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Pharmaceutical Outsourcing Post-Launch : Contract Manufacturing, Biomanufacturing and Sales, 3rd Edition

This report is focused on two expanding pharmaceutical outsourcing markets, contract manufacturing of prescription drugs and contract sales and marketing. Both markets represent excellent post launch outsourcing opportunities for companies competing in this fast growing pharmaceutical outsourcing sector.

A major factor driving the upward trend in the number of manufacturing projects being outsourced is that specialized production, i.e., sterile manufacturing, biopharmaceutical manufacturing and specialized processes, such as chiral chemistry and improvements in catalyst activity, is often not included in the core competency of pharmaceutical and biotechnology drug makers.

Detail on Biopharmaceutical Markets

The growing number of biotechnology-driven protein and peptide drugs, antibiotics, chemotherapeutic agents and other compounds administered as sterile injectables, with its concomitant technological requirements, has brought about an increase in the demand for contract sterile manufacturing services. The sheer numbers of biologics in the pipeline are driving drug makers to outsource specialized production rather than build new plants.

As part of its unique coverage of the outsourcing markets for manufacturing and sales, this report includes

  • CMO and CSO Global Market Size and Forecasts
  • Total Pharmaceutical Market Statistics by Region
  • Overview of CMO/CSO Market and Key Drivers
  • Key Issues and Trends
  • Biopharmaceutical Manufacturing
  • Assessment of Key Companies in the Market
Traditionally, large pharmaceutical companies considered sales and marketing a core competency, and built in-house sales teams and the infrastructure to support promotional activities, launches and general portfolio expansion. However, in recent years, consistent with the "lean-and-mean" business model evolving in the pharmaceutical industry, sales and marketing is shifting—albeit slowly—from a core competency to a prime candidate for outsourcing.

Primary and Secondary Research

The information for this report was gathered using both primary and secondary research including comprehensive research of secondary sources such as company literature, databases, investment reports, and medical and business journals. Telephone interviews and email correspondence were the primary method of gathering information. For the purpose of this study Kalorama Information conducted interviews with key industry officials, consultants, health care providers, and government personnel. These sources were the primary basis in gathering information specifically relating to revenue and market share data presented in this report. Specific interviews with pharmaceutical company representatives included marketing directors, division managers, and product representatives.


Excerpts From Interview with Kalorama Information Publisher Bruce Carlson on the Outsourcing of Pharmaceutical Sales

By some estimates, the practice of “third-party pharma product detailing” to physicians began in the late 1980s. How would you characterize the growth/adoption of the practice since then: Steady growth/adoption of the practice by pharma companies, or more of a back-and-forth pendulum swing over the years, depending on prevailing market conditions?

We’ve seen pretty consistent growth this decade. The historical time range is accurate. Late 80’s probably the first companies.. It really took off in the 1990’s when it was a new concept and then since 2003 has settled into a pattern of steady growth consistent growth…I would say consistent growth. Individual companies might experience ups and downs, but the market since

What has the adoption trend looked like over the past 5 years or so, vis-à-vis the pharma industry’s short-term or log-term use of third-party contract sales personnel? What are the major market drivers that account for this most-recent trend? Can you share any market data/statistics or anecdotal evidence to support your characterization of the recent trends?

No stats directly in terms of adoption, but revenues at these companies have increased dramatically, so we can assume adoption is occurring

Proponents say the use of temporary, third-party pharma detailing teams can save money for the pharma co. Where do these savings come from, and what type of savings are typical/possible (i.e., what percentage savings might a pharma co. expect compared to the costs associated with maintaining a dedicated internal sales force)?

What happened with outsourced manufacturing from the early 90’s until now..we expect with outsoursed marketing and sales. In pharma outsourcing of manufacturing, it started as a cost-saver and now is more.. Initially companies were looking for cost savings, or just frantically looking for a solution when due to a corporate reorganization their R&D or manufacturing was gutted. Now, companies go to these outsourcers for drug discovery for instance because they have better computer systems can work faster, and get better results. Take bio manufacturing. These days, you use an outsourcer not only because they are cheaper, not only because you have too little capacity, but because they might even be better at doing the myriad processes of biomanufacturing than you. This is a trend I think you will see with sales and marketing. The CSO does marketing and sales, all day every day. The pharma company has other concerns - product management, production, R&D, regulatory activity.

