Matej Mikulic
Research expert covering health, pharma & medtech
Global pharmaceutical outsourcing - statistics & facts
The big global drug manufacturers are economic heavyweights worth hundreds of billions of U.S. dollars. However, not many people would know that pharmaceutical and biotech companies significantly depend on outsourcing their activities, and the share of outsourcing is increasing.
Outsourcing represents a significant market
The most important outsourcing providers for drug manufacturers can be found in the groups of contract research organizations (CROs), contract development and manufacturing organizations (CDMOs), or just contract manufacturing organizations (CMOs). As the names suggest, these organizations are doing research, development and/or manufacturing of drugs on a contract basis. While some organizations are focused on one of these areas, there are also overlaps between the groups. It is therefore not easy to clearly distinguish and separate these two markets. However, as of 2023, the global CRO market is estimated at around 77 billion U.S. dollars, while the CDMO market is estimated at some 140 billion dollars.Why outsourcing in pharma has become inevitable
As in any other industry, in the end it is all about saving costs and efficiency for pharma companies as well. The cost to develop a drug has skyrocketed over the past decades, with some estimates going as high as 2.6 billion U.S. dollars on average for one drug. This is also reflected in the growing number, scope, and complexity of clinical trials, for example, a segment which CROs have specialized in. Additionally, drug research and discovery, pre-clinical and clinical phases, heavily involve big data and information technology. Artificial intelligence already plays a significant role and is expected to do more so in the near future. These are capabilities which many pharma and biotech companies do not possess, and that is why they reach out to specialized organizations. On the other hand, in-house drug development and manufacturing is becoming more and more unprofitable for many companies, and here is where C(D)MOs jump in. Currently, big pharma is outsourcing nearly half of all its R&D activities, while the share can even increase to 100 percent for smaller companies.The big players are in early-stage research
While the outsourcing market for late-stage processes (CDMOs) has a longer tradition and is quite consolidated, early-stage research (CROs) is much more fragmented and heavily based on innovation and speed. Nonetheless, the CRO market has its leaders and flagships. One of the best-known CROs is U.S. company IQVIA. It was formed through the merger of IMS Health, a company specialized in healthcare information with a focus on detailed data about prescription drugs, and Quintiles, a drug development outsourcing company. Today, IQVIA is successfully combining these two segments: IQVIA is focused on work in clinical trial phases I to IV, while still being a global leader for any data around drug sales and drug usage. Other global leading contractors are Laboratory Corporation of America, Charles River Laboratories, and Wuxi Apptech. However, since the acquisition of PPD in late 2021, Thermo Fisher Scientific has become the new leader in the industry.
