1. Perspective: Model N Improves Pricing
and Contracting for Boston Scientific
www.healthindustry -insights.com
PERSPECTIVE #HI225603
Er ic New ma rk
IN THIS PERSPECTIVE
This IDC Health Insights Perspective discusses the recent adoption of
M o d e l N's pricing, contract management, and sales analytics
applications by Boston Scientific Corporation (BSC), as the
organization strives to improve its pricing and sales execution
F.508.988.7881
capabilities.
Background
As the world continues to flatten, businesses regularly look for ways to
P.508.935.4445
capitalize on diminishing geographical borders. In the life sciences,
companies have taken advantage of cost reduction opportunities
through the outsourcing of IT development, maintenance, and support
and have further optimized operations through the increased off-
shoring of both manufacturing and clinical development. However,
Global Headquarters: 5 Speen Street Framingham, MA 01701 USA
while globalization provides new opportunities, with it come new
challenges, so it is equally important that companies strategize how to
best prepare for these newfound obstacles. One area of concern that is
receiving increasing attention from life science companies is global
pricing and contract management. Historically, isolated deal analytics
and "one off" contract negotiations were somewhat manageable in
conducting business with minimal negative implications to revenue.
But in today's connected and ever-increasing transparent world, such
business practices can create unwanted and unexpected pressure on an
organization's bottom-line results. Deals negotiated in one
geographical location potentially can impact negotiations months later
in another geographical location. For this reason, companies are eager
to improve their visibility and control over pricing decisions and desire
to provide better data and decision-making tools in the hands of their
selling organizations.
The Need for Improvement
Back in 2002, Boston Scientific Corporation. (BSC) recognized that
customers were starting to aggregate their pricing across geographies
and become more sophisticated in their procurement practices.
Customers in business roles were collaborating more tightly with
November 2010, IDC Health Insights #HI225603
IDC Health Insights: Life Science Business Systems Strategy: Perspective

2. clinical decision makers, and price transparency in the marketplace
was emerging. This ultimately caused BSC to begin questioning
whether it was managing its revenue and pricing in the most optimal
way. At the time, like most organizations, contracting activity was
managed in offline, nonintegrated systems across the enterprise,
lacking a "single view" of the organization's contracting practices.
"The ability to provide various levels of the selling organization's
complete pricing and contracting visibility was impossible," remarked
Raymond Almeida Jr., global sales analytics director at BSC. "It
required probing into numerous off-line systems that reflected
different data taxonomies and disparate business processes. In most
cases, it was an unproductive exercise never arriving at a complete
answer." The company realized greater market transparency was
developing and their sales organization needed enhanced tools to
support success in this environment. "We weren't providing them
(sales) with complete pricing and contract data needed for them to
optimize value to both the customer and to our company. We needed a
way to enhance our existing decision support to accommodate the
transparency dynamic," said Almeida.
The Decision
Obtaining internal approval to purchase a solution was not difficult
because the decision committee had several real-life examples that
clearly illustrated and quantified exposure created without these
needed capabilities. It was clear that while customers were achieving
increased price awareness, the organization had limited visibility and
capabilities to analyze how a particular deal in one area might affect
the company nationally. Real-life examples combined with increasing
market transparency made it easy for the company to realize the
importance of purchasing a pricing and contract management solution.
Evaluation and Implementation
BSC spent three months conducting extensive requirements gathering
by meeting with all internal pricing and contract management
stakeholders who would utilize and benefit from an enterprisewide
pricing and contract management system. This ensured that existing
capabilities could be enhanced to accommodate a more holistic, single-
point-of-view approach to contracting internally. An RFP was then
created and sent out to vendors. After an initial review of the major
solutions available in the market, the prospective list was quickly
reduced to two potential vendors, and after several months of
additional evaluation and due diligence, Model N was selected. The
entire evaluation process took approximately two years, followed by a
carefully phased 18-month implementation paced to both internal
change management processes and a divisional rollout strategy that
delivered pricing, contract management, and sales analytic capabilities
nationwide across the United States.
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3. Lessons Learned
BSC's ability to clearly identify ROI within its project plan prior to
project execution was essential for ensuring executive sponsorship,
high system adoption, and long-term project success. But all
implementations have obstacles. Some of the biggest challenges
experienced during the implementation, which is not uncommon, were
scope creep and rationalization of existing business process. Finding
the right balance between enhancing existing capabilities that are
aligned to strategic, corporatewide goals and honest consideration of
historically effective processes that may not be as effective in a future
state can lead to unnecessary cost and inefficient resource "burn." The
right combination and approach to process redesign, organizational
resource alignment, and core system capabilities can provide for an
optimal implementation. In speaking with BSC, uneven focus on each
of these three factors led to a challenging implementation and early
slow adoption of the system.
The Bottom Line
BSC has now had the Model N solution in place for more than a year
and has realized several significant benefits:
● Improved deal analytic capabilities, including the ability to
understand the impact of proposals on overall revenue, margin, and
truly comprehend break-even points
● Reduced IT maintenance and streamlined operations by
maintaining a single corporate system rather than multiple
disparate systems
● Better forecasting accuracy and the elimination of manual rebate
management processes that led to errors due to rebates no longer
being managed in Excel spreadsheets
● Enhanced pricing visibility, both invoice and net, for all products
and customers
● Increased pricing control due to workflow that requires prior
approval for any pricing outliers, thereby mitigating "best price"
risk and minimizing ASP erosion
● Pricing analysis that can now be performed daily (used to be done
less frequently) for more "real time" price analysis
List price management and exception handling have also experienced
significant improvements. Enhanced reporting, redesigned business
process supported by system workflow capabilities and instantaneous
visibility to this activity has enabled the organization to eliminate
©2010 IDC Health Insights #HI225603 Page 3

4. potential revenue leaks and efficiently utilize operational resources to
better manage price implementations.
Global pricing transparency has become a major focal point, and BSC
believes it is much better prepared now to handle this challenge,
thanks to the Model N solution in the United States and the associated
business processes that can be exported outside of the United States.
Almeida commented:
The market transparency we saw emerging five years
ago in the United States is now beginning to emerge
globally. Government entities and customers alike are
beginning to compare and benchmark prices globally.
We are starting to realize that pricing is not just
restricted by country borders anymore. Even though our
system is United States based in scope, we believe
having the Model N system in place to support our
existing business processes can better position
ourselves to manage pricing more effectively on a
global basis.
LEARN MORE
Related Research
● Business Strategy: Revenue Leakage — Pharma's $11 Billion
Problem (IDC Health Insights #HI220793, December 2009)
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