With technology spend in the global life sciences industry set to touch $40.8 billion by 2017, IT majors are wooing a more choosy clientele with tailored solutions designed to keep them abreast in a dynamic competitive industry By Shalini Gupta
In 2010, IT analyst firm, Ovum, predicted that the technology spend by the global life sciences industry will grow at a compound annual growth rate (CAGR) of 3.3 per cent over the next five years, touching $33.7 billion in 2015. Big biotech and small pharma/ biotech sectors were slated to grow the highest at a CAGR of 6.7 per cent and 7.2 per cent respectively. By the end of 2017, the firm sees this figure at $40.8 billion at a CAGR of 3.6 per cent. “The increase in IT spending will be fuelled largely by the growth in data analysis and related technologies, the acquisition of systems to comply with new regulatory requirements, and increased spending on applications that advance operating efficiency and automation,” the report says.
On a high note
Ovum’s findings show that “value chain fragmentation caused by new entities being spun out of big pharma and rapid growth in emerging markets will see strong IT spending growth of 9.4 per cent CAGR in the small pharma/ biotech sub sector, totalling $10.5 billion in 2017.” A report by Gartner Benchmark Analytics titled “IT Metrics Data 2014” also indicates that pharmaceuticals, life sciences and medical products companies spend 3.2 per cent of revenues on their IT infrastructure — a level higher than industrial electronics and electrical equipment (2.5 per cent), industrial manufacturing (1.7 per cent), and interestingly enough, chemicals at 1.3 per cent. So clearly pharma is coming out of its conservative approach to information technology.
Cognizant serves 28 of the top 30 global pharma companies, four of the top five pharmacy benefit management companies in the US, nine of the top 10 biotech companies, and 12 of the top 15 medical device companies and has a growing healthcare and life sciences practice that provides domain-aligned consulting, IT, business process and analytics solutions globally. “In the March-ended quarter of 2015, our healthcare segment, which consists primarily of our payer, pharma, biotech, medical device clients and now our TriZetto business, grew 13.8 per cent sequentially and 42.7 per cent year-over-year. Within the pharma segment, we saw a trend towards multi-service deals across infrastructure and IT services, leveraging cloud technologies and platforms. Additionally, we saw steady demand driven by vendor consolidation and cost optimisation across many existing and new clients,” informs R Meenakshisundaram, Vice President, Life Sciences, Cognizant.
He goes on to add that the acquisition of Cadient Group, a full-service digital marketing agency that serves a broad spectrum of life sciences companies in the pharma, biotechnology, consumer health, and medical device industries, is helping drive Cognizant’s digital agenda with its pharma clients. Elaborating on the growth of the business, he says, “We are quite pleased with the traction we are seeing from this acquisition, where we have added nine new logos since closing the acquisition late last year. Recently, Otsuka Pharmaceutical, a US pharma research and development company, publicly highlighted the work Cadient delivered in helping it develop and deploy a highly innovative approach to communicating with clinical trial investigators using iPads and large-format touch screen technology.” He attributes this to companies coming out of pipeline challenges with 2014 witnessing the highest number of drug approvals, and a transformation in the how businesses are run and managed.
Ram Yeleswarapu, President and CEO, TAKE Solutions reiterates Meenakshisundaram’s sentiment. “There is a demand in the global pharma/ life sciences market for regulatory compliance and customised solutions to meet business needs. Customers are increasingly looking for value and subject matter knowledge in a true partnership model where they can engage by leveraging the best products, solutions, and services available and couple them with best practices and industry knowledge to gain competitive advantage,” he says. As of the quarter ended September 30, 2014, 61 per cent of TAKE Solutions’ revenue came from life sciences. While the US and Europe are the major markets driving growth, the company plans to expand into Japan by FY 17.
Utkarsh Palnitkar, Partner, Head of Advisory, Head, Life Sciences practice at KPMG offers a perspective. “In the last decade, life science has emerged as an important target segment for IT companies. Highly regulated pharma and lifescience industry requires significant expenditure to manage the value chain skillfully and tackle issues such as dwindling research and development pipeline, rising costs of research, patent expirations and increasing compliance issues. The services are aimed at the whole width of drug life cycle starting from R&D to marketing the product,” he says. These include solutions such as R&D data management, bringing innovative products quicker, genome mapping, supply chain optimisation and efficiency, manufacturing operations management to boost productivity, quality control, customer relationship management and sales force automation, he adds.
