Welcoming procurement onto the team
Sunday, May 15, 2016
For decades, procurement professionals have been the Rodney Dangerfields of the pharmaceutical industry: they got no respect. Procurement held up projects, got bogged down in protracted budget and contract negotiations, and was a hassle.
The function is now changing. Procurement is moving from the back room to front and center.
Searching for new ways to improve the effectiveness of their collaborations with CROs and investigative sites, sponsor companies are looking at the procurement function as a more strategic relationship-driving asset. The role of procurement professionals is evolving from one focused almost exclusively on cost-savings and transactional activities to one focused more strategically on facilitating collaboration, innovation and efficiency.
Keith Greaux, executive director, Global Strategic Sourcing at Amgen, has observed this evolution over his 20-year procurement career. “We have gone from being a purchasing organization to being more of a strategic organization,” he said. “We’re moving in that direction, evolving over time. Before we were in a reactive mode; now we are trying to be in a proactive mode.”
“We’re really focused on being more of a team player, working to help set strategy and to really understand the business so we can help make good decisions,” said Kevin Mitchell, head of Clinical and Medical Procurement at Shire. “What I see in the industry is a real change from colleagues saying to us, ‘You need to sign off on this’ to ‘We need to do this, can you help?’”
“Procurement functions have different roles in different organizations,” said Brian Whitlock, director for R&D Services, Global Procurement, at Bristol-Myers Squibb. “Some procurement groups can be transactional. However, here at BMS, procurement partners strategically with the business units to achieve the greatest total value in terms of speed, innovation, securing goods and services, and savings.”
“Where is our procurement evolving and where would our procurement professionals like to be?” asked Jyothi Ahmed, executive director, Center of Excellence, Global Procurement, also at Bristol-Myers Squibb. “Moving toward a more integrated role influencing business strategy.”
“At Bristol-Myers Squibb, the Procurement group has transformed its role in the organization,” Whitlock explained. “As a strategic-sourcing resource, we take a long-term, cross-functional view that incorporates market dynamics, innovation and strategic supplier relationships, while ensuring our stakeholders can secure the required goods and services.”
The reasons for this change, the cultural shift it requires and how this evolution is being supported internally all have much to do with the complex and challenging environment surrounding drug development today.
Cost and efficiency pressures
Cost pressures are a significant drug development reality that must be managed carefully by the procurement function. According to EvaluatePharma, total global spending on R&D will exceed $150 billion in 2016; up from $94 billion in 2010. Agreements governing contract service relationships have become more comprehensive as sponsor companies look to set expectations and establish clear collaboration terms.
Major and mid-sized pharmaceutical companies have consolidated and downsized their fixed operating costs, which has increased their reliance on variable capacity and expertise provided by CROs. A growing number of subcontractors, niche service providers and technology solutions providers, support clinical projects, and many external service providers have entered into more strategic R&D relationships.
The procurement function has responded by extending its traditional role beyond developing requests for proposals and administering purchase orders. Procurement is now playing a key role in coordinating and integrating a diverse team of internal and external players and disparate solutions.
“Procurement is one of our externally focused organizations,” said Marisa Co, vice president of R&D, Business Insights and Analytics, and vice president of R&D Services, Global Procurement at Bristol-Myers Squibb. “We are constantly looking at the marketplace to try to determine best practices and how to incorporate them into the way in which our stakeholders and business partners operate. When you think about the role of procurement, it should never be three bids and a buy, which is the perception and what we traditionally have done in procurement in pharmaceuticals.”
Procurement professionals are bringing new insights from suppliers to enhance the business of drug discovery. “Traditionally the legacy has been that procurement is very cost-focused, and there are times when that is needed, but sometimes you sub-optimize by just looking at cost,” Ahmed explained. “Now we are contributing to strategy. We are saying that we understand the marketplace capabilities, trends and best strategies, and we are drawing on that market intelligence.”
