OUTSOURCING SURVEY. This year we had 315 industry professionals respond
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1 2016 Tim Wright Editor OUTSOURCING SURVEY Herein are the results of our 2016 Annual Outsourcing Survey, where we call on you, the readers, to help us benchmark the state of the pharmaceutical outsourcing industry. This year we had 315 industry professionals respond to Contract Pharma s Twelth Annual Outsourcing Survey, which was down from 375 last year. Forty-two percent of respondents were from pharmaceutical sponsor companies, and the remaining 58% represented service providers. Survey demographics are broken down further beginning on page 76. When asked if there is an increasing demand for outsourcing this year, 73% of respondents answered yes. The number one reason for this, according to 41% of respondents, is to focus on core competencies (Figure 1). Pharmaceutical company sponsors say they are also outsourcing more because they are virtual (30%), while a significant number say they lack the capabilities inhouse (1). Figure 2 highlights the top focus areas for sponsor companies outsourcing efforts. On page 73 we ve also compared this to last year s results to highlight where the focus of outsourcing has shifted. 70 Contract Pharma contractpharma.com May 2016
2 t FIGURE 1: Why do you outsource? 1 41% 30% OTHER14+ TEMPORARY LACK OF CAPACITY COMPANY IS VIRTUAL LIFECYCLE MANAGEMENT TO FOCUS ON CORE COMPETENCIES TO REDUCE COMPANY SIZE t FIGURE 3: Would you describe your outsourcing as Tactical (case-by-case, based on availability) or Strategic (entire classes of functions perfomed out-of-house) TACTICAL 50% STRATEGIC 50% VALIDATION SERVICES FIGURE 2: Where is your company focusing its outsourcing efforts? % 19% ANALYTICAL & TESTING SERVICES CHEMISTRY CLINICAL TRIALS (PHASE I-IV) CLINICAL LOGISTICS CMC DRUG DELIVERY SYSTEMS FORMULATION DEVELOPMENT IT LABELING LOGISTICS MFG.: API MFG.: BIOLOGICS, BULK MFG.: BIOLOGICS, FINISHED DOSAGE MFG.: CLINICAL TRIALS MATERIALS MFG.: FILL/FINISH MFG.: HIGH POTENCY MFG.: INJECTABLE DOSAGE MFG.: ORAL LIQUID DOSAGE MFG.: PARENTERALS MFG.: SOLID DOSAGE METHODS DEV. / VALIDATION MICROBIOLOGY PACKAGING: COMMERCIAL PACKAGING: CLINICAL PRECLINICAL / TOXICOLOGY PROCESS DEV. / SCALE-UP QA/QC R&D SERVICES REGULATORY FILING SALES STABILITY STUDIES STERILITY TESTING SUPPLY CHAIN MANAGEMENT 19% 10% 9% 9% 8% 9% 10% 8% 8% 9% 10% 2% May 2016 Contract Pharma 71
3 t t FIGURE 4: Do you see this approach changing over the next few years? YES, WE RE MOVING IN THE OTHER DIRECTION NO, THIS IS WHERE WE RE STAYING 51% % 19% % 19% 1% FIGURE 6: What do you find are the most challenging aspects of any outsourcing project? ANALYTICAL METHOD DEVELOPMENT COMMUNICATION AND CULTURAL ISSUES DOCUMENTATION IT PROBLEMS REGULATORY ISSUES SCALE UP AND SCALE DOWN SECURITY TRAINING QUALITY CONTROL QUALITY ASSURANCE TECHNOLOGY VENDOR QUALIFICATION AND SELECTION t 27+ FIGURE 5: Would you use the word Partnership to describe your relationship with a Contract Service Provider? YES 20% NO 80% FIGURE 7: What percentage of your company s Commercial (Final Dosage) Manufacturing is outsourced? 3 11% Contract Pharma contractpharma.com May 2016
4 WHERE IS YOUR COMPANY FOCUSING ITS OUTSOURCING EFFORTS? Analytical and testing services (2) 2. Clinical trials, Phases I-IV (2) 3. Formulation Development (22%) 4. Solid Dosage manufacturing (19%) 5. Commerceial Packaging (19%) 6. API manufacturing () Analytical and testing services (3) 2. Clinical trials, Phases I-IV (3) 3. API manufacturing (31%) 4. Solid Dosage manufacturing (28%) 5. Formulation Development (20%) 6. Clinical Trials Materials (1) GROWTH IN OUTSOURCING CONTINUES t FIGURE 1: Are you seeing increased demand for outsourcing this year? YES FIGURE 2: Where are you seeing most increased demand for your services? % 73% 51% NO 41% This year, 184 professionals from contract service companies responded to the survey. Seventy-three percent of them say they are seeing an increased demand for outsourcing (Figure 1). Figure 2 shows where the demand is coming from. Most of it (51%) is coming from mid-sized diversified pharma companies, according to the service providers. Next are small pharma companies (41%). When asked what their biggest challenges are in working with sponsor companies, most service providers (69%) say unrealistic deadlines are the biggest hurdle they face followed closely by insufficient information (6) (Figure 3). BIG PHARMA BIG BIOPHARMA MID-SIZED DIVERSIFIED PHARMA COMPANIES SMALL PHARMA COMPANIES SMALL BIOPHARMA COMPANIES 30% FIGURE 3: What are the top three challenges that you face in working with operating pharmaceutical companies? 3 41% 6 69% 28% INCOMPATIBLE TECHNOLOGY PLATFORMS INFREQUENT COMMUNICATION INSUFFICIENT INFORMATION UNREALISTIC DEADLINES INADEQUATE TECH SUPPORT May 2016 Contract Pharma 73
