Slow Climb Back - Pharmaceutical Technology

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PharmTech Europe

Slow Climb Back
The health of the contract-services industry is improving but the market is signaling tougher competition ahead. This article is part of the 2010 Outsourcing Resources special issue.

Pharmaceutical Technology
Volume 34, pp. s10-s20

Supplier consolidation is a major threat

Another potential risk of less concern to service providers is supplier consolidation. Only 3% of CRO and CMO respondents in 2010 said that "supplier consolidation by Big Pharma" was a major concern, and at no time in our survey has the number reached 10%.

Figure 8: Please indicate how your company has tried to consolidate its supplier base
However, bio/pharmaceutical company survey respondents did signal that service providers are overlooking a major industry trend (see Figure 8). For 2010, 45% of bio/pharmaceutical company respondents indicated that they have reduced the number of service providers they work with, or plan to do so in the near future. That's the highest share ever in our survey indicating that supplier consolidation is ongoing. More dramatically, the share of respondents indicating that they plan to increase the number of suppliers they work with dropped to just 18% in the 2010. In the 2007 survey, 44% indicated their intention to increase their number of suppliers.

QbD impact minimal so far
One factor driving supplier consolidation is vendor performance: There is a conviction, generally confirmed by actual industry experience, that working more closely with fewer service providers leads to improved vendor performance and better project outcomes. Our 2010 PharmSource-Pharmaceutical Technology Outsourcing Survey indicates that there continues to be plenty of room for improvement in vendor performance.

Figure 9: Client and contractor views on contractor performance
As has been the case every year in the four years we have asked the question, CROs and CMOs rate their performance more highly than do their clients (see Figure 9). The biggest gap continues to be in project management, where 80% of service-provider respondents rate their performance as "excellent" or "good" but only 51% of clients rate them that way.

One area where the perception gap has closed over the past few years has been in customer service, where client perceptions have improved while service provider self-assessments have become more modest (see also, "Performance Metrics, A CMO Roundtable".)


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