Especially considering the types of compensation plan discussed in 6. below… where some of these CSO contracts are risk-shared. It should be saving in terms of reduced costs of internal sales staff, less downtime for sales staff because staffing is hired out more tightly according to the products that are being promoted. but also earning “lost revenue” from a product that might have been abandoned by internal sales management due to lower sales and profit margins than the blockbuster products. An in-house sales force costs not only in terms of the representatives themselves, but also in terms of recruitment, sales support, etc. The CSO delivers that.

When it comes to the contracts that a pharma company might establish with a CSO vendor to line up contract sales reps, how are the payments, incentives and metrics for success typically defined? (Could you provide some illustrative examples?)

In our interviews with excutives in the industries few wanted to discuss details of contracts but all gave a general sense, and the most common is a one fee payment based on the size and scope of the project plus either a) payments broken out when various goals are achieved

CSOs can enter in to risk-based ‘co promotion’ contracts in which all or a portion of revenues earned are based on defined percentages of either a) product revenues or the market value of prescriptions written and filled in a given period. However, if a pharma company contracting only the sales services it is predominately on a fee for service bases. They will promise a dedicated team, specific activities. But usually you are going to see operational bench marks.

When it comes to the use of contract pharma sales personnel, how are the “rent-a-reps” typically compensated and incentivized — on a per-call basis or as a salaried employee of the CSO employer? What are the pros and cons of each approach?

That depends on the size and scope of the CSO. Larger CSO firm Cegedim Dendrite, InVentiv Health and Professional Detailing have enough regular work that they have full time employees.. Take Professional Detailing Inc. for instance. They have 1,100 employees, most of those are sales reps and sales managers. About half of the sales reps are full time and the others work based on jobs that they get. The advantage of a CSO using those full time employees is the experience of a professional, and the relationships these reps have with doctors (depending on the type of doctor targeted) In a way the reps function like any other sales force because they are at the ready.

Full time reps at a CSO are generally getting some form of salary plus incentives as would in-house rep but not as much. A significant number of them have worked as pharmaceutical reps before. It may be a good trade off to the rep because their future at a larger pharma may not be as secure as a CSO bustling with business.

There seem to be quite a few vendors available in the CSO space. What are some of the factors that help to distinguish competing vendors competitively? In terms of your company’s own offerings, what are the key “selling points” or “unique offerings” that help to distinguish your company from your competitors?

There is and there is not. It’s a market that is competively robust but not fractured… there is a great number of vendors in the space. Some are started by former sales employees at major drug cos. Having said that however, it is still a market where the ‘Other’ revenues earned do not add up to revenues from the 3 big chains who earn most of the contracts. 2/3rds of the market. Dendrite, InVerta Health and Physician Detailing. These guys have established relationships, experienced reps/managers, big enough to have presence in major MSAs, and technology. These are the three other CSOs want to emulate. Reputation is the currency in this business. There is probably room for more players but if I were a very small CSO looking to grow I would start in a niche therapeutic area or geographic region.

All pharma products are said to have a natural lifecycle as they move from launch to peak adoption to maturation and dwindling sales as they approach patent expiry. In your opinion, are certain phases of the lifecycle more or less amenable to the use of an outsourced sales team? I’d love to hear your thoughts here.

I suppose I could separate what we think is most amendable to ‘where are CSOs being used’ It could be useful at many stages - even the near expiration stages where the pharma company may not be putting sales muscles into in order to get the best results out of all year of the drugs life. But in reality, launches are where they are used most. The trouble with a launch is the conflict between the product’s priority and the company’s priority.

I understand that many efforts related to pharma detailing to physicians are trying to incorporate high-tech/wired/electronic elements to improve the delivery and convenience of the information, and to meet the physicians’ on-demand need for information in ways that go beyond the traditional face-to-face sales call by the pharma rep. Can you comment on the growing importance of these “state-of-the-art tools and techniques,” and discuss some of the market drivers that are helping to spur the ongoing interest in, development of and use of such alternative sales-support/educational tools? Illustrative examples would be great!

