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This presentation was given at Rainmaker 2013, hosted by Model N, March 5-7.
Citation preview
Drugs and Devices Do Mix: Challenges
and Opportunities for the Integrated
Life Sciences Manufacturer
March 7, 2013
© 2013 Huron Consulting Group. All Rights Reserved. Proprietary & Confidential.
Agenda
APPROACH FOR
PROCESSES AND
SYSTEMS
OVERVIEW CONTRACTING
ENVIRONMENT
© 2013 Huron Consulting Group. All Rights Reserved. Proprietary & Confidential. 2
RECAP AND KEY
TAKEAWAYS
IMPLEMENTATION
KEYS TO SUCCESS
QUESTIONS
Overview – History and Future PHARMACEUTICAL AND MEDICAL DEVICE COMPANIES
Historical Context:
Pharmaceutical and medical device companies have existed
separately for a long time.
The historical perception is that they have different cultures, products
and regulatory requirements.
Changing of Times:
Due to continuous pressure on companies to grow, pharmaceutical
and medical device companies are joining each other today.
The integration between the two can create a long list of operational
and regulatory challenges that are difficult to manage
© 2013 Huron Consulting Group. All Rights Reserved. Proprietary & Confidential. 3
This session will discuss some similarities, differences, as well as some of the key issues
and opportunities to consider if during a merger.
Overview of Current Contract
Environment
Contract Management Environment
For both types of companies, the following chart displays the functions
and review requirements around commercial contracting that are similar:
© 2013 Huron Consulting Group. All Rights Reserved. Proprietary & Confidential. 5
OVERVIEW OF PROCESS AND REVIEW REQUIREMENTS – FOR BOTH
Contract
Strategy
Offer / Contract
Development
Contract
Admin
Chargebacks /
Distributor
Rebates
Incentive
Rebates /
Admin Fees
Contract
Execution /
Implement
Customer
Compliance
Department Review, Execution and Maintenance
Manage Process and Functionality
Sales/ Marketing
Develop draft
contract
Legal
Compliance with
company and
requirements
Sales/ Marketing
Execute
Contract
Sales/Marketing/Finance
Manage
payments, pricing
and discounts
Sales/ Marketing
Conduct profitability
analysis and finalize
with customer
Contract Management Environment FUNCTIONAL REQUIREMENTS – SIMILARITIES AND DIFFERENCES
There are many functional and operating differences and
similarities that exist in both types of companies.
© 2013 Huron Consulting Group. All Rights Reserved. Proprietary & Confidential. 6
Below please find some of the similarities:
• Contract Header
Requirements
• Admin Fee
• Member
Management
• Market Basket
• Tier Discounts
• Payer Contracts
• Hospital
Contracts
Device Pharma
Below please find some of the differences:
• Contract
Creation
• Legal Review
• Contract Review
• Contract
Execution
• Master Data/
MemberMgmt
• VA
• Medicare
• Medicaid
• PHS
• Managed
Care
• Payer
Contracts
• Hospital
Contracts
Device Pharma
Approach for Optimizing
Processes and Systems
Merging Operations and Systems
During a merger, contract management and government pricing
systems can be optimized to satisfy all business, process, functional,
and technical requirements.
Utilizing elements of a system development life cycle methodology will
help identify full requirements for merging systems and operations
The following is a sample approach in four phases of how to ensure
this integration and implementation are successful:
Create Baseline
Inventories
Determine
Functional
Requirements for
Desired State
Determine
System
Requirements
For Desired
State
Create
Roadmap
© 2013 Huron Consulting Group. All Rights Reserved. Proprietary & Confidential. 8
OVERVIEW OF A FOUR PHASED APPROACH
Phase 1 Phase 2 Phase 3 Phase 4
Merging Operations and Systems PHASE I: UNDERSTAND THE “AS-IS” ENVIRONMENT
© 2013 Huron Consulting Group. All Rights Reserved. Proprietary & Confidential. 9
Pharmaceutical companies typically
have robust solutions for
chargebacks, rebates and similar
transactions.
Medical-device companies need
these systems but can be less
developed.
Processes are not fully developed or
integrated
Different business units are involved
and priorities differ
Managing uncertainty
Organization may not be aware of all
necessary review or reporting
requirements
Phase I Challenges
To address these challenges, companies may consider the
following:
Document the “as-is” commercial contracting and
government price reporting processes for both the
pharmaceutical and medical device business units
Create an inventory of existing master data elements
(i.e. customers and classes of trade for both business
units)
Create an inventory of systems used for contract
management and government price reporting, that
include: • Functionality for each system/module
• Department that uses the application and purpose
• Integration requirements for source and “downstream
“systems (SAP, CRM, Healthcare Professional Spend
Reporting, etc.)
