Market Uncertainty, Responding to Price Pressure and Rising Competition are Major Concerns for the Industry

30 Nov 2011 • by Natalie Aster

Rising demand, inflation, increasing raw material prices and energy costs, and environmental guidelines have contributed to supplier price increases.

London – The pharmaceutical industry is optimistic about a rise in revenue expectations for 2011. Low GDP growth rates, reduced consumer spending and decreased government expenditure had slowed the growth of pharmaceutical industry in 2009. As national economies began to recover, revenue growth expectations increased during 2010 and rose further in 2011, according to the report “Buyer Spend Activity and Procurement Behaviors and Strategies in the Pharmaceutical Industry - 2011-2012: Survey Intelligence” by iCD Research.

A total of 45% of respondents from pharmaceutical buyer companies considered ‘market uncertainty’ as the most important business concern during 2011–2012 and a further 44% considered ‘responding to price pressure’ as the second most important concern. Additionally, some level of uncertainty is expected to continue in the global pharmaceutical market. The impact of the US healthcare law, European price reductions, healthcare reforms and patent expiries are some of the concerns for the industry in the short-term. As some major products are set to lose patent protection, branded pharmaceutical manufacturers may be forced to decrease the price of these products to counter competition from low priced generics. Such actions could further intensify the price competition in the industry and expose companies to decreased levels of profitability.

Report Details:

Buyer Spend Activity and Procurement Behaviors and Strategies in the Pharmaceutical Industry - 2011-2012: Survey Intelligence
Published: October, 2011
Pages: 60
Price: US$ 1,250.00

Pharmaceutical industry respondents expect an increase of 6.3% in their procurement budgets

For 2011, the average size of the global, annual procurement budgets of pharmaceutical industry buyer respondents is estimated at US$110 million, while in 2010, the average procurement budget was estimated at US$122 million. The ICD Research industry survey reveals that overall buyer budgets are expected to increase over the next 12 months at a higher average compared to the 2010 survey. A total of 64% of respondents expect to see an increase in their procurement budgets in 2011. The average increase in budgets is expected to be US$7 million. ‘Clinical trials and development services’, ‘contract manufacturing’ and ‘active pharmaceutical ingredients (API) and intermediates’ are the categories most expected to see an increase in demand over the next 12 months in the pharmaceutical manufacturing industry.

The implementation of e-procurement is a priority for 30% of respondents, while 23% confirm that they are in the process of implementing e-procurement in their companies. In total 53% of respondents indicate acceptance of e-procurement, and this is evidence of the potential for IT services in pharmaceutical procurement. Of all buyer respondents, 59% expect an increase in supplier prices, while 11% expect a decrease and 23% expect no change. Rising demand, inflation, increasing raw material prices and energy costs, and environmental guidelines have contributed to supplier price increases.

Engaging in partnerships to optimize working capital, improving customer service and creating new products helps supplier respondents to maintain and win buyer business

Survey results show that, in 2011, buyer respondents require suppliers to ‘engage in partnerships to optimize working capital and reduce costs’, ‘improve customer service’ and ‘innovate product’ to secure business from buyers. Suppliers also consider similar actions to be the most important for maintaining and securing buyer business. However, a higher percentage of supplier respondents consider ‘providing support for generating new business’ to be more important than ‘engaging in partnerships to optimize working capital and reduce costs’.

More information can be found in the report “Buyer Spend Activity and Procurement Behaviors and Strategies in the Pharmaceutical Industry - 2011-2012: Survey Intelligence” by iCD Research.

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