Survey results have again surprised analysts by showing prices charged by CROs, particularly to large pharma, have increased in recent months.
Volume-based discounts and overcapacity are believed to be depressing prices charged by contract research organisations (CROs). However, for the second time this year more than a third of surveyed biopharm employees said outsourcing prices are increasing.
“We felt like our [first half of 2011] data might have been an anomaly and we provided multiple caveats. However, [second half of 2011] survey results are even more supportive”, Eric Coldwell, equity analyst at RW Baird, said.
In the latest survey 42% of respondents said pricing has increased over the past three months, up from one-third in the earlier report. The proportion of staff at mid-sized and large pharma reporting price increases jumped to close to half in the latest survey, offsetting a dip among smaller firms.
Increases were reported by more than half of clinically focused respondents, compared to around one-quarter of those working in preclinical. Decreases were equally rare in both groups. Small firms and European-based biopharm reported more decreases than other groups.
The ratio of respondents reporting price increases to decreases was 6:1, compared to 5:1 in the April survey. Reported price increases averaged at mid-to-upper single digits.
Why, why, why?
The reason the survey found price increases, which goes against what CROs have reported, is unclear. “Last report we suggested that one of the drivers of the unexpectedly strong pricing data might relate to those working specifically in fields where capacity has come out”, Coldwell said.
Phase I capacity has been cut and this could quickly lead to price increases. Coldwell said: “If one of two Phase I sites in a market closes we would expect the remaining site to have substantially better recruiting capabilities and for capacity to fill, and prices to increase, fairly rapidly.”
Of the 12 respondents working in clinical pharmacology, 11 said prices have increased. The other group that overwhelmingly reported price increases was Asia-Pacific-based biopharm. Rising labour costs in emerging markets, such as China, could account for the increase in their outsourcing prices.
“While we still have much to learn about this survey feedback, one thing is certain: the vast majority of internal pharma staff surveyed believe that they are spending the same, or more, per unit of outsourced work today than in the recent past”, Coldwell said.