Internet Strategy - Is it really still crucial to
SummaryE-business is turning from hype to reality and is starting to become that most crucial of things, measurable. Pharmaceutical companies must orient their businesses to take into account the formidable
- Author Name: Editor
A few years ago, the internet was booming and any idea or even word starting with "e" was seemingly worth millions. The new economy was here to stay.... Thousands of "start-ups" mushroomed. A year later, the bubble burst and "start-ups" began disappearing... Does that mean that the Internet won't deliver on its promises? Certainly not. But the reality is that the way to invest in the internet has changed. The gold rush has stopped. Pharmaceutical companies are moving away from the model where they outsourced work to pure dot.coms. Instead, they are moving toward a Clicks and Mortar model, where they integrate use of the internet into their own capabilities. Opportunities for the Pharmaceutical market… So is it still worth having an internet strategy? Certainly. The internet has begun to deliver on it's promises. There are several obvious reasons why use of the internet as a new channel can be a benefit to the Pharmaceutical sector:
- Pharmaceutical companies are re-evaluating the way they do business now and how it impacts on their S&M and R&D capabilities
- The balance of power in the healthcare chain is shifting towards the end customer
- This is an industry where information is key
- Health and drug related web sites are the most popular on the internet
- The industry is fragmented
As a consequence, executives realise the value the internet can bring. For example, these are the results of a survey conducted by Scrip last December. Main factors driving the adoption of e-business % of responding to a “high” or “great” degree
The main opportunities for the use of the Internet within Pharmaceuticals are in S&M (product web sites, disease web sites, portals...etc), R&D (product development, clinical trials and patient recruitment) and in e-procurement (supply chains, market places). The difficulty resides in prioritising initiatives and in adopting the best strategy to gain a rapid ROI. So what are the questions to ask yourself before you start an e-project? The opportunities offered by the internet are enormous, but you may feel that issues of integration with your legacy technologies, your personnel's capabilities or your medical strategy are prohibitive. You need, then, to start with methodology, e-business should be treated as business-as-usual. There are a few basic questions that you need to be able to answer: What are your objectives? Do you understand your end customers and your value proposition to them? What is your plan of action with each of them? How are you integrating and using the internet as a channel? From strategy to implementation - Which areas are likely to bring the most successes? The pharmaceutical industry is by essence a conservative and highly regulated industry. While until now the financial, retail and automotive industries were further ahead with their e-business initiatives, the Pharmaceutical sector is catching up. Still, what did the internet bring so far? According to the survey conducted by Scrip last December, the area where executives expect to see the most benefits is Sales and Marketing.
The same survey indicates that online sales are projected to increase from 3% to 14% within 18 months. You've got a corporate website, but did you get it because it was a need or just because you were scared of being left behind? Can you sit down today and measure your ROI? Has your site traffic had an impact on your prescriptions rate? Thanks to your Internet channel, do you know your customers, be they patient or doctor, better? Have you created a community? What has the money you invested in your site done for you? If you can't yet see any ROI, can you justify a continued investment in "e"? Well, despite the fact that DTC is not yet allowed and e-commerce is not happening widely, it is still worth investing in "e". There are some very encouraging trends:
- Internet penetration amongst UK GPs is above 80% and more than 70% spend more than 1 hour on the net everyday (in contrast with the 3 minutes they spend reading print journals) (Source :Scrip December 2000)
- 50-70% of sales reps vists don't result in them seeing GPs: e-Detailing appears to be a great solution
- DTC is coming to Europe: trials with AIDS, asthma and diabetes drugs have been approved.
The use of the internet as a new channel is also already impacting significantly the supply chain and R&D sectors. The e-supply chain:
- Accenture forecast that from the 600 internet exchange companies we have today, there will be 50 to 100 by 2001/2002
- The aforementioned Scrip survey indicates that 82% of pharma companies expect to offer at least limited transactions through their web sites within 18 months, compared with just 21% doing so today
- A survey conducted by CGEY and Insead in August 2001concerning supply chain procurement indicates that 64% of executives said the internet brings major changes
- A survey of 50 R&D executives of leading manufacturing companies shows that more than 50% agree that new technologies are changing R&D processes and promise to make traditional approaches to discovery and development swiftly obsolete. 86% of the respondents thought these technologies would have a great impact in the near future, while 58% indicated there is already a high level of urgency within their organisations to adopt new technologies (Source: Accenture)
What is happening today? Most of the Pharmaceutical companies are involved in pilots. Today the main area of focus is Sales and Marketing. Across the Industry, pharmaceutical companies are currently spending an estimated 0.5-1% of sales – approximately $2 billion annually on e-initiatives.
- Most pharmaceutical companies have already established a wide range of websites that include corporate and international information, as well as pages dedicated to specific products and diseases, particularly in the US market where companies can advertise directly to consumers.
- A 1/3 of companies contacted for the CGEY survey were conducting e-detailing pilots and were hopeful that US-wide roll outs would cut sales costs by as much as 50% and improve doctor’s access
- 70% of Pharma companies said “e” would have the greatest impact on how they go to market and this has been reflected in the investments being made in S&M initiatives such as e-detailing and CRM.
Some examples… Overall around 3% of the overall marketing budget of big pharma is going on websites and health portals (Source: Insead). Disease web sites are growing, with Amgen’s Renal-Advances.com (nephrology); Gsk Avandia.com (for Diabetes) and Lilly’s Prozac.com (Depression) being prime examples E-strategy examples:
- Creation of e-Lilly: e-business arm of Eli Lilly
- Merck &co has invested heavily in the internet particularly with Merck-Medco (the leading e-pharmacy in the US with CVS.com – dispensing more than 100,000 online prescriptions a week)
- Novartis and AstraZeneca are experimenting with e-detailing
- Merck & co and Bayer have concluded major partnerships with Yahoo!
- GSK took a 20% stake in portals for doctors in Spain
Conclusion…a bright future for e-Pharma? According to Accenture: "Intelligent use of the Internet will separate the successful companies from the rest". What does it mean for Pharmaceuticals? Will the traditional way of doing things be a fatality? Yes. The internet has already made a significant impact on patients and health professionals; Pharmaceutical companies need to adapt to this change. E-business is turning from hype to reality and is starting to become that most crucial of things, measurable. Pharmaceutical companies must orient their businesses to take into account the formidable potential that the internet offers for introducing efficiencies into their industry.