Digging For Data: IMS Health Buys Rival SDI
7 CommentsBy Ed Silverman // January 14th, 2011 // 1:08 pm
As with any industry, there are always behind-the-scenes players that occupy an important role and one of them is IMS Health, which is best known as a market research firm because it traffics in an enormous amount of data. And to expand its scope, IMS Health is now buying a rival, SDI Health, according to sources who are familiar with the deal.
The move will solidify IMS Health’s position as a provider of key data to the pharmaceutical industry, which means drugmakers will have fewer sources for information on patients and prescriptions. This raises the question of the extent to which this deal will cause antitrust concerns. The next biggest player in this market is Wolters Kluwer.
The acquistion comes after IMS Health was taken private last year, but has been under pressure to boost profitability. Terms were not available, but sources say as much as 15 percent of the SDI staff, which numbers more than 500 people, may lose their jobs.
SDI Health, which purchased Verispan not long ago for what sources say was about $100 million, is a significant provider of longitudinal data, which are claims data gathered from pharmacies, hospitals and physican offices, and then encrypted and tracked over time. And like IMS Health, the market research firm also traffics in prescription data.
Not surprisingly, though, IMS Health and SDI Health have worked closely in a fighting a key battle over data mining, which is the sale of prescription drug info that identifies prescribers and patients for commercial marketing purposes. However, a few states - Vermont, New Hampshire and Maine - have attempted to restrict this activity. The issue is before the US Supreme Court, which will now decide the extent to which the data mining controversy involves commercial transactions or speech (back story).
Gil Johnson
This will lead to higher prices and less innovation in data assets for the Pharmaceutical companies.
Only good news is that Wolters Kluwer is around since IMS with monopoly power would be dangerous for the pharmaeutical industry.
MedicalQuack
Yes indeed the data mining business means big money all over the place. It’s the business intelligence that sits back there behind the scenes uses for analytics for underwriting and more. The data base created for pharma marketing has evolved even far from where it originated and in my point of view compared to where the information is marketed and sold today, the least of my worries or even that of a doctor is a drug having it.
The bigger concerns are the folks with the analytics and algorithms to produce predictive behavior and risk assessments. When insurers enter into this with to predict who they feel with analytics is at risk of becoming an expense you have things like putting pharmacists on pay for performance programs to enroll consumers into their wellness programs, and even more data gets collected:) Keep an eye open as you might be seeing some motivated pharmacists jumping over the counter to get you well based on the behavioral analytics they receive from data that is purchased:)
http://ducknetweb.blogspot.com/2010/04/unitedhealthcare-to-use-data-mining.html
It’s all about making big dollars selling data and if some of us get healthier in the course I guess they feel they can justify this. Even with anonymized data, there are now companies applying for patents,like PeekYou LLC, to run an algorithm to re-identify. Our lawmakers are so out of touch.
With mergers and acquisitions today I think one needs to pay attention to who’s doing what as data will be purchased, sold and analyzed for big profits. Also now you have the medical devices too that are connected with pharmacies that give even more information as they will notify and alert when the patients are ready for a refill too and there’s a ton of those out there with the routine disclosure presented to the consumer that gets pretty gray too as somewhere in the text there’s a disclaimer that advertising and information could in some fashion be used or resold and the language used is a bit confusing.
This same information also gets sold to companies that do marketing for clinical trial participants to mine too, one big vicious data circle to make millions.
Outside the Box
Ironic that the post of this news has an SDI advert next to it!!
A big part of the success that SDI has enjoyed has been because they weren’t IMS. The re-privatization of IMS involved huge debts that were barely serviced by the free cash flow generated by the company - which means that real returns on investment require reductions in costs and increases in revenue to improve margins. Given that IMS had been trying to do this for years, acquisition must have become just about the only remaining option. That said (and we don’t know the deal structure) this acquisition must be costing more - so I wouldn’t want to be one of the hundreds of employees that is now in a duplicated position at either company (database management, QC, client service, admin, legal).
As for competition, WK have to be big winners here as they are now the “non-IMS” player. But let’s not forget the new data types that are just beginning to come to market. Perhaps the old Rx / claims model isn’t the best place to be in the long term…….
Old Timer
There was no way three companies could survive given the large fixed cost structures and shrinking pharma spend.
That said, it is sad to see the most nimble and innovative of the three, SDI, get borged into the giant IMS monolith. Creativity and customer response will be purged in the forge of process control and higher margins.
WK will relish being ‘the other guy’. However they lack both capital and leadership to be a serious alternative.
A decade ago pharma would have been to arms and at the barricades at the prospect of such a dominant vendor that can largely dictate pricing and related terms. But likely the industry has too many other worries to spend time here.
The next parlor game will be to bet how long before IMS moves to restrict use of its data by analytic and consulting firms like ZS, Campbell and (their bastard step child) Cognizant.
Pharma Analyst
Old Timer, IMS has already moved to restrict data use by consultants. Whenever we’re using IMS data on behalf of a client, we have to sign “third-party” use agreements with IMS up the ying-yang. IMS basically treats us like criminals out to steal their data, whereas we’re the ones actually telling the client what data to buy. I think in the future we might be recommending a WKH data buy instead, just to stick it to the Man.
Hope the Justice Department puts the kibosh on this one.
Stick it to the Man
I believe that WK still holds the advantage with regard to patient longitudinal data as well as linkability across patient, physician and payer data. I would expect that to be the wave of the future that Pharma is craving.
DoYourHomework
Old Timer: signing third-party agreements is a standard in any industry dealing with sensitive data such as pharma. A lot of times, it is actually the suppliers which require signed agreements when releasing out data to third party consulting firms. 2 cents.