E-detailing is a key tool and one where a CSO may be able to help the traditional pharma co. The physician will either engage in one on one interaction with a pharamcetuical representative over the Internet, or they complete a Web-based detail on their own ina self service manner..or video e-detailing where the physician gets a video system installed in the office and conducts meetings with sales representatives through this system. Companies spend about $150-200 detailing doctors; e-detailing can cut that into about $100. and they can take less time from the physician and reach more physicians with less reps. This is not exclusively a CSO function of course; traditional pharma is in on this but since CSOs are focused on sales and marketing and traditional pharmaceutical companies have myriad other areas to improve performance in, one might expect CSOs to keep up with the latest.

PDAs, handhelds are used by many pharmaceutical reps, again given that CSOs are sales and marketing experts you can expect the larger companies to implement these and keep up with software and hardware changes. The more a CSO works. Advance CRM systems. If you look at Dendrite’s marketing for instance, they are not just selling rent a reps, they are selling a whole package with data management, established knowledge of physicians and their prescribing habits, IT systems

How would you summarize the most important “pros” or “potential upside reasons” for a pharma company to use a contract sales team to augment its existing internal sales force?

There are 85,000 sales reps in the United States according to IMS Health. A lot of competition, and that means diminishing returns from the use of sales reps over the years as physicians are simply too busy to see them. Therefore each internal rep doesn’t pay as much as they used to. So do you disable your sales force? Well, that has negatives too. CSOs are useful to balance reductions in internal sales force. This is particularly useful during mergers. Companies may want to combine sales forces and in most cases reduce the combined force of both companies, but fear loss of sales. CSOs help to provide that comfort level.

Internal sales forces can only do so much and the average pharmaceutical company has a wide portfolio of products. Without a CSO, products may be dropped and not get the detailing and sample management efforts needed to make them effective business units. Company may be able to shed internal sales force if enough CSO solutions are used.

How about “potential downside or cons” to the use of a third-party, outsourced physician detailing team? I’m sure there are skeptics out there; how would you address their lingering concerns they may have about entrusting such an important task to a team of outsiders?

Less and less, using a CSO in some part of a companies sales efforts is becoming close to a ‘must do’ but of course having an internal staff is optimal where it is profitable; you get their attention all the time, they are not working on your drug one day and a competitor’s product the next. Profit is a concern - if it turns out to be a profitable drug product you want your own sales force and not a CSO working on it especially where it’s a risk-sharing contract-everything they sell is in our pocket. We did not get a lot of downside factors in our research, but it could be because they are more subtle reasons within organizations.