The differentiating factor
The trends within the industry also merit close coordination with IT. From a scientific standpoint, genomics and precision medicine are changing the way drugs are discovered, developed and marketed.
By 2016, over 60 per cent of the top 10 drug sales are expected to be specialty drugs. “In marketing, the key trend continues to be around the “value-versus-volume” debate. There is an increasing focus on real-world analytics to establish product and pricing differentiation and delivery in the context of population health. Market access is also a key focus. Disruptive technologies have passed the chasm and are now becoming mainstream. The (Social, Mobile, Analytics and Cloud) SMAC stack is now a common requirement and evaluated across multiple opportunities and business use cases. There is a strong push towards digital innovation as devices are becoming more a norm than an exception. This is bringing about a dramatic change in process delivery and efficiency,” observes Meenakshisundaram. He adds that the industry is also witnessing significant portfolio consolidation and increased mergers and acquisitions. The operating model has evolved and is highly collaborative—between peer companies and with academia. Most of these changes are being seen in North America and are rapidly catching on in the rest of the world.
Pitches in Palnitkar, “North America( followed by EMEA) is the top destinations for IT services companies driving 55 to 60 per cent of the revenues of Indian IT companies. Europe is the second largest market for Indian players contributing close to quarter of their revenue. Eastern Europe, China and South America are gradually emerging on the radar of Indian IT players for their next growth wave. APAC is moderately attractive to the sector due to growing pharma industry in China and India which is the major consumer for IT services followed by medical devices and biotechnology. Major IT companies in India are on the top of the pyramid capturing close to 75 per centile both in delivery capacity and transaction activity.”
Stringent FDA regulations and export rejections in this space have urged Indian pharma companies to seek the help of technology. This has led to investments in technology solutions and best practices to enable risk mitigation, quality, and compliance measures. “The desire by Indian pharma to export indigenous drugs and make them commercially available in international markets mandates their need to follow international regulatory norms. M&A activity as well as trading partner relationships with international partners along with more frequent and adhoc audits by the regulators is compelling them to make these investments. Moreover, India pharma companies are looking at technology support to help them in patent filing process,” says Yeleswarapu.
Companies in the US and Europe, which are higher up the maturity curve, are looking for cost advantages along with better quality outsourced services such as patent management, clinical trial and quality control. The branded/ New Chemical Entities (NCE) research that these companies undertake necessitates innovation and adoption of cutting edge technologies to stay ahead of the curve. That said, Indian companies are also catching up. “Currently, a bulk of the Indian market is focused on generics as opposed to the US and Europe, which are more innovation-driven. The services focus is therefore very different, albeit with some common touch-points. Services in the Indian market are driven more by automation, quality benchmarks, and increased compliance needs. The process focus extends to manufacturing, quality assurance, and regulatory compliance. We are seeing an increased focus on research and development with investments in developing novel entities. We do believe that the trend will translate into some companies going after the end-to-end innovator business,” says Meenakshisundaram optimistically.
He informs that Cognizant is witnessing a spurt in requirements from the Indian market with companies benchmarking themselves against global standards to meet growing quality and regulatory demands. China, Singapore, Australia, Malaysia, New Zealand and Korea are other emerging markets for the company, a few of which are emerging as research and clinical hubs for global pharma companies. Significant investment push from governments to provide universal healthcare is providing the pharma sector with new growth opportunities and markets such as China, he adds. Globalisation and collaboration are becoming a core part of the operating model and service delivery and hence companies not just want to improve performance efficiency and effectiveness, but also drive innovation and transformation. The focus of IT companies is thus is on transforming the client’s business process and underlying technology with a global operating model.
