When will European pharma go online?

Some areas of the pharma industry are clearly at the cutting edge of new technology. But especially in Europe, this hasn't translated to eBusiness efforts in the sector - it's far behind other industries in computerization and automation, particularly in Europe. So why are European pharma not capitalizing on the savings IT can bring, and when will this change? John Band investigates... What images does the pharmaceutical industry conjure up for you? Many people would see a hotbed of new technology. Perhaps a white-coated scientist, using the latest high-tech equipment to analyze the new drug she has developed, helped by databases that digitally store details of every gene in humans' DNA. But outside a few specific areas, the reality is different. Information technology is still to make a major impact on some of the most important areas of the business, especially in Europe. In particular, companies' sales efforts and clinical trials - which together account for a huge proportion of their costs - remain heavily based on reams and reams of paper. "There's a lot of resistance in the industry to the use of technology," says Datamonitor eHealth analyst Yvonne MacPherson. La resistance Pharma companies in the US have started embracing eBusiness, particularly in the area of customer relationship management (CRM). The largest pharma companies have started providing physicians with PDAs, boosting the company's brand as well as encouraging the physician to do more of her business online. But the European market lags well behind. Industrial productivity in developed countries has been growing faster than any time since the industrial revolution. Throughout Europe, companies are discovering the benefits of 'l'email' and 'Automatisierung'. So why is an industry that is in many ways so technology-driven falling behind? "By definition it's a defensive, conservative and highly regulated industry," adds Laurence Mizrahi, marketing and strategy director for PharmiWeb, a European life sciences portal and eBusiness company. That much is true in Europe and the US. But there are various reasons why Europe is behind. A major reason is simply that the giants of healthcare eBusiness, including IBM, Oracle and Siebel, are all based in the US. "The big eBusiness firms are American ones, headquartered in the US, who start in the US and roll it out to Europe," says Ms MacPherson. This is part of the generally friendlier operating environment for pharma companies across the Atlantic - the reason why following the merger of the UK's Glaxo Wellcome and Anglo-American SmithKline Beecham, Glaxo SmithKline decided to site its operational headquarters in the US. But at least European pharma companies' use of technology will take off as the US vendors roll their products out in Europe. This isn't the only thing holding Europe behind, however. Markets and marketing "Europe is behind the States because of a combination of different factors: the regulation, the technology and the players," says Ms Mizrahi. "For example, DTC advertising is allowed in the states, and the market there is much more consumer oriented." This is an important point. One of the advantages of eCRM is that huge databases of customers and their interests can be matched to the company's marketing programs. But ethical pharmaceuticals is an industry where - particularly in the EU - companies are allowed very little contact with their end users. "Restrictions on direct-to-consumer marketing mean that you lose some of the advantages of eBusiness in a regular industry, where you can cross-market," says Ms MacPherson. This has held European pharma back from automation, particularly since CRM is generally seen as the most important area of eBusiness for pharma companies. The reason for this focus is simple. "When it comes to eBusiness, pharma companies' number one concern is return on investment," says Ms MacPherson. "If an executive is trying to convince the board of directors to give them more funds for eBusiness projects, the board will want to know whether the project will make them more money. It's easier to demonstrate the rationale for sales and marketing investment than for R&D." Of course, on both sides of the Atlantic, companies' major targets for CRM are physicians rather than patients. There is substantial scope for eCRM initiatives here, including websites aimed at physicians, the provision of PDAs, and efforts to communicate with increasingly time-pressed physicians via email rather than through face-to-face contact. Ms Mizrahi says, "It is important to increase the sales force efficiency as they get the chance to spend less and less time with doctors. As Pharmaceutical companies keep increasing their sales force size, around 50% of doctors would not see sales representatives. The trend is to use technology, e-detailing, to gain time with doctors. Time will tell the value, but e-detailing seems to be a very cost-effective tool." The potential in Europe is great. In Ms Mizrahi's words, "although eBusiness uptake has been slow, now it's accelerating and catching up". And Ms MacPherson points to Datamonitor's research, which shows that younger physicians in Europe are increasingly willing to use the Internet for patient management. As this newer generation takes over, the scope for pharma companies to go online in Europe will increase. Insurers vs. health services But while physicians' attitudes should change, one of the institutional factors that has driven eHealthcare uptake in the US will likely remain very different in Europe. Ms Mizrahi says, "Insurance companies in the US are very powerful and ruled by cost, so prevention and diagnostics are very highly regarded. This means that communication tools where patients can self-assess are highly important." European healthcare is generally paid for by the state rather than by private insurers. While national health services are also short of money, as bureaucratic institutions they are not driven as strongly by the need for cost savings. "In France or the UK for example, costs are huge," says Ms Mizrahi. "The problem is a balance between priorities. On the one hand I should be able to see the doctor I choose, but to boost cost savings health services must reduce patient freedom." Eventually, this factor too will be overcome. The financial pressure will ensure that European health authorities do start to promote efforts towards telemedicine. However, without the impetus of private companies seeking to save money, it will take some time. Slowly but surely... The future for European pharma certainly involves more eBusiness initiatives. For now, sales and marketing will be the major focus - and there's a good chance that these efforts will pay off. "The learning curve is steeper in Europe - we're learning from the United States' experience," says Ms Mizrahi. In the longer term, efforts elsewhere may pay off. According to Ms Mizrahi, "there's a lot of potential in applying technology to R&D. If you manage to shorten the product development cycle, there are huge cost savings and competitive advantages. This is already happening". "One of the major areas of eBusiness investment in R&D is online clinical trial recruitment. This decreases drugs' time to market and so is directly linked to cost reduction, but calculating the return on investment in that process is very difficult," says Ms MacPherson. "A lot of people in the industry feel that investigators will be reluctant to adopt the technology in clinical trials, but pharma executives say it hasn't been a problem at all." The key for success in less transparent areas is to make return on investment clearer. "Pharma companies know they need to devise metrics for determining return on investment, specific to the area of the value chain they are addressing", she adds. "But the consensus in the industry is that before they all dive into devising eBusiness strategies, they must understand their business strategy. Pharma companies do not want to let technology drive their strategies." It looks like the European healthcare industry's unwillingness to rush into eBusiness could eventually pay off. It's easy to waste money on technology you don't need. While pharma companies may be sacrificing potential savings now, they're also ensuring that when they do get eBusiness technology in place, it will do exactly what they need it to. Submitted by Datamonitor.