The global pharmaceutical analytical testing outsourcing market size was valued at USD 8.32 billion in 2023. It is estimated to reach USD 17.19 billion by 2032, growing at a CAGR of 8.4% during the forecast period (2024–2032). The global market for pharmaceutical analytical testing outsourcing has experienced significant growth in recent years due to the surging end-user volume from the pharmaceutical industry. Additionally, the stringent regulatory processes for drug approval and manufacturing set by the authorities worldwide is estimated to drive the global pharmaceutical analytical testing outsourcing market growth.
Pharmaceutical analytical testing outsourcing is the structure of public services from the testing, manufacturing, and supporting pharmaceuticals and therapeutics. It is a testing practice that reduces in-house production costs by outsourcing portions of the work to a third party as an extension of contract research organizations. Outsourcing services for pharmaceutical analytical testing have begun to replace a substantial portion of in-house analytical development and testing.
As an integral element of the drug and therapy development process, pharmaceutical testing plays a crucial role from the beginning to the commercialization of the product. It involves determining the structures of compounds, purifying a mixture of substances, synthesizing and characterizing active pharmaceutical ingredients, and purifying a mixture of substances (APIs). This initiative to accelerate compound activities typically includes formulation development and early-phase manufacturing.
The burgeoning volume of end-users across various pharmaceutical sectors significantly propels the pharmaceutical analytical testing outsourcing market. According to the IQVIA Institute, global medicine spending reached $1.54 trillion in 2022, a 6.1% increase from 2021, reflecting heightened drug consumption. This growth is driven by an aging population; the UN's World Population Prospects 2022 reports that people over 65 will number 1.6 billion by 2050, up from 771 million in 2022. This demographic consumes 3-4 times more pharmaceuticals.
Furthermore, the rise in chronic diseases further amplifies this trend. For instance, the International Diabetes Federation projects 783 million diabetes cases by 2045, up from 537 million in 2021. Additionally, the Global Cancer Observatory recorded 19.3 million new cancer cases in 2020, necessitating extensive chemotherapy testing. Also, the booming generics market plays a crucial role; the U.S. Generic Drug User Fee Amendments facilitated 1,021 generic approvals in 2022, a 10% rise from 2021. This multifaceted growth in end-users is overwhelming in-house testing capacities, driving outsourcing demand.
The pharmaceutical industry is one of the most heavily regulated sectors globally. Regulatory bodies such as the U.S. Food and Drug Administration (FDA), European Medicines Agency (EMA), and others have stringent guidelines for drug approval and manufacturing processes. Compliance with these regulations necessitates extensive analytical testing to ensure product quality and safety.
Outsourcing these services to certified testing laboratories ensures compliance with regulatory standards, reduces the risk of non-compliance, and expedites the drug approval process. The FDA's increasing focus on quality and safety, exemplified by initiatives like the Quality by Design (QbD) framework, has heightened the demand for advanced analytical testing. As a result, pharmaceutical companies are increasingly outsourcing these functions to specialized firms, driving the market's growth.
Despite the benefits, outsourcing pharmaceutical analytical testing comes with significant costs that can strain smaller companies or those with limited budgets. The fees charged by third-party laboratories for sophisticated testing services can be substantial, particularly for advanced analytical techniques like mass spectrometry or nuclear magnetic resonance (NMR) spectroscopy.
These costs can be exacerbated by the need for multiple rounds of testing and validation to meet regulatory requirements. According to the Tufts Center for the Study of Drug Development, the average cost to develop a new drug has reached $2.6 billion, with a significant portion allocated to compliance and testing. For small and mid-sized pharmaceutical companies, these expenses can be prohibitive, limiting their ability to outsource and potentially slowing down the pace of innovation and product development.
Innovation or the creation of new products is proportional to the demand for testing services. Companies outsource testing services due to competitive pressures, pricing concerns, and market lead times. Increased emphasis on individualized care and technological advances have shortened the product lifecycle, resulting in the rapid development of new products. Furthermore, the development of biosimilar, combination products, and other innovative medicines has increased demand for specific types of tests.
Moreover, automation technology has also helped develop new drugs by expediting the development process without affecting the quality of drugs. Increasing R&D investments is among the essential strategies for achieving sustainability. Not all businesses have an infrastructure suitable for all forms of analytical testing. Thus, outsourcing these operations is the best course of action, as it saves time and money. In recent years, the R&D expense to total revenue ratio has been increasing and is expected to continue to increase over the forecast period, thereby creating opportunities for pharmaceutical analytical testing outsourcing market growth.
| Study Period | 2020-2032 | CAGR | 8.4% |
| Historical Period | 2020-2022 | Forecast Period | 2024-2032 |
| Base Year | 2023 | Base Year Market Size | USD 8.32 billion |
| Forecast Year | 2032 | Forecast Year Market Size | USD 17.19 billion |
| Largest Market | North America | Fastest Growing Market | Europe |
Based on region, the global pharmaceutical analytical testing outsourcing market share is bifurcated into North America, Europe, Asia-Pacific, Latin America, and the Middle East and Africa.
