Digital Transformation in the Pharmaceutical Industry: Trends and Impact

The global pharmaceutical market is one of the world's largest and most profitable industries, with a market size of over $1.5 trillion. Yet, due to its strict regulatory and safety requirements, it has been slower to embrace digital transformation than other industries.

The COVID-19 pandemic has significantly expedited this process. From developing and testing vaccines in record time to organizing remote work and digital interactions with customers and patients, pharmaceutical companies have had to adapt to the new reality. This has led to a significant investment in digital technologies, including artificial intelligence (AI) for data analysis, cloud-based solutions for storing and processing substantial amounts of information, and the development of telemedicine and remote patient monitoring.

In this article, we will examine how pharmaceutical companies approach digital transformation and its impact on drug development, manufacturing, and distribution processes. We will also explore the core digital pharma technologies companies use to drive innovation.

Digital transformation is the process of rewiring existing business operations, improving customer experience, and increasing overall organizational efficiency and competitiveness through the adoption and integration of digital technologies. It is an ongoing, complex, joint effort that evolves in response to technological breakthroughs and ever-changing business and societal needs.

Although the term has been around for more than a couple of decades, it gained increased attention during the COVID-19 pandemic and has come to represent a broad cultural shift toward more agile, intelligent, and future-proof ways of working that go beyond technology.

The pharmaceutical industry, responsible for the research, development, production, and distribution of drugs, is considered one of the most profitable industries in the world. The market has experienced significant growth over the past two decades, with global revenues reaching $1.15 trillion in 2024, and is expected to grow at an annual rate of 6.19%, reaching $1.47 trillion by 2028.

However, according to several analytical reports, before the pandemic, the industry was lagging behind other sectors in digital transformation. The report by the Boston Consulting Group conducted during this time found that despite demonstrated leadership commitment, less than 20% of biopharmaceutical companies had successfully implemented digital transformation—well below the industry average of 35%.

Two years later, another survey of 65 biopharmaceutical companies revealed that only 20–30% are actively engaged in digital transformation, while more than 50% have yet to develop a pharmaceutical digital strategy.

While there are many reasons for this delay, a major one is the industry's complex regulatory environment, making pharmaceutical companies more cautious and conservative in adopting digital innovation.

Nevertheless, a massive shift toward pharmaceutical digital transformation occurred during the COVID-19 pandemic. Innovation projects that had been in the planning stages for years suddenly received budgets and support for immediate implementation. Biopharmaceutical companies began rapidly incorporating innovative digital technologies into their operations, from AI to cloud computing to smart factories.

For instance, during COVID-19, Pfizer incorporated AI and remote communication technologies to accelerate its Pfizer-BioNTech vaccine's development, manufacturing, and distribution. Novo Nordisk employed augmented reality to guide and train operators during complex drug manufacturing procedures. AstraZeneca developed an AI solution to support the automated detection, reporting, and assessment of crucial outcome events in cardiovascular trials.

Digital innovation in the pharmaceutical industry has enormous potential. However, with only 20% of companies actively engaged in digital transformation today, much work still needs to be done to achieve a broader, transformative impact.

Given the ongoing digital transformation in the pharma industry, let's explore the key functional areas and business processes that have already embraced digital innovations and the technologies behind them.

From the beginning, drug discovery and clinical development have been top digital priorities for pharmaceutical companies due to their time-consuming and costly nature. Many companies have begun to up their R&D game by using digital technologies to more accurately model drug interactions, accelerate the identification of potential drug candidates, and optimize formulations.

For instance, Sanofi’s R&D team started to use AI to mine large datasets for novel, druggable targets. This technology allows the company to address the complexities of diseases by identifying key molecular entities (genes, proteins, and mRNA) that can be targeted effectively. AI also aids in predicting potential side effects before actual experimentation, optimizing the research process, and reducing time spent on unproductive avenues.

AstraZeneca partnered with a clinical-stage pharma technology company, Verge Genomics, to identify novel drug targets for rare neurodegenerative and neuromuscular diseases using AI and patient tissue data. This partnership helps researchers more efficiently identify and validate therapeutic targets for rare diseases.

Another example of the industry's increasing reliance on AI in R&D is the recent deal between Novartis and Yseop. The companies have partnered to use AI to automate the complex and time-consuming process of generating study documents for clinical trials. They are already involved in over 150 clinical trials worldwide.

Drug manufacturing is another area of the pharmaceutical supply chain where innovation has been fully embraced. This includes the adoption of Pharma 4.0 technologies (automation, robotics, IoT, advanced data analytics, and others) to improve production efficiency, product quality, supply chain agility, regulatory compliance, and reduce environmental footprint.

For instance, in 2021, GlaxoSmithKline introduced digital twin technology – virtual replicas of physical manufacturing processes that simulate, predict, and optimize ongoing production without interrupting it – to optimize its vaccine adjuvants manufacturing.

To optimize raw material spend, Sanofi has developed an in-house AI-enabled yield optimization solution that learns from past and current batch performance to enable consistently higher yield levels. The company is also digitizing its quality assessment processes, moving from paper to electronic batch records.

