Life Sciences Practice

Top ten observations from

2022 in life sciences digital
and analytics
Life sciences companies are making progress in adopting and deploying digital
and analytics. But they can go further and faster by heeding some lessons from
the past few years.
This article is a collaborative effort by Bjorn Albrecht, Siméone de Fremond, Thomas Devenyns, Richard Ting Li, Dan
Tinkoff, and Lieven Van der Veken, representing views from McKinsey’s Life Sciences Practice.

© Luis Alvarez/Getty Images

January 2023
 Looking toward the new year is a good time to
take stock of the life sciences industry’s digital
maturity. This article provides ten observations
from McKinsey’s work in this space, complemented
by targeted analyses and a McKinsey survey
conducted in November 2022 of one hundred
digital and analytics (DnA) leaders in life sciences
functional areas, such as R&D, manufacturing and
supply chain (M&SC), commercial, and enabling
functions such as finance and HR.1 Life sciences
companies have historically lagged behind banking,
telecom, retail, and other industries in digital
maturity. A McKinsey analysis from 2016 identified
a multitude of factors that make life sciences
companies slow to adopt DnA innovations, including
not fully understanding healthcare practitioners’
(HCPs) decision journeys, challenges linking DnA
to the broader business, and difficulty maintaining
an efficient operating model. Has the pandemic
accelerated the adoption of digital technologies,
have life sciences companies caught up at all, and
how far are they from realizing the full potential of
digital and analytics?
The results are sobering. The gaps with other
industries are not closing, and the reported benefit
to businesses is moderate. All players in the
ecosystem can benefit from incorporating digital
and analytics into every aspect of their operations
to fully deliver on the promise for patients and
societies. Here are our ten observations in detail.
Where the industry is now
1. The digital maturity gap persists between life
sciences and digital leaders. Despite efforts
made over the past few years, life sciences
companies still trail cross-industry leaders
in digital maturity by a factor of two to three
times in every key dimension—strategy, culture,
organization, and capabilities—without any clear
signs of catching up.2
Pharmaceutical companies (pharmacos)
surveyed are slightly more mature than medical
1
All data in this article are from the McKinsey survey unless stated otherwise.
2
Measured in the Digital Maturity Index based on a self-reported McKinsey Digital Quotient score.
2 Top ten observations from 2022 in life sciences digital and analytics
technology (medtech) companies: 55 percent
of pharma DnA leaders say they have deployed
some applications at scale, compared with
34 percent of medtech DnA leaders. Overall,
commercial and R&D are more digitally mature
than other functions, with more than 14 percent
of DnA leaders in those areas reporting that
digital applications are deployed at scale and are
contributing tangible business value. Less than
6 percent of DnA leaders see the same in M&SC
and enabling functions.
Life sciences has also struggled to execute on
the idea of building novel digital businesses
beyond digital solutions like apps supporting
their existing products. The jury is still out
on whether life sciences companies are the
best owners of these, due to misalignment
of incentives, the need for agility, and the
capabilities needed.
2. Life sciences companies are starting to capture
value from digital and analytics but are still
just scratching the surface. Life sciences
DnA leaders surveyed estimate that digital
and analytics drove a 5 to 15 percent bottom-
line improvement in specific pockets of their
functional areas over the past five years, yielding
an annual global impact of $6 billion to $9 billion.
This compares with an estimated $130 billion
to $190 billion that the full application of digital
solutions and innovation along the life sciences
value chain could bring.
The largest opportunities DnA could
help unlock are derisking drug discovery,
accelerating clinical trials, and reinventing
engagement with HCPs. As a result, many
leading companies are incorporating DnA
into early-stage drug discovery and clinical
development to shrink timelines and improve
the probability of success. In addition, leading
players are reinventing their interactions with
healthcare providers and patients to provide
 enhanced and tailored experiences and
achieve better treatment outcomes.
3. Early innovation is clearly catching up, but it
took the top 40 life sciences companies until
2021 to overtake the big three tech companies
(Alphabet, Amazon, and Apple). The top 20
pharmacos and the top 20 medtech companies
generated more than 1,700 DnA and life
sciences–related patents in 2021, a growth
surge of more than 70 percent over 2017 that
finally allowed the industry to overtake the
combined volumes of Alphabet, Amazon, and
Apple. Publications also increased by 28 percent
in that period, reaching 650 last year.3
In other industries, such as retail banking,
strategic and financial benefits accrue to
digital innovators. Still, despite the recent burst
in digital innovation, there is not yet a clear
correlation between life sciences companies’
digital maturity and their financial performance.
This is probably because of long product
development timelines and limited short-term
benefits, especially in R&D, underlining the
importance of defining and linking digital
strategy to scientific and business value at every
level of the organization.
4. US venture funding in digital health peaked
during the COVID-19 pandemic and is now
stabilizing at twice its historical base, with the
big three tech companies’ investments edging
out those of the top 40 life sciences companies.
Funding along the life sciences value chain
jumped from $5 billion in 2019 to more than
$20 billion in 2021 (Exhibit 1), with more than

