by The Rise of Pharmaceutical Contract Sales Outsourcing (CSO)
In recent years, more and more pharmaceutical companies have turned to contract sales organizations (CSOs) to promote their drugs and medical devices. Faced with patent expirations, pipeline uncertainties, and the need to launch multiple new products each year, big pharma is outsourcing an increasing portion of its sales and marketing activities.
CSOs first emerged in the 1990s as a way for small biotech companies with one or two products to gain access to a field sales force. However, the model has increasingly been adopted by large pharmaceutical firms as a way to augment existing sales capabilities and target niche therapeutic areas or hard-to-reach geographic markets in a more cost-effective manner. A study by ZS associates found that spending on Global Pharmaceutical Contract Sales Outsourcing services grew at a compound annual growth rate of 13% between 2006 and 2016, reaching $8.2 billion globally.
Focusing Internal Resources on High Priority Products
For big pharma, using Pharmaceutical Contract Sales Outsourcing (CSO) allows them to selectively deploy limited field resources on their most important new product launches and therapeutic focus areas, while outsourcing promotion of older, non-core products. This enables internal sales reps to dedicate more time selling high-value products that will contribute significantly to future revenue and profits. CSOs take over lower priority tertiary products, freeing internal teams to double down on major brands.
CSOs also take the burden off internal staff for non-core or geographic markets. Rather than build out permanent infrastructure in certain countries or therapeutic areas, companies can “dip a toe in the water” by partnering with a CSO on a contract basis. If the market opportunity develops as expected, the company can potentially bring the effort in-house down the road. If not, it risks little by partnering initially.
Cost Savings from Outsourcing Non-Core Promotion
Beyond focus and flexibility, CSOs allow pharmaceutical companies significant cost savings. Contracting out secondary and tertiary product promotion is far cheaper than maintaining an expensive direct sales force. CSO reps are paid less, receive fewer benefits, and require less training and oversight compared to internal staff. There are also no long-term personnel costs associated with outsourced reps.
By some estimates, using a CSO can reduce the cost of promoting a non-core product by 30-50% versus an internal sales force. The cost is all variable too—a company need only pay for the services it requires and can terminate a contract at any time without further commitments if market conditions change. This lack of fixed costs from outsourcing non-core promotion yields significant savings for big pharma companies.
Improving Access to Specialist Expertise and Key Geographies
Given their singular focus, CSOs can often cultivate deeper therapeutic area expertise that generalist internal sales reps may lack when promoting a diverse portfolio. Specialized CSOs have reps dedicated entirely to certain therapeutic classes or disease areas, allowing them to gain more refined promotional messaging and knowledge.
Pharmaceutical Contract Sales Outsourcing (CSO) additionally provide better access to certain hard-to-reach or diverse geographic markets. For example, many have sales forces tailored specifically to target physicians embedded within hospital healthcare systems. CSOs also allow access to overseas markets like China, India, and Latin America that would require far greater infrastructure investment to build out internal resources. Their existing ground operations in these regions enable big pharma partners to reach new populations with minimal incremental costs.
Flexibility to Rapidly Scale Promotional Efforts Up or Down
Unlike maintaining an extensive internal sales force, CSO partnerships allow pharmaceutical companies far more flexibility to scale promotional resources up or down as market conditions warrant. If an important new product launch overperforms expectations, a company can contract additional CSO reps to capitalize on momentum without making long-term staffing commitments.
Likewise, if a product underdelivers or loses patent protection sooner than expected, there are no severance costs associated with quickly reducing the CSO promotional program. Pharmaceutical firms gain flexibility they otherwise lack with a large in-house sales force when circumstances change. This ability to flex up or down promotional investment levels based on real-time performance is a major advantage of the CSO model for big pharma players.
Privacy and Regulatory Complications Avoided
Shifting non-core promotion to CSOs also takes the responsibility and liability for compliance off the Pharmaceutical Contract Sales Outsourcing (CSO) Company’s internal compliance programs. CSOs assume the risk of ensuring their reps promote products only on FDA-approved indications and do not engage in any improper marketing practices, sidestepping certain legal and regulatory hurdles big companies face.
CSO partnerships also avoid collecting, storing, and managing sensitive protected health information that internal reps need to perform their roles. Complying with evolving privacy regulations like HIPAA falls fully to the CSO as an independent third party, simplifying compliance programs for pharma partners.
Ravina Pandya, Content Writer, has a strong foothold in the market research industry. She specializes in writing well-researched articles from different industries, including food and beverages, information and technology, healthcare, chemical and materials, etc. With an MBA in E-commerce, she has an expertise in SEO-optimized content that resonates with industry professionals.
