European healthcare budgets are being challenged by rising drug prices for new approvals for some of the most prevalent conditions, such as diabetes and rheumatoid arthritis. For European governments, greater generic drug use offers the opportunity for cost-cutting, and in the last decade, many blockbuster drugs have experienced patent expiry (Wouters et al., 2017).

The trend of European governments moving from branded generics to commodity generics in order to control costs has affected European contract manufacturing organizations (CMO); confronted by an increasingly difficult prescription drug market, many European CMOs are emphasizing offerings for the over-the-counter (OTC), nutraceutical, and functional foods markets, as reported on in the November issues of the Bio/Pharmaceutical Outsourcing Report (November 2016 B/POR).

As a result, many CMOs are investing in specific types of delivery technologies (such as softgels) and packaging formats (such as stick packs), to better serve the capabilities required for these related offerings.

In the US, drug pricing is less stringently controlled; it has been found that US prices for the world’s 20 top-selling medicines are, on average, three times higher than in the UK. As a result, European CMOs are increasing their presence in the US, and in recent years a number of European drug product CMOs, such as Fareva and Recipharm, have made acquisitions in North America.

There is high demand for European companies to make acquisitions in the US; however, the opportunities are currently limited and the costs required are high (November 2016 B/POR). European CMOs are also expanding their presence of sales representatives in North America.

European CMOs are not the only ones that have been acquiring redundant facilities from global bio/pharma companies at low cost; large CMOs like Avara have grown rapidly by aggressively utilizing the same tactic, which drives up competition and prices in an already challenging market environment (November 2016 B/POR).

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