This is the conclusion of a soon-to-be-released report from Business Communications Co, which notes that the current market for contract services into the drug industry was $100bn in 2004 and will grow at an average annual rate of nearly 11 per cent over the next five years.
"Not so long ago, big pharmaceutical companies turned to contract manufacturing organizations (CMOs) solely to achieve efficiencies in cost, capacity, and time-to-market, or to obtain a specific expertise not available in-house, according to the report.
Today these factors still also play a role, it says, but the most dynamic driver behind the use of CMOs is rapidly becoming the process and production technology they offer.
Many CMOs have gone far above and beyond the immediate needs of their customers to create innovative homegrown processes and to implement technologically advanced equipment and technology - for example in he production of chiral drugs or biologics - that frequently surpasses that available at pharmaceutical companies' own facilities.
And pharma companies are starting to recognise that the cost of setting up and maintaining facilities - with a workforce of highly-skilled operators with more than just the knowledge to run them but also the expertise necessary to continually update and improve them - does not always provide a good return on investment.
The market for contract manufacturing of prescription drugs for 2004 was estimated at $26.2bn, and is expected to rise to $43.9bn by end of 2009, a 10.8 per cent average annual growth rate.
However, contract manufacturing of over-the-counter (OTC) and nutritional products is the largest and fastest growing segment, expected to rise at an AAGR of 11.3 per cent to $102bn by 2009. Meanwhile, the contract research market is expected to reach at $21.9bn mark by 2009, rising at an AAGR of 8.6 per cent from last year's level of $14.5bn.
Within the contract manufacturing segment, that for the cardiovascular drugs is the largest among all other application categories with worldwide revenue of about $2.56bn in 2004: it is rising at an AAGR of 8.7 per cent through the forecast period. Analgesics seem to be rising at the highest pace in the contract manufacturing business with the expected annual average growth rate of 11.9 per cent over the next five years.
The BCC report, entitled Pharmaceutical Contract Manufacturing and Research, is due for publication in April and is priced at $3,950.