drugs and devices do mix: challenges and opportunities for the integrated life sciences manufacturer

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


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:


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.


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


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


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


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


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


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


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


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


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


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.

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drugs and devices do mix: challenges and opportunities for the integrated life sciences manufacturer

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