Web <2023>
<DigitalAnalytics> request to add 2x label was prevously rejected as being obvious and would make it cluttered to add
Exhibit 1
Exhibit <1> of <2>

US funding along the digital healthcare value chain peaked during the height
of the COVID-19 pandemic and is stabilizing at about twice its historical base.

US venture funding in digital healthcare, by fiscal year, $ billion

21 Across the Research

value chain 15 14

–57% Enabling
functions 8
>4× US venture funding
in digital healthcare, 16 Development

11
2021,1 %
<1
9

5
Manufacturing
Commercial1 47 and supply chain

2019 2020 2021 2022²

1
Includes medical affairs.
²Jan–Sept 2022.
Source: Rock Health Digital Health Venture Funding Database, Rock Health, Jan 20, 2023

McKinsey & Company

3
McKinsey analysis of US Patent and Trademark Office and National Center for Biotechnology Information data provided by Clarivate.

Top ten observations from 2022 in life sciences digital and analytics 3
 45 percent of the funding in commercial
solutions. Funding in research and development
ranked second, totaling $6.4 billion, with almost
equal interest from investors in research and
early development ($3 billion) and development,
regulatory, and safety ($3.4 billion).
Year-to-date funding and digital-health stock
indexes, such as the MSCI ACWI IMI Digital
Health Index, for 2022 have almost halved
compared with 2021, partially because of a
general public-market correction. However, they
are still twice their 2019 levels.
The US life sciences sector still leads Europe
and Asia in DnA investments. The top 20
pharmacos and the top 20 medtech companies
made slightly more DnA-related major deals in
the United States than in the European Union
over the past five years—32 versus 26— but
on average, the US deals were about five times
larger, $700 million versus $150 million in the
European Union.4 This is a strong indicator of
the difference across continents in the level and
pace of innovation.
Globally, the big three tech players are edging
out the top 40 life sciences companies
as leading strategic investors. The top 40
life sciences players have invested almost
$20 billion in DnA deals since 2017, but less
than $6 billion in the past three years; big tech
players invested $10 billion in tech-related
healthcare deals, $8 billion of that in the past
three years. Big tech players can leverage their
ability to generate cash flow to fuel their M&A
activities, while life sciences companies tend to
prioritize asset acquisitions over DnA deals.
Where the industry is going
5. Hiring and spending are accelerating, but not
by much. The hiring rate of DnA talent by life
sciences companies is accelerating slightly, from
2 to 4 percent a year over the past five years to
4
Deals include M&A, venture funding, grants, accelerator/incubator, private investment in public equity, and secondary transactions/open
market. The US average is based on 22 deals with publicly available information, and the EU average on 15.
4 Top ten observations from 2022 in life sciences digital and analytics
an expected 3 to 5 percent a year over the next
three. Only 10 percent of respondents said they
had grown the talent in their functional areas by
more than 30 percent, and only 9 percent said
that they are targeting such an expansion over
the next three years. Hiring is generally more
robust in R&D and commercial, and it’s expected
to remain so.
Similarly, leaders expect to grow their DnA
spending by another 10 to 15 percent over the
next three years, starting from today’s baseline
of 8 to 12 percent of their function’s budgets.
Only 7 percent of leaders expect to increase
their investment by more than 30 percent over
the next three years.
6. Analytics rule the world of life sciences tech
investments. Life sciences companies make
45 percent of their tech investments in three
analytics-related technologies—applied
artificial intelligence (AI), industrialized machine
learning (ML), and cloud and edge computing—
and expect to derive most of their short- to
medium-term benefits from them.
Applied AI has permeated the life sciences
value chain, allowing more business decisions
to be made based on data the organization has
generated or acquired. Cloud and industrialized
ML allow life sciences companies to adopt new AI
approaches more reliably and at a faster pace and
