GSK's Real Value In Outsourcing To China And India

By Louis Garguilo, Chief Editor, Outsourced Pharma

There is nothing “virtual” about GSK’s Virtual Proof of Concept outsourcing program.

VPoC is as real as Shanghai and Hyderabad. As a drug discovery engine, it is as tangible as compounds progressing through the clinic and to late-stage development. According to Allen Oliff, senior vice president at GSK’s Alternative Discovery and Development, and founder and leader of VPoC, it is also the most cost-effective outsourcing on the globe.

Located with his team at GSK’s King of Prussia, PA, facilities, Oliff speaks quietly but with a determination for straightforward explanation regarding the reality in the world of outsourcing as he has experienced it.

“VPoC started in 2008 with six people overseeing two discovery programs, and we’ve grown to 25 managing 15 projects today,” says Oliff. “Nowadays, the name “virtual” to indicate we are outsourcing has become something of a misnomer. While maybe not to our level of whole-project outsourcing, externalization has become a standard for pharmaceutical research. For us, it is predominantly externalized to Asia.”

Allen Oliff, senior vice president, GSK’s Alternative Discovery and Development, and founder and leader of VPoC

Oliff minces no words on the subject of outsourcing to Asia—specifically China and India—and deftly debunks theoreticals that get loosely repeated in the outsourcing industry. The foremost regard quality.

“Until the early 2000s, the quality of the work you could get at most Asian CROs was not up to the level of Western Europe and North America,” he says. “In the last decade or so the quality is absolutely as good there as it is any place else on the planet.”

Oliff adds, “Not just in terms of executing on specific assays or particular tasks, but actually conceptualizing on how programs go forward. You can frequently do more with the same resources by shifting work overseas.”

Where quality is in common, the benefit of other comparative factors become amplified.

“We have a team of only 25 people. Our side occupies office space; no internal lab space whatsoever and therefore reduced infrastructure costs. We have about 100 to 125 people at CROs. I can’t give you a less vague number because we go up and down depending on the stages of the program and other factors.” He continues, “This really is a key advantage. We do not maintain scientists irrespective of how the programs are progressing. We flex resources as needed, and the best CROs are amazingly responsive to this. Some of the CROs in China and India we work with have literally thousands of chemists and hundreds of biologists, and they shift them adeptly. Compare this to running through internal committees or bartering for resource realignment.”

“Our general calculation,” concludes Oliff on this point, “is we can get the same level of activity between 20 and 30 percent less cost than if we did this internally,” he says.

Oliff makes clear what this calculation has meant for GSK and its employees. “We started VPoC as an attempt to counter the rising cost of drug discovery, and so that we did not have to reduce or limit the number of projects GSK could work on. We’ve been able to save jobs internally with this program.” Oliff also points out that toxicology, pharmacology and other groups within GSK run continuously in support of all programs, and “VPoC is a benefactor to GSK internal resources.” 

The Arguments for East and West Outsourcing

Perhaps because I am programed to do so, I continued to push Oliff on quality, and the other expressed deterrent for outsourcing from West to East: IP concerns. And there certainly have been examples of issues in both categories over the years, in manufacturing most recently (and persistently).

“You are right, the argument has always been that quality is far better in the states or Western Europe. Even in 2008, the Asian market was very heterogeneous, meaning that you could go to some CROs and they had little clue what they were doing, but then you went to others with very high standards of quality and knowhow.”

This time, Oliff subscribes to the proffered opinion on the state of affairs. “I do think the key is the post docs in the states and Europe going back to Asia and populated those companies with valuable experience.” As he has throughout our conversation, Oliff then hammers home the point: “The West educated its competition and added that value to the Asian companies on a cost basis the West cannot easily compete with dollar-for-dollar.”

Others in the industry point out that the cost differential is closing, with rising salaries and other expenses elevating in China particularly. How much of a factor for big pharma in global outsourcing decisions this becomes is still largely anecdotal, although some pharma have openly expressed frustration with outsourcing in the East and announced pulling back whole programs to the West. A salient point then is that the playing field is not static; market dynamics are in flux: Better quality in Asia is coming at somewhat elevated Asian pricing.

Oliff has experienced the shifting sands. “We have seen more Asian CROs become better, although you still do have to be careful with who you hook up. There still are companies in Asia not as good as what we have here in the U.S. More to the point nowadays, there are still companies in Asia not as good as other Asian CROs.”

Even more than quality concerns are IP breaches; Oliff says GSK was very concerned about this when VPoC was starting out. He said GSK’s legal group and others worked carefully to create enforceable agreements surrounding IP and detailing how IP is protected and handled. “The CROs are keenly aware that their survival depends on maintaining confidentiality,” says Oliff again getting to the bottom line. “In our six years of doing this, we have never had a problem.” One counter-measure to IP lapses that GSK implemented was establishing groups in China and India specifically dedicated to any IP issues. “We have only used them once in six years for a concern, and it was quickly taken care of.” Of course, getting back to costs, these are added expenses to the outsourcing operations.

Selection And Communication With Asian Partners

Oliff says that when he started VPoC in 2008 they looked globally for CROs to provide services on programs from early discovery through early clinical development. “We were not particularly focused on Asia. As it turns out, though, after a thorough selection process we started with a couple of companies in Shanghai.” I asked Oliff about managing these long-distance relationships, starting with the question of how many CROs does VPoC work with at a time. “We really do try to hold down the number. Currently, we are working with two companies in China and two in India. At a minimum, my head biologist and head chemist go and visit those companies twice a year. Usually the head scientists on our programs from the CROs will come here, so roughly three times a year we have face-to-face meetings,” explains Oliff.

He says that otherwise communications are done via the phone or Internet. Because the distances cause “unusual timings,” they do not worry too much about videoconferences. “Frankly, communication just has not been a problem,” he says, casting aside another industry-pervasive precept, this one regarding the need for more face-to-face meetings, the growth in importance of life sciences hubs (which this author has written about), and at least some propensity for near sourcing per se.

“Every once in a while there is difficulty with a biological assay or making a compound, for example, but we have found that troubleshooting those problems even halfway around the world is no more trouble than from one GSK facilities in the U.K. and the U.S. It is the same routine: Pick up the phone and call London vs. pickup the phone and call Shanghai,” says Oliff.

Epilogue

Results to date have been impressive. Oliff says several projects have passed their proof of concept benchmark—typically a Phase IIa or IIb study—and those projects have already been brought back in-house for late-stage development and progression. “Of the programs we have started completely de novo,” he says proudly, “two are just now undergoing candidate-selecting for compounds to put in man early next year.”

I end our discussion by asking Oliff what he might rename his program now that the “virtual” banner has little meaning. He takes this seriously and takes time to consider: “Externalized R&D’ or something like that is all I can come up with,” he says and then laughs. He once again grows serious: “What you have to understand is back between 2002 and 2008, everything was about proof of concept. The number of proofs of concepts that you got—and we were all obsessed about it—the number of marks on your gun handle to show how good a director of research you were,” he says. “So VPoC was a desirable if not sexy term at the time.”

I’d rather suggest a simpler change in name. Perhaps the “V” in VPoC should stand for “Value.” I’m not as sure as to where to put the “Asian” into it, but if not in name particularly, Asian Value is the real equation Oliff has worked out for GSK outsourcing.