The Virtual Organization: Is It the Future Industry Landscape?

August 1, 2001
John McCarthy

John McCarthy is a partner at Barnett International, Rose Tree Corporate Center, Ste. 2000, 1400 N. Providence Rd., Media, PA 19063, (610) 565-2622.

Applied Clinical Trials

Applied Clinical Trials, Applied Clinical Trials-08-01-2001,

Outsourcing and data-sharing technologies are creating virtual pharmaceutical companies. Soon, you may be only as good as your network.

Outsourcing and data-sharing technologies are creating virtual pharmaceutical companies. Soon, you may be only as good as your network.


Currently, the data from more than 95% of all clinical trials is recorded in pen-and-paper format. Cleaning up human errors can take as long as six monthsa process that costs millions of dollars in lost sales for every day of delay. But the paper-based method may be headed for the recycle bin. The rising demand for ethical pharmaceuticals, the aging population, and the increased supply of compounds made possible by high-throughput screening and genomics are pressuring pharmaceutical companies to enlarge their pipelines. But as pipelines enlarge, the amount of clinical data and the effort required to collect, verify, and analyze that data will grow exponentially.

Because of these demands, many companies will soon conduct every phase of their clinical trials via a global technological infrastructure. The Internet, for example, can be used to assist with subject and investigator recruitment, safety monitoring, regulatory submissions, and the management of clinical sites and data. Using the Internet and other information technologies, pharmaceutical companies can streamline operations, reduce costs and time to market, and maintain quality.

But just adopting new technologies is not enough. To meet the demands for new products in the future, pharmaceutical companies will have to reinvent themselves and the ways they do business. Already, some pharmaceutical companiesparticularly start-upshave begun to migrate to a virtual company model to decrease drug development costs and speed time to market.

Portrait of the virtual company
A virtual company uses strategic partners to conduct trials and produce regulatory submissions. The pharmaceutical company functions as a backbone, integrating and managing the activities of its partners through the use of data-sharing technology. In a virtual organization, the lines between internal and external, research and development, and acquisition and analysis disappear. Both strategic and nonstrategic functions are outsourced to electronically integrated networks of partners, which may form long-term relationships or come together for a single project. Because each partner focuses exclusively on one business need or core competency, such as subject enrollment or investigator selection, these specialized partner companies can function far more efficiently than a conventional pharmaceutical company.

Though drug development will continue to be a time-consuming and complex process, outsourcing functions to partners who share data in real time has the potential to dramatically improve efficiency during drug discovery, development, registration, and commercialization, saving millions of dollars in development costs and shaving years off development time.

The virtual company model also changes the way pharmaceutical companies talk to regulators. Dialogue with regulators can begin during the start-up phase and continue at critical decision points throughout the drug development and marketing life cycle. In short, the virtual model can be vital to controlling clinical trial costs, reducing time to market, managing complexity, and improving product development success rates.

Despite this prospect of efficiency, most pharmaceutical companies have been slow to embrace online collection and sharing of data. The challenge of integrating and migrating data from existing systems into new ones, and the difficulty of winning acceptance and approval from a global user base, have hindered adoption of these technologies. But those willing to invest in new technology will see the pace of their drug development efforts significantly increase. And the benefits are not confined to clinical trials. Technology now in development will make it possible for every part of a compounds journeydiscovery, development, manufacturing, distribution, marketing, and salesto be electronically driven.

A change in strategic priorities
Once technological change and the demands of the marketplace have done their work, the pharmaceutical industry will comprise three different types of companies:

  • A small number of global and highly networked pharmaceutical companies
  • A large number of small, highly focused niche pharmaceutical companies
  • The outsourced strategic partners, serving the first two groups, who specialize in a particular aspect of drug discovery, development, or manufacture.

Pharmaceutical companies functioning in this virtual world will place a high priority on developing their information management infrastructures. The ability to access and integrate information from numerous partners and make that information readily available to key decision-makers in an organization will be critical to success. Each virtual company will cherish a group of technicians responsible for managing the data and technological systems necessary for decision support, information sharing, and collaboration. These specialists will enable different parts of an organization and its outsourced partners to communicate in real time and across geography. The sponsor and development partners will be able to access the same data, coordinate responsibilities, make decisions, and verify the status of specific projects in real time.

Finally, although investment in hardware, software, and IT staff will be a high priority for virtual pharmaceutical companies, the individualand the knowledge to which he or she has accesswill become increasingly significant to the success of future research and development efforts. The companies that will surviveand thrivein the future industry landscape will be those that not only keep up with technology, but also let their staff use the technology to support better decision making, knowledge sharing, and collaboration across all parts of the organization.

John McCarthyis a partner at Barnett International, Rose Tree Corporate Center, Ste. 2000, 1400 N. Providence Rd., Media, PA 19063, (610) 565-2622.

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