Industry | Pharmaceutical

Abstract

The Indian pharmaceutical industry is today the fourth largest globally in volume terms and 13th

largest in value terms and continues to grow annually at 14%. The industry is making significant IT

investments to support this growth.

This paper surveys the IT usage in the pharma industry. It describes the opportunity in the market, the

gaps that the Industry is facing currently in the services offered by IT Service providers and how the

Industry is coping with these gaps. The paper concludes by highlighting the expected benefits that

Industry will obtain by outsourcing their IT needs to Service Providers.

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IT trends in Indian Pharmaceutical

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The pharmaceutical industry in India is estimated to be worth around INR 61,000 crore, growing at an annual rate of 14%.

In terms of world rankings, the domestic

industry stands 4th in terms of volume and 13th in value terms. The ranking in value terms could also be a reflection of the low prices at which drugs and pharmaceuticals are sold in the country.

According to the latest data published by

Department of Industrial Policy and Promotion (DIPP), the cumulative drugs and pharmaceuticals sector attracted foreign direct investments (FDI) worth INR 56,500 crore during April 2000 to April 2013. A highly organized sector, a number of pharmaceutical companies are boosting operations in India and the size of the industry is expected to touch INR 288,000 crore by 2017.

Pharma companies have developed Good Manufacturing Practices (GMP) compliant facilities for the production of different dosage forms. In addition to having GMP, WHO, several Indian companies have also been obtaining plant approvals from international regulatory agencies like US FDA, MCA (UK), TGA (Australia), MCC (South Africa).

A highly fragmented industry, the Indian pharmaceutical industry is estimated to have over 10,000 manufacturing units, where around 8,000 units manufacture formulation drugs, while the balance are involved in manufacturing bulk drugs. Small and medium enterprises (SMEs) account for around 80% of the production in terms of volume and 40% by value. Key pharma companies are located primarily in the western region, followed by the south.

Top IT Priorities

Pharmaceutical companies need to keep up with their constantly changing industry dynamics to stay viable and competitive. Pharmaceutical companies face the challenges of simultaneously reducing costs, increasing revenues, improving operational efficiencies, shrinking drug pipelines, patent expiration, getting new products to the market faster, lowering supply chain costs, driving brand awareness and consumer loyalty, and meeting regulatory and security requirements.

With these growing challenges, pharma companies are compelled to adopt the advanced and latest IT technologies and automation levels to stay ahead of the competition. The role of IT is not limited to only being a supportive tool for operational activities, but also to be a strategic tool as well as a major enabler for organizational change, improved quality, and cycle-time reduction. IT solutions allow these companies to tap into their huge databases and deliver easy-to-comprehend insights to improve business performance and maintain regulatory compliance. Not only the large pharma companies, but small and medium scale enterprises (SMEs) are also realising the importance of IT and using it in one way or the other.

Courtesy: Feedback Business Consulting

- Pharmaceutical

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Introduction Top Functions where IT Practices

Pharmaceutical industries are using IT across various functions like Production, R&D, Quality, Supply Chain, Finance, HR and Sales & Marketing. However, R&D, Supply Chain and Sales & Marketing are the three functions where usage of IT becomes critical as the huge amount of data generated by these verticals and complexity of their business processes

Research and development: The race to develop new drugs, compete with generic drugs, and put forward their own generic drugs has resulted in companies doubling their investment in R&D, making it even more important for these compa-nies to streamline their costs and increase their profit margins. In the R&D department, a huge volume of data and documents gets generated with respect to drug formulations, chemical compounds for drugs, details for clinical trials, etc. Several large drug companies are also joining forces with biotech companies by forging research alliances, allowing them to take advantage of the biotech industry’s scientific advances and expertise in drug delivery. Finally, the pharmaceutical industry is increasingly outsourcing the manufacture of drugs, thereby enabling greater allocation of funds to R&D and marketing, while also raising the stakes to ensure the quality of outsourced production. As a result of all these mergers, alliances, and outsourcing initia-tives, these companies are now dealing with an overwhelming volume of information from many sources thrown together into one giant pool—a pool that is becoming increasingly difficult to man-age. IT enables efficient management of this data and easy accessibility of documents. It also helps to generate holistic models from these diverse set of data on real time basis.