Getting on the cloud bandwagon
Today’s leading pharma companies are breaking down internal and external barriers to explore truly novel, collaboration-based approaches to streamline processes, standardise clinical data and accelerate new therapies to the patients they serve. And they are teaming up with providers who can help them achieve the same. Exostar, a global leader in cloud based based solutions launched its life sciences identity hub two years ago. The launch followed a year of working closely with Merck to develop and test the solution and demonstrate it was a viable approach. Today 700 organisations and 15,000 individuals in 50 countries including manufacturers, contract research organisations, academic institutions, laboratories, participate in the on-line life science community . “Organisations increasingly need to collaborate outside of their enterprise boundaries, especially in life science and healthcare. That makes the cloud a more attractive technology for them. At the same time, they must comply with regulations like 21 CFR Part 11 and HIPPA to protect the integrity of sensitive information. And they desperately want to avoid data leakages triggered by the rising number and complexity of cyber security threats. Our cloud-based, Software-as-a-Service delivery model, organisations no longer have to deal with the time, cost, and complexity of implementing these capabilities themselves,” explains Vijay Takanti, Vice President of Security and Collaboration Solutions at Exostar.
Cloud-based technology platforms help pharma companies to innovate in a more open, collaborative, cost effective and timely manner; demonstrate efficacy and outcomes for patients, with the goal of achieving appropriate pricing of and reimbursement from governments and payers for their products; Promote products by leveraging multiple channels and the digital world and run global supply chains and global operations. And this could be the future predicts Sriram Srinivasan, Managing Director, Life Sciences, Accenture India.
“Over the next few years, as R&D accelerates into the cloud, life sciences companies will layer service components onto their products that will provide value and build loyalty along the entire value chain, from patients to payers. New medicines and services will be developed using an entirely new paradigm, drawing on external innovation and data from multiple sources,” he says. No wonder then that in April this year Cipla, Ranbaxy and Biocon adopted the Cirrius PharmaCRM Digital Platform that runs on Microsoft Azure(in the cloud) for enabling multi-channel digitisation of medical engagements.
The cloud decoded
Software as a Service (SaaS) is the highest level of the cloud stack and includes actual cloud applications. This segment is the largest segment in the overall cloud computing market and is being adopted by large, medium and small businesses and organisations. This segment is the largest segment in the overall cloud computing market and is being adopted by large, medium and small businesses and organisations. The other key sub segments are Customer Relationship Management (CRM), Content, Communications and Collaboration (CCC) market and Enterprise Resource Planning (ERP) revenue.Adoption of SaaS is being driven by availability of demand software, understanding of the model, increasing interest and pressure on IT managers to reduce costs. North America, followed by Europe are the key markets for it.
Pharma companies need to develop a robust pipeline to counteract the revenue squeeze they are feeling. With the window between product launch and patent cliff being too small, time-to-market is crucial. “This has led companies to the realisation that the most efficient way to develop new drugs is to tap into the brainpower outside their four walls while accounting for enterprise security and regulatory compliance requirements. As the number of partner organisations and individuals grows, the challenge of implementing a secure collaboration environment in-house becomes an immovable obstacle. It simply takes too long, costs too much, and requires too many resources to establish and maintain a secure platform that must accommodate a highly dynamic and diverse set of participants,” notes Takanti.
Unlike other industries, life science and healthcare companies are in the midst of a transition to a business model that relies on external partners. Cross-enterprise collaboration with on-premises solutions introduces complexity and a wealth of security concerns with respect to access by external partners. Cloud-based services are facilitating, and accelerating, this transition by providing a central gathering place that lies outside of enterprise boundaries. However, the cloud itself is not a panacea. Public clouds may be too vulnerable, especially when personally identifiable information or intellectual property is involved. Private clouds may be too restrictive for productive collaboration amongst a diverse, large group of partners. Hybrid clouds offer the best of both worlds, but the question remains – who will be responsible for tasks such as on-boarding, authentication, and support?
“Combining the hybrid cloud with an as-a-Service delivery model may well be the answer. With this approach, life science and healthcare companies can build collaborative teams of partners more quickly, reduce the cost of connecting everyone together, minimise the burden on their IT organisations, and relieve themselves of operations, maintenance, and support responsibilities. In addition, they can shift capital expenditures to operating expenditures, and only pay for what they need, when they need it, ”concludes Takanti. The convergence of mobility, big data, advanced analytics, and social media, all underpinned by the cloud, presents a very attractive opportunity for life sciences companies to operate in a more nimble, collaborative, customer-centric and cost-effective manner than in the past. It is where the future lies.