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The Information Value Chain

By Charles Firneno

Nov 15, 2005 | Software, hardware, service, and information vendors need analytic tools to help them assess the pharmaceutical industry in terms of its use of information. This column examines the value pharma creates in terms of network power — the value of the network that pharmaceutical products address through the technique of information value chain (IVC) analysis. By looking at the evolution of pharma’s information networks, strategies can be designed for IT solutions such as CRM, CTMS, AERSs, and business analytics software to deliver the highest possible value.

The pharmaceutical information environment has moved over the last three decades from an open system of information exchange, largely continuous with the healthcare industry, to a closed, proprietary system that is driven by ownership and differential advantage and is highly segregated from healthcare information. With the development and adoption of new information solutions that span both the product launch and the healthcare/pharma information divide, the possibility now exists for a reintegration of the pharma and healthcare information environments.

Value chain analysis originally sought to examine the operations of a manufacturing enterprise by looking at the value or cost of inputs in terms of the value or price of outputs such as products and services. Such analyses help enterprises identify where they add the greatest value and think about how to maximize that value within the balance between the supply and demand of inputs and outputs. Obviously, value chain analysis becomes a little more complex when the major portion of a product’s or service’s ultimate value derives from designs, patents, or other intellectual property.

In many industries, the acquisition and exploitation of intellectual property is largely how capital is attracted and value created. In a still smaller subset of industries such as pharmaceutical and certain business and scientific publishing industries, the actual information content associated with other intellectual property such as technology patents is how value is created. For example, although it is the product and manufacturing process patents associated with new chemical entities that protect pharmaceutical products from generic competition, it is the information gained and disseminated through clinical trials and research publications and, to a greater extent, an individual product’s specific market performance that actually determine the value paid to drug companies for their products. For such industries, it is often more desirable to look at the value chain of both patentable and nonpatentable information created by the enterprise.

Links in the Chain
The four functional silos in a material pharmaceutical value chain — discovery and development, clinical development, manufacturing and distribution, and sales and marketing — also correspond to different but increasing types of information value. They include information on target identification and validation as well as lead generation, prioritization, and optimization for discovery and development; clinical trial design, execution and analysis, including safety, for clinical development; design and variance monitoring as well as supply chain management for manufacturing and distribution; and safety and marketing studies and market performance tracking during the pre- and postlaunch phase for sales and marketing. At different times, the particular value of these different types of information is related to their status as patentable, proprietary, or openly disseminated, according to a drug company’s particular information strategy. Over time, the pharmaceutical industry has moved away from an open information model, integrated into the academic and community medical institutional establishment, toward a patent and proprietary approach to information that seeks differential advantage through ownership.

One type of IVC analysis provides a scaling principle around which software, hardware, and data/information companies can develop and evaluate organizational and market strategy for pharma end users. Such an IVC analysis orders information inputs and outputs in terms of their network power, which is a measure of the quantity and quality of data access and exchange. We can reinterpret traditional pharma functional activities such as lead generation or physician detailing in terms of their network power and relative dollar value. By means of such a reinterpretation, the pharmaceutical industry’s current performance can be examined, uncovering opportunities for IT and data vendors and their end users to add additional value.

Charles Firneno is a research manager at Life Science Insights. E-mail:

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