The North American region dominates the global pharmaceutical analytical testing outsourcing market, driven by several key factors. The United States, in particular, holds a significant share due to the presence of numerous pharmaceutical giants, a well-established healthcare infrastructure, and stringent regulatory standards imposed by the U.S. Food and Drug Administration (FDA). The FDA's rigorous requirements for drug approval and continuous monitoring of drug safety and efficacy necessitate comprehensive analytical testing, which many pharmaceutical companies prefer to outsource to specialized firms to ensure compliance and efficiency.
In addition to regulatory demands, the region's strong focus on research and development (R&D) propels the market. According to the Pharmaceutical Research and Manufacturers of America (PhRMA), the U.S. pharmaceutical industry invested approximately $102 billion in R&D in 2022, highlighting the industry's commitment to innovation and the development of new drugs. This substantial investment in R&D translates to an increased need for advanced analytical testing services to support the development of novel therapeutics and biosimilars.
Moreover, the trend toward personalized medicine and biotechnology in North America further fuels the demand for specialized analytical testing. Companies are increasingly developing complex biologics and personalized treatments that require sophisticated testing methodologies. The region's robust network of contract research organizations (CROs) and analytical laboratories equipped with cutting-edge technologies and expertise make it an attractive hub for outsourcing these services.
Canada also contributes to the market's growth with its favorable government policies, increasing pharmaceutical R&D activities, and growing focus on biopharmaceuticals. The Canadian government’s initiatives to support the pharmaceutical sector and enhance healthcare infrastructure play a crucial role in driving the demand for analytical testing outsourcing. Thus, the North American pharmaceutical analytical testing outsourcing market is expected to continue its strong growth trajectory, supported by regulatory frameworks, substantial R&D investments, and advancements in biotechnology and personalized medicine.
Europe is estimated to exhibit significant growth over the forecast period. European biopharmaceutical companies are expected to benefit from services such as research and products, thereby boosting the growth of CROs and CMOs. These services are expected to be majorly outsourced within the U.S. and Chinese regions. Europe is the leader in microbial manufacturing technology and represents the global R&D endeavor for this industry. Diverse developing nations worldwide are pursuing partnerships with Western giants to establish their domestic capability by offering support services to the industry, such as clinical research, toxicity testing, and drug development.
In addition, Europe's pharmaceutical and biotechnology sectors have significantly invested in R&D in recent years because of surging demand for advanced medicines. This may be attributed to the increasing aging population, chronic diseases, and infectious diseases. The rapid consumption of advanced medicines is influencing the need for support from CROs. Owing to easy access to large treatment-naïve patient pools, highly skilled medical research talent, and low labor and manufacturing costs, Europe is expected to witness a lucrative growth rate over the forecast period.
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The global pharmaceutical analytical testing outsourcing market is segmented by service.
Based on service, the global market is bifurcated into bioanalytical testing, method development and validation, stability testing, and other testing services.
The bioanalytical testing segment dominates the global market over the forecast period. Bioanalytical testing involves the examination of drugs/formulations or active ingredients within a biological system, such as blood, urine, serum, tissue, and others. This analysis is performed to characterize and quantify the drug activity and provide evidence for therapeutic action. These tests also help create the drug monograph for reference during preclinical and clinical trial testing. Broadly, the segment is further classified into clinical and non-clinical bioanalytical testing and is expected to witness lucrative growth over the forecast period. This is attributed to the fact that various companies are working toward developing new molecules (both small and large), particularly biopharmaceuticals. These firms are investing huge amounts of capital and manpower in innovating the antibiotic, vaccine, and cancer drug markets. A surging number of clinical trial registrations and the entry of new players within the market space in the past ten years have also contributed to the growth of bioanalytical testing needs.
Pharmaceutical companies seeking marketing approvals from regulatory authorities must also analyze and report stability testing results. This service is segmented based on the product being examined or the type of study conducted into drug substance testing, stability-indicating method validation services, accelerated stability testing, photostability testing, and others (including stability storage services and excipient testing). Amongst these tests, accelerated stability testing dominated the market during the forecast period. In addition, accelerated stability testing deals with the product's analysis to understand the drug's or formulation's stability curve over a long period. This test helps identify the product's shelf-life, educating the consumers and healthcare providers about the duration the product is fit for use. A product is never introduced in the market without an expiry date; hence, conducting these studies is highly important. However, generally, companies work on product design and market launch simultaneously, which overburdens their resources. Outsourcing acts as a boon for managing resources and better attention to the performance of the entire process.
