The Truth About
Life Sciences CRMs' Unbelievably High Costs
Customer relationship management (CRM) platforms are not new to the life sciences industry; in fact, they’re quite old. They have been in use by the industry for over 20 years, and for good reasons. CRMs were introduced to help pharmaceutical companies accurately track customer information, increase or maintain sales, decrease marketing costs, improve customer support, and organize data collection and storage. However, all of these features come at a hefty price. In fact, large pharmaceutical companies often pay 20 to 30 million dollars globally for the licensing and implementation of a sales and medical CRM software. Given the myriad of benefits this software offers and the revenue generated by companies in this industry, it seems like a very logical price to pay. That is until you consider that it’s more than double the amount other industries are paying for the same solution.
Currently, life sciences companies are facing a flurry of challenges such as reduced frequency of blockbuster drugs in the pipeline, increased generic competition, smaller patient pools for specialty drugs, price containment regulations, etc. On top of these challenges, organizations need to shift part of their budgets to new digital channels and capabilities in preparation for a digital-first reality. Naturally, all of these factors are pressuring life sciences companies to improve their profit margins and decrease their expenses.
Since we’re looking at cutting down costs, now is a good time to take a deeper dive into the forces at play behind the immoderate pricing of life sciences CRMs and the reasons why it’s so much higher than what other industries have to pay.
Pharmaceutical Companies Have Unique Challenges…
Or Do They?
If you’re in the life sciences industry, you’ve most definitely heard of how we’re faced with one-of-a-kind challenges that no other industry has to deal with. But before rushing to conclusions, let’s have a closer look at these challenges.
Complex industry-customer relationship
It makes perfect sense that the uncommon structure of the biopharma sector necessitates a more complex CRM software. This is the most common reason given to explain the higher than average cost of pharmaceutical CRMs; the more complex a system is, the higher its price. After all, selling a prescription drug is not like selling any other product. Marketing and sales departments have a difficult task at their hands. They often cannot market or sell directly to their end consumer (the patient). Additionally, there are multiple stakeholders at play; healthcare professionals (HCPs), payers, and institutions, which make customer relationship management that much harder to accomplish. Add to that a layer of regulatory restrictions and requirements (more on that later), which play a large role in controlling the relationship with customers, and this argument seems pretty solid.
However, after this many years, is the cost still justified?
The customizations needed to reflect the complexity of the stakeholders’ relationships are already accounted for in today’s sales and medical CRM framework. There is often no need for any major updates to the core system as the industry has been relatively stable. So, why are we still being charged so much if 95% of the complexity has already been factored into the base framework of the software? If anything, these circumstances should’ve led to a reduction in the price tag for the license and maintenance of these software programs. The plot thickens…
Large amount of customer data and insights needed
Another commonly given reason is that life sciences companies have to deal with massive amounts of data. Every 5 months, the pharma industry doubles its data as a wide array of information needs to be captured and stored, such as prescription writing patterns, HCP interests, patient data and insights and the related segmentation analysis, sensitive patient program information… again, to name a few. Additionally, pharmaceutical businesses need to procure these insights from multiple sources; there are many different stakeholders and channels in the customer journey and not all of them can easily be ingested into systems for analysis. Given the high price of a life sciences CRM and how long they’ve been in the market, this shouldn’t be a major issue.
Unfortunately, a lengthy standardization process typically costs pharma, biotech, and med-device companies several million dollars to manage globally. And even after all is said and done, once the data is clean, it may not be all that insightful. The end result requires the hiring of large analytic firms, the purchasing of master data management (MDM) platforms, the initiation of several artificial intelligence (AI) pilots that do not scale, and then, you are met with a big fat bill and not that many insights. What a mess!
Then again, most industries are dealing with the same volume of data, if not more. For instance, FMCG companies have a comparable business model and need even more data than pharmaceutical companies or banks and the red tape related to their complex framework. In addition to customer insights, consumer goods representatives have to write large orders with complicated discount algorithms all while collecting more data points per call than their life sciences counterparts. Yet they pay half of the price for a CRM. Many industries are faced with similar data restrictions and complexity, but none seem to face the same costs. So what gives?