Supply Chain: Usage of IT is considered a prereq-uisite for the effective control of today’s Supply Chain. High inventory levels and product obsoles-cence costs, high manufacturing and logistics costs, looming regulatory mandates and collaborations with channel partners, which could include suppli-ers, intermediaries, third-party service providers and customers, are the major areas of concern for Pharma companies. As a result of these challenges, Pharma companies are now deploying IT solutions in manufacturing areas that have traditionally been carried out manually. flexible and compliant.

Pharma companies are compelled to rethink their supply chain and IT strategies and develop more collaborative models that enable them to be more agile, flexible and compliant.

Another area of concern for pharma companies relates to theft and counterfeiting. The need for serialization of primary packaging materials to avoid counterfeiting is driving investments in Track and Trace (Barcode / RFID) technologies and Mobility solutions.

Sales and Marketing: Pharmaceutical companies are focusing their efforts on sales and marketing activities. In fact, industry estimates indicate that pharmaceutical companies are now spending more than twice as much on marketing and administration, than they are on research and development. Pharma companies are initiating efforts to directly reach consumers, while still trying to drive increased physician adoption. The proliferation of generic drugs and of information available to consumers through the Internet – as well as the pressure from insurance companies and HMOs to fill prescriptions with generic drugs is making it increasingly important for companies to target their marketing strategies to strengthen consumer loyalty to the brand-names of drugs that previously led the market.

Moreover, the pharmaceutical business has the largest sales force of any industry. By adopting IT tools, companies are able to improve their marketing practices and empower their sales force to communicate and collaborate efficiently.

Courtesy: Feedback Business Consulting

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Introduction Major IT Trends

Today a number of IT solutions are commonly used in pharma industries. Some of the popular ones are ERP, SCM, CRM, SFA, LIMS, DMS and Analytics. Companies are moving towards usage of solutions that make them stay ahead of their competition and ease the regulatory process.

Analytical tools like BI (Business Intelligence) and Product Life cycle management system (PLMS) are also gaining momentum. BI provides the pharmaceutical companies with the ability to analyze vast amounts of information they al-ready have, to make the best business deci-sions. The software allows these companies to tap into their huge databases and deliver easy-to-comprehend insight to improve business per-formance and maintain regulatory compliance.

Product Lifecycle Management system ena-bles pharmaceutical companies to have a uni-fied view of their entire product development lifecycle, with the ability to view and trace every product detail throughout the entire process. It provides the capability to both manage and cen-tralize product information. This help pharma-ceutical companies to address some of the most essential needs, including hastening the time to market, lowering overall operation and produc-tion costs and realizing quality standards such as QbD (Quality by Design).

Advances in instrumentation through minia-turized biosensors and the evolution in smart phones and their apps are resulting in increas-ingly sophisticated health-measurement devic-es. Pharmaceutical companies can deploy smart devices to gather large quantities of real-world data not previously available to scientists. Re-mote monitoring of patients through sensors and devices represents an immense opportuni-ty. This kind of data could be used to facilitate R&D, analyze drug efficacy, enhance future drug sales, and create new economic models that combine the provision of drugs and services.

Remote-monitoring devices can also add value by increasing patients’ adherence to their pre-scriptions.

Technology and mobile providers are offering services such as data feeds, tracking, and analy-sis to complement medical devices. The new generation of wireless sensors will be able to provide more sophisticated real-time insight.

Technologies such as cloud computing and social media are already making headlines. Cloud services provide the companies with an ideal opportunity to switch from capital-intensive information technology to a more var-iable operational cost model. To reduce costs, even the smaller companies will look to IT com-panies as hosts of services, thereby sharing the costs with other companies. On the other hand, Social media in pharma helps in building confi-dence as companies can go beyond their organ-ization to engage with patients and healthcare practitioners.