TABLE OF CONTENTS
CHAPTER ONE: EXECUTIVE SUMMARY
  • Scope and Methodology
  • Challenges Facing the Pharmaceutical Industry
  • Meeting Investor Expectations
  • Erosion of Blockbuster Sales
  • Increased Generic Competition
  • Pricing Pressures
  • Pipeline Output Slowing Compared to ROI
  • Strategies to address challenges
  • Mergers and Acquisitions
  • Strategic Outsourcing
  • Outsourcing Manufacturing Operations
  • Outsourcing Sales and Marketing
  • Contract Manufacturing
  • Biopharmaceutical Manufacturing
  • Characteristics of Biopharmaceutical Manufacturing
  • Biopharmaceutical Manufacturing Demand Increasing
  • CMOs Expanding Operations to Manufacture Biologics
  • Contract Primary Manufacturing
  • Ramping up the Technology Toolbox to Gain a Competitive Edge
  • Contract Primary Manufacturing Trends
  • Secondary Contract Manufacturing
  • Demand for Sterile Manufacturing Capabilities on Increase
  • Contract Manufacturing Market Analysis
  • Contract Sales and Marketing
  • Contract Sales Organizations
  • Drivers of Outsourcing Sales & Marketing
  • CSOs Offer Broad-based Portfolio of Services
  • Maximize Efficiency of Sales and Marketing
  • Speed and Flexibility
  • Provide Sales Team to Companies with No In-House Sales/Marketing Experience
  • Contract Sales Market Analysis
CHAPTER TWO: MEETING THE CHALLENGES OF A CHANGING MARKETPLACE
  • Challenges Facing the Pharmaceutical Industry
  • Meeting Investor Expectations
  • Erosion of Blockbuster Sales
  • Increased Generic Competition
  • Pricing Pressures
  • Pipeline Output Slowing Compared to ROI
  • Strategies to address challenges
  • Mergers and Acquisitions
  • Strategic Outsourcing
  • Restructuring manufacturing operations
  • Reducing the Size of In-house Sales Force
CHAPTER THREE: CONTRACT MANUFACTURING
  • Industry Overview
  • Major Drivers of Contract Manufacturing
  • Key Competing Factors for Contract Manufacturing
  • Biopharmaceutical Manufacturing
  • Characteristics of Biopharmaceutical Manufacturing
  • Types of Contractors Involved in Biomanufacturing
  • Demand for Biopharmaceutical Manufacturing Increasing
  • Impact of Financial Crisis on Biopharmaceutical Sector
  • Production Capacity for Biopharmaceutical Manufacturing
  • Alternative Methods of Producing Biopharmaceuticals
  • CMOs Expanding Operations to Manufacture Biologics
  • Biomanufacturing in Asia
  • Contract primary manufacturing
  • Contract Primary Manufacturing Trends
  • Ramping up the Technology Toolbox to Gain a Competitive Edge
  • Chiral Technologies
  • Oligonucleotides and Peptides Capabilities
  • Hi-Potency Capabilities
  • Specialized Niches Offer Opportunity
  • Dangerous Reagents
  • Controlled Substances
  • Exploring Other Growth Opportunities
  • Contract Secondary Manufacturing
  • Demand for Sterile Manufacturing Capabilities on Increase
  • Market Analysis
  • Contract Manufacturing Market and Forecast
  • Mergers and Acquistions
  • Contract Biomanufacturing
  • Contract Biomanufacturing Market and Forecast
  • Contract Secondary Manufacturing
  • Biologics Drive Special Manufacturing Processes
  • Ramping up Sterile Manufacturing
  • Contract Secondary Manufacturing Market and Forecast
  • Contract Primary Manufacturing
  • Expanding into High Potency API Manufacturing
  • Contract Primary Manufacturing Market and Forecast
CHAPTER FOUR: CONTRACT SALES AND MARKETING
  • Contract Sales Organizations
  • A Brief History of the CSO Industry
  • Governmental and Organizational Regulations Impacting CSOs
    • Prescription Drug Marketing Act (PDMA)
    • Title 21 Code of Federal Regulations, Part 11 (21 CFR Part 11)
    • Office of Inspector General Guidelines (OIG) for Industry
    • Health Insurance Portability and Accountability Act (HIPAA)
    • Additional Guidelines Established by Industry and Professional Organizations
  • Drivers of Outsourcing Sales & Marketing
  • Broad-based Portfolio of Marketing and Sales Services
  • Maximize Efficiency of Sales and Marketing
  • Speed and Flexibility
  • Provide Sales Team to Companies with No In-House Sales/Marketing Expertise
  • Selecting A CSO
  • Wide range of Services Offered by csoS
  • Integrated Sales Force Recruitment, Training and Management
    • Implementation Services
    • Technical Support Service
    • Data Center Services
    • Call Center Services
    • Hardware Support Services
    • Training and Educational Services
  • Product, Sample and Literature Fulfillment
  • Telemarketing
  • Brand/Portfolio Analytics and Forecasting
  • Strategic and Tactical Planning
  • Strategic Consulting
  • CSO -client contracts
  • Improving Sales Force Effectiveness Through Technology-Based Solutions
  • E-detailing
    • Virtual Live e-Detailing
    • Scripted e-Detailing
    • Physician Portal e-Detail
  • Customer Relationship Management
  • Mobile Technology
  • Outsourcing CRM-related Services
  • Information Management
  • Business Intelligence & Analytics
  • Commercial Operations
  • Market Analysis: Contract Sales and Marketing
  • Industry Characteristics
  • Market Environment
  • CSO Market and Forecast
  • CSO Market Share
  • Strategies for Gaining Market Share
