Novartis looks to data management vendors to slash costs

Ongoing problems at Ranbaxy have spared Novartis ($NVS) some generic competition this year, but the Swiss pharma still expects copycats to knock $2.3 billion off 2013 sales. Novartis has taken various steps to offset these losses and has now revealed its latest target for efficiency gains--data management.

Speaking at an investor day late last week, Novartis chief financial officer Harry Kirsch outlined how the company plans to generate "substantial savings" by working with external data management vendors. Historically, Big Pharma has kept data management in-house, but attitudes have changed as companies have become more at ease with using third parties in other areas of drug development. And, with pressure to find savings still mounting, the potential to cut costs by working with external vendors is attractive.

The data management plan is one of four initiatives Kirsch is implementing to boost productivity. These follow on from other strategies Novartis has already adopted. Over the past two years, Novartis has realized savings--which it claims more than offset losses from generic competition--by taking steps like offshoring IT and other service functions to its India hub. Novartis has also tried to cut costs by outsourcing other aspects of IT to third parties.

Other Big Pharma companies have pursued similar strategies. Pfizer ($PFE) moved to a fully outsourced model for data management more than 5 years ago, while GlaxoSmithKline ($GSK) inked a big deal with an Indian contractor back in 2007. Merck ($MRK), in contrast, slashed overheads by setting up its own data management center in China.

- view Kirsch's slides (PDF)
- here's the transcript from Seeking Alpha