REPORT: 2025 Annual ProcureCon Chief Procurement Officer (CPO) Report

Four Big Trends Pushing Pharmaceutical Companies to Enterprise Contract Management

Change is afoot in the pharmaceutical industry. Merger-and-acquisition activity is high; regulations are becoming ever more stringent; companies are focusing on cost; and outsourcing is rising. And this just scratches the surface.

Forward looking pharma leaders are exploring how the digital transformation of their processes can help meet these challenges head-on. Indeed, a quick survey of any pharma news site shows CEOs like Novartis' Vas Narasimhan talking about getting "digital in the DNA" of their companies.

Digital innovations have the potential to revolutionize every facet of the pharmaceutical industry, from the way trials are conducted to how medicine is manufactured and delivered. One digital initiative already being undertaken at many of the world's biggest pharma companies is enterprise contract management.

We are interested in the impact of contracting on four major trends in the pharmaceutical industry:

  • Outsourcing

Every pharmaceutical company works with a mix of captive and outsourced resources to develop, manufacture, and market, but outsourcing is clearly on the rise as companies focus on core competencies. Industry magazine Contract Pharma reported in 2017 that the market for outsourcing services is growing faster than the pharmaceutical industry as a whole. Today, a pharmaceutical company's relationship with its vendors is business critical and these relationships have become much more collaborative.

Each of these relationships is defined by contracts. Manual contract processes often see negotiations get bogged down in approval cycles, and it is difficult to have full visibility into who a company is doing business with, and on what terms. Missed supply or regulatory obligations, unwanted expiries or renewals, and other contract oversights can damage important business relationships and create inefficiencies.

  • Complicated Supply Chains

With more outsourcing comes a more complicated supply chain, as companies must monitor work completed across multiple jurisdictions to ensure products are delivered to market safely and on time. A single trial could involve multiple Contract Research Organizations (CROs) and it is often the sponsor's responsibility to ensure all sites are compliant.

A manual contracting process means visibility into these complicated supply chains can be impossible. Especially difficult to track are "back-to-back" contracting situations when a vendor contracts with another vendor to fulfill an obligation. If companies don't have full visibility into multi-tier supply chains, they expose themselves to regulatory liabilities.

  • Increasing Focus on Cost

Traditionally, the pharmaceutical industry has been revenue focused. However, in the past decade companies have placed greater emphasis on controlling costs as reimbursement pressures and drug development costs escalate.

Manual contracting processes impede a company's ability to optimize spend. For example, it is not uncommon for two different divisions of the same pharma company to unknowingly contract with the same vendor but on different terms. Because the departments have no visibility into each other's contracts, inefficiencies persist.

  • Increased M&A Activity

The pharmaceutical industry has seen a large amount of M&A activity in recent years, a trend that shows no sign of slowing down.

During an M&A transaction, sellers need to respond to a huge volume of due diligence queries on contracts involving customers, vendors, suppliers, employees and intellectual property. Even a simple question around contract expiry dates or the location of the latest version of a contract can slow down an M&A process.

Once the deal is done, the buyer must integrate the acquired company's contracts into its own system – while avoiding technical issues and costly delays. Without a robust contract management platform, the risk assessment process both pre- and post- close becomes onerous and lengthens the amount of time it takes to capture the full value of the merger or acquisition for all parties.

How Enterprise Contract Management Can Help

Through central contract repositories, automated workflows, and the tracking of obligations and spend, enterprise contract management systems can help pharmaceutical companies proactively address these challenges. Here are a few benefits companies can expect.

  • Better Internal Visibility

Enterprise contract management software creates a central repository of contracts, providing better visibility across an organization. For example, it can help a company identify vendors that multiple departments are contracting with to take advantage of the best terms. One global pharmaceutical leader was using a fragmented, partially automated contract management system that was challenging to use and difficult to govern. The company adopted the Icertis Contract Management (ICM) platform to create a unified end-to-end system that integrated with its existing IT infrastructure. The improved visibility meant the organization could better leverage sourcing agreements and lower costs. This internal visibility also supports M&A activity.

  • Improved Supply-Chain Management

Supply chain visibility is greatly improved by enterprise contract management. By creating a single source of truth for all commercial relationships, pharmaceutical companies gain deep visibility into their supplier relationships, including regulatory compliance, renewal and expiry data and back-to-back contracting risks. This greatly improves a company's ability to manage supplier relationships and reduce regulatory risk.

  • Stronger CRO Relationships

To build on the benefits of the ICM platform, Icertis has also developed a specialized application for CRO relationships. The Clinical Trials Agreement and Budgeting app provides sponsors and CROs with powerful tools to manage clinical trial agreements and track budgets. This helps companies ensure compliance and improve collaboration with CROs and sites and compliance on agreements; easily track trial budget consumption; and reduce contract cycle times by up to 80%.

In today's shifting pharmaceutical industry, companies need to find ways to accelerate their business, protect against regulatory and financial risks, and optimize processes to better compete in the marketplace. All three imperatives can be aided by enterprise contract management. To learn more about why Icertis has earned the business of contact us today.