According to the 2023 State of Revenue Report, pharma companies are prioritizing digital transformation while struggling with inflation and supply chain disruptions.
Entering 2023, pharma executives recognize the value of data analytics in driving competitive advantage and revenue optimization. While spreadsheets remain ubiquitous in revenue management, most industry leaders are prioritizing digital transformation and bringing in new leadership perspectives. These efforts come amid external pressure from inflation, supply chain disruptions, staffing issues, and regulatory compliance.
The insights described in this article emerged from the Model N 2023 State of Revenue Report.1 Researchers surveyed more than 300 revenue operations leaders in the pharma, medtech, and high-tech industries to understand the current reality of revenue management. Here are a few key statistics:
- 100% of companies use spreadsheets for revenue management.
- 70% of companies believe their industries are losing billions of dollars due to poor revenue management, such as inaccurate pricing and quotes.
- 95% of companies have expanded their C-suite.
- 96% of companies report staffing and expertise issues hinder their revenue management programs.
- 84% of companies cite inflation as the top factor impacting innovation.
Let’s zero in on four takeaways for the pharma industry.
1. Companies face inflation, supply chain, and staffing challenges
Inflation is far and away the market factor most influencing pharma innovation, with 88% of pharma executives citing the issue. With drug prices tightly regulated, high production and delivery costs are eating into average selling prices and forcing companies to find new ways to maintain profitability while still investing in research and development. Global instability, supply chain and logistics, and material availability round out the top innovation influences.
For the second consecutive year, pharma leaders believe supply chain disruptions have the most significant impact on revenue management. Product shortages and delays are compelling companies to develop alternate supply chain strategies.
Ninety-two percent of pharma companies face significant issues with resourcing, staffing, and expertise, and most are turning to business process outsourcing. Almost all pharma executives (99%) report they will use some level of outsourcing to cover gaps, and nearly half of them view it as a permanent solution. On a positive note, the pharma industry’s staffing issues are improving and are less impactful than in medtech and high-tech.
2. Executives are concerned about compliance and reporting
Regulatory compliance can have an outsized impact on pharma companies. Executives cited it as a top factor affecting revenue management. The vast majority (97%) of teams are preparing for potential changes. Executives are keeping a close eye on the following:
- Financial controls (45%)
- New healthcare policy (40%)
- Increasing price transparency requirements (38%)
- Regulatory compliance (36%)
Nine of ten company leaders worry the data collected by the states could impact revenue management programs. Within the next few years, 30 states will likely require transparency reporting, putting a significant burden on pharma companies and increasing the risk of fines and penalties.2
3. Pharma companies are expanding their C-suite
Most surveyed companies have expanded their C-suite to address new initiatives and priorities. More than half created a new function, such as chief strategy or digital transformation officers. An equal number leveled up to a vice president (VP) function. For example, a VP of marketing role transitioned to a chief marketing officer. Companies are also splitting roles into separate positions (e.g., chief information officer responsibilities are divided between an information security officer and an IT systems officer).
According to the survey, pharma’s C-suite expansion centered on strategy, with 55% introducing a chief strategy officer.
A diverse range of leadership expertise allows companies to tackle complex issues from multiple angles, generating new and innovative solutions to industry challenges. The expansion strategy seems to be getting results—with 94% believing that expanding their C-suite has positively impacted their revenue management program.
4. Leaders are prioritizing data analytics and digital transformation
While companies use spreadsheets less often, everyone involved in the Model N survey reported using them for revenue management at least some of the time. The pharma industry most often employs spreadsheets for sales and analytics.
Spreadsheets create issues for revenue optimization. Manual management is time-consuming, unscalable, prone to errors, and cannot be easily integrated into shared systems, resulting in inconsistent, inaccurate, and unreliable data. More than half of surveyed executives don’t trust the data used for revenue management decision-making.
The survey results show a keen interest in improving data and analytics processes. Executives list technology and digital transformation as the number one focus area for 2023 innovation plans. An alarming 20% of companies list their revenue management analytics program as very limited, and only one third rate theirs as mature. The rest are somewhere in between.
Regarding technology investment motivation, an urgent operational need drives the most adoption in pharma, followed by customer experience. Most companies plan to improve existing strategies to build business operations stability.
Technology as a solution to revenue challenges
Pharma companies generate a wealth of data that can drive business insights when properly managed. This knowledge is vital to address inflation and supply chain issues; however, staffing limitations and spreadsheets challenge data management.
Developments in artificial intelligence (AI) open new doors for data analysis. Three-quarters of surveyed leaders expressed interest in adopting more data-driven applications and tools.
A centralized and automated data repository makes surfacing comprehensive information easier, faster, and more efficient. Company leaders obtain visibility into day-to-day operations, sales, and supply chains, and staff can spend time on more strategic tasks.
Revenue management technology gathers and analyzes data to improve demand forecasting, helping companies shoulder the current economic challenges. Automated data analyses also facilitate accurate government price transparency reporting to ensure compliance.
New technology can limit inaccurate and ineffective pricing and quoting, a significant source of revenue loss. AI enables companies to analyze every detail of every contract to confirm the right price and rebate and to set guidelines for competitive pricing aligned with revenue and portfolio strategies.
The survey results indicate pharma executives recognize the power of digital transformation. As they prioritize data analytics, companies are better positioned to respond to government regulations, inflation, and other macroeconomic challenges. The move away from spreadsheets is promising, but there is significant room for improved revenue data management—a fact nearly all executives acknowledge. Given the crucial role of data in all revenue functions, investing in the right technology can address operational needs, help deliver better customer experience, and optimize revenue amid a turbulent economy.
References
1. Model N, 2023 State of Revenue: A Survey of Top Industry Executives (February 2023). https://www.modeln.com/wp-content/uploads/2023/02/model-n-2023-state-of-revenue-report-final.pdf
2. Forcier, K., “Drug Pricing Transparency: Planning for Change” (Nov. 9, 2022). https://hitconsultant.net/2022/11/09/drug-price-transparency-planning-for-change/
About the author
Kyle Forcier is a senior director of life sciences product marketing for Model N. For more than 15 years, Forcier has focused his time on the life sciences space, helping manufacturers increase their revenue, maintain compliance, and bring innovative ideas to the marketplace. He currently helps shape Model N’s strategic direction, focusing on bringing complex, valuable solutions to the market to solve longstanding operational challenges within the medtech industry.
