Friend or foe

The widespread introduction of more formalised procurement teams into the medical communications setting in the late 1990s was initially met with much trepidation and angst by agencies around the world. Questions included: 'What is their role?' 'How far does their remit extend?' 'What are the implications for our business?' And, occasionally, just 'What?'

Procurement teams were once viewed as being on the periphery of business relationships (and judged with a high degree of suspicion). They are now accepted as the norm, and for many agencies, their first direct contact with a new or prospective client will often be with the procurement team.

Since the early days of procurement, the remit of the team has extended from purely fiscal management to a much broader and holistic approach. The exact responsibilities of the procurement team in the current setting vary from company to company but, in large, encompass one or more aspects of the following:

•  Fiscal negotiations and benchmarking
•  Contractual discussions
•  Identification of potential suppliers
•  Management of partner agency relationships
•  Establishing frameworks for delivery
•  Setting of standards and operating procedures
•  Monitoring of quality and compliance.

Since its uncertain beginnings, for many, the procurement-agency dynamic has evolved successfully and has become an established and valued partnership. As the industry continues to face increasing fiscal challenges and the need to 'do more with less', it will be increasingly important for procurement and agency teams to work together to identify greater synergies and efficiencies moving forwards: finding the right balance between cost and quality will be paramount.

Defining the optimal framework for supplier relations
The roster or preferred supplier list is a well-established concept for many pharmaceutical companies. There is, however, a great deal of variety in how these rosters are developed and subsequently utilized, depending on both company philosophy and resource availability.

For some companies, the preferred supplier list is exactly as the label suggests: preferred but not mandated suppliers. For others, it is a mandatory list and suppliers not included on the roster will not be allowed to provide services to that company. The size of rosters can vary considerably, ranging from a handful of agencies to hundreds. For a pharma company to reap maximum benefits from any given roster, it requires clarity on the objectives of the roster, a clear view on what is required of potential suppliers, buy-in from all the relevant internal stakeholders and the commitment to establish and then maintain the roster.

Also critical to the success of the roster is its size. Limiting the number of roster agencies too severely may result in a lack of therapy area expertise, skill sets or interpersonal fit for the product teams. Conversely, having too many suppliers on the roster will dilute the potential benefits that can be gained from a procurement perspective and may negate the perceived advantages of participating in the roster from an agency perspective.

Balance is vitally important here for both sides so that each is willing to invest in the relationship and drive value. For a global roster in the medical communications field, anywhere between four and 15 discipline-specific agencies is generally considered to be the optimal number, depending, of course, on the size and product diversity of the company. Potential benefits associated with this scale include:

•  Manageability in terms of procurement team resources and required input, assessment, training and accompanying relationship building
•  Consistency in terms of quality and delivery, and the ability to monitor this effectively
•  Speedy and effective on-boarding as a result of familiarity with company processes
•  Preferential rates, project prices and volume-based discounts based on both surety of business and process efficiencies.

Other considerations that are important include:

•  Size and culture of the agency: an ideal partner will offer the breadth and depth of resource required for peak workloads (particularly for those companies choosing to outsource at franchise level), but will remain client-focused with minimal bureaucracy
•  Scope and scale of the agency: network consolidations are becoming increasingly attractive to some companies due to the huge potential for cost savings, geographical diversity and multidisciplinary skills acquisition associated with large networks. Although some companies remain sceptical about the lack of choice for their teams and working with a potentially disparate group of offices around the world, a visible demonstration of joined-up working (in terms of infrastructure and internal communications) and tangible benefits will become increasingly key.

Setting the right hurdles
Selecting the right agency for a specific opportunity presents a challenge that is both exciting and potentially onerous for the procurement team and its product team colleagues. From the agency perspective, the pitch process is often a labour intensive and expensive process, with a very uncertain outcome. As an area for making significant time and cost savings, it offers great potential.

