By Alex Wong, Industry Manager, Discovery & Diagnostics 

Outsourcing has been an ongoing practice in the biopharmaceutical, chemical and drug discovery sectors for many years now. Likewise, subcontracting in the field of clinical diagnostics represents no new phenomenon. In a recent Frost & Sullivan end user survey which implicated approximately 500 central labs across Europe, lab managers were asked what they would do if they needed to perform a particular assay for which they did not have the testing capability. Reflective of the current climate of cost-constraints affecting the European diagnostics industry, outsourcing - rather than investing in new technology - emerged as the prominent solution. Following on from last month’s insight into outsourcing in the in vitro diagnostics industry, this article highlights some of the key rationale behind the appeal of outsourcing in the clinical laboratory arena. 

More often than not, labs (and companies in general) tend to outsource so as to access capabilities not currently available in-house. Such competencies include:

• accreditations of personnel and lab practices, including quality control and quality assurance processes
• analytical equipment
• experience 
• technical expertise

Employing a contract laboratory / service provider may also aid in:

• combating (skilled) staff shortages
• eliminating purchase of sophisticated, capital-intensive instrumentation
• implementation of ‘best practices’ - providing an independent viewpoint on current procedures and analytical techniques compared to in-house protocols
• improving result turn around time
• project management - extremely large or low priority assignments realised without neglecting higher priority tasks

As seen in other industries, outsourcing in clinical diagnostics is economics-driven. In other words, the chief motivating factor to support an outsourcing strategy is saving money. Whether it concerns the outsourcing of capital- and/or labour-intensive development activities or simply to alleviate bottleneck situations, the financial benefits of outsourcing are becoming – and to a certain extent, have already become – an increasingly integral part of the daily management of the European central lab.

Why not?

Despite the obvious cost-benefits that may be achieved through outsourcing, this approach may come with a few drawbacks. Nevertheless, these drawbacks usually become insignificant when compared to the advantages gained. Some examples of disadvantages include the following:

• selection of service provider / outsourcing lab. Current estimates suggest that there are over 50,000 laboratories - an ever-increasing number - offering analytical/pharmaceutical outsourcing worldwide
• analytical processes complicated due to more parties involved
• in-house employees feeling undermined and insecure of their positions

What to outsource?

Given the recent trend of hospital consolidation and the centralisation of testing, it is unsurprising that outsourcing within the hospital setting frequently involves sending samples from a de-centralised location, eg satellite lab, emergency room, critical care ward, to the core lab. Whilst running test at the point of care would undoubtedly represent the ideal solution, the fact remains that testing continues to be largely dictated by tradition and pricing. In cases where de-centralised settings do not possess the appropriate clinical chemistry or immunoassay system, for example, patient specimens are usually be sent to the core lab.

In other cases, particularly within the private sector, low-volume or even medium-sized hospital labs may choose to subcontract tests to specialist analytical service providers which offer more attractive cost-beneficial solution than the central lab. 

Who outsources?

As illustrated in Frost & Sullivan’s end user survey, central labs across Germany, France, UK, Italy and Spain are outsourcing. But where to? In this particular study, central labs without the necessary skill sets or instrumentation generally outsourced specific tests to a specialist lab within the same hospital or to another central lab in a nearby hospital.

Elsewhere, it has been reported that hospitals based in the UK, US, Middle East and West Asia are already outsourcing diagnostic tests to places such as India and China. Although savings in excess of 80% per test have been reported for subcontracting testing to India, other sources state that a more realistic figure would be around 25%. Here, samples are generally shipped to India by logistic companies, with the results being reported back to the foreign health providers on-line. For the time being, these tests have been largely restricted to highly-specialised molecular diagnostic assays focusing on clinical fields such as cancer, hormones and infectious diseases.

Boasting over 20,000 outsourcing laboratories and offering huge discounts on clinical testing, one common and serious criticism of some - thought not all - Indian labs is the fact that many of them have yet to attain international accreditation for testing. Issues such as certification, customer service and information management must be thoroughly addressed by outsourcing vendors in the near future if they are not to be left behind in the race to capitalise on this global outsourcing trend over the next decade.

As a result of the adoption of an outsourcing approach, the heavy workloads currently endured by labs across western Europe may be lifted, on a temporary or even permanent basis. By improving their performance, productivity and service, clinical labs and outsourcing vendors are likely to reap the rewards of a symbiotic outsourcing strategy.

For more information contact mkenkare@frost.com