In the pharmaceutical industry, data governance is a critical enabler for success. Effective governance practices are integral to every aspect of a pharma business, from ensuring regulatory compliance and data integrity to facilitating life-saving research and development. But determining the appropriate level of investment for governing data can be daunting, especially for pharma organizations that navigate the web of regulations, data infrastructure and strategic priorities.
Understanding these key investment factors enables pharmaceutical companies to optimize their data governance (DG) spending and maximize the value of their data assets. In my experience collaborating with pharmaceutical companies, I’ve seen first-hand how crucial it is to carefully evaluate the funding of data governance. The stakes are high, and the right investment level can mean the difference between merely complying with FDA and other regulations and truly transforming data into a strategic asset.
Key Factors Influencing Pharma Data Governance Investment
The level of investment needed for DG varies widely based on several factors such as organization size, industry, location, sector, etc. An often-referenced guideline is that pharma organizations could expect to spend anywhere from 1–5% of revenue on governance-related activities to ensure compliance, data integrity and security.
While some models project governance spending as a percentage of an organization’s IT budget, the recommendation is to use a percentage of revenue as a more accurate projection. DG activities and associated budgets rarely live solely in the IT organization.
Let’s consider a medium-sized, multi-national pharma company committed to spending 1–3% of its revenue on data governance-related activities and the key factors impacting its governance investment:
- Regulatory environment – Strong governance protects pharmaceutical companies from legal and financial penalties while safeguarding the integrity of life-saving research. Complex data regulations and reporting requirements drive higher governance investments, especially for multi-national organizations that must comply with dynamic rules across multiple countries. When you establish mature governance practices, you’ll typically see your investment needs decrease over time as processes become more efficient and automated.
- Data infrastructure – A robust data infrastructure enables organizations to effectively ingest, prepare and deliver data that meets business needs. Strong governance ensures appropriate data availability and accessibility, supporting the free flow of information across the organization. Complex data architectures demand higher governance investments, particularly when you must manage siloed systems, disconnected specialized applications and inconsistent data processes. By streamlining and integrating your infrastructure, you can significantly reduce your governance investment while still achieving your objectives.
- Organization size and complexity – If you’re a medium-sized pharmaceutical organization, you manage substantial data volumes across commercial operations, research and development, requiring the same rigorous compliance with data regulations and reporting requirements as your larger competitors. Your organization may need to allocate a higher percentage of revenue to governance activities than larger firms, while still maintaining the same high standards for data integrity, security and quality. While economies of scale may favor larger organizations, you can optimize your governance investments by carefully assessing your company’s specific needs and priorities.
- Governance maturity – Mature data governance programs require lower proportional investments than new initiatives, as maintaining and enhancing established processes costs less than building them from scratch. Early investments create a foundation of experienced data professionals who can readily adapt to emerging technologies, practices and regulations. You can accelerate your path to maturity by strategically increasing initial investments, though your optimal pace will depend on your desired timeline and current governance capabilities.
- Strategic focus – Your company must maintain unimpeachable data for critical operations like drug development, patient safety monitoring and clinical trials, making strong governance essential. Each of your strategic priorities that relies on data will increase your required governance investment. When you pursue modern initiatives, like connected technologies and digital patient experiences, you’ll need to allocate additional governance resources to ensure robust security and access protocols, particularly for sharing sensitive patient information beyond your organizational boundaries.
Maximize Return on Your Data Governance Investment
Investing in governance isn’t just a checkbox exercise; it’s a strategic imperative that can propel pharmaceutical organizations to new heights of success. By carefully weighing the factors I outlined here and aligning your governance investments with your unique needs and objectives, you can foster a culture of data-driven decision-making. This strategic approach helps accelerate innovation and, ultimately, improve patient outcomes.
At FSFP, we understand the nuances of the pharma industry and the critical role governance plays in navigating data complexities. Our team of experts is ready to partner with you in developing and implementing tailored governance strategies that drive tangible business value. Let us know how we can help you.
For more information on pharmaceutical industry data governance spending, see:
- Lee, J. (2023). Outsourced Pharma. A Practical Look At Data Governance In The Life Sciences.
- Firican, G. (2024). LightsOnData. What’s the return on investment from data governance?
- PwC. (2022). Unlocking the full potential of data and analytics in pharma: A perspective on design best practices for building a data and analytics operating model.
- Petzold, B., et al. (2020). McKinsey. Designing data governance that delivers value.
- Fox, B., et al. (2016). McKinsey. Closing the digital gap in pharma.
