Declining economic conditions are having a chilling effect on the pharmaceutical industry's capital investment. The results
of Pharmaceutical Technology's annual survey on spending and innovation trends for pharmaceutical equipment and machinery show that fewer companies increased
spending in 2008 than in 2007 and still fewer plan to spend more in 2009. Overall economic conditions are the chief culprit
behind the fall. When spending, however, the chief motivation for increasing spending is to facilitate regulatory compliance.
Other key findings show more than a majority of respondents have implemented process analytical technology (PAT) in their
manufacturing lines and are using disposables or single-use components in biopharmaceutical manufacturing.
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The results of the survey showed fewer companies increased spending on equipment and machinery in 2008 when compared with
2007 and less spending planned for 2009. More than one-third (35%) of respondents said that they increased spending on equipment
and machinery in 2008, but less than one-quarter (24%) said they plan to increase spending in 2009 (see Figures 1 and 2).
These levels are also down from Pharmaceutical Technology's previous survey in which almost half (47%) of respondents said that they increased spending in 2007 (1). Approximately 20%
of respondents said they decreased spending in 2008, and more, nearly 28%, said they plan to decrease spending in 2009.
Figure 1 Compared with 2007, did your company 2008 spending on equipment and machinery
Uncertain economic conditions seem to be affecting purchasing decisions. More than two-thirds of respondents said that they
postponed buying equipment and machinery in 2008 and will again in 2009 because of overall economic conditions (see Figure
3). Respondents also reported difficulty in securing financing for capital investments, reduced production, and a slight increase
in outsourcing because of economic conditions. Twenty-two percent of respondents said that they had difficulty in securing
financing for capital investments in 2008, and slightly more, 27%, said they had such difficulty for planned expenditures
in 2009 (see Figure 3). About one-fifth of respondents said they face reduced production because of customers' financial difficulties,
and a similar level reported that they did or plan to increase outsourcing to avoid capital costs (see Figure 3).
Figure 2 Compared with 2008, will your company 2009 spending on equipment and machinery
For those companies increasing spending, the level of spending as a percentage of sales, absolute spending, and the amount
of spending increases are expected to be less in 2009 compared with 2008 levels. Respondents' companies' mean percentage of
overall sales spent on equipment and machinery in 2008 was 4.3%; the median was 3.5%. For absolute spending, the mean expenditure
in 2008 was $74.5 million; the median was $4.4 million. Planned expenditures for 2009 are less. Respondents' companies' mean
percentage of overall sales that they plan to spend on equipment and machinery in 2009 is 3.9%; the median is 3.0%. For absolute
spending, the mean expenditure planned for 2009 is $51.1 million; the median is $4.3 million.
Figure 3 Which of the following apply to your company because of overall economic conditions?
Spending increases on equipment and machinery were most prevalent in 2008 by generic-drug companies; 55.6% of these companies
increased spending in 2008. Biotechnology and consumer healthcare companies followed, with nearly 43% of biotechnology and
42% of consumer healthcare companies reporting increases in spending in 2008. Approximately 30% of contract manufacturers
and 24% of innovator pharmaceutical companies reported increases in spending in 2008.
For 2009, 50% of consumer healthcare companies said they plan to increase spending. Generic-drug companies were the second
largest company type to increase spending (27% plan to increase spending in 2009) followed by contract manufacturers (23%),
biotechnology companies (23%), and innovator pharmaceutical companies (19%).
For those companies that increased spending in 2008 compared with 2007, more than three-fourths (76%) said the increase was
greater than their 2006–2007 increases; 21% said it was on par, and 3% said it was less. For 2008, the mean increase in spending
was 8.7%; the median was 4.3%.
Lower spending increases are anticipated for 2009. For those respondents whose companies plan to increase spending from 2008
to 2009, 60% said their planned increase will be greater than their 2007–2008 increase; 36% said it is on par; and 2% say
it is less. The mean planned increase for 2009 is 5.9%; the median is 3.7%.
Spending by equipment type
Figure 4 details how respondents spent in 2008 and plan to spend in 2009 in specific areas. In 2008, respondents' companies
most frequently increased their spending on equipment for manufacturing and processing (37%), quality assurance and control
(35%), and laboratory equipment (31%). For purposes of the survey, manufacturing and processing equipment includes clean-in-place and steam-in-place systems, hoppers and drums, materials handling and conveying equipment, pallets,
pipes and fittings, robotic equipment, stainless-steel tanks and tubing, and other piping.
Figure 4 Year-over-year, how did or how will your spending change for the following equipment areas?
For 2009, respondents' companies most frequently plan to increase their spending on machinery and equipment for quality assurance
and control (23%), manufacturing of biologic-based (active pharmaceutical ingredients (APIs) (21%), and machinery and equipment
for packaging (21%).
Where was spending the highest? Respondents' companies spent the most on machinery and equipment in 2008 in manufacturing
and processing equipment (17%), solid-dosage manufacturing (16%), and parenteral manufacturing/aseptic or sterile processing
(11%). A similar pattern holds up for 2009. Companies responded that they plan to spend the most in 2009 on manufacturing
and processing equipment (16%), solid-dosage manufacturing (14%), and parenteral manufacturing (9%).
The factors that most influenced purchasing decisions in 2008 were compliance with good manufacturing practices (GMPs) (57%
of respondents reported as a high-impact factor), expansion of manufacturing facilities (41% reported as a high-impact factor),
and other regulatory compliance (34% reported as a high-impact factor) (see Figure 5).
Figure 5 What was the impact of the following factors on your purchasing decisions for equipment and machinery?
Compliance again is the leading reason for planned spending on equipment and machinery in 2009. Forty-six percent of respondents
report that GMP compliance was a high-impact factor in their planned expenditures , and 35% said other regulatory compliance
was a key factor (see Figure 5). Unlike in 2008, when 41% of respondents said facility expansion was a strong influence for
spending increases, only 27% said facility expansion will be a major influence on their planned spending for 2009 (see Figure