larger scale, accelerating tech-driven innovation.
Cloud technologies are increasingly being
embraced by life sciences to speed tech-
enabled business transformations; in 2021, more
than 80 percent of the top 20 global pharma
and medtech companies were operating in the
cloud. In addition, companies are increasingly
leveraging the cloud to shift IT infrastructure
management and to fill gaps in their software
development and analytics capabilities, buying
software as a service rather than building and
operating it themselves.
 Despite the high media attention, longer-term pharma and medtech DnA leaders as a top
bets such as quantum technologies, Web3, issue. In addition to accessing existing data,
advanced connectivity, and immersive reality DnA leaders are increasingly interested in
together account for only about 15 percent of life supporting decision making by generating
sciences tech investments. new data from business operations, such as
Beyond focusing on a single tech trend, new digital channels for HCP engagement.
the research shows that DnA leaders could
• Lack of the right DnA talent. To scale DnA
consider investing in a combination of trends
transformations successfully, life sciences
to unlock the most innovation and new sources
companies need cross-functional teams
of value. For instance, life sciences companies
with experienced leaders and accomplished
could accelerate drug discovery, create more
DnA practitioners. In addition, life sciences
personalized treatments, and optimize treatment
companies still require the role of translator,
plans for patients by leveraging a combination
because most DnA experts don’t have
of Al and ML, cloud computing, quantum
degrees in life sciences or prior knowledge
technologies, and bioengineering.
of a specific therapeutic area. The reverse
is true for colleagues on the business side.
7. The plan for the future is largely the plan of
It is, therefore, critical to have experts who
today. DnA leaders are betting that the areas
can bridge the gap between the business
that have brought the most value to date will be
and analytics teams to facilitate cross-
the primary value drivers for the next few years.
functional collaboration.
In the past three to five years, each function
• Lack of adoption and scaling. In many
has had two or three areas in which digital
functional areas, DnA solutions still are
and analytics brought noticeable changes
not deployed at scale. In R&D, for example,
and moderate impact. These included disease
many companies are still producing proofs
state and target understanding in research and
of concepts and pilots detached from
early development, clinical trial planning and
business needs without a plan or the means
execution in development, regulatory and safety,
to scale them. In addition, many life sciences
end-to-end supply chain in M&SC, go-to-market
companies fail to recognize the need to
and field force effectiveness in commercial,
transform the mindset and culture of their
unmet medical need in medical, and shared
organizations to drive DnA adoption at scale.
services productivity in enabling functions.
9. The field is moving from ‘hard’ capabilities to
What it will take to succeed and scale more focus on ‘soft’ elements. Two-thirds of
life sciences DnA leaders say they have focused
8. The challenge has shifted from strategic
on developing a value-linked blueprint and
alignment and executive leadership to data and
strategy, and around 60 percent indicate they
talent. The top hurdle to scaling life sciences
have also made progress in setting up the “hard”
DnA in 2020 was a lack of leadership support
capabilities to scale DnA, such as digital and
and misaligned strategy, but that is no longer
analytics solutions (62 percent of respondents),
the case (Exhibit 2). Instead, the key challenges
data architecture5 (65 percent), and
today include the following:
technological infrastructure (56 percent). The
• Lack of high-quality data sources and data adoption of these hard capabilities has improved
integration. This challenge is cited by both by 1.5 to 2.3 times over 2017. On the “soft”

5
Data architecture means to make data FAIR: Findable (via enterprise data catalog), Accessible (via data fabric regardless of internal/external
or on cloud), Interoperable and Reusable (via knowledge graph that stores how data sets are related to each other).

