A 2011 Wakeup Call for Pharmaceutical Companies

February 17, 2011

By R. Arun Kumar

February 18, 2011 | Guest Commentary | 2010 was wrought with challenges for the pharmaceutical industry with the aftermath of the global recession continuing to put pressure on drug discovery, compliance and customer interactions. These pressures have been further exacerbated by ongoing industry challenges including a shrinking drug pipeline, in which the numbers of New Molecular Entities or NMEs being approved by the U.S. Food and Drug Administration (FDA) have decreased in the last several years. This is the end of the blockbuster drug era, and larger pharmaceutical companies face growing competition from the generics.

In addition, most large pharmaceutical companies are facing a high proportion of patent expirations between 2011 and 2014, which analysts expect will negatively impact over $150 billion of revenues of branded drugs. Demand from emerging markets is also shifting traditional sales and marketing practices. Pharmaceutical companies are exploring non-traditional customer bases and must tackle the associated challenges that come from dealing with new markets, such as dealing with unstructured distribution, counterfeiting and lower price points.

Challenges are not new to the pharmaceutical industry. Will pharmaceutical companies get a break in 2011? What are the trends that are impacting the pharmaceutical industry? Here are our predictions for 2011:

Technology will help pharmaceutical companies overcome the big challenges
With shrinking drug pipelines, companies are investing in better collaboration, standardization and analytical tools to improve R&D productivity as well as their sales and marketing operations. Research departments are using next generation sequencing technologies to fail fast and fail cheaper in their quest to identify the right target drug candidate. They are increasing their efforts by collaborating with external partners for research as in-house research is not delivering results as quickly. They are also using standardization and analytical tools for better reuse of existing digital assets and information.

Clinical trials are becoming more adaptive by incorporating signal detection technologies and more efficient in terms of global supply chain and forecasting. Companies and organizations are beginning to embrace the web, especially the web 2.0 models of social networks and media in terms of interactions between physician and patients and patients and drug makers.

Affordability, prevention and patient-centricity
The future of the healthcare economy is going to be driven by three big imperatives: affordability, prevention and patient-centricity. The cost of healthcare is increasing as the increasing elderly population lives well beyond their earning years, and incidence of chronic diseases increases. Current healthcare practices focus on symptoms and regard the patient as a passive recipient of service, but patient-centric care is emerging to consider the patients’ values, involve them in clinical decisions, and ensure transparency and self-care. Technology can minimize errors and redundancies while ensuring better healthcare delivery through patient data analytics, evidence-based medication, paperless transactions and more. With IT integration, patients can be accorded personal attention through seamless communication and interactions with care providers.

Customer-centricity is leading to patients and physicians demanding better outcomes, and patients having a higher stake in their own health management decisions and treatment regimes. Patients want health solutions, not just drugs from pharmaceutical providers, and they expect more adherence and compliance support for complex and chronic treatments. They are also turning toward prevention and lifestyle changes to combat diseases. Social media is helping in promoting preventive healthcare.

Cloud computing will shape the pharmaceutical sector
The impact of cloud computing is just beginning to be felt in the areas of research, development, clinical trial management and healthcare information exchanges. The explosion of data from next generation sequencing, the growing importance of biologics in the research process is making cloud-based computing an increasingly important aspect of R&D.

We are already seeing complex genetic sequences and biomarker data being hosted in the cloud by a few open source bodies. Data are then accessed in a secure fashion by individual companies for their research needs. However, there is still a need for more integrated data sharing across research, development, manufacturing, and sales functions to improve trials, increase time to market for drugs, and utilize feedback faster. We’ve seen an increasing trend of pharmaceutical customers exploring use of both public and private clouds for data storage, hosting and access needs.

The main impact to pharmaceutical companies of increased usage of cloud computing is a reduced dependence on their own IT infrastructures. Cloud computing provides the ability for companies to move away from capital expenditures or CAPEX intensive deployments to an operating expenditure/pay-as-you-go business model. The business advantages of cloud computing include the standardization and streamlining of operations, higher reusability, better integration and stronger collaboration with external entities and the health care ecosystem. However, as the uptake of cloud increases, we can also expect a greater focus on security, privacy, data protection and IP management as reliance on the cloud grows.

Pharmaceutical companies will continue to face major roadblocks in emerging markets 
While there is a huge opportunity for pharmaceutical companies to sell their products in emerging markets due to rising incomes, higher incidence of chronic and lifestyle diseases, better insurance coverage, and better patent protection regimes for drugs, major roadblocks such as lack of mature distribution networks, lower price points due to generics competition, and counterfeiting are leaving even the large companies struggling to handle the challenges from some of these less sophisticated markets. Uncertain political, regulatory, and legal systems in emerging markets, which are unable to prevent undercutting, spurious medicines, and loss of IP are reasons to worry. Local business partnerships and better understanding and responsiveness to cultural differences will be very important in determining the success in emerging markets.

R. Arun Kumar is VP, Head - Global Life Sciences at Infosys Technologies.