5 t t FIGURE 8: How important are the following factors in your selection of a Contract Service Provider (CSP) Ranking From 1 to 5? CONFIDENTIALITY CONSISTENCY OF PERFORMANCE COST FINANCIAL STABILITY (theirs, not yours) GEOGRAPHY/PROXIMITY GMP INNOVATION ONE-STOP SETUP PROCESS OPTIMIZATION QUALITY RAPID AVAILABILITY REFERENCES REGULATORY INSPECTION HISTORY RELATIONSHIPS SIZE OF CSP SPECIFIC TECHNOLOGY TIMELINESS VALUE-ADDED SERVICES % FIGURE 9: What percentage of your company s Clinical Manufacturing is outsourced? 4 3% 9% 2% 13% % FIGURE 10: What percentage of your company s API manufacturing is outsourced? 5 2% 8% 11% Sponsors say they are also using contract service providers as secondary suppliers, with 4 saying they are using them for APIs, 39% for commercial supply, 3 for clinical materials. Twenty-three percent say they are not using providers for any secondary supplies (Figure 13). Sponsor companies report they are continuing to take strategic (50%), as well as tactical (50%), or case-by-case, project-toproject approaches to outsourcing (Figure 3). Change is not likely in the wind as most (7) are planning to continue this approach (Figure 4). In addition, 80% of sponsor company respondents this year say that they view contract relationships as partnerships (Figure 5). Preferred vendor lists have become less important for respondents this year; roughly 33% of sponsor company respondents say that more than half of their outsourcing budget currently goes to preferred vendors, which is down from 38% last year (Figure 14). Mid-sized and big pharma companies were tied, leading the pack in terms of seeking service providers () followed by generic pharma (13%); specialty pharma (11%); consumer/otc (10%); and big biopharma (9%). 74 Contract Pharma contractpharma.com May 2016
6 t t t % FIGURE 11: What percentage of your company s Analytical Testing work is outsurced? FIGURE 13: Do you use Contract Service Providers as secondary suppliers for 31% any of the following? 39% YES, FOR COMMERCIAL SUPPLY 11% 3 YES, FOR CLINICAL MATERIALS 4 YES, FOR APIS 19% 23% NO, WE DO NOT USE PROVIDERS FOR ANY SECONDARY SUPPLIES FIGURE 12: What portion of your company s Nonclinical Work is outsourced? 3 33% 13% 1 FIGURE 14: What portion of your outsourcing dollars goes to preferred vendors? 21% May 2016 Contract Pharma 75
7 t t Despite growth in outsourcing, both sponsors and service communication paths are getting cloudier. Documentation and providers point out ongoing challenges in outsourcing relationships. The top issue continues to be communication and culture lenge cited (3) followed by quality assurance (2), scale up vendor qualification/selection were tied for the next top chal- (Figure 6). One respondent from the sponsor side said, Only and scale down (2), and regulatory issues, quality control and commit to what you can deliver with quality and integrity. Do a technology (19%). good due diligence of the scope of work, maintain transparency From the service providers perspective the top challenges and communicate. cited when working with pharmaceutical companies (see box on Fifty-one percent of respondents this year cited this as the top page 73) are unrealistic deadlines (69%), insufficient information challenge of the sponsor-contract services relationship, which (6), infrequent communication (41%), incomplete technology was down from 4 last year. Hopefully this is not a sign that platforms (3), and inadequate tech support (28%). CP RESPONDENT DEMOGRAPHICS t FIGURE 1. MY COMPANY IS A: This year, 58% of respondents came from contract service provider companies, the rest from sponsor companies (Figure 1). Of sponsor company respondents, came from small/mid-tier pharma and another from Big Pharma (Figure 3). Top sponsor company respondent job functions were Corporate Management 42% (18%), R&D (), Quality and Validation (10%). Figure 2 below breaks out respondent job functions further. 58% FIGURE 2: What is your job function? CONTRACT SERVICE SPONSOR/CLIENT 9% CONTRACT SERVICE PROVIDER 17+ 2% 3% 18% R&D QA/QC/VALIDATION BUSINESS DEVELOPMENT CONTRACT MANAGER PROJECT MANAGER CORPORATE MANAGEMENT SUPPLY CHAIN MANAGER 10% 3% REGULATORY AFFAIRS PURCHASING/SOURCING CLINICAL RESEARCH PROD./MFG./PKG. MARKETING/SALES OTHER 18+ FIGURE 3: What type of company do you work for? 13% 10% 11% 8% TOP 20 PHARMA TOP 10 BIOPHARMA 9% SMALL/MID-TIER (NOT TOP 20) PHARMA VIRTUAL PHARMA EMERGING BIOPHARMA SPECIALTY PHARMA GENERIC PHARMA CONSUMER/OTC HEALTHCARE OTHER 76 Contract Pharma contractpharma.com May 2016
8 t t t % FIGURE 15: Has your company ever received a Warning Letter from FDA, EMA or other regulatory agency due to an inspection at a CMO? 79% FIGURE 16: If you outsource generic manufacturing, have you ascertained that your dosage form manufacturers and API suppliers have registered with FDA under GDUFA? 2 20% YES NO NOT SURE YES NO NOT SURE % FIGURE 17: On a scale of 1-5, how likely are you to outsource a project to a company in India or China in the next year? 18% 21% t FIGURE 18: In the past year, have you canceled or delayed outsourcing projects (due to the current economic climate) that you would have outsourced? 83% HIGHLY UNLIKELY RATHER UNLIKELY NOT SURE; WE RE EVALUATING POTENTIAL PARTNERS WILL OUTSOURCE PROJECTS TO THOSE REGIONS WE RE ALREADY ACTIVELY INVOLVED THERE AND PLAN TO OUTSOURCE MORE WORK TO THOSE REGIONS YES NO May 2016 Contract Pharma 77
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