Why haven't pharmaceutical distributors embraced the cloud?

Why haven’t pharmaceutical distributors embraced the cloud?

It seems almost counterintuitive to write a blog post, at this moment in 2021, advocating for the use of cloud solutions as the foundation of a business’ computing infrastructure. It’s been 14 years since Google CEO Eric Schmidt introduced the phrase into the common vernacular, and the idea behind cloud computing has been around much longer than that. For the last decade, the number of remote workers—those who rely on the cloud to get things done, wherever they may be—has steadily increased. And, of course, there’s the little matter of a pandemic pushing nearly everyone into their home offices for the long haul. If the cloud wasn’t a standard before this, it is now.

But not everywhere. The pharmaceutical industry in particular hasn’t been as quick as the rest of the world to move their technology needs to the cloud. As recently as 2011, at a time when cloud computing was already battle-tested, nearly three-quarters of CIOs and IT executives in healthcare steered clear of the cloud for privacy and security concerns. This same survey showed a more hardline resistance within pharma companies specifically.

It doesn’t take a big leap to understand pharma’s initial aversion to the cloud. At the heart of the industry is a trove of sensitive information pertaining to the manufacture and distribution of prescription—and occasionally illicit—drugs. This means that operations need to be handled securely, and in compliance with government regulations. With that in mind, migrating the software responsible for managing all the data and processes onto a globally accessible network seems more than a little risky. And distributors—those businesses that exist in the spaces between manufacturers and purchasers—feel that risk along every point in the supply chain.

Especially for small and medium sized pharmaceutical distributors, the perceived risk, cost and complexity involved with the two chief concerns—security and compliance—prevents them from moving their technology infrastructure and applications to the cloud. However, ironically, these objections are actually the biggest reasons in favor of a cloud migration.

Data Security

It’s always the first reason given, and for good measure. When you’re running software in the cloud you’re putting your data there too. For distributors, who often live and die by their resource and supply chain management software, operating in the cloud means putting pretty much all of their important data out there as well.

That’s a scary proposition, but the fact is, whether you’re running on hosted software or you manage everything locally on your own hardware, it’s all still connected to the cloud—which, really, is just a marketing term that means “the internet.” If you’ve done it right, your in-house server farm will live behind several layers of security, but even that is no guarantee. But the likelihood is your in-house IT security will be inferior to a reputable cloud technology provider, who’s business and reputation is closely tied to being best in class in this area.

Furthermore, vulnerabilities aren’t a hardware or software concern: they are a security concern. That means you need security experts to set up the systems that monitor and protect your software and data from being compromised. Security also isn’t a one-and-done item on a to-do list. You’ll always need to stay ahead of the curve when it comes to mitigating threats and preventing outside attacks.

Knowing this, ask yourself who you trust more to do that? The IT department of a small company with expertise in product distribution, or the tech company that continually invests in, develops and hosts state-of-the-art cloud-based software?


Compliance is where things can get really complex—and where distributors may find themselves ill-equipped for success. Especially with healthcare and pharmaceuticals, regulatory compliance is an ever-shifting set of rules that can be hard to follow.

The Drug Supply Chain and Security Act (DSCSA) is a perfect example. Though first signed into law in 2013, the DSCSA won’t fully take effect until 2023, with certain provisions having been phased in over a period of years. Some provisions affect only manufacturers. Some only deal with distribution. Some parts of the law deal with how those two concerns must work together to track and verify thousands of kinds of medications. The arbitrary nature of the dates and what is expected of each entity along the way is well out of a distributor’s day-to-day operational concerns.

Staying on top of regulations like the DSCSA requires timely software updates to ensure compliance at every level of distribution with every new regulation that’s enacted. With a locally installed on-premise solution, distributors will find themselves in the position of having to coordinate and implement these software updates, and schedule the downtime to do so. The small or medium sized distributor is unlikely to have the resources or expertise to do this successfully.

In the cloud model, software updates happen seamlessly and behind the scenes without effort on the part of the company using the software. Moreover, SaaS comes at a predictable monthly or annual cost with updates included. Selecting the right software provider means distributors get automatic, up-to-date regulatory compliance as a service, as well as the peace of mind of knowing they’ll always be playing by the rules.

You Can’t Fight Progress

The pharmaceutical industry’s slow adoption of cloud software aside, the technology has established itself as a standard at this point. We are well past the novelty phase, and firmly entrenched in the tried-and-tested category. Most of the big players have already made their move to the cloud (you can check out the Johnson & Johnson case study here). Smaller companies across the pharmaceutical industry are going to soon make the move if they haven’t already, and distributors that don’t follow suit will be left behind. Making the choice to migrate turns out to be a pretty easy one to make. And things only get easier from there.

If you’re wondering if now is the right time for your organization to make the move to the cloud, we can help. Contact us for a conversation. To learn more about how small and medium sized pharma distributors can manage DSCSA requirements, download our white paper.