InformationWeek
Defining The Business Value Of Technology
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Sept. 11, 2000 |
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Prescription For Change: IT
Mergers, competition, and the feds are being tackled with technology
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orporate mergers, intensifying global competition, and federal scrutiny tied to record-keeping, adverse-reaction reporting requirements, and quality control have forced the IT departments of biotechnology and pharmaceutical companies to speed up deployment of enterprise resource planning and supply-chain systems, build custom systems, and increase their use of the Internet for business-to-business and business-to-consumer E-commerce. Many companies also have focused on increasing customer service by building Web sites aimed at providing disease-management information for both patients and doctors.Although biotechnology and pharmaceutical companies are at the cutting edge of health care, many of them have lagged behind when it comes to using centralized information-management systems to drive efficiencies and growth. But they're trying desperately to catch up, says analyst Roddy Martin. Rather than simply allowing each division or plant to make IT decisions on its own, "for the first time, drug manufacturers are pulling IT decisions upAMR Research to the corporate level to look at how information systems can add to operational effectiveness throughout the company," Martin says.
AstraZeneca Pharmaceuticals plc's rush to build a world-class IT infrastructure was based not only on a desire to compete in a market with slimming margins and expanding global competition, but also on a need to integrate four operations into a single global company. About two years ago, AstraZeneca, an $18 billion pharmaceutical company based in the United Kingdom and Wilmington, Del., and known for medications such as Prilosec, the gastrointestinal medicine, was two separate companies, Zeneca plc and Astra AB; there was also a subsidiary, Astra USA; and a joint venture of Astra and Merck & Co., called AstraMerck. Once the merger--designed to make the four entities stronger in a competitive world--gained regulatory approval last year in the United States and other countries, the combined company faced the daunting task of integrating its IT operations, and building systems that would let its 40,000 worldwide employees--10,000 in the United States--operate as a single, global company.
John Murray, AstraZeneca's director of IT capability and deployment, says the integration project began at the ground floor. Depending on their location, systems ran on Windows 95, 98, or NT 4.x Workstation, and networks ran on various Novell NetWare versions or Windows NT Server. The Swedish operation (the former Astra) used SAP R/3 as its enterprise resource planning system. The U.K. and U.S. operations ran a custom-built ERP system and two versions of PeopleSoft apps, as well as a range of custom and package specialty apps designed for the pharmaceutical industry.
In the past year, AstraZeneca has standardized on Windows 2000 client and server for its networking architecture, first for its 10,000 U.S. employees. Windows 2000 networking and clients are being deployed to the remaining 30,000 employees around the world. The company has standardized on SAP R/3 for finance, human-resources, legal, and manufacturing operations, and deployment has begun in the United States. The company also provided its sales personnel with sales-force automation and customer-relationship management tools custom-built to run on the Oracle database. One of those tools lets sales reps order samples for physicians from their NEC Mobil Pro 780 personal digital assistants, which has reduced the need for them to carry large quantities of samples as they make physician visits. The new sales applications let salespeople view all information on any physician at any time--what they have ordered, how much, and when they usually need replenishment. "A salesperson who hasn't made a call on a particular physician before carries a complete history of our relationship with the physician," CIO Robert Cohen says.
The major focus for the next year is on building Web sites for patient disease management, adverse reactions reporting, and physician education, Cohen says. Patients will be able to go to a site that lists diseases and link to information on treatment alternatives, medication, and products that may help them. The sales-force automation tools will track each patient who registers and can forward any new information related to his or her care. Physicians will be able to report adverse reactions in a format required by the U.S. Food and Drug Administration, as well as keep up-to-date on new treatments available for specific diseases.
The company is also facing strict new FDA requirements relating to clinical trials of medications and expects to roll out a Web site for physicians to make their reports. "We're becoming more and more an E-business company," Cohen says.
For $20 billion Bristol-Meyers Squibb Co., in Princeton, N.J., ERP was a major focus in its effort to build a business infrastructure strong enough to run a global company. And so was the Internet.
Bristol-Meyers Squibb, which markets medications such as the cholesterol-lowering drug Pravachol, deployed SAP R/3 version 4.5 worldwide last year except in Asia and South America, CIO Jack Cooper says. He plans to upgrade to version 4.6 in the coming year, and to deploy SAP in additional locations. The company also consolidated strategic purchasing at the business level using Ariba Inc. procurement tools integrated with SAP. That has already resulted in millions of dollars worth of savings, he says. "Not long ago, when we went to order PCs, instead of each department or each division ordering its own, we consolidated the purchase," Cooper says. "We demanded deep discounts and got them--and ordered $15 million worth at one time."
For simple supplies, most of the company's 25,000 U.S. employees and 55,000 worldwide order from their desktop via a portal based on Plumtree Software Inc.'s enterprise portal product and Ariba procurement. Orders are handled centrally and routed to the contract source for each item. Plumtree's portal also lets the company put its human-resources operation online so employees can track their benefit plans, change the number of dependents they claim, or modify their 401(k) information.
