Mergers posing integration headaches for pharma companies

TORONTO — A proliferation of new technologies in the pharmaceutical industry that grew out of companies’ deep pockets is becoming a challenge as global mergers and acquisitions have risen over the years, said an IBM executive at a conference here about the demands facing the pharma supply chain.

“”You have a Company A that’s running SAP, and a Company B that’s running J.D. Edwards, and they’re both fairly large companies — $10-, $15-, $20-billion companies,”” said Shai Verma, associate partner, supply chain lead for life sciences, IBM business consulting services, at the Canadian Institute event. “”What’s the decision point to actually bring those technologies together?””

Drug firms that have embraced these technological advancements have two choices to deal with this situation, Verma explained. “”One is, basically, they bite the bullet”” and re-implement the technology in the organization that’s been acquired or one of the merged companies, he said.

Verma said although it’s a more expensive option, in many cases organizations want to use the same platform for applications or hardware to derive the greatest benefit from the business union.

A more likely scenario, however, is the two companies turn to integration tools to bring together their application and processes, Verma said. He noted advantages include lower costs, potentially quicker speeds using technology and fewer cultural issues revolving around shifting to another firm’s software and hardware.

One new technology that is gaining ground among drug companies and is being touted as the solution to significantly transform the pharma sector is RFID, or Radio Frequency Identification tags, tiny chips with antennae embedded in retail items, Verma noted.

RFID scanners read the tags to identify, track and store information on the objects. The unique identifier allows users to locate every asset. Verma said stakeholders in the supply chain can employ RFID to tell them the stage at which products are in the manufacturing process.

Boosting RFID’s prominence, the U.S. Food and Drug Administration has advised manufacturers to consider using it to prevent counterfeiting and theft.

Yet RFID is saddled by what the IBM executive calls a limiting factor. Although the technology is at a stage at which it can benefit an organization, “”when you start extending RFID across different trading partners — so from a manufacturer to a distributor to a retailer — there has to be some consistency with how that information is available on the RFID tag itself.””

Verma said the issue is whether the data the manufacturer loads onto the product tag is the same as the retailer and distributor want.

Also tied to this question is whether the parties will be willing to share information, such as costs and selling prices, he said.

Over the years, a lessons have been gleaned from the use of technology, added Ken Mulhall, vice-president, supply chain, at the Canadian Association for Pharmacy Distribution Management in Woodbridge, Ont. Drug makers have often put technology first instead of understanding the true problem, he said.

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