|Email Newsletters from Pharmaceutical Technology and Pharmaceutical Technology Europe|
Providing the latest business, scientific, and regulatory news for the pharmaceutical and biotech industries.
News from Europe's pharmaceutical manufacturing industry coupled with upcoming events, and exclusive articles and interviews from industry experts.
Customer Drivers Influencing Supplier Differentiation
To gain a perspective on how these issues relate to pharmaceutical development and manufacturing, the Nice Insight Pharmaceutical and Biotechnology Survey evaluated levels of customer awareness and perception of contract-service providers and the factors that influence those views. The quarterly survey is deployed to 40,000 outsourcing-facing pharmaceutical and biotechnology executives. The survey is comprised of approximately 1200 questions and randomly presents approximately 30 questions to each respondent to collect baseline information with respect to customer-awareness and customer perceptions on 400 companies that service the drug-development and related commercialization cycle. A customer awareness score is derived based on assessing five levels of awareness, and the customer-perception score is based on six drivers in outsourcing: quality, accessibility, regulatory compliance, pricing, productivity, and reliability. These factors are ranked by respondents to determine the weighting applied to the overall customer-perception score, which can be calculated overall, in specific segments, and for a particular company. The most recent survey, released in June 2011, provides useful insight into the factors that influence outsourcing decision-making (1).
Factors influencing outsourcing
Where there was some degree of difference was how the other factors—productivity, reliability, quality, and accessibility—ranked in order of importance. In evaluating companies engaged in sterile manufacturing or lyophilization, reliability ranked as the second most important factor influencing the perception of all types of biopharmaceutical/pharmaceutical companies and productivity ranked third. In offering their views on outsourcing companies overall as well as specifically for companies engaged in custom manufacturing, chemical synthesis, and preformulation/formulation, all types of pharmaceutical and biopharmaceutical companies ranked productivity second in importance and productivity third. Across all areas (i.e., overall outsourcing, custom manufacturing, chemical synthesis, sterilization, lyophilization, and preformulation/formulation development), quality was ranked as the fourth most important driver and accessibility fifth.
Specific customer bases
Further analyzing the drivers influencing customer perception among specific customer bases reveals interesting results. In examining the ratings offered by Big Pharma companies in outsourcing overall and in specific segments, regulatory compliance was most important and price/ affordability the least important. Similarly, biotechnology companies ranked regulatory compliance first and price/affordability last (see Tables II and III).
Levels of outsourcing
The survey examined the level of all pharmaceutical outsourcing in terms of the average number of services outsourced and the amount spent. Emerging biotechnology/biologics companies outsourced the most number of services, an average of 5.79 services, and emerging, niche or start-up companies the least, with an average of 3.27 services. Big Pharma companies were the second largest purchaser of outsourced services, outsourcing an average of 4.82 services, followed by biotechnology companies with an average of 4.35 services and specialty pharmaceutical companies with 4.04 services.
As would be expected, Big Pharma companies spend the most on outsourced services. Fifty-six percent of Big Pharma companies spend $50 million or more on outsourced services on an annual basis, 23% spend between $10 million and $50 million, and 10% spend less than $10 million. Biotechnology/biologics companies' spending levels were fairly evenly distributed. Twenty-one percent spend more than $50 million per year, 27% spend between $10 million and $50 million, and 22% spend less than $10 million.
Although emerging biotechnology companies on average outsourced more services than other bio/pharmaceutical company types, they spend less. Only 4% of emerging biotechnology companies spend $50 million or more on outsourcing services per year, 10% spend between $10 million and $50 million, and 7% spend less than $10 million. Emerging, niche or start-up companies tend to spend less as well, with 42% of these type of companies spending less than $10 million per year on outsourced services, 17% spending between $10 million and $50 million, and 7% spending more than $50 million. The spending patterns of specialty pharmaceutical companies fall in between those of Big Pharma companies and smaller players. Only 12% of specialty pharma companies spend more than $50 million per year on outsourced services, 23% spend between $10 million and $50 million, and 18% spend less than $10 million.
Understanding the drivers of customer perception, the spending levels, and volume of outsourced services are crucial determinants
for a contract service provider in developing and implementing a business strategy. These factors provide an overall framework
for which specific areas of outsourcing activity can be further accessed. The survey analyzed the distribution of outsourcing
activities by bio/pharmaceutical company type to examine which type of company outsourced in a particular area. For example,
for those companies outsourcing custom manufacturing, 37% were Big Pharma companies, 26% were biotechnology/biologics companies,
16% were specialty pharmaceutical companies, 14% were emerging, niche or start-up companies, and 8% were emerging biotechnology
companies. In examining the other areas previously examined in terms of customer perception (i.e., chemical synthesis, sterile
manufacturing, lyophilization, and preformulation/formulation development), the survey results showed the following distribution
among companies in outsourcing those functions:
1. "Nice Insight Pharmaceutical and Biotechnology Survey, Quarterly Report" (Nice Insight, New York, June 2011), www.niceinsight.com.