  • Strategic Acquisitions to Gain Market Share
CHAPTER FIVE: CONTRACT MANUFACTURING ORGANIZATIONS
  • AVECIA Group plc
    • History and Lines of Business
    • Contract Manufacturing Services
    • Financial Information
  • BACHEM HOLDING AG
    • History and Lines of Business
    • Contract Manufacturing Services
    • Financial Information
  • BAXTER PHARMA SOLUTIONS
    • History and Lines of Business
    • Contract Manufacturing Services
    • Proprietary Formulation Technologies
    • Financial Information
  • BAYER PHARMACEUTICAL MANUFACTURING SERVICES
    • History and Lines of Business
    • Contract Manufacturing
    • Financial Information
  • BEN VENUE LABORATORIES
    • History and Lines of Business
    • Contract Manufacturing Services
    • Development Services
    • Clinical Material Manufacturing and Commercial Production
    • International Services
  • BOEHRINGER-INGELHEIM
    • History and Lines of Business
    • Contract Manufacturing
    • Primary Manufacturing
    • Biopharmaceutical Manufacturing
    • Mammalian Cell Culture
    • Microorganisms and Yeast Fermentation
    • Financial Information
  • CAMBREX CORPORATION
    • History and Lines of Business
    • Contract Manufacturing Services
    • Financial Information
  • CATALENT PHARMA SOLUTIONS
    • History and Lines of Business
    • Financial Information
  • CELLTRION, INC
    • History and Lines of Business
    • Contract Manufacturing Services
    • Cell Culture & Harvesting
    • Purification and Downstream Processing
    • Quality Assurance/Quality Control and Product Characterization
    • Formulation and Finish
  • CHESAPEAKE BIOLOGICAL LABORATORIES
    • History and Lines of Business
    • Contract Manufacturing Services Commercial: Experimental:
  • COVIDIEN PHARMACEUTICAL OUTSOURCING
    • History and Lines of Business
    • Contract Manufacturing Services
    • Financial Information
  • DIOSYNTH BIOTECHNOLOGY
    • History and Lines of Business
    • Contract Manufacturing Services
  • DSM PHARMACEUTICALS, INC.
    • History and Lines of Business
    • Contract Manufacturing Services
  • DOWPHARMA
    • History and Lines of Business
    • Contract Manufacturing Services
    • Financial Information
  • GENZYME PHARMACEUTICALS
    • History and Lines of Business
    • Contract Manufacturing Services
    • Financial Information
  • GIRINDUS AG
    • History and Lines of Business
    • Contract Manufacturing Services
  • HOLLISTER-STIER LABORATORIES CONTRACT MANUFACTURING
    • History and Lines of Business
    • Contract Manufacturing Services
    • History and Lines of Business
    • Contract Manufacturing Services
    • Financial Information
  • HYALURON, INC.
    • History and Lines of Business Contract Manufacturing
  • LAUREATE PHARMA
    • History and Lines of Business
    • Contract Manufacturing Services
  • LONZA CUSTOM MANUFACTURING
    • History and Lines of Business
    • Contract Manufacturing Services: Lonza Biologics
    • Fermentation
    • High Yielding Cell Line
    • Purification
    • Choice of Chromatography Steps
    • Process Scale-Up
    • Process Validation
    • Process Transfer
    • Analytical Services
    • Development of Contaminant Assays
    • Product Characterization
    • Pre-formulation and Stability Studies
    • Analytical Support
    • Molecular Biology
    • Financial Information
  • PATHEON, INC.
    • History and Lines of Business
    • Contract Manufacturing Services
    • Financial Information
  • SIEGFRIED, INC.
    • History and Lines of Business
    • Contract Manufacturing Services
    • Accounting Information
CHAPTER SIX: CONTRACT SALES AND MARKETING COMPANY PROFILES
  • ASHFIELD IN2FOCUS LIMITED
    • History and Lines of Business
    • Contract Sales Services
    • Dedicated Sales Teams
    • Hotspot Teams
    • Vacancy Management
    • Co-Funded Teams
  • CEGEDIM DENDRITE
    • History and Lines of Business
    • Contract Sales & Marketing Services
    • Sales Solutions
    • Marketing Solutions Regulatory Compliance Clinical Solutions
    • Financial Information
  • INNOVEX, Inc.
    • History and Lines of Business
    • Contract Sales and Marketing Services
  • INVENTIV HEALTH, INC.
    • History and Lines of Business
    • Contract Sales, Marketing and Communication Services
    • inVentiv Clinical
    • inVentiv Communications
    • inVentiv Commercial
    • inVentiv Patient Outcomes
    • Financial Information
  • ONCALL, LLC
    • History and Lines of Business
    • Contract Sales Services
    • Dedicated Field Sales Teams
    • Shared Field Sales Teams - OnCall-Share
    • Medical Scientific Liaison Services
    • Deployment options
    • Telesales
    • Marketing Services
  • PROFESSIONAL DETAILING, INC.
    • History and Lines of Business
    • Contract Sales and Marketing Services
    • Contract Sales
    • Marketing Research
    • Medical Education and Communications
    • Financial Information
  • VANGUARD PHARMA
    • History and Lines of Business
    • Contract Sales and Marketing
    • National Contract Sales Forces
    • Recruitment and Placement Services
    • New Product Launches Mature Product Support
APPENDIX: COMPANY NAMES AND ADDRESSES

