When their household budget is under pressure, a family’s true priorities become apparent. And as families typically value their health highly, the pharmaceutical industry has held up unusually well throughout the economic downturn.

The industry as a whole grew 7% to $837 billion in 2009, according to pharmaceutical market intelligence company IMS, and will continue to grow by between 5% and 8% each year until 2014.

That is not to say that pharmaceutical companies do not face serious challenges, however. On the one hand, drug discovery and development are being upturned by scientific progress, changes in the competitive landscape and government regulation. On the other, the way in which medicines are bought and sold is being revolutionised by the Internet, the empowered consumer and structural shifts in the healthcare sector.

To meet these challenges, pharmaceutical companies must be able to share information with business partners while protecting their intellectual property. They must be able to analyse information with cutting-edge sophistication. And they must be able to store and manage a volume of data that, according to some estimates, is growing at five times the rate of the average company’s storage capacity.

Little wonder the industry plans to spend $17 billion on IT this year, according to analyst company Ovum, as companies reshape their internal infrastructure and develop new data-driven routes to market.

A third-party approach

This does not necessarily mean pay dirt for their internal IT departments, though. The industry is increasingly turning to outsourcing, and its approach to IT development could well follow the ever more dominant attitude to drug development, namely letting third parties lead the way.

The pharmaceutical industry is dominated by a few very large companies (Pfizer, GlaxoSmithKline, AstraZeneca, etc), which have traditionally been heavily reliant on a few very popular products. These so-called ‘blockbuster’ drugs can generate billions of dollars in annual sales until their creator’s exclusivity rights expire, at which point ‘generic’ drug developers can make cheap copies and their market value plummets.

The era of blockbuster drugs is approaching its end, says Kevin Deane, a healthcare technology expert for PA Consulting Group. “A lot of the big blockbusters are coming out of exclusivity between 2011 and 2014,” he explains.

New blockbusters are hard to come by for a number of reasons. Drugs aimed at patients with particular genetic traits are more effective and typically have fewer side effects, but they also have a narrower market.

To make up for the impending blockbuster shortfall, pharmaceutical companies need more ideas for potentially profitable drugs. This has led them to look outside their own research and development divisions towards universities, third-party research companies and small ‘biotech’ start-ups.

Companies typically use document management systems such as Documentum or collaboration software such as Microsoft’s SharePoint to support the development process across organisations. Some have used social media technologies to make the collaboration more personal and more spontaneous, and to map out which skills are available in-house.

But there are some complexities that have yet to be addressed by the technology. “When you have multiple organisations contributing to the innovation process, you need to track who has contributed which ideas and when, and you need a way to put a value on those ideas,” explains Henry Peyret, principal analyst at Forrester Research. “The collaborations tools are not there yet.”

However, Peyret believes that it will soon be possible to automatically discover where ideas came from and the contribution they made to a final product by semantically analysing the interactions of researchers.

Another challenge to cross-party collaboration is the fear of intellectual property theft. “IP security is hugely important to pharmaceutical companies, especially as they move into emerging markets for new business and for research partnerships,” explains PA Consulting’s Deane.

On the face of it, the challenge of sharing information while keeping it secure is a paradox. Forrester’s Peyret argues that the solution is for pharmaceutical companies to establish multiple layers of IT infrastructure, allowing research partners access to different layers based on the value of the information in question and the extent to which they are trusted. Companies should, he says, “organise their R&D in such a way that they deal with different partners at different levels of the infrastructure, so that the level of security depends on the contract in question.” However, Peyret adds, pharmaceutical companies have moved in precisely the opposite direction in the past decade, towards standardised and centralised systems.

Deane agrees that the recent pressure to support collaborative research has caught many pharmaceutical industry IT departments off guard. “The IT function seems to think long term, and they typically lay five- or six-year plans,” he says. “But the whole industry has changed very quickly over the past two years, and suddenly collaboration is a huge part of the agenda. “It’s a struggle for those IT departments because they’ve got to change their underlying assumptions,” he says.

Number crunching

Computing supports the drug development process in other ways beside collaboration. Clinical trials produce reams of data that must be processed and analysed, and the industry is beginning to use sophisticated, computerised models of biological systems to discover new products and to replace certain stages of drug testing.

These can be heavily compute-intensive tasks, requiring access to expensive supercomputers. The pharmaceutical industry has therefore pioneered the use of utility computing, whereby access to such systems is charged for by the hour. Indeed, this has been a crucial enabler for small biotech companies that can afford neither the supercomputers nor traditional in vitro drug testing programmes.

It is unsurprising, then, that the industry gave rise to one of the first high-profile case studies for the Amazon Web Services cloud computing platform. In 2008, scientists at drug giant Eli Lilly used Amazon’s EC2 service to process research data, saying at the time that it was quicker to deploy a new server in the cloud than in its own data centre.

The same case study may also demonstrate the limits of the public cloud, however. In July 2010, Eli Lilly decided not to extend its use of AWS, reportedly due to concerns over who was liable should the data be lost.

