Kristin Brooks03.02.07
Pharma IT Outsourcing
ERP consolidates IT infrastructure
By Kristin Brooks
Pharma IT has seen some significant changes during the last few years as the breadth of IT has spilled across all aspects of a pharmaceutical organization. At a time when several blockbuster drugs are no longer on the radar, when drug patents expire and competition is at its peak, and when the future of personalized medicine looms, pharma has had to restructure in a major way in order to reduce costs and become more agile. IT is providing an avenue to reach these objectives. Pharma companies are looking to invest in IT infrastructure that covers the whole gamut, as it has become a necessity to improve efficiency and streamline operations within the entire organization. This comes in the form of Enterprise Resource Platforms (ERP), for which industry investment has been significant--though not without its fair share of challenges.
IT Changes
Pharma's IT focus is shifting from monitoring or tracking, to managing processes and, to an even greater extent, business operations. Nikki Willett, vice president of marketing and regulatory products at Pilgrim Software, said, "The change we have been seeing is that some of our clients are taking a look at IT from a corporate strategy, resulting in a lot more consolidation of IT from the support as well as from a compliance perspective. We're also starting to see a consolidation of disparate systems to minimize the cost management and resources that are required to support enterprise applications." The areas she mentioned include consolidating multiple ERPs into a centralized approach (yes, some companies have more than one), streamlining IT management by looking at enterprise-level quality compliance and eliminating multiple approaches in this area, and looking to solutions that go across the organization.
According to Steve Cagle, vice president of marketing at Sparta Systems, Inc., "Many of our clients are taking an enterprise approach to their systems and are gradually phasing out local or point solutions in favor of a global system." He contends that this approach allows IT to reduce costs, increase application delivery time, and enforce consistent processes across the organization.
Q&A with Dennis Constantinou, Senior Director, Life Sciences Strategy and Marketing at Oracle Q: Why did Oracle move into the life sciences arena and what is the company's history in life sciences? A: We got into the life sciences arena well over 10 years ago. It really came from the top down. It was an area Lawrence Ellison, our chief executive officer, had looked at in terms of expanding areas in the market place. One of the last vistas that he saw great opportunity was from life sciences and healthcare. That kicked off the life sciences road map for Oracle, where we started with the database. That's why we have strong capabilities with compliance requirements, because we started off with managing all that information within a single database. Not only do we have bioinformatics capabilities, we have the capabilities for genealogy tracking and compliance requirements. All of those are inherent in our technology stack and from there we started building out applications supported by that technology, based on life sciences requirements. As we move forward, not only are we looking at technology that has life sciences capabilities, but also, our vision is to really look at open standards. We're looking at how we support CDISC in our clinical applications and how we integrate between life sciences and healthcare as we move forward in terms of knowledge integration. So, from those early beginnings a little more than 10 years ago, looking at the technology perspective on the database side, we have exploded and moved forward, which has led to some major acquisitions during that time as well. Q: Which aspects of the life sciences initiative are you focusing on? A: We're focused on a number of areas in terms of manufacturing and clinical research. What we are trying to do is marry each of these industry's offerings together in terms of information sharing. As these become more mature, we are seeing integration between call center and adverse events reporting, integration between adverse event reporting and ERP and manufacturing, integration between clinical drug discovery and early phase research, and, also integration between the electronic health record and the clinical trials area as well. Even though the industry has traditionally been very separated, we see that the progression of the industry, and for the industry to survive, this model will have to change. Oracle is looking at that vision and adapting our solutions accordingly. As the industry begins to evolve, we will have the solutions ready for them to adopt. Q: What is the significance of the pharma manufacturing business to this strategy? A: We're enabling a lean initiative within the manufacturing environment, and lean primarily is about reducing waste. In the manufacturing area, some of the things we're hearing about from our constituents is how do we reduce our overall operational costs in a regulatory compliant environment? How do we automate and enforce our compliance requirements? How do we ensure our products comply with the industry quality standards and safety standards? How do we ensure the integrity of our products throughout the entire supply chain? Some of the ways that Oracle helps to address these areas is through our lean manufacturing initiatives, which companies are now beginning to get into, particularly on the pharma side. We're seeing an increasing momentum for companies to adopt lean initiatives in their process manufacturing area. In terms of the compliance side--as we know, that's the ante to play in the game -- Oracle's technology in applications is completely embedded with 21 CFR Part 11 capability. It has complete audit trails and Part 11 compliance throughout the application in the manufacturing area. And, in terms of automating those GMP processes--the common theme in terms of compliance -- we support a lot of the major high-risk GMP business process load that are stipulated in the Code of Federal Regulations for manufacturing. In terms of the safe and secure supply chain, Oracle has within its technology and applications the capability to provide a very comprehensive track, trace, and authentication throughout the drug chain and the chain of custody of information as the product is being created and shipped. We have a very unique position in this particular market as well as in manufacturing. Oracle's manufacturing solution includes: computer aided formulation for batch optimization; auto-create batch for sales orders to eliminate delays; and process operations that guide operators to assure consistency and compliance, as well as integration of quality-critical control points and enables in-line testing. |
From an organizational perspective, the key benefit resulting from this is getting visibility at both the corporate and local level in real time because the data is now being maintained by one system that's easier to report on. Also, with ERP, there's less emphasis on integration to support or consolidate reporting, meaning reliance on IT departments for maintenance and support is lessened or in some cases eliminated.
