Understanding CDMO Pricing: Insights for Pharmaceutical Firms

Pharmaceutical companies often face confusion and frustration when comparing pricing from different Contract Development and Manufacturing Organizations (CDMOs). Price discrepancies can range significantly, with offers varying by as much as 2-3 times for the same product, even when factors like batch sizes and manufacturing locations are identical. A recent guide from Fuliginous Management Consulting provides insights into the complex world of CDMO pricing, helping pharmaceutical firms navigate these challenges more effectively.

The guide highlights that understanding the reasons behind price differences is crucial for pharmaceutical companies. It emphasizes the need to evaluate offers beyond just the quoted price. Questions regarding total cost of ownership and the potential value offered by a seemingly more expensive CDMO should be central to decision-making processes.

Key Factors Influencing Pricing Decisions

A critical aspect of CDMO pricing involves balancing three main elements: internal costs, customer willingness to pay, and competitive benchmarks. The guide reveals that many CDMOs predominantly focus on a cost-plus pricing strategy, which involves calculating costs, adding a margin, and quoting a price. This approach often overlooks market realities, leading to potential lost revenue or missed opportunities.

For instance, in a hypothetical case study within the guide, two CDMOs with identical direct costs quoted prices that differed by €16.65 per thousand units. Factors contributing to this variance included capacity utilization rates—75% at one CDMO compared to 40% at another—and differing corporate overhead costs.

Pharmaceutical companies are encouraged to adopt a market-based pricing strategy. This involves calculating customer margins by working backward from pharmacy prices and assessing willingness to pay across various product categories. For example, generic products can yield 30-50% pharma margins, while specialty generics may reach 50-70%. Branded or innovative products can see margins as high as 85-95%.

Strategic Insights for CDMOs

For CDMOs, the guide provides strategies for pricing that extend beyond reactive measures. It emphasizes that merely relying on cost-plus pricing can lead to undervaluation of services or pricing out of competitive opportunities. Understanding market dynamics and balancing internal costs with competitive positioning is key to attracting the right business at optimal prices.

George Ntortas and Kyriakos Kansos, the founders of Fuliginous Management Consulting, note that pricing strategies should align with the specific business situations of both CDMOs and pharmaceutical companies. They advocate for transparency in pricing discussions, which can strengthen partnerships and foster better collaboration.

The authors will also be hosting a workshop at CDMO Live Europe from May 19-21, 2026, in Rotterdam. This interactive session aims to provide further insights into pricing strategies, featuring real Request for Quotation (RFQ) data and live pricing simulations.

The comprehensive guide, which spans 43 pages, includes practical frameworks for calculating and comparing CDMO prices, real-world case studies, and templates for evaluating quotes fairly. It stresses the importance of understanding capacity utilization and the significance of total cost of ownership in decision-making processes.

In conclusion, by grasping the nuances of CDMO pricing, pharmaceutical companies can make informed decisions, minimizing frustration and enhancing their strategic partnerships within the industry.