January 29 by Sharath Beedu
A Season of M&A
Industry pundits are predicting that we could see another wave of M&As in 2018 after a lull in M&A activity for a few years. In the years in between, Pharmaceutical companies relied on raising drug prices. With further consolidation of Managed Care Organizations, such as the recently announced CVS acquisition of Aetna, and new promising biotech startups being far and few between, the Pharmaceutical industry is ripe for consolidation. Again.
Integration is one of the top concerns during M&A. Consolidation of large enterprises is always complicated, but it is even more challenging in a contract-heavy, regulated industry. The crown jewel of a pharma company is market access and market access is driven through contracted agreements across commercial and regulatory channels including managed care, institutional, wholesale, pharmacy and government contracts. Performance and obligations becomes key to track, manage and amend over the contract lifecycle since this drives the gross to net, regulatory reporting and revenue transactions
M&A activity affects all critical aspects of contracting including processes, systems, organizations and people. A few key questions are important to consider:
• How do you preserve historical obligations while ensuring harmonization going forward? For example, how do the companies really stay on top of their contracts and obligations with their channels?
• How will legal teams, account teams and contract operations operate in the “business as usual” mode expected by partners, customers and other external entities in the midst of far-reaching organization and IT changes?
• Since even standalone corporations struggle to have a centralized repository for legal or contract ops to pull NDAs from, how should a transnational company integrate whole lines of business effectively without compromising knowledge and auditability? These are questions that should top of mind for acquiring companies or acquisition targets.
Different Times Now
There is a better way. A forward-looking enterprise approach to contract management incorporates process, system, compliance, change management and organizational readiness. For example, a common scenario is integrating new NDCs and labeler codes or unfamiliar formulary-based approaches to the commercial catalog and into contract renewals or amendments? Instead of going with a niche solution provider for each of their commercial, procurement or clinical research needs, pharmaceutical companies should consider a flexible contract management platform that can be tailored to the needs across their entire enterprise. An Enterprise CLM solution built on a common platform can help manufacturers drive operational efficiency, minimize risks and contain costs in their organization.
One example of such an implementation is at Avanir Pharmaceuticals. Avanir went with 100% conversion to Apttus Contract Lifecycle Management (CLM) on day 1 – they got rid of all paper contracts and every single contract goes through the Apttus system. Avanir was a finalist in the 2017 IACCM awards for their visionary approach to contract management. In this presentation at Accelerate 2017, Avanir’s Garlan Adams, Vice President, General Counsel, and Joseph Le, Manager, Contracts, explained how Avanir achieved 100% adoption of on day 1 by using the “Five Ps” – Philosophy; Pre-Work; Preparation; Practice & Post-Launch. These are discussed in detail in the session recording.
Any large M&A is fraught with several moving parts and risk of failure on multiple fronts before and after the deal. In the face of such volatility, Apttus Enterprise CLM for Pharma can help take some of the integration risks out of the M&A.