Large amount of customer data and insights needed
Is Life Sciences to Blame?
Highly regulated market
There is no doubt that the pharmaceutical industry is highly regulated. This forces companies to look at solutions that allow them to be compliant with all the different rules and regulations that govern their communications with customers. For example, a content management system is purposefully built for commentary and routing from med-legal around the use of marketing materials such as visual aids, leave-behinds, social media posts, etc. In addition, there are many rounds of med-legal changes to content and firewalls between teams such as between Medical Affairs and Commercial teams. So, additional expenses are expected to not only cover regulatory processes but also to adapt to the ever changing rules, which explains the higher costs of life sciences CRMs. Right?
In reality, the regulatory laws that govern customer and pharmaceutical companies’ relationships have been stable for quite some time. Again, this means that they have been built-in to all the systems in the market today and are simple to implement. Additionally, other heavily regulated industries like the financial and banking sectors are benefiting from much lower costs of CRMs. This means that the highly regulated nature of life sciences is also not a very convincing argument to be made. The cost of content related to med-legal also cannot be a driving reason; that too can be templated and automated through systems to reduce cost. Many just have not made the leap of faith – a reflection of the speed of adaptation within this industry.
If these common arguments fail to justify why biopharma companies are paying so much for CRMs, then
It’s clear by now that the features of life sciences commercial and medical CRMs do not justify the higher price tag that accompanies it. This becomes even more evident when looking at the disparity in costs offered in different markets. The price of the same solution seems to drop significantly in developing markets compared to its price in developed markets. This suggests that technology providers in this sector are willing to provide discounts in new markets and still remain profitable. So why are pharmaceutical companies willing to pay the higher price?
The simple answer is oligopoly. The market of life sciences CRM vendors is dominated by just a few major providers, who have no reason to offer lower prices. Meanwhile, CRM providers in other industries are striving to have more attractive pricing for their customers. Another factor is the significant use of legacy applications by pharma companies, which leads to extra integration and customization costs of the CRMs being used.
The bigger question comes when looking at the ever-expanding market size. The number of pharmaceutical, biotech, and med-device companies emerging is on the rise, so why does this oligopoly still exist?
Part of the blame goes to biopharma companies themselves. Historically, this industry has been risk-averse, especially when it comes to adopting new technologies. Companies are often very hesitant to try new solutions or new vendors. They prefer to choose the biggest and most established provider to reduce risk, resulting in a market dominated by a few main players, who have no incentive to decrease their costs.
Looking to the Future
With pharmaceutical companies looking at ways to reduce costs and improve profit margins, they should have a harder look at the unreasonably high costs they are paying for their medical CRM. Companies should push for lower prices from their suppliers and question whether risk aversion is the best strategy to adopt when choosing their technology partners.
Whether it’s new solution providers or existing CRMs, life sciences should start looking at what is in their best interest when choosing their multichannel CRM providers. With the pandemic accelerating pharma’s move to digital and permanently changing the way customers interact, the question to ask becomes what are the CRM features that can help biopharma brands thrive in a digital world? We’d thought to help answer that question with the below list:
Unified System: Look for a platform that prevents “data silos”, a single cloud data model to centralize
all your data and make it easily accessible to all departments.
Deep Customer Insights and Predictions: AI-powered, real-time customer insights from multiple channels and predictions help commercial sales, medical affairs, and marketing teams to offer a personalized experience.
Omnichannel Capacity: future-proof platforms will offer you real omnichannel marketing and insights, with an ability to easily post content and combine analytics from email, website, social media, face-to-face interactions, chatbots, and self-service portals while remaining compliant.
Device Agnostic: It is no longer enough for a CRM provider to be mobile-friendly and only be available on a limited number of mobile devices. For a fully integrated team, it has to be present on all devices including mobile, desktop, and tablets. It should also function on all operating systems (OS, Android, and iOS) and support the most common screen resolutions.
Open Integration: Open and comprehensive integration capabilities are essential for a company’s future growth. Look at platforms that can easily integrate with other solutions without massive add-on costs.