Industry Outlook: Mixed Signals Lead to a New Outsourcing Equation

If the respondents to this year's PharmSource—Pharmaceutical Technology Outsourcing Survey are right, 2008 is shaping up to be another strong year for the contract services industry and another big step in the remaking of the biopharmaceutical/pharmaceutical business model. However, the coming months are likely to be more difficult for contract service providers than have the past three years.

Industry trends in 2008 as reported by our respondents (see sidebar, "Respondents profile") are very similar to what we found in 2007. Nearly 45% of bio/pharma company respondents expect their spending on contract services to increase by 10% or more in 2008, about the same as in 2007 (see Figure 1). More than a quarter of these buy-side respondents say their contract services spend is growing faster than total spending in their functional area, but an equal number said spending is growing at a slower rate than total spend (see Figure 2). Still, respondents indicate that more activity is being outsourced than in past years: 42% say one quarter or more of the work in their functional area is being outsourced, up from 35% in 2007 (see Figure 3). Responses indicate that the rate of growth in outsourcing spend is slower at mid-size and generic bio/pharma companies than it is at large and small bio/pharma companies.