This document discusses strategies for buyers to counter monopoly control by secondary market research service providers. It recommends: 1. Gradually de-bundling services and engaging alternative providers in specific markets to create competition and leverage better prices. 2. Establishing a center-led procurement structure to increase negotiating power and harmonize costs across business units. 3. Accepting short-term increased complexity and costs to realize long-term savings of 5-10% on purchases from diversifying suppliers.

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3. Angad Singh
Senior Research Analyst
Beroe-Inc
Dialing in from:
India
Host
Members for the Webinar
Shriram
Engagement Manager
Beroe-Inc
Dialing in from:
India
Moderator

5. 01
Demand scenario
02
Demand management
03
Justify the Monopolistic Control
04
How Buyer Side Procurement can Counter the Monopoly

6. 33
34
35
36
37
38
39
2012
2015 (F)
Loss in Billion USD
Patent
Expiries
Opportunity Loss Comparison – 2012 vs 2015(F)
38
Patent Cliff

7. Growing Emphasis on Reducing Healthcare Costs
Generics
Inflation

8. Increased dependency on secondary market research
Spend Of 10-50 million USD on secondary market research
On an average, 60-70% of this amount is spent “on the monopolistic provider”
Patients, Payers & Prescriber
Competitor Landscape & Drug Positioning

9. Increased dependency on secondary market research
Market
New Market Same Product
New Market New Product
Same Market Same Product
Same Market New Product
Product



?
Data Insights
Pharma Consultants

10. Patent Cliff in 2011-2012
35 Billion
Increased demand for secondary market research services
Individual company opportunity loss as high as 6.1 billion USD
On an average 3 billion USD for top pharmaceutical organizations

11. Recovering from the Economic Slowdown
Service Providers Unable to Sustain
Stakeholder Facing Budgetary Cuts
Innovative Procurement Trend – Single Base Service Provider Dependency
Win-win Situation
Assured Revenue Influx
Accommodating Budgetary Cuts

12. Attracted More Client Portfolio's
Buyer’s Constraints
Budget Cuts (Minimum of 3% – 5%)
Supply Risk – Financial Instability of Service Providers
Service Provider’s Leveraging Points
Operated on Low Profit Margins
As low as
7-10%
Financial Stability
Overall Revenue
USD 2.1 Billion
Capability to Service Across Geographies
Organic expansions
New business units
Research Revenue
USD 750 Million
Net Profit
USD 311 Million
Inorganic expansions
M&A

13. Highlights
Ownership For Outsourcing was on the Service Provider
RFI & RFQ Process
On-site Support
Global Contracts
Services at Competitive Prices
Spend Consolidation
Continuous Revenue Influx
Captive Working Model – FTE Basis

14. YES!!
North America
Suppliers – 40-50
Latin America
Suppliers – 25-30
Europe
Suppliers – 40-50
APAC
Suppliers – 75-100
Africa
Suppliers – 10-20

15. Globally, About 160 – 170 Service Providers Competing Across “The Perceived Giant’s” Service Lines
Cost of services is 10%-15% lower
100
75
50
Service Provider 1
Service Provider 2
0
25
55-65%
65-70%
2/3 Demand

16. Step by step de-bundling of services
Identify markets with presence of alternates
Initial phase
Phase I
Engage with alternatives on short term basis
Phase II
Engage with preferred service providers on long term basis
Evaluation Phase
Review performance of service providers
Service like payer insights, patent insights, prescriber insights, patient & physician insights
Key market like US, UK, France, Germany, Pharmemerging markets
•Here the contract duration may range from 3 months to 1 year
•Evaluate & filter out service providers
•Long term 2-3 years
•Parallel engagement would ensure a platform to benchmark services
•Value Benefits Provided
•Accuracy of Insights
•Ease of Integration

17. •Ability to bring in service innovation or onboard technology to meet buyer’s business objectives
•Measured Based on Database Synchronization, Refresh Rate, Server Downtime
•Preferential pay-back terms, ability to work on a pay-for- performance model
Value Benefits Provided
Accuracy of Insights
Ease of Integration

18. Market Leader Buying out Competition
1
Relative Value/Profit Impact
Market Risk Complexity
Critical
Acquisition
Leverage
Strategic
Low
High
High
Shifting Balance towards Supplier
Low
Possibility is Low
Amount of competition in the market is HIGH

19. Increased Sourcing Complexity
2
Center-led Procurement Structure
Business Unit 1
Business Unit 2
Business Unit 1 Category Director
Business Unit 2 Category Director
CPO
Corporate Purchasing
Centralized procurement with regional corporate control

20. Increased Harmonization Costs
3
De-bundle up to (60-70)%
Implies 5%-10% saving on purchasing secondary market research services
On time investment on harmonization cost would be
3%-5% of the spend
“Realize cost savings from second year itself”

21. Leverage Value Benefits
•Implement pay-for- performance pricing mode
•Free ad-hoc projects
Create Supplier Competition
•Parallel sourcing – monopolistic service provider & alternatives
Reduced Supply Risk
•Evaluation of untapped supply base
Higher Negotiating Power
•Discounts on pricing points
•Preferential service provider fee payment terms
Pros

22. Increase
Sourcing
complexity
Increased
Harmonization
Costs
Keep in Mind
•Increased service provider base
•Multiple contract management
•Internal re-structuring
•Service providers & procurement team synergies

23. “Change is inevitable”
The time to evaluate alternative providers is “NOW!!”