Top ten observations from 2022 in life sciences digital and analytics 5
 Web <2023>
<DigitalAnalytics>
Exhibit 2
Exhibit <2> of <2>

The main hurdles for the use of digital and analytics in healthcare have shifted
from strategic alignment and executive leadership to data and talent.

Hurdles to scaling digital and analytics in healthcare, Area 2020

respondent score (1 = low hurdle, 5 = high hurdle)1 shown 2022
1.0 2.0 3.0 4.0 5.0

Lack of integrated data sources

Difficulty in finding talent

Lack of adoption after implementation

Lack of internal visibility on other initiatives

Low quality of data

Inadequate IT infrastructure

Lack of leadership support; misaligned strategy

3.0 3.5 4.0

1
Question: What have been and will remain the biggest hurdles to applying digital and analytics in your primary functional area? The average score is calculated
using a scale of 1–5, with higher scores for bigger hurdles.
Source: McKinsey survey of 100 digital and analytics leaders in life science functional areas, Nov 2022; Manuel Möller and Nils Moser, “Data and culture as
stepping stones for Digital@Scale,” McKinsey, Feb 7, 2020

McKinsey & Company

capabilities front, the adoption of appropriate
talent strategies and agile operating models has
improved from 29 percent in 2017 to 46 percent,
and the adoption and scaling of DnA has
improved from 10 percent in 2017 to 46 percent
today, though both are still underdeveloped.
Our survey results suggest that many life
sciences companies are about to reach an
inflection point in their DnA transformation
journey and could benefit from evaluating
the options ahead. Broadly, there are three
archetypes for scaling DnA: DnA-targeted
partnerships and acquisitions, arm’s-
length digital business building, and digital
transformation of the core business, which is
arguably the hardest but generally delivers the
highest long-term value.
In December 2022, at a McKinsey-hosted
Quantum Jump event on digital and analytics
transformation, 61 percent of participants
indicated their businesses have adopted an
agile approach to digitally transforming their
core business.6 Only 24 percent of participants
indicated DnA-targeted partnerships and
acquisitions, and 15 percent picked arm’s-length
digital business building.

6
A leading digital-transformation approach already used by a handful of companies that overcomes common pitfalls and drives impact is
called quarterly value release.

6 Top ten observations from 2022 in life sciences digital and analytics
 Find more content like this on the
10. Medtech DnA leaders are trailing behind other
McKinsey Insights App
life sciences colleagues in scaling DnA. DnA
leaders regard a leadership-backed, impact-
driven blueprint (25 percent) and fit-for-purpose
and scalable digital and analytics solutions
(27 percent) as the two most important factors
for scaling DnA. This is reflected in how they
have approached DnA transformations so
far. Although the “soft” capabilities are still
Scan • Download • Personalize
underdeveloped, pharma DnA leaders have
started to shift their focus to adoption and
scaling (19 percent), whereas medtech DnA
leaders still focus less on these. Across the
board, medtech companies have invested
less, have fewer DnA applications with visible
business value deployed at scale, and still
have less focus on the soft elements. Although
medtech companies are behind pharma
companies in digital maturity, their successful
adoption of DnA can help provide better
products and services to patients. In turn, this
will help close the digital maturity gap between
life sciences and digital leaders. The COVID-19
pandemic has pushed the life sciences industry
to rethink its approach to adopting digital and
analytics. Thanks to some initial proof points and
investments in hard capabilities, life sciences
companies now have an opportunity and need to
accelerate and scale to capture DnA’s full value.
The answer to the industry’s challenges may lie in
fusing digital and analytics with those competencies
that have historically made life sciences successful:
innovation, HCP, and patient relevance. By bringing
these capabilities together, the industry could
change the game and deliver greater benefits for
patients. If it doesn’t, it risks missing out on much of
its potential.

Bjorn Albrecht is a partner in McKinsey’s Paris office; Siméone de Fremond is a consultant in the Geneva office, where
Thomas Devenyns is an associate partner; Richard Ting Li is a consultant in the New York office; Dan Tinkoff is a senior
partner in the New Jersey office; and Lieven Van der Veken is a senior partner in the Lyon office.

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Top ten observations from 2022 in life sciences digital and analytics 7