This document discusses the challenges of integrating pharmaceutical and medical device companies. It outlines a four-phase approach to merging operations and systems, including understanding current processes, determining requirements, identifying system needs, and creating an implementation roadmap. Key challenges include differing regulations, processes, and systems between the two industries. Success requires thorough planning, strong project management, and ensuring regulatory requirements are met.

1. Drugs and Devices Do Mix: Challenges
and Opportunities for the Integrated
Life Sciences Manufacturer
March 7, 2013
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2. Agenda
OVERVIEW CONTRACTING
ENVIRONMENT
APPROACH FOR IMPLEMENTATION
PROCESSES AND KEYS TO SUCCESS
SYSTEMS
RECAP AND KEY QUESTIONS
TAKEAWAYS
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3. 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.
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4. Overview of Current Contract
Environment

5. Contract Management Environment
OVERVIEW OF PROCESS AND REVIEW REQUIREMENTS – FOR BOTH
 For both types of companies, the following chart displays the functions
and review requirements around commercial contracting that are similar:
Manage Process and Functionality
Contract Chargebacks / Incentive
Contract Offer / Contract Contract Customer
Execution / Distributor Rebates /
Strategy Development Admin Compliance
Implement Rebates Admin Fees
Department Review, Execution and Maintenance
Sales/ Marketing Legal Sales/ Marketing Sales/ Marketing Sales/Marketing/Finance
Compliance with Execute
Develop draft Conduct profitability Manage
company and Contract
contract analysis and finalize payments, pricing
requirements
with customer and discounts
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6. 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: Below please find some of the differences:
Device • Contract
Pharma Device Pharma
Creation
• Payer • Legal Review • Payer Contracts • Contract Header
• Medicaid • Hospital Requirements • Market Basket
Contracts • Contract Review
• PHS Contracts • Admin Fee • Tier Discounts
• Hospital • Contract
• Managed • Member
Contracts Execution
Care Management
• Master Data/
MemberMgmt
• VA
• Medicare
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7. Approach for Optimizing
Processes and Systems

8. Merging Operations and Systems
OVERVIEW OF A FOUR PHASED APPROACH
 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:
Phase 1 Phase 2 Phase 3 Phase 4
Create Baseline Determine
Determine
Inventories System Create
Functional
Requirements Roadmap
Requirements for
For Desired
Desired State
State
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9. Merging Operations and Systems
PHASE I: UNDERSTAND THE “AS-IS” ENVIRONMENT
Phase I Approach
Phase I Challenges
Create Baseline
 Pharmaceutical companies typically
have robust solutions for
Inventories
chargebacks, rebates and similar
transactions. To address these challenges, companies may consider the
following:
 Medical-device companies need
these systems but can be less  Document the “as-is” commercial contracting and
developed. government price reporting processes for both the
pharmaceutical and medical device business units
 Processes are not fully developed or  Create an inventory of existing master data elements
integrated (i.e. customers and classes of trade for both business
 Different business units are involved units)
 Create an inventory of systems used for contract
and priorities differ
management and government price reporting, that
 Managing uncertainty include:
• Functionality for each system/module
 Organization may not be aware of all • Department that uses the application and purpose
necessary review or reporting • Integration requirements for source and “downstream
requirements “systems (SAP, CRM, Healthcare Professional Spend
Reporting, etc.)
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10. Merging Operations and Systems
PHASE II: DETERMINE FUNCTIONAL REQUIREMENTS FOR DESIRED STATE
Phase II Approach
Phase II Challenges
 Planning/Implementing for regulatory Determine Functional
changes Requirements
‐ Requirements for Health Care
Reform To address these challenges, companies may consider the
 Resistance to change following:
 Develop a functional vision for the “to-be” operation
 Looking for software solutions prior
Create an inventory of existing master data elements
to understanding the business needs, (i.e. customers and classes of trade for both business
process and regulatory requirements units)
of both the pharmaceutical and  Develop process/work flow descriptions that identify
medical device business units areas of commonality as well as differences in the
 Legal and commercial contracting operations between the two business units
 Identify all functional processes, regulatory
departments need tools and
requirements, work flow requirements and
templates to define their new interdepartmental dependencies
responsibilities, and how they will  Identify required data elements to satisfy process,
serve all units of the expanded regulatory, work flow and interdepartmental
company. requirements
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11. Merging Operations and Systems
PHASE III: DETERMINE SYSTEM REQUIREMENTS FOR DESIRED STATE
Phase III Approach
Phase III Challenges
Determine System
 Companies look for software
solutions prior to understanding the
Requirements
business needs, process and
requirements of the company they are To address these challenges, companies may consider the
acquiring. following:
 Differences in regulatory  Conduct review based on objective evaluation criteria
requirements, i.e. less government for the new “to-be” environment
reporting for medical device  Identify gaps that exist between existing system
companies, lowers the perception for capabilities and “to-be” functional requirements (even if
the system comparisons are between off-the-shelf
the need for change;
systems, custom built or hybrid)
 Gaps in data collection can be a  Identify root cause for gaps identified – not all gaps are
result of gaps in policy or result from system related
business processes not being • Identify approach for closing identified gaps
followed  Identify required data elements to satisfy process,
regulatory, work flow and interdepartmental
requirements
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12. Merging Operations and Systems
PHASE IV: DEVELOP IMPLEMENTATION ROADMAP
Phase IV Approach
Phase IV Challenges
Create Roadmap
 Management overseeing the post-
merger effort wants to contain or To address these challenges, companies may consider the
minimize merger costs and looks for following:
opportunities to save budget for post-
 Identify dependent integration conversion efforts (i.e.
merger activities JDE to SAP)
 Implementation efforts may be  Identify dependent internal business or corporate
affected by mandatory deployment milestones
milestones  Identify expected regulatory changes that may affect
contracting and government price reporting
 Regulatory changes may introduce requirements and have a plan around these items
need to reevaluate implementation  Develop implementation project plan based on best
milestones and resource distribution practice methodologies and not an arbitrary or forced
milestone date
 Plan for extended testing
 Ensure regulatory requirements and controls are
considered upfront
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13. 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.
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14. Recap and Key Takeaways

15. 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
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16. Contact Us
ATLANTA OFFICE NEW YORK OFFICE
Six Concourse Parkway Suite 1500 | 599 Lexington Avenue, 25th Floor|
Atlanta, GA 30328 New York, NY 10022
Clay Willis, Manager Mark Linver, Managing Director
Phone: 404-825-3319 Phone: 312-515-1677
Email: cwillis@huronconsultinggroup.com Email: mlinver@huronconsultinggroup.com
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