Offshoring in the Pharmaceutical Industry

Offshoring has been adopted as a tool for reducing costs and for gaining strategic advantages by financial services, software development, and other competitive industries. For a variety of reasons, the pharmaceutical industry has been slow to take advantage of the benefits that offshoring can provide. The purpose of this article is to explore the internal and exogenous factors motivating global pharmaceutical firms to increase and expand their sourcing activities. And, instead of discussing global sourcing in general, India has been analyzed as a unique and explanatory case study for this new, emerging trend. The reasons behind this decision include India’s position as a renowned global IT hub, the country’s “home grown” biotechnology and biopharmaceutical industries, the numerous strategic partnerships and offshoring relationships between global and Indian firms, as well as its significant advances in IT and information management. globAl PhArMAceutIcAl overvIew The global pharmaceutical industry broke historical records with revenues of approximately U.S. $600 billion in 2006 (Pharmaceutical Research and Manufacturers of America [PhRMA], 2006). This is particularly striking as the growth slowed somewhat in North America and Europe; however, China, India, Mexico, Russia, South Korea, and other emerging markets outstripped established markets, growing collectively at an astounding rate of 81% (Herper & Kang, 2006). The lifeblood of the industry flows from its research and development (R&D) efforts with an annual investment of U.S. $49.3 billion, or between 10