Pharma companies need a collaborative IT in-frastructure to grapple with the problem of data generated from highly heterogeneous sources. One of the biggest challenge of pharmaceutical businesses is to have data that is consistent, reliable, and well linked. The ability to manage and integrate data generated at all stages of the value chain, from discovery to real-world use after regulatory approval, is a fundamental re-quirement to allow companies to derive the maximum benefit from the technology trends. Data is the foundation upon which the value-adding analytics are built. Effective end-to-end data integration establishes an authoritative source for all pieces of information and accu-rately links disparate data regardless of the source - be it internal or external, proprietary or publicly available.

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Introduction High Focus areas from Future Technology Stand-

Courtesy: Feedback Business Consulting

IT Usage depends on Company Size

Large companies are going through IT transformation and looking for solutions to help them gain competitive advantages. Regulatory norms/ compliances, Drug coun-terfeiting, Timely delivery of product to market and low operating cost are the major concerns for large firms in today’s economic environment.

Many large pharma companies in India have already de-ployed software such as ERP, SCM, CRM and are into their next evolutionary phase to adopt collaboration, communication and analytics and are in the process of integrating software like SFA, Business intelligence, E-procurement and QoS (Quality of service) with ERP. They are also adopting technology solutions like Cloud com-puting, Social media, Big.

data, Mobility solutions to lower IT oper-ating costs and serve customers better.

With the increasing usage of cloud com-puting technology among small compa-nies, the gap of IT maturity is also mini-mizing between the large and small Phar-ma firms, who can now buy software so-lutions, including ERP, over the cloud and pay only for what they use.

About a decade ago, Small and Medium enterprises (SME) in Pharma were con-servative in their IT spending. IT was con-sidered a communication technology, but today the situation has changed to a great extent. SME Pharma firms have re-alized that IT can play a considerable role in aiding in better product development as well as business management, giving them an edge over the increasing com-petition.

However, most small and mid-size play-ers find it hard to justify their investment in ERP, especially big-ticket solutions from the likes of SAP and Oracle, as they operate on thin margins. In order to ad-dress their requirements, several smaller players have emerged that offer ERP so-lutions designed to meet their needs at affordable price points.

Large pharma companies spend ap-prox. 2-3% of their turnover on IT, whereas SMEs spend 0.2-1% of their turnover on IT. However, with the in-creasing awareness of benefits de-rived by implementing IT, the % spend on IT is expected to increase among SMEs.

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Introduction

Pharma companies expect IT service providers to be technology partners and possess good industry knowledge to provide end to end services, which re-sult in high ROI.

Companies need technology providers who pos-sess good domain knowledge and understand their business operations well. This will assist companies to identify and suggest the business process/areas where IT implementation is critical with minimal investment leading to increased ROI

Solution provider should possess a technically sound team with industry expertise. and They should also have the right automation level to suggest/develop/design the appropriate IT solu-tion for the concerned division, which is required to meet the business objectives. The service pro-vider needs to study the operating functionality of the segment of interest and based on the study, develop comprehensive solutions and services, which can sustain the complexities of the business and lower costs

Companies wish to understand the value proposi-tion they can derive by implementing the IT solu-tion. They would like to determine the return on investment/ business value derived from adoption of IT in any business process

Companies need technology solutions like cloud computing, mobility, virtualization, which reduce the IT operating operational cost. IT service pro-vider should possess correct automation level and scalable and extensive architecture that helps in reducing application development time, service downtime, thereby reducing IT operating cost and increasing the profitability

Regulations related to the Pharma industry and compliances with them are a major challenge for the companies. They would hence like to have a technology partner who has good knowledge of all the regulations followed in the industry and provide them solutions to ease the regulatory pro-cess.

The Challenges Faced in IT Practices

Identifying right business process that needs automation

Identification of right product/solution that fulfills the need correct-ly and optimally

Resistance to change/ adoption of new technology specially by medium & small companies

High IT operating costs

Segregation between regulated and non-regulated IT process

Identification of a right technology

partner/service provider

Companies expectations from IT Service Provider

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Introduction Experience with IT Service Providers Present-

Companies look up for IT service providers for var-ious services like Consulting, Testing, Application development, Management and Up gradation, Business process services, Packaged implementa-tion, Infrastructure management, etc. Experiences of the companies on key services offered by IT service providers are as follows:

Consulting: By leveraging their domain knowledge and expertise, service providers have helped Pharmaceutical companies to achieve business transformation. They reinvent their oper-ating models and processes to adapt to changing market conditions, enhance productivity, unlock innovation and drive corporate performance and value.

