Outsourcing has helped drug companies cut capital investment while circumventing production bottlenecks. There are other advantages making outsourcing a cheaper way of running a business. The less you produce in-house, the less you are likely to suffer the headaches of labour disputes and tough environment regulations.

There is also a technical reason for this swing towards outsourcing. Finding and testing new molecules for treating various diseases has become increasingly complex, sophisticated and expensive. The advent of chiral chemistry and analysis of racemates have increased the average number of steps in synthesis of new molecules, and is pushing process development and manufacturing to the limits.

For example, Amprenavir, Glaxo-Wellcome''s anti-viral compound, has to undergo 14-step synthesis during manufacturing. The increasing complexities of chiral molecules has seen the emergence of one more dimension to outsourcing -- contract research for developing manufacturing processes for newer drugs.

Research and development eats up more than half the 20-year exclusivity period granted to patented drugs. Hence companies are under tremendous pressure to amortise their R&D costs in the remaining 8-10 years of the exclusivity period. Manufacturing can often lead to bottlenecks resulting in loss of precious time and money.

In the case of a blockbuster molecule, delay of a single day can result in a loss of $0.5-1 million. For example, drug company Agouron of France had an exclusivity period of only 36 months for its newly discovered nelfinavir. The company settled for outsourcing the bulk drug from Puerto Rico-based MOVA International. Had Agouron tried to make the product in-house, it would have had to spend another fourteen months to construct a new facility from the conceptual stage.

also see : Report on contract manufacturing