What is Pharmaceutical Contract Manufacturing?

Pharma contract manufacturers help fast track new drug products to market

What is a contract manufacturer in the pharmaceutical industry?

Did you know that only about one third of pharmaceutical manufacturing is actually conducted in house?  It’s true.  From cell therapy to diabetes drugs and biologics in cold chain, today American drug companies are choosing to outsource most of the manufacturing of drug products.  Contract pharma is now BIG BUSINESS.  While it is an exciting time to be in the drug discovery business, the cost of operations, need to adhere to regulatory requirements and other factors have become burdensome.  Pharma manufacturing is a highly complex process, from research and development through to commercial manufacturing.

What is driving so much outsourcing in the pharmaceutical industry?  Here are some of the relevant factors:

  • Pressure to reduce expenses due to diminished R&D returns and increased competition
  • Pharma industry consolidation
  • Pharma company restructuring capabilities around technologies experiencing rapid growth, including gene and cell therapy or biologics
  • Need to shift operations away from markets with high labor costs or less profitable drug products
  • Shortage of technical talent in pharmaceutical industry
  • Push from tech giants into the pharma/healthcare space

Here is a scary fact.  Did you know that the lack of American focus on STEM education (science, technology, engineering and math) means that the U.S. workforce has fewer qualified workers to meet the needs of the pharmaceutical industry?  In America, the skills gap is leading to a significant pharma industry labor shortage:  According to the Pharmaceutical Research and Manufacturers of America (PhRMA), by 2025, approximately 60% of American pharmaceutical industry jobs may be unfilled.  Australia and China have ramped up their efforts in STEM education.  In China, 4.7 million STEM graduates were produced in 2016 as compared to only 568,000 in the U.S. in the same year.

A pharma contract manufacturing company provides an array of services to drug companies which may include:

  • Drug development
  • Drug manufacturing and commercial production
  • Documentation of compliance with FDA regulatory requirements
  • Pre-formulation
  • Development of drug formulation
  • Conduction of stability studies, method development, pre-clinical and Phase I clinical trials
  • Providing late-stage clinical trial materials
  • Providing formal stability, scale-up, registration batches

All pharmaceutical contract manufacturers must adhere to FDA good manufacturing practices and comply with applicable FDA regulations. 

In addition to pharmaceutical contract manufacturers, known as CMOs, there are other business models that handle the outsourcing needs of pharmaceutical companies such as that of drug development, pharmaceutical manufacturing, research and testing:

What is a CRO and a CMO?

In the pharmaceutical industry, a CRO or contract research organization company provides support to pharmaceutical companies by providing a range of professional research services on a contract basis so that this work is no longer done internally.  Contract research organizations help drug manufacturers in the extensive drug discovery process by lightening some of the costly burdens involved with data research, testing, project management and drug trials that are run on a post-approval, pre-clinical and clinical basis.

According to a 2018 article in Pharma IQ, here are the Top 10 Contract Research Organizations, ranked by Pharma IQ network voting.

A CMO, or contract manufacturer organization is different from a CRO in that it specializes in manufacturing drug products for pharmaceutical companies rather than engaging in research.  Some outsource entities perform multiple duties, such as a CDMO, or contract development and manufacturing organization which provides comprehensive services from drug development through to drug manufacturing.

Are you looking for a pharmaceutical contract manufacturing companies list?  Perhaps a pharmaceutical contract manufacturing organization can help.   Try the Pharma & Biopharma Outsourcing Association.  Here is a list of pharmaceutical contract manufacturer members from their website.

What is a CTL?

In pharma, the term CTL refers to a contract testing laboratory which provides pharmaceutical testing services to drug manufacturers.  Here are some of the types of services provided by a contract testing laboratory:

  • Bioanalytical services/bioanalytical testing services
  • Drug development services/drug discovery services
  • Pharmaceutical dissolution testing services
  • Preclinical testing services
  • Central laboratory services/clinical trials laboratory services

Need a CTL?  Here is a list of contract testing laboratories from Pharmaceutical Outsourcing.

What is the meaning of third party manufacturing?

In pharma parlance, the term “third party manufacturing” refers to a contact manufacturer that produces goods for drug companies but does not own the inventory.  This strategic partnership provides significant benefits for the contract manufacturing company, drug companies and patients.  The CMO is contracted by a pharma company to provide the materials and labor to manufacture drug products which are then owned and paid for by the client.  The manufacturing work is performed externally, by a third party rather than by the pharmaceutical company itself usually to reduce costs and save time.

Why do pharmaceutical companies outsource drug manufacturing?

Pharma contract manufacturing presents drug companies with added flexibility, more options and benefits such as the ability to:

  • Fast track drug products and speed time to market
  • Cut out cost
  • Improve focus on core mission of drug discovery and drug marketing
  • Relieves pharmaceutical companies of the cost and burden of hiring and training workers during periods of labor shortage
  • Meet current and projected growth trends for drug products


In an industry of strong growth, the pharmaceutical market continues to evolve finding new options to bring more FDA approved drug products to market quickly and cost effectively.  The major outsourcing of the development and manufacturing of drug products by CMO contract companies fills critical gaps and is expected to continue or even accelerate over the next few years.

Strategic partnerships  between drug companies and contract pharma businesses .often fuel strong growth in the pharmaceutical market. The pharma contract manufacturing market continues to mature and leans on pharmaceutical technologies to fulfill client objectives.  Contract pharma companies must adhere to cGMP standards, i.e. for sterile facility, manufacturing processes, formulation development, etc. to assure patient safety and drug quality.

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