Bristol-Meyers has begun to use the Web and its enterprise portal to handle government requirements and to let its researchers communicate in virtual conferences. The company recently deployed a proprietary Web application used by physicians anywhere in the world to report adverse reactions to a particular medication. The FDA requires drug companies to report adverse reactions immediately, and in a specific format, and the new Web app lets the company make its reports available to the agency instantly. Researchers in company facilities around the world also make use of the company's newfound Web orientation to hold virtual conferences on work of mutual interest. "There's no other way that researchers in distant places could collaborate in as natural and free-flowing way as they can on the Internet," Cooper says. Even the way the company invests its money has changed due to the Internet, Cooper says. Each day, the company takes an account of the money on-hand from all its operations, scans the world's money markets for the highest rate of return available that day, and invests its cash. Before the Internet, such investing was done on a local basis--divisions in Madrid invested in Madrid banks, divisions in Germany invested in German banks. "But now we get the company's money working to make money at the highest return we can find anywhere," Cooper says.
In the future, Bristol-Meyers Squibb plans to keep up its pace of innovation. The company's Clairol division recently put up a Web site for those who want to dye their hair unusual colors. The company plans to take the customer-experience idea a step further. Soon, it will offer disease-management Web sites that will give patients the opportunity to get information on the company's products and medications, as well as information on how others manage diseases. The company plans to personalize the service by offering bulletins with news about treatments and products sent by E-mail to all registered users.
Supply-chain management software is the next step in managing the enterprise, Cooper says. The company plans to link raw-materials suppliers to production data to ensure that the company's needs are met. Manufacturing plants will be connected with finishing plants and fulfillment operations, to maximize the potential for savings. And they plan to join an exchange to auction excess supplies. "Increased productivity and better communication mean big bucks, but communicating with the patients who depend on us about things that can help them--we think that makes us a good company," Cooper says.
Eli Lilly and Co. in Indianapolis, upgraded its SAP R/3 version for financials and other applications to version 4.5 in Europe; Lilly is upgrading its U.S. operations to version 4.5 from early versions of R/3 and disparate legacy systems used for finance and human resources in various divisions and locations, says Roy Dunbar, CIO and VP of IT. The company, which produces the antidepressant drug Prozac, also wants to build an E-business presence and is evaluating mySAP.com E-business applications for use worldwide, he says.
For Abbott Laboratories in Abbott Park, Ill., better information systems weren't only required by the competitive marketplace--they were mandated by the federal government. Last November, Abbott paid $100 million, the largest fine ever for a U.S. pharmaceutical company, and entered into a consent decree with the Food and Drug Administration, agreeing to correct deficiencies in its testing procedures for certain diagnostic test products. The FDA didn't find fault with Abbott's products themselves, but halted their production until Abbott was in compliance. Ujjwal Mehta, Abbott's IT planning director, says the company had followed FDA requirements but couldn't produce required documentation. "The FDA required we follow certain steps, and we didn't have documentation to show we had done it properly," he says.
With the FDA shadowing every move since the consent decree, Abbott has been making fundamental changes to the way it documents not only its quality-control systems, Mehta says, but its entire operation from bottom to top. A first step was selecting SAP R/3 version 4.5 for deployment earlier this year to replace a group of applications--some proprietary and some from J.D. Edwards & Co. and Oracle--that run the back office. Deployment of SAP's order-management modules and some financial modules--including invoicing and accounts receivable--came first. "In the old system, a customer might get a bill from each division they purchased from. Now we send a single bill that includes everything a customer ordered from us," Mehta says.
Abbott also joined the Global Healthcare Exchange, as part of which hospitals and health providers can purchase products from partners such as Baxter Labs, General Electric, Johnson & Johnson, Metronics, and other suppliers.
Abbott has traditionally developed most of its software applications in-house, using consultants and a number of software development products. Each division typically handled hiring its own consultants and licensing its own software. For example, Mehta says, Abbott historically had 100 to 150 contracts with Oracle--each department negotiated its own price and paid for its own licenses. The company has centralized management of consultants and software licensing. Though it employs 200 to 400 outside consultants from more than 80 consulting companies, he says, that number will be pared significantly during the next few months.
Also, Abbott will begin negotiating companywide contracts with Documentum, IBM, Lotus, Microsoft, and Oracle for the software it needs. With the buying power a single contract will give the company, Mehta says, "we expect to save a lot of money."
And that's important. Abbott is currently developing its own application in-house to satisfy the FDA's demand for better record-keeping related to testing and quality control. With the feds looking over its shoulder, he says, everything is taking longer than it should because everything about building the software is being examined at a microscopic level. The FDA is raising questions about the basic nature of electronic documentation. For example, there are stringent requirements for certain documents, and the FDA has taken an interest in electronic signatures and the technology that can be used to ensure an electronic signature is valid. The FDA also is concerned about the validity of date and time stamping, and discussions have even centered on which time is valid--U.S. East Coast, U.S. West Coast, or Greenwich Mean Time. "We have a team of 50 people involved in translating FDA regulations into English so that software requirements can be written that developers can understand," Mehta says.
A combination of intensifying global competition and increasing governmental scrutiny is forcing biotechnology and pharmaceutical companies to move faster, think bigger, and keep a closer eye on all parts of their organizations. Trying to overcome a late start in the use of IT, those industries are rushing to exploit technology to reach those goals.
Illustration by Jeffrey Fisher
Photo of Cohen by Scott Robinson
Photo of Cooper by Giorgio Palmisano
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