Slow Climb Back - Pharmaceutical Technology

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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

Cautious about 2011

Figure 10: How will your contract-services spending change next year?
Bio/pharmaceutical company respondents to our 2010 survey did provide positive signals about 2011 (see Figure 10). Among that group, 70% indicated that they expect their contract-services spending to increase in 2011. That's a big move from one year ago, when only 54% expected the next year's spending to increase.

This indicator has to be interpreted cautiously, however, because our respondents may not have a clear view of the external factors that can impact their budgets. After all, in our 2009 survey, 69% of respondents expected their 2009 expenditures to increase, 45% by 10% or more; they failed to foresee the financial crisis and the effect it had on slowing R&D spending.

Respondent profile
Service providers are being more cautious in their outlook for next year. Nearly half expect 2011 to be "somewhat better" than 2010, and 29% expect business next year to be similar to 2010.

The 2010 edition of the PharmSource–Pharmaceutical Technology Outsourcing Survey portrays an outsourcing market that continues to mature. Buyers of contract-development services are taking a more sophisticated approach to procuring those services. They are more willing to exercise their leverage over pricing, to venture offshore for lower cost services, and to work more closely with a smaller number of providers.

For their part, CROs and CMOs seem to be taking a more realistic approach to the market and the changes taking place. They are competing harder for new business and accepting the reality of greater competition from service providers in emerging markets, especially India and China.

These developments indicate that the contract services industry should continue to thrive and grow in coming years. However, we are unlikely to return to the conditions of 2003–2008, when investment flowed like water into pharmaceutical R&D, and contract service providers had to do little more than answer the telephone to grow their businesses. That period provided fertile ground for CROs and CMOs to flourish, even those with limited capabilities and management skills. The more rigorous environment the industry faces today will lead to an industry of stronger and more skilled companies working in closer collaboration with more capable clients.

Call for Papers

Pharmaceutical Technology welcomes manuscripts about subjects pertinent to all aspects of applied research and development, scaleup, and manufacturing technologies for the pharmaceutical industry. Topics include regulatory affairs, contract services, drug-delivery systems, ingredients, formulation, analytical methods and testing, information technology, processing, packaging, validation, and API synthesis. All papers undergo a double-blind peer-review process by members of the Pharmaceutical Technologys Editorial Advisory Board to determine whether they are appropriate for publication. Before they undergo peer-review, papers are first reviewed by the senior editorial staff.

Pharmaceutical Technology also publishes special focused issues each year. Upcoming topics are Ingredients, Analytical Technology, and Drug Delivery. Author guidelines can be found at under "For Authors."


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