Contract management solutions can help life sciences organizations reduce sales cycle time and close at higher volumes.
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Life sciences organizations process a high volume and wide variety of contracts related to the commercialization of drugs and devices, as well as service agreements to maintain larger medical equipment. This contract process, including generating, signing, storing and acting on the obligations, can be labor-intensive and complex. But a contract lifecycle management (CLM) platform can help automate and simplify this process for pharmaceuticals and medical device companies.
In 2019, pharmaceutical companies generated $356 billion in net revenue from the sales of drug products. The top 10 medical device makers, meanwhile, reported $162.2 billion in revenue in 2019. That $500 billion-plus in annual revenue represents a multitude of contracts related to the commercialization of drug products, medical devices and service agreements.
Yet, getting sales and service contracts approved, particularly when agreeing to terms and conditions that pose potential risks, is often cited as one of the biggest obstacles in the agreement process. A common way for sellers to prepare a contract is to copy an existing document and replace the original content with details about a new deal. This is a quick way to populate a contract, but it also opens the door for a range of errors and delays by the legal team—incorrect data entry, reuse of outdated language or terms, repetition of previous mistakes, and more. Any time saved creating documents this way is forfeited later as reps revise documents to correct bad information.
Additionally, when the contract goes through the negotiation process with a customer that painstakingly reviews agreements, the extensive amount of revisions can cause missed sales forecasts and contribute to lost deals.
In the past year, which of the following consequences has your organization experienced as a result of inefficient and/or manual agreement processes?
Larger medical device companies rely heavily on their service contract business. These companies contract with customers for equipment maintenance and repair over long periods—usually two to five years, although it might be longer. In some cases, the equipment maintenance service contract is completed as part of the equipment sale; in other cases, it’s a separate contract close to the end of the warranty period. After the initial contract term expires, the sales cycle begins again to renew another term for that contract.
With all these important dates affecting sales transactions, tracking agreement milestones, like warranty periods and contract end dates, a CRM system such as Salesforce can become a critical part of the sales process.
Service contracts can also be more complex because, unlike the equipment itself, the service is an intangible offering that can be customized as much as you or the customer would like. The terms of service, timing and amount of service hours, service level agreements (SLAs) for response time and the specific parts of the system that will be serviced are all potential points of negotiation—and possible points of delay in the contract process.
Service contracts must also mitigate potential risks. If medical equipment goes down, preventing a physician from conducting procedures, the physician loses potential income and a patient is prevented from receiving treatment. The service contract must document the responsibilities and obligations of all parties to mitigate risk in such situations. In this respect, the legal team is a critical stakeholder in effectively managing the sales contract workflow.
A CLM platform can tame contract complexity. Here’s how:
There are many steps across the lifecycle of the sales contract process. CLM solutions automate and streamline as many of those steps as possible—including document generation, negotiation and approvals—to reduce errors and increase the productivity of each stakeholder in the process. Because contracts in the life sciences industry are crucial to preventing organizational liability, a CLM solution can automate and digitize the signing process based on authorization levels so employees don’t waste precious time hunting down key signatures.
CLM platforms can integrate with other information systems, most notably the customer relationship management (CRM) system. This allows users to pull pre-populated data into new sales and service contracts with greater ease without the errors of repurposing an old contract. You can also pull in pre-approved language, terms and clauses.
Handoffs between steps in the contract process are often informal, highly manual and easy to lose in an inbox. As a result, stakeholders are often left wondering about the status of a contract. CLM solutions instantly advance agreements to the right people, connect people, bridge systems, keep the process on track and provide visibility to all stakeholders to understand where the bottlenecks are. Automated workflows also create standardization in support of compliance by ensuring each authorized step in the contract process happens the same way every time per corporate policies and industry regulatory requirements.
Life science organizations are constantly signing master-service agreements (MSAs) and non-disclosure agreements (NDAs) to keep proprietary information safe. Their contracts often contain confidential information like financial terms and obligations that need to be secure yet available for analysis.
Most organizations use digital methods for this, but not necessarily smart methods. Often, agreements end up in random places throughout the organization—or, if there is a specific place to put them, getting them there is manual and error-prone. Moreover, once an agreement is filed, it is frequently forgotten, which means missed opportunities for changes in pricing at renewals and missed entitlements.
CLM solutions centralize all contracts in secure storage for easy searchability by various criteria and available for precise analysis, allowing your organization to minimize risk and uncover opportunities while reducing the chance that a contract will fall into the wrong hands.
Which of the following benefits have you experienced as a result of implementing digital agreement processes?
Clinical benefits: By digitizing these contracts and forms and automating how they flow from stakeholder to stakeholder, CLM solutions enable transactions to happen in seconds and minutes instead of hours and days. Those transactions also become more accurate as organizations reduce the opportunity for human error. And patients get the treatment they need when they need it, increasing the odds of better clinical and business outcomes.
Financial benefits: The longer a contract lingers, the more likely it is that the deal could go south because someone drops the ball or has second thoughts. A digital agreement process can reduce the length of a transaction significantly, increasing the speed at which revenue can flow to a business. By digitizing contracts and forms, automating how they move from person to person, reducing document turnaround time and increasing contract visibility so agreements don’t get lost in someone’s inbox, you’ll spend less time waiting for action and get more value out of business initiatives. Faster agreements also create a better experience for partners and employees.
Risk mitigation: A CLM platform mitigates risk on two fronts:
The automated workflows in CLM also help mitigate the risk of having multiple versions of an agreement and the inability to control access to changes. With CLM, there is only one version of a digital contract that exists at any moment. All reviews, changes, modifications, updates and tweaks happen to the same version of the contract and only by people authorized to do so. By standardizing structure and language in digital contracts and forms, you reduce the risk that contract terms may not comply with company policies or industry requirements.