The majority of agencies would agree that rather than incur high business development costs, it would be preferable to invest this money in other ways to the benefit of both the agency and the client. While this may be a utopian concept, some practical ideas, which may offer potential savings in terms of time, effort and cost on both sides include:

•  Use of a simple but effective precursor screening exercise eg, a brief overview of therapy area based experience and understanding will enhance the selection process and filter out unsuitable agencies in a very efficient manner. In some cases, a simple exercise such as this may actually preclude the need to pitch
•  Setting of test projects, based on real-life product needs, rather than an artificial pitch situation offers a genuine opportunity to test an agency's true ability to deliver. Selecting a project of appropriate scope and scale will also be more meaningful and cost effective from the agency perspective
•  Having a good understanding of potential partners' strengths and areas of expertise (through optimal roster management) will hopefully result in the selection of an optimal number of agencies for consideration. Three-way pitches are increasingly becoming industry standard. Increasing the number of participating agencies within a pitch process often poses practical difficulties in terms of time commitment for the product team
•  Consideration of other non-traditional performance indicators may be helpful. For example, procurement teams often elect to share the answers to questions from one agency with all the agencies under consideration to level the playing field. However, in doing so, the traits that the procurement and product teams may value in 'real life' – for example, proactivity, insight and good questioning and listening skills – may be masked by this process.

What might the future bring for the procurement/agency dynamic?

While it is difficult to predict future events accurately, there are a number of emerging trends that will provide interesting challenges for both the procurement and agency teams over the next few years.

•  Roster consolidation: with increasing budgetary constraints, a more streamlined approach to purchasing may become more attractive. The ability to leverage greater purchasing power with fewer but more incentivised suppliers may override the need for a plethora of choice. In turn, these suppliers will be required to demonstrate high levels of expertise, breadth and depth of resource, insight, flexibility and agility. Adding value will be key, not just in monetary terms, but through innovations that offer improvements in time and quality, eg, faster turnaround times, reduced number of review cycles etc

•  The 'working' network: as previously outlined, the agency network concept has been received with varying degrees of success thus far. The first network to demonstrate robust internal connections and the ability to offer true global/local integration across and within both the more traditional and emerging markets, while offering significant cost savings, will change the face of medical communications procurement

•  The 'integrator model': one 'master' agency within a network could work with other agencies on behalf of the client. The 'master' supplier would drive standardisation and reduce the level of client oversight required to manage multiple agency interactions. The same principle could also be applied to a non-network situation

•  Increased agency specialisation: the evolving regulatory environment and accompanying need for separation between various disciplines, combined with internal agency efficiency drives may lead to increased specialisation and streamlining of service offerings within an individual agency

•  More quantitative benchmarking: the advent of more sophisticated technology in the form of web based e-auctions, combined with a more standardised delivery approach will lead to greater transparency, awareness and increased pressure on pricing for agencies moving forwards

•  Offshoring: this remains a topic of much debate. A number of companies have outsourced their medical communication supplier services to emerging markets such as India and China. Their progress is being watched with keen interest by both the industry and agency community alike – this approach, while having potential benefits, is also associated with potential pitfalls and possible cost-benefit erosion in the future. Hans Engel, Purchasing Manager at Eisai says: "There has begun a trend to 'right-shore' back many of the services that were originally offshored and forecasted to reduce an organisation's bottom-line. Recent statistics have shown that almost as much money and in some cases, more money, has been spent in rectifying mistakes made and starting up the offshore facilities. Thus, offshoring as a complete solution is not turning out to be a true cost-effective means to save monies. Rather, companies may be better served by a mixed model eg, 20% offshoring, where the 20% covers specific requirements such as overnight coverage."

Conclusion
The one certainty moving forwards is that price pressure is going to increase. Focusing solely on cost, without consideration for quality and compliance, is a short-term fix and will ultimately be detrimental in the long term for the procurement, product and agency teams. Instead, maintaining an open dialogue between all parties, and creating an environment where both parties can constructively challenge each other and explore new ways of working, are going to be key for future success.

The author
Alice Choi is Head of Communications at Complete Medical and can be contacted at Alice.Choi@complete-mc.com