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WIKI ANALYSIS
IMS Health (NYSE: RX) sells data on drug prescriptions and sales to pharmaceutical and other healthcare companies. IMS' data is the only data of its kind available at the resolution of individual doctors and facilities such as hospitals and offices - which means it can be cut and sliced to match the phamaceutical company's sales districts, and used both for targeting and for paying sales force commissions. A pharmaceutical company might use IMS' data to identify which doctors write prescriptions for a competing product - and then set these doctors as high-priority targets for the company's own sales reps. If the company's sales reps are successful at converting these doctors to use the company's product, their bonus is based off of the increased number of prescriptions for the company's own product which the doctors wrote, as reported by the IMS data.
IMS compiles data from over 30,000 different providers to track 90% of prescription and over the counter drug sales in the U.S. and 75% of drug sales in over 100 other countries. As a condition of selling its data, IMS requires its clients to disclose their own sales data back to IMS - an important source of data and one reason why IMS' network has been hard for competitors to replicate.The company's major potential headwind is the efforts by state and federal governments to restrict the commercial use of patient data.
Business Financials
Business Financials
Total revenues earned by IMS Health for 2009 was $2.2 billion, a slight decrease from its 2008 total revenues of $2.3 billion. 2009 marked the first time in five years that IMS's revenues declined. Unsurprisingly, IMS's net income was impacted by the decreased revenues. Between 2008 and 2009, IMS's net income declined from $311 million in 2008 to $261 million in 2009.
Business Segments
Commercial Effectiveness (50.4% of 2009 revenue)[1]
The commercial effectiveness segment include sales territory reports to measure the sales of a client’s own products compared to competitors in a geographic region; prescription tracking reports that monitor prescription levels and movement through retail channels; and other sales and account management accounting services. In 2009, this segment had total revenues of $1.1 billion.[1]
Product and Portfolio Management (31.2% of 2009 revenue)[1]
This provide a number of prescription, sales and treatment metrics used by pharmaceutical clients in making informed product pipeline selection and development decisions. Metrics measuerd include sales of pharmaceuticals to pharmacies, use of therapeutics in hospitals, prescription of drugs by physicians. In 2009, this segment earned a total of $684 million in total revenues.[1]
New Business Areas (18.4% of 2009 revenues)[1]
The new business areas segment include marketing consulting services that analyze product promotional, pricing and penetration strategies for clients. The company also provides consulting assistance for developing products in managed care, OTC and personal care/nutrition markets. This segment earned $402 million during 2009.[1]
Trends/Forces
Dependence on Pharmaceutical and Healthcare Industries
As a vendor of market information and consulting services to pharmaceutical companies, IMS Health is largely dependent on the state and welfare of the healthcare industry. Changes in pharmaceutical business environments such as government imposed price controls, increased FDA restrictions, declining sales are exogenous factors that can have dramatic effects on the demand for IMS Health’s products and services.
Growing Patient Privacy and Legal Concerns
A growing wave of privacy concerns over commercial use of prescribing information has spurred legislative changes that can affect the certain business operations of IMS Health. A New Hampshire state law was passed originally aimed at prohibiting commercial use of physician prescription information and stopping inappropriate marketing to physicians. Although the law was overturned in April 2007, it has set a precedent for other states that can in the future limit IMS’ highly coveted abilities to collect data at the physician level. [2]
Increased Payer Pressure
Rising health-care costs in past years have pushed payers (i.e. health insurance companies, government insurance programs, etc.) and patients to demand substantial proof of value, safety and efficacy before purchasing or reimbursing pharmaceutical products. This can increase demand of IMS data by pharmaceutical companies as evidence to demonstrate their product’s benefits in order to adequate secure market share for its therapeutics.
Rising Incidence of Cancer and Diabetes
IMS Health originally launched the Oncology Analyzer in 2000 and updates it annually by adding available data from new countries to its growing list of geographic coverage. The line of specialized products and services is designed to collect longitudinal patient information regarding the diagnosis and treatment in the critical area of Oncology and Diabetes across the major pharmaceutical markets. As the U.S. population ages and falls prey to chronic diseases such as cancer and diabetes, IMS is well positioned to capitalize as pharma companies demand therapy, treatment, and prescription information linked to such diseases.[3]
Competition and Market Share
While no competitor provides the geographical reach or breadth of IMS Health’s services, the company with other information services companies as well as the in-house market research and analysis capabilities of its pharmaceutical clients. In general, competition has arisen on a country-by-country basis. IMS competes with Taylor Nelson and Cegedim in various European countries, in addition to competition from smaller niche competitors in local European markets. In the U.S., some lines of IMS products, such as the sales territory and prescription tracking reports, compete with the offerings of various companies, like Wolters Kluwer. Other companies in America, such as Verispan LLC, compete with IMS for its market of research services. Finally, the company’s broad range of management and strategic consulting services compete with various consulting firms around the world.[4] Some of its top competitors include TNS (TNS) and Wolters Kluwer (AMS:WKL).
References
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