Pharmaceuticals: Best Medicine: Data Warehouses

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By Jill Gambon
Issue date: Sept. 9, 1996

he ongoing revolution in the health-care industry is transforming pharmaceutical firms from businesses that simply make and distribute drugs to information companies that gather and deliver health-care data to their customers.

Increasing pressures from managed-care companies to contain costs have spurred drug makers to develop new business models and create services and products. "Within the pharmaceutical industry, there's an aggressive move to 'knowledge management,' or the ability to take data from a variety of sources and use it to make good strategic decisions," says Saul Kaplan, managing partner of Andersen Consulting's pharmaceutical and medical products practice in Boston.

Many of these efforts are based on data warehousing technologies. Pharmaceutical companies have vast stores of information amassed in their sales, marketing, and research organizations. Other efforts involve custom-developed software and services for pharmacists; still others use Internet technologies.

Whatever their approach, pharmaceutical companies are using information technology to transform their data resources into competitive weapons and provide customers with critical information and value-added services. "Pharmaceutical companies are becoming knowledge brokers," says Karen Harper, partner in charge of strat egic services consulting for KPMG Peat Marwick's life sciences practice in New York.

A chief application of data warehouse technology is in sales and marketing. At many companies, sales-force automation programs are evolving from simple contact-management software to robust data warehouse applications.

American Home Products, an $8.9 billion pharmaceutical and medical products manufacturer in Madison, N.J., has turned to data warehousing to help revamp its sales operations. Says Ed Schefer, VP of information systems at the company: "We've reengineered what we expect salespeople to do. They have enhanced capabilities, built largely around data warehousing applications."

These data warehouse applications support a sales and marketing organization that has been decentralized to operate along geographic lines. This realignment "reflects the fact that the market in Seattle is different than the market in Tampa," Schefer says.

Customizing The Pitch
Pfizer Inc., a $10 billion pharmaceuti cal firm in New York, has launched a massive sales-force auto-mation program that enables 2,700 sales reps to customize their sales pitches. The result: Reps can quickly provide doctors with highly detailed information about each product's effectiveness, side effects, and costs. The information is stored in an Oracle database that sales reps access through customized territory-management software from Dendrite International of Morristown, N.J.

"Companies are giving [sales reps] the tools to manage their territories like a small business," KPMG's Harper says. Sales reps no longer simply send call reports into headquarters to show which doctors they visited. Instead, they use sophisticated data warehouse tools to assess whether managed-care contracts, which stipulate what drugs a doctor can prescribe, are being followed.

Finding the right database to support necessary applications isn't always easy. Bergen Brunswig Corp., an $8.5 billion drug distributor in Orange, Calif., is building the requirements f or a customer-history database. It will contain information about the status of accounts, customers' credit ratings, their last call to the company, and records of complaints. But Linda Burkett, Bergen Brunswig's CIO, says, "We haven't found the software to support that yet."

Companies also are deploying data marts--scaled-down data warehouses that help deliver crucial information to the people who need it. Merck-Medco Managed Care Inc., a subsidiary of Merck & Co. in Montvale, N.J., has created six data marts from a 500-Gbyte data warehouse. The goal: Give departments and employees access to necessary information.

Appetite For Information
The health-care industry's voracious appetite for information also is driving pharmaceutical companies to develop information-based products and services. Bergen Brunswig, for instance, is developing software to automate order and inventory tasks for pharmacists. Pharmacists will be able to spend more time with their customers and less time on the ex pensive task of processing paperwork. "We're taking the cost out of drug distribution for our customers," Burkett says. Bergen Brunswig also has established a system that allows its customers to transmit orders electronically via a private network on a leased T1 line.

The company also announced earlier this year that its IntePlex Inc. subsidiary teamed up with ProxyMed Inc., a Fort Lauderdale, Fla., health-care information company, to offer electronic prescription-processing services based on ProxyMed's software. ProxyMed operates a national health information network that connects doctors, pharmacies, HMOs, and other health-care providers. Under terms of the deal, IntePlex will market ProxyMed's services to Bergen Brunswig's customer base.