Testing: Testing services have helped in perfor-mance optimization of new and existing IT pro-cesses, which have enabled Pharma companies in increasing the efficiency of the business process, reduce business and IT operating cost, and in-creased ROI.

Application development, management and up gradation: Software's available in the market do not meet the need of ever changing business environment. Hence, time and cost-effective cus-tomized applications offered by the IT service pro-vider help in addressing functional gaps and achieve business goals effectively. By application management and up gradation services, IT service providers have helped in reducing service down-time, reduced recurring cost and enhanced per-formance.

Packaged implementation: By completing the project on time and as per the budget, IT service providers have enabled to achieve maximum ben-efits while minimizing risk and total cost of owner-ship.

Infrastructure management: Helps to build and manage a highly available, scalable, reliable, cost effective and secure IT infrastructure that is capable of meeting the dynamic needs of busi-nesses in a multi-sourcing scenario.

The experience of Pharma companies has so far been satisfactory with the current IT ser-vice providers.

Companies also claim of achieving 20-25% increase in their profitability by availing these IT services.

However, there still exist certain dissatisfac-tion areas which needs to be addressed,

Unresponsive behavior of the vendors who are awarded AMC contracts resulting in de-lays in servicing

Inadequate domain knowledge of the IT ser-vice provider resulting in application failure, long service downtime, reduces ROI thus affecting the overall profitability of the busi-ness

Long implementation time thus effecting the project budget and ROI

Lack of technical expertise among the tech-nicians is a major issue. The technicians are sometimes not in line with the project man-ager thus affecting the overall project profit-ability.

Inadequate automation level and IT architec-ture resulting in reduce efficiency of the cur-rent IT process, long application develop-ment time, long service downtime thus im-pacting ROI

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Steps taken by Pharma companies to bridge the gaps

Nowadays rather than looking for just a solution provider, companies are looking for risk sharing partner who can share the risk; in case something goes wrong rather than simply taking his fees and walk away after project completion.

Penalty is imposed on the IT service provider, hence resulting in improvement

Large companies develop an internal IT team who continuously monitor the performance of the project using agile and scrum methodology. Companies along with service providers have started developing a working model of the actual project to find out the realistic measures about the actual project to reduce the risk involved.

A few large companies have developed an in house IT team to take care of their IT needs so as to guard against delayed or unresponsive services and mitigate outsourcing costs

A few Companies while outsourcing the work, transact with couple of vendors to mitigate the risk cost or schedule with one service provider and keep an ancillary available

In case, if none of the option works out they replace the vendor

To conclude, the advantages companies expect by outsourcing their IT to service providers

An organization will need the support of an IT partner offering a full range of services to master the 'digitized' business environment that is the new face of the Pharma industry to become a leader. Service integrators will need to play an industry-defining role, by transforming into a ‘master of the pharmaceutical business game’ to stay relevant in the emerging industry. The industry today seeks to leverage on business transformation capabilities of full service integrators for:

Help in bringing down the total cost of ownership (TCO) of IT Assets, and increase the return on investments (ROI) on the IT initiatives

Simplification, streamlining, consolida-tion of application portfolio and associat-ed business processes to align with the business needs and objectives

Core IT team is free to focus on their core business, thus enabling sustainable growth

Ease down the regulatory process ena-bling them to timely reach the market and stay ahead of the competition

Access to global best practices and IT strategies

Experience best-in–class service delivery at door- step

In depth understanding & knowledge of the concerned industry vertical, right au-tomation level and IT architecture, busi-ness experience & technical expertise of the technicians and good after sales sup-port can help them in gaining clients

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We work with our clients in their stra-tegic initiatives to create reliable long-term IT services relation-ships. Clients work with us to create the right processes that are personalized and flexible. We supplement these processes with the right values and a commitment to excel – which are long term relation-ship requirements. Togeth-er, we create new capabili-ties for our client to fall back upon and realize their IT initiatives. Techwave brings a unique combination of attributes to the market with its agile, flexible and easy to work approach.

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