WEBINAR: Turbocharging Legal Contract Transformation in the Age of Generative AI

Healthcare and Pharma Companies Are Trailblazers in Contract Management – And Other Results from the WorldCC Benchmark Report

Key Takeaways:

  • The health & pharma sector is ahead of many in having dedicated and centralized healthcare contract management resources but remains too engaged with administrative activity.
  • Continued focus and momentum on digitization and integration of buy/sell resources and data flows will equip the sector for change. Skills and knowledge must also adjust.
  • The action plan for change should focus on speed, adaptability, improved margins, and greater visibility into business risk.

World Commerce & Contracting recently released its highly anticipated "2021 Benchmark Report: The Benefit of Focus, the Cost of Neglect," representing data from over 600 respondent organizations— making it the largest survey of commercial and contracting professionals in the world.

While the overall findings are fascinating, even more insightful are the learnings that emerge when we drill down into specific industry data. After all, contracting challenges, opportunities, and maturity vary significantly by industry.

In the second of a series of industry deep-dives, WorldCC released a report looking specifically at the health and pharma industry—providing sector-specific analysis and comparison with cross-sector performance and trends.

What jumps out from the report is that the health and pharma sector is ahead of many sectors in having dedicated and centralized contract management resources, being among the earliest sectors to introduce technology in support of contract management.

72% of respondents in health and pharma feel responsibility for contract management is clear in their organization, and 57% report that their contract management resources are fully centralized. Centralizing contract management in an organization enables the company to scale best practices and gain a global understanding of its commercial engagements. The centralized nature of contracting in the healthcare and pharma space points to an advanced state of maturity for contract management.

That's the good news. What is also clear from the report are signs that some of these existing systems may now be outdated, especially for the emergent types of agreements that are increasingly in use. In a recent webinar hosted to discuss the report's findings, Tim Cummins, president of WorldCC, noted how outdated technology can stand in the way of how today's workforce expects to work in a digital environment.

"There is a push for a more collaborative approach to contracts," Cummins observed. Meeting the new expectations will "require a new set of tools and technology than what is usually expected in this sector."

Industry Faces Commercial Pressures

The need to achieve contracting excellence is only increasing as new commercial models make the industry more dependent on contracts. Specifically, health and pharma companies are turning to outcome- and performance-based contracts, in which payments are tied to mutually agreed-to metrics (such as health outcomes). There is also a significant push to "as-a-service" agreements that enable companies to quickly access software, human resources, and even medical devices through licensing contracts.

All of this adds up to more complex post-award contract management scenarios. Yet, while health and pharma companies have above-average engagement of contracting resources pre-award (almost double the cross-sector average), they dedicate below-average resources post-award. Meanwhile, only 23% of respondents reported having the budget to support improvement, versus an all-sector average of 43%.

"In an industry sector where there is significant pressure to focus on new commercial models, especially SaaS and PaaS, new skillsets are required in the post-award environment," said Sally Guyer, Global CEO, WorldCC. "This is definitely an area of improvement for the industry."

Conclusions

What is clear from the WorldCC report is that while the health and pharma industry is well advanced in its contract and commercial maturity, a mindset shift is needed to truly understand the expanding value modern contract management can deliver.

WorldCC's research shows that, with the right investments, the health and pharma sector could benefit from up to 80% faster average cycle time from bid to signed agreement, and up to 8% improvement in average contract value retention. The health and pharma sector has the opportunity to learn what other sectors know: that organizations that invest in capability consistently demonstrate higher levels of profitability.

The action plan for change should focus on speed, adaptability, improved margins, and greater visibility into business risk. Simplification initiatives should concentrate on clause libraries, user-based design, AI-enabled playbooks, self-service tools and competency development, and an end-to-end digital process.

For more insights and a fuller discussion of the health and pharma sector benchmark report, watch our on-demand webinar here.