Today’s procurement best practices support a more strategic and productive collaboration, and having the right skill set is critical for procurement professionals to proactively meet these new responsibilities. “Before we were just processing information, but now we have to have the ability to influence,” Amgen’s Greaux pointed out. “You need to have both influencing skills and deep analytical skills to not only come up with new ideas, but to present those ideas in a logical fashion that drives good business decisions.”
Today, procurement must be a natural partner to all the functions in the enterprise—but those on the front lines say this involves a culture shift that has not always been easy. “It’s a process of building our value proposition to the team, and it’s taking a lot of education,” Shire’s Mitchell said.
In some organizations, this new role has evolved from an often-adversarial relationship to a collaborative one. Many procurement professionals believe that their expanded role is fully supported by upper management, but the onus has been on procurement to demonstrate its worth to stakeholders.
“I think you have to not just advocate for yourself, you have a build your case,” Greaux said. “If you do the right work and provide value, then people will come to you. If you want to have a seat at the table, then you have to prove your value.”
Do some question why procurement is getting involved beyond cost control? “Every day,” Whitlock answered. “And that should happen. We need to build that relationship and build that trust. We are the external experts for the organization, so we are constantly managing industry trends, conducting peer benchmarks and talking with suppliers, in addition to working with internal stakeholders. In relationships where we have those key elements, as a business partner, we can push conventional thinking aside and bring innovative solutions to the business.”
To support this culture shift, many pharmaceutical companies are working to break up silos to encourage better internal collaboration. They are employing procurement professionals with a broad range of technical skills and experiences, those with proven ability to focus on building relationships and driving innovation through a deeper understanding of the supply base.
Procurement professionals anticipate that enhancing their role in managing supplier relationships, harmonizing technology and driving innovation, will deliver new operating efficiencies that will allow sponsors to optimize their resources.
“As procurement professionals, we bring value to the organization by first understanding all the pieces of the puzzle, and integrating the various pieces of the R&D supply chain from Discovery to Medical,” Bristol-Myers Squibb’s Co said. “That understanding is a fundamental skill set that a sourcing professional has to bring to stakeholders in order to suggest where the value can be unleashed.”
Bringing stakeholders together is especially critical in today’s tight economic times. “Collaboration, and understanding how to link strategy to sourcing, is an enormous key, and so is understanding the business and how the various pieces intertwine,” Co continued. “This completely changes not only the mentality of the sourcing professional, but the mentality of a business partner, who now sees us getting involved much earlier in the process to link sourcing strategy to the business strategy.”
Procurement professionals point to technological tools as a significant way to support their expanded role, such as an e-procurement solution developed by Biofficient. The product uses a cloud-based platform to allow for the clinical RFP process to be completed online, with detailed analytics providing insight in clinical development spending.
“Although they are getting a seat at table, in many cases procurement professionals still don’t have the tools they need to really enable them to provide value-added information,” said Biofficient CEO and President Karen Wills. “This tool enables the collection of data in a much more structured format, accelerating the RFP process in order to get to trial faster. It helps the procurement professional make the process a more collaborative effort.”
Shire’s Mitchell views procurement as an agent of change in the drug development process.
Mitchell and others believe that this new generation of procurement practice will provide a competitive advantage to organizations looking to become partners of choice. Procurement is the bridge that brings internal collaborations together and acts as a guide to help them coordinate and succeed.
“Procurement has great value in building capacities that don’t already exist in the organization,” said Mitchell. “It goes beyond some of the past behaviors of needing to buy something and just going out to get it. Now there’s a bigger thought process that involves the best requirements and options to buy. Procurement is bringing discipline and structure to collaborative relationships, and providing value to stakeholders.”
Lisa Catanese, ELS, has been a medical writer and editor since 1986, covering clinical trials, medical research, newly approved drugs and devices, consumer health education, continuing medical education and more. She is a member of the American Medical Writers Association and is certified by the Board of Editors in the Life Sciences. Email Lisa@BlueBlazeCommunications.com.
This article was reprinted from Volume 23, Issue 05, of The CenterWatch Monthly, an industry leading publication providing hard-hitting, authoritative business and financial coverage of the clinical research space. Subscribe >>