Meanwhile, the pharmaceutical industry has joined the Internet juggernaut. Companies are exploring both Internet and intranet applications to improve communications with customers and business partners and make information more readily available across the enterpri se.

To be sure, some companies have been more aggressive than others. Pfizer, for example, is looking at a combination of public and private secure networks to link its global research organization, suppliers, and other partners. "I believe the Internet has tremendous potential to reach customers or communities of physicians, but it has to be thought of in context: Who are you going to reach? What's the content? How is it going to be kept fresh?" says Vita Cassese, Pfizer's VP of business technology and marketing research.

Taking advantage of one of the newest applications of Internet technology, Pfizer is piloting an "extranet," or secure, TCP/IP-based virtual private network called VendorGate. The network will use leased lines to connect Pfizer's worldwide research labs to contracted genetic engineering firms around the world.

American Home Products' over-the-counter drug division has set up Web sites to make product information available. But the pharmaceutical unit is taking a go-slow approach , waiting to see how the medium shapes up for early adopters.

Bergen Brunswig also is taking a somewhat cautious approach to the Internet, with a watchful eye on reliability and performance. "I'll be on the leading edge," Burkett says, "but I won't be on the bleeding edge."

Interoperability Obstacles
The pharmaceutical industry still faces its share of challenges. One is system interoperability. Companies that have grown through acquisitions, as American Home Products did, face the formidable task of knitting together disparate software and hardware systems into a single enterprise. After completing the $9.7 billion takeover of pharmaceutical company American Cyanamid Corp. last year, American Home Products has plenty of systems integration work to do.

At the top of the list is an effort to reduce support and software costs by whittling the company's 13 separate messaging and E-mail systems down to two--Novell's GroupWise, which is the company's long-term corporate standard, and Lotu s' cc:Mail.

Also, American Home Products is phasing out Apple workstations used in its research and development laboratories in favor of Intel machines. "There have been large pockets of Apple workstations in the R&D environment, and with Apple's problems, we are evolving to an Intel workstation environment," Schefer says.

Another area receiving attention from pharmaceutical companies is manufacturing. These firms, which lag behind other industries in automating their manufacturing operations, see a big opportunity for improved inventory control and resource planning. "Some companies have no choice but to invest in manufacturing to remain competitive," says Harper of KPMG Peat Marwick. "There's a tremendous opportunity for them to lower their costs."

Several divisions at American Home Products are upgrading their manufacturing resource planning systems, adding manufacturing execution systems and scheduling applications. But the company hasn't established a standard corporate system. Instead, d ifferent divisions have selected different systems, including packages from J.D. Edwards and System Software Associates.

Such implementations aren't always easy, Schefer notes. One division of the company has been working three years to implement an order-management system. "It's been a long and expensive process," he says. "We are experiencing all the potholes."

Pfizer, meanwhile, recently signed a $1.5 million deal with Ross Systems of Atlanta for the manufacturing and distribution modules of Ross' Renaissance CS software suite, which is used by several other leading pharmaceutical companies. Pfizer plans to first install the software at its Groton, Conn., research facility.

At Bergen Brunswig, a major initiative is under way to increase performance and lower costs at its 32 distribution centers. Originally, each center ran its operations on an IBM AS/400 minicomputer. But by converting to the AS/400 Advanced Series, which is based on 64-bit PowerPC RISC processors, as many as four distribution centers can share a single server. "We'll go from 32 to 12 machines," Burkett says. "This reduces software costs and administration."

Along with the imperative for efficiency in the pharmaceutical industry has come an increased appreciation of the value of information technology among top executives. "You talk to a CEO or division president, and they understand the power of IT," says Kaplan of Andersen Consulting. "They talk comfortably about the Internet, client-server, even object-oriented technology. You never would have seen that three years ago."

This heightened awareness is raising the bar for IT executives, who are under increased pressure to deliver technology that will help
drive their companies' business goals. But the prescription for success, say industry CIOs, is relatively simple: Focus on the business goal, not the technology.

"We have a philosophy where we look for productivity and process enhancements wherever we can," says Pfizer's Cassese. "To a great degree, that dictates t he technology solution, rather than the other way around.

To view the IW 500 Pharmaceuticals chart in PDF format click here

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