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Cost-cutting will continue while marketplace demands a higher level of data quality from pharma
It’s well known that the pharma industry commercial practices—sales, marketing, market research and distribution—are changing in the face of healthcare reform and cost pressure. How that will play out over the next several years is the subject of a new report from the IMS Institute of Healthcare Informatics (Parsippany, NJ), Riding the Information Technology Wave in Life Sciences: Priorities, Pitfalls and Promise. The bottom line: commercial operations costs at the largest multinationals will need to be cut by approximately $36 billion annually through 2017 to maintain current levels of R&D spending and financial operating margins. “While the source of cost cutting will vary by company,” says the report, “a primary focus likely will be on sales, marketing and administration costs, which amount to nearly 30% of net sales.”
At the same time, the growth of digitized healthcare information—especially through use of electronic health-record (EHR) systems—is pushing governments and healthcare payers to demand more from the industry in outcomes, health economics and patient safety. The solution, suggests IMS, won’t be pouring more money into IT overall, but investing more wisely in the IT spending going on now. That puts CIOs in the hot seat.
The report notes a broad-based movement toward cloud-based applications, especially in customer relationship-management systems, multichannel marketing and social media. Cloud systems generally trade the installed cost of on-premise IT systems for subscription or per-use models with lower up-front and maintenance costs. (40% of those surveyed expected hardware and infrastructure costs of IT to drop over the next three years.) Another trend will be a continuation of outsourcing, especially of non-core operations. But the brute-force approach: reducing headcount (cited by 29% of respondents); reduced data budgets (26%); and across-the-board budget cuts (35%) will also be used.
On the bright side, IMS sees an extensive list of optimization tactics to apply, in the areas of data management, resource management, workflow automation and outsourcing:
Knowledge and data management
While there is a parallel effort going on in the R&D side of life sciences to reduce costs by better data automation and analytical tools, Murray Aitken, executive director of the Institute, tells Pharmaceutical Commerce that that area was not a focus of the study, but notes that it will be increasingly valuable in areas such as pharmacovigilance and patient support. It’s also worth noting that IMS Health itself (the parent of the Institute) is making moves away from its traditional role as a provider of pharma sales activity and commercial practices, and into healthcare generally, and IT services such as social media, CRM and related areas. The company, currently in a quiet period following the filing of paperwork for an anticipated IPO, is getting ready for the industry’s future state.