Clinton takes the traditional liberal Democratic tack of big government infrastructure projects. McCain, no surprises here, takes the Reagan approach of lower taxes and a hands off policy by government. Honestly, this is bigger than just the pharmaceutical industry.
The recent trends to offshore back office services, information technology, research and development, and clinical trials have been helping Big Pharma maintain profitability while its revenue growth is stagnating. With little likelihood of government interference, these trends should continue. Of course, this is only a short term fix. Sooner or later, there will no further costs to wring out of operations. Then there are the risks associated with offshoring. The recent incident in China where a factory contaminated healthcare products intended for the United States highlights the risks here. I suspect that somewhere in the U.S. drug industry someone is doing an analysis of the labor costs saved versus the increased quality assurance, public relations, legal and litigation costs arising from going overseas.
With all the problems that Big Pharma has been going through and all that are pending (please see our other blogs for more on this), government non-interference in offshoring is probably a good thing from their narrow perspective. I believe that this will only allow Big Pharma to continue to be distracted by moving operations offshore and become entangled in these activities. It’s only a band-aid, not a long term fix. Daniel Silverstein’s latest blog entry (see in archives below) talks about large PRI’s that are getting too big and are forgetting, or are unable, to remember what they were originally chartered to do.
So, it is business as usual for Big Pharma, at least as far as offshoring is concerned. We may be returning to this topic in the future if they can’t get their quality assurance under control.
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Contributed by Guy de Lastin
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