When it comes to digital transformation in pharma distribution and supply chain management in general, a handful of technologies are leading the way. One of these is blockchain, which pharmaceutical companies integrate to ensure drug authenticity and supply chain transparency.

For example, in 2020, Merck participated in a U.S. Food and Drug Administration pilot program to explore the use of blockchain technology in the pharmaceutical industry to enhance drug traceability and safety by enabling accurate tracking throughout the supply chain. As a result, blockchain helped the company significantly reduce the time it takes to process drug recalls, improving overall patient safety by enabling faster responses to problems.

Another initiative transforming supply chain operations is the adoption of digital pharma commerce solutions (e.g., eZRx by Zuellig Pharma, McKesson Connect) to streamline the distribution process for manufacturers and the procurement process for pharmacies and healthcare providers.

By launching direct-to-consumer platforms and online B2C and B2B marketplaces, pharmaceutical companies can effectively manage inventory, forecast demand, and ensure efficient order fulfillment. At the same time, they can ensure that patients, drugstores, and healthcare providers have secure and timely access to the medicines they need.

With every new opportunity comes a new challenge. This is especially true in highly regulated industries such as pharmaceuticals, where any new initiative, whether a new pharma technology or business process, must comply with industry regulatory standards to ensure patient safety and drug efficacy.

In this regard, pharmaceutical business leaders must be aware of several challenges when building their pharmaceutical digital strategy and introducing digital transformation initiatives into their workflow.

Compared to companies that are born digital, pharmaceutical companies do not have the luxury of starting with a clean slate when adopting modern technologies. Many of them have been operating for decades and have accumulated several outdated and complex legacy systems, such as clinical trial management systems, laboratory information management platforms, and others, that can be difficult to integrate with newer technologies.

These older systems are often inflexible and not designed to interact seamlessly with the latest software or data formats. That is why it is essential to understand what systems your innovative pharma technology will need to communicate with and how many resources that integration will require. It’s also necessary to determine whether your current IT architecture can support your upcoming digital initiatives or if it needs to be upgraded.

Whether you want to migrate your core pharmaceutical data analytics to the cloud or integrate AI into your clinical trial processes, it can be challenging to justify the significant upfront costs and benefits of pharma technology implementation. These costs include initial research and vendor selection, purchasing new software or upgrading hardware, training staff, changing organizational processes, and more.

To accurately assess potential ROI and calculate expected costs, create a clear business case for any digital initiative and start with smaller pilot projects. This will help you understand its effectiveness and make interactive changes for optimal results before committing to a full-scale implementation.

Another challenge that can delay the implantation of your pharmaceutical digital strategy is ensuring that the new software or hardware you want to implement complies with the laws and regulatory standards in the domain and region in which you operate.

For example, if your company implements an eCommerce platform to streamline transactions with hospitals, you will need to consider several types of regulatory compliance. For one, the software must meet privacy and security compliance requirements because it will handle sensitive patient and healthcare data. This includes establishing strong data encryption, access controls, and audit trails.

In addition, if you operate in the U.S., ensure the platform supports tracking systems to comply with the Drug Supply Chain Security Act (DSCSA), which requires tracking of pharmaceuticals through the supply chain to prevent counterfeit drugs.

Other areas of compliance may include financial transactions, product quality, safety, accessibility, and others.

Any innovation takes time and can be met with resistance, especially in large, established pharmaceutical companies. As we mentioned at the beginning, digital transformation requires not only technological changes but also a change in mindset and culture.

To ensure that your culture supports and accelerates digital transformation rather than hinders it, the leadership should “lead” the way. They need to clearly communicate about the changes, why they are happening, and how they will benefit all levels of the organization. It’s also essential to provide ongoing learning opportunities and training programs for employees involved in the project, listen to their feedback and concerns, and involve them in decision-making processes where possible.

Despite lagging behind other industries, digital transformation in the pharma industry has tremendous potential. The COVID-19 pandemic has accelerated its widespread adoption, and as current trends in the pharmaceutical industry indicate, it's only a matter of time before we see more companies jump on the digital bandwagon to streamline their R&D, manufacturing, and supply chain operations.

At the same time, digital transformation comes with certain challenges and risks that pharmaceutical companies must address to take their digital initiatives from idea to reality. While they may delay the pace of transformation, by addressing them early, you will be in a better position to capitalize on digital efficiencies, optimize operational workflows, achieve a faster return on investment, and overall digital pharma excellence.

If you're looking for ways to streamline your current pharmaceutical distribution workflow, Virto Commerce's all-in-one, secure eCommerce and marketplace management platform can be your go-to digital transformation partner. Discover how to create a seamless eCommerce experience from laboratory to market, whether you are at the beginning of your digital commerce journey or ready to upgrade from your current legacy technology stack.

To learn more about how other pharmaceutical companies embrace innovations like digital commerce and the latest eCommerce trends in the pharmaceutical industry, visit B2B Experts.