According to a report by Everest Group, Outsourcing and Offshoring Trends in Pharmaceuticals, pharma companies are expected to continue increasing spend on global sourcing after a record number of contracts were signed in 2010.
According to the report, pharma outsourcing deals grew at a faster pace in 2010 that represented an 81% growth over 2009 as compared to the overall industry average of 13%. Everest Group estimates outsourcing levels are currently about 3-5% of the pharmaceutical industry’s total annual spend of $490-670 billion, and has the potential to reach 10-15%, opening up opportunities of about $33-65 billion.
“The pharma industry is a nascent adopter of outsourcing as compared to some other industries, but multiple factors have emerged that are driving adoption, and we saw strong evidence of these dynamics coming into play last year when the market peaked,” said Amneet Singh, vice president of Global Sourcing at Everest. “The spike we saw in 2010 was largely the result of pent-up demand from the recessionary economy; however, the business drivers for outsourcing adoption remain and continue to evolve. Cost pressures, a changing pharma ecosystem, emerging markets and other market forces are continuing to drive the market. Moving forward, we expect to see an increase in sourcing of drug development and research, supply chain, data management and analytics functions.”
The report also mentioned several trends: European companies, excluding the UK, have dominated contract signings over the past three years; most buyers are leveraging hybrid sourcing models with defined focus areas; business process outsourcing adoption has steadily risen; emerging markets are strategically setting up and gaining a foothold, with Asia and Central and Eastern Europe as leading locations.
Everest Report: Outsourcing Spend Hits 10-Year High
Published October 7, 2011
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