TABLE OF EXHIBITS

CHAPTER ONE: EXECUTIVE SUMMARY
  • Exhibit 1-1: Global Pharmaceutical Sales by Region, By Percent, 2007
CHAPTER TWO: MEETING THE CHALLENGES OF A CHANGING MARKETPLACE
  • Exhibit 2-1: Global Pharmaceutical Sales by Region, 2007
  • Exhibit 2-2: Global Research and Development Spending 2002-2012
  • Exhibit 2-3: Drug Patent Expirations, 2007-2009
  • Exhibit 2-4: NMEs and New BLAs Filed between 1996-2007
CHAPTER THREE: CONTRACT MANUFACTURING
  • Exhibit 3-1: Selected Contract Manufacturing Subsidiaries of Pharmaceutical and Biotechnology Companies Competing in the Outsourcing Market
  • Exhibit 3-2: Percent Of Respondents Projecting Production Increases Greater Than 100%by 2012
  • Exhibit 3-3: Selected Top-selling Biopharmaceuticals, 2007
  • Exhibit 3-4: Planned Future Capacity Expansions: 5-year Estimates, 2008 through 2012; Biotherapeutic Developers vs. CMOs
  • Exhibit 3-5: Selected Animal-derived Biopharmaceuticals in Research and Development
  • Exhibit 3-6: Selected Plant-made Biopharmaceuticals in Research and Development
  • Exhibit 3-7: Selected CMO’S Expanding to Meet Biopharmaceutical Demand
  • Exhibit 3-8: Selected Asia Biomanufacturing CMOs
  • Exhibit 3-9: Global Prescription Pharmaceutical Contract Manufacturing Market Primary, Secondary and Biomanufacturing 2003-2013
  • Exhibit 3-10: Selected Contract Manufacturing Mergers and Acquistions, 2007 & 2008
  • Exhibit 3-11: Planned Future Capacity Expansions: 5-year Estimates, Biotherapeutic Developers vs. CMOs, 2008-2012
  • Exhibit 3-12: Planned Future Capacity Expansions: 5-year Estimates, Biotherapeutic Developers vs. CMOS, 2008-2012
  • Exhibit 3-13: Geographic Distribution of Contract Biopharmanufactures
  • Exhibit 3-14: Global Contract Biomanufacturing Market, 2003-2013
  • Exhibit 3-15: Global Secondary Contract Manufacturing Market, 2003-2013
  • Exhibit 3-16: Global Contract Primary Manufacturing Market, 2003-2013
CHAPTER FOUR: CONTRACT SALES AND MARKETING
  • Exhibit 4-1: Key Contract Sales Organization Solutions to Maximize ROI
  • Exhibit 4-2: Global CSO Market
  • Exhibit 4-3: CSO Market Share of Public Companies, 2007

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