What is the most important industry trend in commercial life sciences?
Since the turn of the century, we’ve seen a huge number of patent expirations, with a large majority of the patent-protected drug revenue closing out. Blockbuster drugs that treat large numbers of people had previously provided lush margins for many years in large part because their targeted population was immense.
However, the traditional blockbuster model is evolving. That’s not to say that there won’t be breakthroughs in drugs and therapies, but the traditional drug line is changing, as many of the huge blockbuster areas have now been addressed, to some degree, by some type of a drug. Now, margins are being squeezed, and companies are working to reduce costs across the value chain and within most business functions. Thankfully, cloud and mobile technologies are enabling companies to institute process improvement and are creating new avenues for innovation.
Without the blockbuster drug model, how will life sciences companies seek growth?
Emerging from this shifting business model is personalized medicine in the form of more targeted therapies. When you look at the opportunities going forward, you see more niche products. There may be lower volume, but the average margin is likely to be much higher going forward.
How does that happen?
This is because the population base that a particular drug might target could be relatively smaller, but the dollars involved will be significantly higher. The hope is that more personalized therapeutics help to deliver better outcomes for patients.
How does the recent rash of M&A activity tie into growth?
Life sciences companies are using M&A activity to add to their portfolios and hedge their bets on the next avenue of growth. We are seeing a large number of buyouts, as companies seek new patents and products that help diversify existing product lines. This creates new avenues for growth, as well as smooth out current peaks and valleys in existing revenue streams.
What else is on the horizon?
Unlike most industries, life sciences lacks item level serialization. This has been an ongoing battle of failed regulatory bills and compliance deadline delays for more than two decades. Beyond the obvious risk of lacking supply chain security and the infiltration of counterfeit drugs into our everyday supply, there are tremendous inefficiencies that exist across the enterprise due to this lack of product movement visibility
Can you elaborate on that?
Everything from supply chain management, to production planning, sales and marketing, and even revenue management suffer due to the absence of serialization. For example, companies today must recall 10 times more product than is likely necessary simply because they can’t narrow down the specifically affected products. If we had item level visibility, not only would this save millions of dollars, but it would save time, reduce liability, protect potentially damaged brand equity, and most importantly, help protect lives by identifying and removing potentially tainted product more quickly. The US recently passed a bill referred to as DQSA which will require all pharmaceutical supply chain entities to pass transaction statements with related information and history from seller to buyer. This should help with supply chain security, but since it stops short of sterilization at the item level, the holy grail for improving industry operational efficiency still remains at large.
What is the industry's greatest concern right now, and why?
We have seen significant increases in regulation, both in terms of the operational stringency that companies must adhere to, as well as the rigidness in reporting that companies must produce.
Regulatory compliance is a growing challenge, especially with the diversity that exists within regulations across countries and regions. The world is getting flatter, and as companies expand the geographic areas they operate in, they expose themselves to an increasingly complex and challenging set of regulations.
It seems like a necessary evil, right?
Unfortunately, companies often tend to look at regulatory initiatives as simply something they have to spend money on – instead of finding strategic value from the exercise. For instance, we have looked closely at aggregate spend reporting data, which is a growing reality not just in the US, but increasingly around the globe. In short, it means that companies need to pull together information on every financial touch point they have with healthcare practitioners and report it to the government. This includes everything from giving them a complimentary pass to a conference, to their involvement in a clinical trial. All of that now needs to be rolled up and reported on to help promote transparency around how companies are interacting with healthcare professionals.
However, despite the required compliance aspect of this exercise, there is a lot of information that companies can use from that data. For the first time, companies will now have a 360-degree view into their touch points with all HCPs. Analyzing this data could provide new insight surrounding everything from better campaign management, to improvements in sales activity, territory planning and many other initiatives. As a result, it's important that companies realize there is underlying value that can be extracted from many of their required regulatory compliance initiatives.
You mention analytics. We know Big Data is a concept that is affecting numerous industries; how are Big Data and other digital technologies affecting commercial life sciences?
At IDC, we often refer to what we call the "four pillars" to describe what's new in information technology that is affecting the industry. These include cloud, mobile, social, and Big Data and analytics:
In life sciences, cloud has tipped significantly in the last few years. Most applications are being moved to the cloud in all areas of the business. This is helping to drive efficiency gains that span operational speed, improved integration, increased collaboration and even cost savings.
Everything is moving to mobile – from doctors to end-user patients to business partners. While its benefits are vast, some challenges in its adoption do exist, such as migrating applications to various mobile platforms, redesigning user interfaces, streamlining functionality and even deciding which data should be stored locally on the device versus in the cloud. Remote device management and security has also blossomed into an important focal point.
The relationships with the physician community are moving toward social platforms. Doctors don’t have a lot of time; when they go online, they want information tailored to their needs. So by increasing the presence on social platforms, life sciences companies can reach the physician community faster and more directly. Similarly, health consumers want the ability to interact with their health providers through digital and social means, and life sciences companies are getting more involved in this as the industry strives to improve its relationship intimacy with end consumers.
Finally, Big Data and analytics have risen to new heights in terms of their importance and priority of focus. Going forward, the most significant breakthroughs in the industry, both in terms of medical breakthroughs and operational and strategic improvements, will come from the insight and value that companies are able to squeeze out of their ever-growing mountains of Big Data. Whether it's genomics information or serialized supply chain data, there is no hiding from Big Data in the future of life sciences. Companies need to be ready to tackle it head on, or be left behind.