Healthcare Contract Manufacturing: Delivering manufacturing service expertise to clients

Published On: May 2018

Healthcare Contract Manufacturing Market Overview

Contract manufacturing refers to a manufacturer who contracts with another company to make certain components or products over an equally agreed period. The healthcare contract manufacturing organization serves other companies in the medical devices and pharmaceutical industries to provide comprehensive services from drug development to drug manufacturing.

Pharmaceutical contract manufacturing is a huge sector with a large number of integrated services. Some of the services include active pharmaceutical ingredient (API) manufacturing, final dosage form (FDF) manufacturing, advanced drug delivery products, OTC medicines and nutritional product, packaging, and others. The final dosage form comprises solid dose formulations, semi-solid and liquid dose formulations, and injectables. Similarly, medical device contract manufacturing also includes different services such as outsourcing design, device manufacturing, final goods assembly, and others. Device manufacturing services comprise material process services, electronic manufacturing services, and finished products.

As per the report published by MRFR, the global healthcare contract manufacturing market is estimated to grow at a moderate pace and is projected to reach approximately USD 250.9 billion by 2023 from USD 129.9 billion in 2016.

Current market scenario and factors pushing the market growth

Currently, the global healthcare contract manufacturing market is witnessing a moderate growth. Global healthcare contract manufacturing market is expected to grow due to the increasing demand for drugs and medical devices. This continuous upsurge in demand for drugs and devices is due to the growing population, especially in emerging economies. The market around the globe is expanding especially in developing countries such as India and China. There is a major patent cliff occurring in the healthcare market worldwide, more specifically in the pharmaceutical industry. The patent cliff will result in cheaper generic versions in the market which in turn will increase the demand for CMOs. The increased demand is expected to benefit the healthcare contract manufacturing industry. Due to patent expirations, it is assumed that the drug sales will face a loss of approximately 75 USD billion between 2016 and 2023. Roughly the drug sales of 60 USD billion of is expected to be threatened by generics. The off-patent drugs in 2016 were adalimumab, ledipasvir/sofosbuvir, rituximab, bevacizumab, and trastuzumab. Thus, patent protection expiration of major drugs and the growing demand for generic drugs are likely to boost the growth of CMOs globally.

Besides that, the economies of scale significantly affect the final price of the product thus benefiting the final consumers and helping the global players beat the competition in the market. Thus, clients are expected to outsource manufacturing to CMO which do not align with the economics of in-house production. Healthcare contract manufacturing serves multiple customers and thus can acquire raw materials at a reduced cost, benefiting from the economies of scale. For instance, China is a prime example of gains made from the economy of scale in active pharmaceutical ingredient manufacturing. The reduced costs of manufacturing then can be transferred to the final customer or end-user, thereby giving the benefit of cost efficiency and thus greater sales. The incentives provided by the government of developing regions such as China and India for setting up of healthcare-related manufacturing plants will be a growth enhancement factor. Economies of scale will enable the healthcare market players to achieve better profit margins in the highly competitive market. Thus, CMOs are expected to achieve greater business volume, which directly boosts the market growth of the healthcare contract manufacturing market. Moreover, mutual benefits to both contract manufacturer and client, and lean manufacturing and agility are also pushing the demand for the contract manufacturing services.

Future of healthcare contract manufacturing Industry

The healthcare contract manufacturing market is projected to showcase many opportunities in the forthcoming times due to rapidly surging demand for the contract manufacturing services. The government has shown great interest in companies’ ventures and is trying to be a constant support for the manufactures with prospects of developing long-term contract manufacturing partnerships among companies.

The healthcare industry is the largest investor in research and development and also has many research and development subsectors. There also exists a strong partnership between industry and universities. The access to centers of innovation is the prime need of the healthcare manufacturing industry. Thus, improving research and development environment is expected to be the greatest opportunity for the global healthcare contract manufacturing market. Apart from that, there are other factors such as increasing demand for personalization and customization of healthcare has created the demand for smart medical devices. This has created a need for real-time monitoring devices which will fuel the demand for advanced medical devices. Thus, increasing customization and personalization will drive the global healthcare contract manufacturing market in the future.

Factors limiting market growth

There are certain factors limiting the growth of the healthcare contract manufacturing market. These include supply chain complexity and issues of control of 3rd parties, Standardization and interoperability issues, growing cost of noncompliance and counterfeited medicines may hamper the market growth.