It’s always exciting to see how a given industry responds to the market’s dynamics, and for pharmaceutical contract services companies these are exciting times indeed. For the longest time, this segment served Big Pharma from behind the scenes. Like Cinderellas, contract manufacturing, development and research companies (CMOs, CDMOs and CROs in the industry’s lexicon) were relegated to the back of the house, engaged at the servant’s entrance to serve in mundane and discrete roles, delivering API and excipients, clinical trial supply, or for some, extra commercial capacity to speed to market and meet the demand for a successful new therapy. For the most part, contract services companies became the towel boys and water carriers to the industry, certainly filling key and critical roles, but leaving the “competitive” lifting to their primarily vertically structured, predominantly capacity-heavy Pharma customers.
RIGHT TIME, RIGHT PLACE
Sure the industry sustained itself along those lines for decades and it’s safe to assume that during the great AGE of the BLOCKBUSTER contract services providers, no doubt, fulfilled their respective roles with facility and economy, but mostly kept in their place, well within the bounds of their customers’ procurement operations.
Then THE WORLD ENDED for the pharmaceutical industry as we know it. Seriously though, the past decade has been an amazing one for Pharma. Who in the industry can’t recite the litany by now, describing the competitive landscape associated with end-of-the-blockbuster era and the emergence of new business models in response to enormous, practically tectonic political, competitive and regulatory pressures. During these turbulent times, the need to find cost savings, operational economies and competitive advantage prompted drug-owning companies to want more from its contractors, seeking deeper and more meaningful business relationships to help speed their products to market.
According to Visiongain’s “Pharma Leader Series: Leading Pharmaceutical Contract Manufacturing Organizations (CMOs) 2014-2024,” in the past 10 years demand for outsourced manufacturing services grew rapidly. Pharmaceutical companies, say Visiongain’s analysts, have sought to take advantage of the benefits of contract manufacturing — namely lower costs, increased flexibility and external expertise — while focusing resources on core competencies in drug development and marketing. “CMOs are increasingly seen as a strategic partner for pharmaceutical companies,” say Visiongain report authors, “providing a one-stop-shop of services for formulation development and manufacturing throughout the lifecycle of a drug.”
Roots Analysis offers similar insight from its study “Contract Manufacturing in the Pharmaceutical Industry, 2015-2025”: “Amongst the increasing financial pressures and the need to reduce cost and improve efficiencies,” says the executive summary, “the pharmaceutical industry has witnessed a paradigm shift from vertically integrated business model to a network of suppliers.” Contract manufacturing, note Roots Analysis’ report authors, explaining this segment of the industry has become an integral element of the pharmaceutical market. “Started initially as a one-off activity, [the contract services industry] has evolved into a dynamic business model; currently most prevalent in manufacturing, outsourcing is steadily spanning the entire pharmaceutical value chain.”
It’s well documented how established, branded Pharma acted (and is acting) in response to market realities, but there’s another part of this narrative that makes the industry’s recent history an even more compelling story: The rise of pharmaceutical contract services companies, “Contract Pharma” if you will, and their emerging operational leadership post blockbuster apocalypse as Pharma’s heavy lifters.