The industry pressures faced by pharma have led to reliance on IT solutions and ERP in particular. According to Dennis Constantinou, senior director, life sciences strategy and marketing, Oracle, "We're seeing a unique focus and interest in the manufacturing operations area, not only on the plant floor but also the entire supply chain; so how can we streamline costs and improve that? Companies are reexamining their legacy systems, their footprint in terms of manufacturing, and how best to move forward, especially with the change of moving away from blockbuster drugs and the future of personalized medicine and how that change is going to impact their entire supply chain and manufacturing model. Pharma will need to have a very nimble manufacturing operation." We've seen an example of this with Pfizer's recent restructuring initiative.
IT Outsourcing
While outsourcing of IT in general has slowed in the past few years -- because a lot of outsourcing has been done already in the IT space, and some of the low-hanging fruit has already been picked -- investment in ERP systems is growing rapidly, uniting many (if not all) aspects of an organization. Following the initial ERP implementation process, pharma is now looking to consolidate ERP with other systems in order to gain organization-wide functionality. Rather than trying to build all of the necessary expertise in-house to achieve this, they're starting to outsource it.
According to a recent study conducted by EquaTerra, the IT outsourcing market overall grew in the low single digits, while outsourcing related to ERP applications has been in the low double digits. "Although it continues to grow, the data center and hardware applications part of the business is relatively mature. But ERP software and the services to support the user, that's growing much more rapidly," said Stan Lepeak, managing director of research, EquaTerra.
"Relative to some other industries, there's more price pressure in the pharma space today and that tends to drive an interest in IT outsourcing, so when companies are looking to save money, IT is often the place to start," said Mr. Lepeak. "I think there's a desire to reduce IT spend overall, but by the same token look at how to get more out of that spend. So it's not purely cost reduction, it's also fixing some existing problems. That's where we're seeing more activity around IT outsourcing in the industry, and pharma has an appetite to do even more," Mr. Lepeak continued.
Mr. Constantinou at Oracle contended, "With the recent changes the FDA has made with their critical path initiative, Process Analytical Technology (PAT) and trying to improve quality, I think this has also led companies to reevaluate themselves, looking again at the type of systems they have and the type of information they're obtaining and how best to change that."
Challenges for Pharma
In an industry that is historically slow to change, and with the regulatory mire surrounding it, IT in many cases presents a challenge for pharma companies, and when dealing with the implementation of IT/ERP across say 20 or 30 different sites and thousands of users, IT may end up on the back burner. It begins with justifying an IT investment and once the investment has been made, often ends with seemingly insurmountable implementation, integration and maintenance challenges. Pharma is confronted with justifying the means to an end with big dollar investments during tough times. According to Mr. Lepeak of EquaTerra, "The commercial ERP applications themselves are expensive, tens if not hundreds of millions, but the cost to implement and maintain them could be three or four times that. It has created a situation ripe for outsourcing because there really isn't any alternative." It's sink or swim at this point, and companies need to maintain and sustain their investments.
IT maintenance can be a huge challenge for pharma for a variety of reasons, particularly regarding restrictions associated with change management and validation. FDA regulations make maintaining and upgrading systems a lot more complicated, so the bigger the pharma, the slower the change. "Often we see that companies under-invest in the ongoing support of ERP. Therefore, over time, fewer people understand how the systems work and the number of problems that aren't fixed grows because there are not enough people to address them, creating an even bigger backlog of problems," said to Mr. Lepeak.
