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The business trends reshaping the pharmaceutical industry and how IT is being used to address them

When their household budget is under pressure, a family’s true priorities become apparent. And as families typically value their health highly, the pharmaceutical industry has held up unusually well throughout the economic downturn.

The industry as a whole grew 7% to $837 billion in 2009, according to pharmaceutical market intelligence company IMS, and will continue to grow by between 5% and 8% each year until 2014.

That is not to say that pharmaceutical companies do not face serious challenges, however. On the one hand, drug discovery and development are being upturned by scientific progress, changes in the competitive landscape and government regulation. On the other, the way in which medicines are bought and sold is being revolutionised by the Internet, the empowered consumer and structural shifts in the healthcare sector.

To meet these challenges, pharmaceutical companies must be able to share information with business partners while protecting their intellectual property. They must be able to analyse information with cutting-edge sophistication. And they must be able to store and manage a volume of data that, according to some estimates, is growing at five times the rate of the average company’s storage capacity.

Little wonder the industry plans to spend $17 billion on IT this year, according to analyst company Ovum, as companies reshape their internal infrastructure and develop new data-driven routes to market.

A third-party approach

This does not necessarily mean pay dirt for their internal IT departments, though. The industry is increasingly turning to outsourcing, and its approach to IT development could well follow the ever more dominant attitude to drug development, namely letting third parties lead the way.

The pharmaceutical industry is dominated by a few very large companies (Pfizer, GlaxoSmithKline, AstraZeneca, etc), which have traditionally been heavily reliant on a few very popular products. These so-called ‘blockbuster’ drugs can generate billions of dollars in annual sales until their creator’s exclusivity rights expire, at which point ‘generic’ drug developers can make cheap copies and their market value plummets.

The era of blockbuster drugs is approaching its end, says Kevin Deane, a healthcare technology expert for PA Consulting Group. “A lot of the big blockbusters are coming out of exclusivity between 2011 and 2014,” he explains.
New blockbusters are hard to come by for a number of reasons. Drugs aimed at patients with particular genetic traits are more effective and typically have fewer side effects, but they also have a narrower market.

To make up for the impending blockbuster shortfall, pharmaceutical companies need more ideas for potentially profitable drugs. This has led them to look outside their own research and development divisions towards universities, third-party research companies and small ‘biotech’ start-ups.

Companies typically use document management systems such as Documentum or collaboration software such as Microsoft’s SharePoint to support the development process across organisations. Some have used social media technologies to make the collaboration more personal and more spontaneous, and to map out which skills are available in-house.

But there are some complexities that have yet to be addressed by the technology. “When you have multiple organisations contributing to the innovation process, you need to track who has contributed which ideas and when, and you need a way to put a value on those ideas,” explains Henry Peyret, principal analyst at Forrester Research. “The collaborations tools are not there yet.”

However, Peyret believes that it will soon be possible to automatically discover where ideas came from and the contribution they made to a final product by semantically analysing the interactions of researchers.

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