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Big Data in Life Sciences and Healthcare

Big Data in Life Sciences and Healthcare

Robert H. Hutchins, CPA, CVA, Partner
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Technology is constantly changing the way we do business.  Enhancing communications, increasing productivity, decreasing costs—its benefits are numerous and will continue to have a major impact on companies in the future. The significant volume of digital data that exists today is creating opportunities for all types of businesses. Many of the tools available to analyze big data can be obtained by everyone from political organizations to multimillion-dollar companies. Some examples include:

 

President Obama Republican National Committee Major supermarket taco bell General Motors Big Data
President Barrack Obama’s 2008 campaign used data mining of historical voter patterns to turn out the maximum number of supporters. The Republican National Committee recently hired an ex-Facebook executive to help their organization data mine in order to increase voter support. Major supermarkets record the buying trends and habits of its loyalty card holders at considerable costs. They then sell this information to its vendors for restocking optimization. Taco Bell restaurants collect and sort data on service speed, product quality and social media posting metrics. General Motors business analytics specialists are mining vast quantities of big data for trends in customer and dealer behavior.

So what does your healthcare organization have in common with political campaigns, supermarkets, fast food restaurants and auto manufacturers?  Plenty!  Pharmaceutical companies, healthcare providers, insurance companies and other stakeholders are all interested in aggregating and mining electronic medical records, insurance claims and public records like the Food and Drug Administration’s adverse drug database as well as published research studies.

Physicians are using these data mining results to provide better healthcare to patients.  Imagine you are rushed to the hospital with symptoms of kidney failure.  The doctors diagnose Lupus although you are not exactly typical of this disease.  They find no “clinical evidence” so they search for “historical evidence” and discover a significant number of Lupus patients with your symptoms require additional protocols to optimize results.  Big data is now part of your diagnosis and maybe saved your life.

Major pharmaceutical businesses, biotechnology firms, clinical research organizations, insurance companies (payers) and healthcare organizations (providers) are all acquiring big data.  The “Internet of Things” and the cloud have allowed exploration of diverse data bases from the research laboratory bench to the hospital bedside.  This can accelerate drug discovery as well as facilitate the practice of precision medicine.  Digital healthcare which activates the patient in this healthcare supply chain is growing too.

When healthcare and life science organizations are looking to acquire another business, they must be aware of issues such as the valuation and useful life of big data information.  The valuation of big data is rarely capitalized on the balance sheets of technology companies.  Facebook, eBay and Google have net assets of about $150 billion, yet their market value capitalization is many multiples of these amounts.  The difference is the value of their intangible assets, one of which is big data information.

Generally accepted accounting principles in America generally prohibit any company from recognizing internally developed goodwill, such as that arising from leveraging a company’s own accumulated databases of information.  However, when a corporate acquisition results in a significant allocation of the purchase price to intangible assets, an acquiring   company may be  faced with difficult valuation and useful life issues.  The intangible assets may include acquired big data. US generally accepted accounting principles permit acquirers to capitalize acquired databases as an intangible asset.

But what do we do about the valuation and amortization of big data information?  How do we assign values to it? What is its useful life? These are questions that healthcare and life science stakeholders should consult with their CPA on before taking any action.  Big data will continue to play a large role in the way business is conducted, how purchase prices are determined and how companies are valued.

Need More Information?

For more information on the topic discussed, please contact:

Taryn Bostjancic, Practice Leader
Life Sciences Services
tbostjancic@withum.com
732.828.1614

Learn more about our Life Sciences Services >>learnMore


To ensure compliance with U.S. Treasury rules, unless expressly stated otherwise, any U.S. tax advice contained in this communication is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.

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