The R&D function is not the only thing adding to the quantity of data that pharmaceutical companies must store and analyse. The sales process is also becoming more analytical and data intensive. It used to be the case that the pharmaceutical companies sold their products by pitching them directly to doctors. However, this practice is now going the way of the blockbuster drug.

In Europe, the pressure to reduce expenditure has prompted public health providers to apply a more cost-conscious approach to drug procurement. According to Richard Rolt, IT director at European pain control drug provider Napp Pharmaceutical Group, this has completely changed the make-up of the company’s salesforce: “We used to send out medically trained salesmen to talk to GPs. Now we’re employing health economists to prepare 100-page dossiers for other health economists. “This is driving demand for analytics systems,” he explains, “so now we are building data warehouses in order to put all our data in one place, which until now nobody cared about.”

Napp’s experience is typical, says Kay Formanek, executive partner at Accenture’s life sciences practice: “We find that around 20% to 30% of physicians no longer open their doors to pharmaceutical company salespeople, which has had a tremendous impact on the industry.”

There is another way in which technology can help companies address this challenge, Formanek says. She argues that by presenting doctors with information about new drugs remotely through an online presentation – a practice known as ‘e-detailing’ – pharmaceutical companies can get their message across without raising doctors’ fears that they may be subject to undue influence. “It is a safe way to do it,” she says, “and it is also a lot more productive.”

Patient proximity

The Internet has given rise to a black market in pharmaceuticals, as anyone with an email inbox can attest, but also a grey market, where counterfeit drugs are sold through legitimate means. Both of these pose a significant threat to pharmaceutical companies through lost business and brand deterioration.

In 2008, the European Union proposed a set of rules to protect the legal supply chain from counterfeit drugs, known as the ‘EU pharmaceutical package’. These include a proposal to insert ‘product serialisation codes’ on drug packages that could be inspected by legal authorities.

This will of course require pharmaceutical companies to set up the infrastructure to support such measures. According to Accenture’s Formanek, doing so will grant those companies greater insight not only into how their supply chain functions, but also how their products are consumed.

This is one way in which technology might counterbalance the growing distance between pharmaceutical companies and medical practitioners, by bringing them closer to the final consumer of their products, the patient. “Today, pharmaceutical companies are prevented from interacting with the patients, and there’s rationale for that,” explains PA Consulting’s Deane. “But also there’s a drive to shorten hospital stays by allowing people to take care of themselves at home. Electronic health (e-health) systems for the home are therefore going to become more prevalent, and the ability of a pharmaceutical company to reach out and engage directly with their patient population is going to become a differentiator.”

Pharmaceutical companies are not the only ones eyeing this space as a potential area for growth, however. “Mobile phone carriers and technology companies such as Microsoft, Google and Intel all now have significant healthcare divisions vying to own the e-health space because it’s a growing industry.”

So far, Deane explains, the area of e-health in which pharmaceuticals companies have shown the most interest is ‘compliance monitoring’, which allows them to track whether a patient is taking their pills as often as prescribed.

German pharmaceutical giant Novartis, for example, this year signed a licensing agreement with a company called Proteus, which makes tiny chips that can be inserted into pills and which transmit the precise time they were swallowed to external systems.

Business as usual

With such fascinating technologies becoming a practical reality, it seems that the pharmaceutical industry is set for a great deal of IT-driven change in the near future.

Unfortunately for the IT departments of pharmaceutical companies, however, it is unlikely to be them that get to work on such exciting projects. As the Novartis example shows, when it comes to developing innovative IT systems for use outside the organisation, pharmaceutical companies typically look to partner with external suppliers.

Internal IT departments, meanwhile, are left with the job of supporting internal systems, and they are not necessarily safe in that role either: in 2010, 63% of pharmaceutical companies used IT outsourcing to support some part of their manufacturing or supply chain operations, up from 48% in 2008, a recent study by market watcher IDC found.

Napp Pharmaceutical’s Richard Rolt reflects that while his organisation is beginning to realise that IT can drive revenue growth, its attitude towards the IT department remains unchanged. “It’s the same old attitude really; we’re still seeing a lot of business users just asking us to install stuff, rather than involving us from the outset in the problem definition stage,” he says. “We’ve got one or two pockets of the business who understand that they get better results from working with us in a more collaborative way, but not many.”

And when the IT function does attempt to drive innovation, he says, it is not met with much enthusiasm: “We have these lofty aims to be patient-focused, and the opportunities to do that with technology are quite clear. It could be through social media like Facebook and Twitter, or through software on an iPhone that reminds patients to take their medicine. But when we talk about this stuff, we’re seen as a bit wacky, and nobody wants to take it up.” He adds that he does not think Napp is unusual in this regard.

There are some technology trends that are specific to the pharmaceutical industry, but the predicament Rolt describes – in which the business craves innovation but does not give IT the chance to carry it out – will be familiar to IT leaders across all sectors.

Related: Winning with analytics in the pharmaceutical industry