As lifetime earnings for pharmaceuticals decrease, commercialization expenses increase and payers tighten their belts on reimbursement, life science companies will be faced with shrinking margins over the next few years. In order to maintain basic operating margin levels and continue investing in research and development at current levels, life science manufacturers will be forced to reduce costs by more than $35 billion by 2017, according to results from a new survey of 70 life science organizations from the IMS Institute for Healthcare Informatics.
In order to produce cost savings and keep their businesses operationally efficient in the advent of change, IMS suggests in its new report, “Riding the Information Technology Wave in Life Sciences: Priorities, Pitfalls and Promise,” that the most reasonable approach is to adopt a strategy based on data integration and cloud-based technologies. To preserve operating margins, drug manufacturers need to incorporate new technologies and streamline the transfer and curation of data both internally and externally.
To offset rising expenditures, companies already have begun to reduce their marketing teams, outsource some of their in-house functions and adjust their drug development strategies to focus on specialty medications and therapies associated with smaller patient populations, noted the report. “We believe the large global pharmaceutical companies have more restructuring to undertake to remove costs from their business operations,” noted Murray Aitken, executive director, IMS Institute for Healthcare Informatics. “Further efforts are needed to bring efficiencies to the commercial operations of life sciences companies.”
The authors of the report explained that the best use of the new, more efficiently packaged data housed on the cloud would be to inform future campaigns and improve multichannel marketing operations, track audience engagement and feedback through social media-based applications and patient mobile apps, and run commercial operations applications, such as those used by sales teams. Rather than spend money to produce and store company data, manufacturers could run these company functions through cloud-based applications. In addition, according to IMS, “companies typically experience a minimum of 20% to 30% on operating costs and lower total cost of ownership when moving their infrastructure to the cloud.”
Although pharmaceutical manufacturers have historically been resistant to the uptake of social and mobile applications, the report stated there is a new willingness to shift to the cloud, as cloud companies are improving compliance and becoming more sensitive to HIPAA-related issues. Plus, 74% of respondents reported a high or greater level of need to derive insights and value from data, particularly from specialty patient populations.
The report predicted that cloud-based technologies would contribute to better coordination across departments and would save time that would normally be wasted on data reconciliation, however, there could be some potential risks associated with the use of this technology, including security breaches, the intellectual property issues surrounding ownership of the data and/or the loss of control of the data, the report suggested. In addition, while the report noted that there may be a large cost associated with switching data from a “legacy” system, it does not address the costs associated with training employees on the new technology.
While the report contended “healthcare-specific data models with standardized fields are needed to merge and share patient electronic medical records,” there also could be some instances where companies don’t want to share what they consider to be proprietary data. Some pharmaceutical manufacturers don’t necessarily want competing companies to know which fields they are capturing within their forms, and some clinicians could argue that there is no such thing as a “standard” field in data collection, especially as it relates to complex medications that fall into the specialty or oncology category.
However, IMS’ Aitken predicted the adoption of integrated systems will allow for the “democratization of analysis” and will help manufacturers make assessments and conclusions about the success or relative failure of a drug launch and its marketing activities.
“The healthcare industry is beginning to speak the language of real-world evidence,” Aitken said. “We think this is a significant step forward in helping life science companies not only understand how their products are being used but, more importantly, how they should and can be used to lower costs, as well as achieve improved patient outcomes.”
For the full report, including the charts, click here.