Old Model in New Clothes - Pharmaceutical Technology

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PharmTech Europe

Old Model in New Clothes
The traditional pharmaceutical business model is disintegrating, but the new model is not much different.

Pharmaceutical Technology
Volume 32, Issue 1

Winners and losers

Although it is uncertain whether the "new" bio/pharmaceutical business model will really deliver long-term benefits to its adherents, there is little doubt that it will greatly benefit CROs and CMOs. Clinical CROs are already benefitting as major pharmaceutical companies outsource more of their clinical-study and clinical-data-management requirements. Clinical research is people-intensive. The need for staff waxes and wanes according to what is in the pipeline at any given time, so clinical CROs clearly contribute to the goal of keeping costs flexible. Further, clinical CROs have been at the forefront of introducing cost-saving innovations, including new data-management technologies and conducting studies in low-cost geographies. So, they will continue to be winners as major pharmaceutical companies implement the new model.

The picture is somewhat less clear for CMOs. The move to divest small-molecule manufacturing operations will create new opportunities for CMOs to pick up the manufacture of older active pharmaceutical ingredients and dosage forms, and undoubtedly some of the new small-molecule launches as well. However, the decision by most companies to invest in vertically-integrated manufacturing operations for their most strategic product areas suggests that CMOs could be shut out of the most promising new opportunities.

CMOs will need to come up with more innovative strategies and offerings if they really want to leverage the opportunities that will be created under the new Big Pharma business model. For instance, few CMOs have adequately addressed how to deal with the threat and opportunity of manufacturing in low-cost countries such as India and China, and only one—Lonza (Basel, Switzerland) in its deal with Genentech (SouthSan Francisco, CA) to build new cell culture facilities in Singapore—has come up with a truly innovative new business model. Most CMOs are still trying to appeal to the old Big Pharma business model.

Jim Miller is president of PharmSource Information Services, Inc., and publisher of Bio/Pharmaceutical Outsourcing Report, tel. 703.383.4903, fax 703.383.4905,


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