Phase I Approach
Create Baseline
Inventories
Merging Operations and Systems PHASE II: DETERMINE FUNCTIONAL REQUIREMENTS FOR DESIRED STATE
© 2013 Huron Consulting Group. All Rights Reserved. Proprietary & Confidential. 10
Planning/Implementing for regulatory
changes
‐ Requirements for Health Care
Reform
Resistance to change
Looking for software solutions prior
to understanding the business needs,
process and regulatory requirements
of both the pharmaceutical and
medical device business units
Legal and commercial contracting
departments need tools and
templates to define their new
responsibilities, and how they will
serve all units of the expanded
company.
Phase II Challenges
To address these challenges, companies may consider the
following:
Develop a functional vision for the “to-be” operation
Create an inventory of existing master data elements
(i.e. customers and classes of trade for both business
units)
Develop process/work flow descriptions that identify
areas of commonality as well as differences in the
operations between the two business units
Identify all functional processes, regulatory
requirements, work flow requirements and
interdepartmental dependencies
Identify required data elements to satisfy process,
regulatory, work flow and interdepartmental
requirements
Phase II Approach
Determine Functional
Requirements
Merging Operations and Systems PHASE III: DETERMINE SYSTEM REQUIREMENTS FOR DESIRED STATE
© 2013 Huron Consulting Group. All Rights Reserved. Proprietary & Confidential. 11
Companies look for software
solutions prior to understanding the
business needs, process and
requirements of the company they are
acquiring.
Differences in regulatory
requirements, i.e. less government
reporting for medical device
companies, lowers the perception for
the need for change;
Gaps in data collection can be a
result of gaps in policy or result from
business processes not being
followed
Phase III Challenges
To address these challenges, companies may consider the
following:
Conduct review based on objective evaluation criteria
for the new “to-be” environment
Identify gaps that exist between existing system
capabilities and “to-be” functional requirements (even if
the system comparisons are between off-the-shelf
systems, custom built or hybrid)
Identify root cause for gaps identified – not all gaps are
system related • Identify approach for closing identified gaps
Identify required data elements to satisfy process,
regulatory, work flow and interdepartmental
requirements
Phase III Approach
Determine System
Requirements
Merging Operations and Systems PHASE IV: DEVELOP IMPLEMENTATION ROADMAP
© 2013 Huron Consulting Group. All Rights Reserved. Proprietary & Confidential. 12
Management overseeing the post-
merger effort wants to contain or
minimize merger costs and looks for
opportunities to save budget for post-
merger activities
Implementation efforts may be
affected by mandatory deployment
milestones
Regulatory changes may introduce
need to reevaluate implementation
milestones and resource distribution
Phase IV Challenges
To address these challenges, companies may consider the
following:
Identify dependent integration conversion efforts (i.e.
JDE to SAP)
Identify dependent internal business or corporate
milestones
Identify expected regulatory changes that may affect
contracting and government price reporting
requirements and have a plan around these items
Develop implementation project plan based on best
practice methodologies and not an arbitrary or forced
milestone date
Plan for extended testing
Ensure regulatory requirements and controls are
considered upfront
Phase IV Approach
Create Roadmap
Merging Operations and Systems SUMMARY OF KEYS TO SUCCESS AND LESSONS LEARNED
Project management is one of the most important needs to ensure that
the solution implementation is successfully deployed on-time, within
scope and budget.
Project Management needs to ensure the structure and procedures
established the following so they can proactively manage
expectations:
• Project Schedule
• Project Budget
• Issues and risk – technical, compliance and business
There is an importance of assigning a skilled project manager full-time,
who must have subject matter, compliance, and IT PM skills
The testing cycle needs to be thorough and well documented. If this
step is rushed and the cycle is shortened there is a risk that critical
data will not be properly recorded or calculated. © 2013 Huron Consulting Group. All Rights Reserved. Proprietary & Confidential. 13
Recap and Key Takeaways
Recap and Key Takeaways
Combining pharmaceutical and medical device companies is more difficult
than many companies consider because of contracts in products, operating
models, and regulatory requirements. Here are a few takeaways:
Ensure you have a plan in place in the form of an implementation
roadmap so that system at the end should not only satisfy operational
requirements but also regulatory requirements as well.
Ensure you do not select a solutions prior to understanding the business
needs, processes and requirements.
• Avoid the “Ready, Fire, Aim…” approach at all costs
Ensure that the project is staffed appropriately with enough project
management resources that have the necessary skill sets
© 2013 Huron Consulting Group. All Rights Reserved. Proprietary & Confidential. 15
Contact Us
Clay Willis, Manager
Phone: 404-825-3319
Email: [email protected]
16
NEW YORK OFFICE
599 Lexington Avenue, 25th Floor|
New York, NY 10022
ATLANTA OFFICE
Six Concourse Parkway Suite 1500 |
Atlanta, GA 30328
Mark Linver, Managing Director
Phone: 312-515-1677
Email: [email protected]
© 2013 Huron Consulting Group. All Rights Reserved. Proprietary & Confidential.