I Want a New Drug, One That Procures Like It Should

Pharmaceutical sector to increase e-procurement efforts

Mountain View, CA  August 6, 2001  The pharmaceutical industry has been relatively immune to the U.S. economic downturn, and IT spending in this industry will continue to grow, including e-procurement efforts, according to according to Dataquest Inc., a unit of Gartner Inc. IT spending in the pharmaceutical sector is forecasted to grow from $3 billion in 2000 to $5.5 billion in 2005.

Demand for pharmaceuticals is tied to the general health of the populace, which has remained fairly constant over the past few years, and is expected to rise dramatically as the elderly population  the single largest group of prescription drug users  grows. Pharmaceutical drugs will continue to be in demand, regardless of economic conditions, and this will result in continued investment into IT.

"The pharmaceutical industry is poised for tremendous growth in the next five years, and much of the emerging opportunities have yet to be captured by a single IT supplier," said Geraldine Cruz, analyst for Gartner Dataquest's IT services worldwide group. "IT product and service providers that plan to address this growing market must have domain expertise in the business pressures, regulatory issues and technological needs that affect the receptivity of the industry to IT solutions."

Spending for software and external services in the U.S. pharmaceutical industry will outpace spending for hardware, network equipment and internal services. In 2000, external services spending represented 53 percent of total external spending for the U.S. pharmaceutical industry. Hardware spending accounted for 18 percent, followed by network equipment spending at 15 percent and software spending representing 14 percent of external spending for the industry.

By 2005, external services spending and software spending will account for a larger portion of external spending for the U.S. pharmaceutical industry. In 2005, external services spending is projected to account for 58 percent of external spending followed by software spending at 17 percent. Hardware spending is expected to represent 14 percent of external spending in the market, followed by network equipment spending, which will total 11 percent of external spending for the sector.

Gartner Dataquest analysts said suppliers also need to find e-business initiatives that could have an impact on the industry in the future. While marketplaces, e-procurement and other e-business initiatives captured a large share of the budgets of enterprises in other manufacturing industries last year, such initiatives, while important for the pharmaceutical industry, did not capture as much mind share as drug discovery technologies.

"The industry is examining how Internet technologies can affect or transform existing business processes, particularly drug discovery and development and sales and marketing  the two processes most important to the industry today," said Cruz. "Web-based data capture, mining and reporting for clinical trials and e-detailing and e-sampling for sales and marketing are a few of the initiatives that could impact the pharmaceutical industry."

Additional information is available in the Gartner Dataquest Perspective "U.S. Pharmaceutical Industry: IT Spending Forecast 2000­2005."