Most pharma companies will do their ERP project, get the system rolled out, and then try to stabilize it for several years. Some don't want to go through the upgrade expense or pay for the time required for maintenance. "A lot of companies I've dealt with are running versions of their ERP software that are several years old, with plans to upgrade within a year or two. To do the upgrade becomes a major project, and can be 20 to 25% of the effort of the original installation. It's something that is not taken lightly in the industry," commented Mr. Brandl.
"Today, a lot pharma companies have a bit of a mess relative to their IT environment. It's often a common goal to try to rationalize it by greater standardization and having fewer different versions of software running. However, doing this is very complicated and can be distracting from a pharmaceutical company's core business. The result is, despite a lot of investment, many companies still feel their IT is too expensive, too complicated and not really delivering the value they had hoped for," said Mr. Lepeak. "Naturally this is causing pharma to look at outsourcing and bring in an outside firm to do some of the rationalization and consolidation of their systems in an effort to reduce ongoing costs. A third party can be more efficient, use more remote offshore resources, or a variety of other levers."
In the past, some companies viewed ERP enhancements as disruptive and expendable, digging themselves deeper into an IT rut. With this approach--not being up-to-date with ERP systems -- companies risk losing the advantages of ERP and, in terms of functionality, being left behind each time upgrades become available.
Some companies take a proactive approach to maintenance. Larry Pickett, vice president and chief information officer at Purdue Pharma, said, "We perform maintenance with the assistance of consultants and staff extenders. We try to schedule upgrades for when we anticipate transaction levels to be low and we try to minimize business disruption while maintaining some schedule balance with IT staff."
According to Jay Deakins, president, Deacom, Inc., "Pharma companies with properly implemented and maintained ERP systems will have the ability to evolve, respond to change, and create modifications quickly, resulting in a more competitive environment."
For Pharma, a business model that can adapt to new trends is essential. If personalized medicine is the future, between innovation and the manufacturing implications, the industry needs to look at how it can become an agile business. According to Pilgrim's Ms. Willett, "Pharma is going to have to look at how IT, such as automated systems, can help get them there. If they wait to try and streamline those efforts for improved efficiency and productivity in this fast-paced environment, good luck to them! They need to be well prepared for what's going to be hitting them in the very near future."
ERP's Expanse
ERP is changing the way Pharma companies operate, taking business management to a new level. Also, more and more, ERP systems are being integrated with regulatory functions. According to Mr. Pickett, "The major ERP systems are quite integrated these days. Regulatory functions are managed directly within the ERP. It's more than a mere integration. For example, all notifications, investigations, and CAPAs are managed directly with our ERP system. Those functions have direct impact on classic ERP functions like, raw materials management, change control, and product release. The ERP now even helps prepare regulatory mandated reports like the Annual Product Review. This is all now a function of the modern ERP."
In terms of integration, ERP, MES (manufacturing execution system), and PLM (product life cycle management) are some of the key systems essential to the success of the entire life cycle of manufacturing a product. Visibility across an organization is the major benefit. Ms. Willett of Pilgrim said, "When we walk into a new account, each requires some integration. Typically the first integration that we do is with whatever the existing ERP system is. The reason is that some of the key and critical data that's located in the ERP are things that we need to have access to on a constant basis as part of our quality compliance process. We need to make sure we maintain synchronization."
She provided the following example, "There are occasions when we need to look up data from an ERP -- things like products, components, recipe elements, and product catalogs. We need to have access to ERP if there's a non-conformance that occurs during production in order to understand what lot or batch number is associated with that non-conforming product. Because we don't want to bring in the entire list from ERP -- as it changes on a daily basis and continues to grow and since there's no point maintaining that information in two systems--we do a lookup in the ERP to capture the lot or batch we need and then utilize that within our non-conformance record." The more integration, the more functionality and visibility, the more pharma companies can efficiently mange operations.
The growth in IT outsourcing is steady -- if a little slower than a few years ago -- and is strong around ERP software and services related to it. In order to get to the point where companies can reduce their reliance on third party IT vendors, they're finding they have to invest even more. IT management still requires a great deal of investment once systems have been put in place. The increase in use of global ERPs and the effort to consolidate and integrate systems has left the pharma industry looking to the experts for help. IT solutions like ERP may help the pharma industry surmount some of the immediate challenges they face in today's market. These challenges are the key driver for change and investments in IT are inevitable, so a proactive approach to IT is probably the best bet.