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Contracts, Chargebacks and

Rebates: Enabling Sales andMarketing Strategies in the

Life Sciences Industry

Todd Snow, Industry Solution Director, Life Sciences, SAP

Doug McPherson, Director, Enterprise Process Architecture, Perrigo Company

Doug Ferguson, VP, U.S. Sales & Business Development, BSN Medical

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Agenda

Medical/Surgical Product Manufacturer’s

Experience

Q&A

Introduction & Solution Overview

Pharmaceutical Manufacturer’s Experience

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Life Sciences Contract ManagementIncreasingly Strategic & Complex

Life Sciences manufacturers

offer various forms of “ value”

to their customers…

… in an effort to secure their

customer and customer’s

customers business…

… in order to drive revenue

and increase margins.

Gross incremental volume

Increase overall drug or product sales through the

channel.Drive direct sales tohospitalsIncrease margins throughreduced distribution overheadMaximize profitabilitythrough rapid sales model andend to end visibility.

True incremental volume

Additional volume fromcurrent consumers

New consumers

Tactics

Chargebacks Accrual Rebates Managed Care Rebates Performance Based

Rebates Volume Based Rebates Admin Fees Credits Discounts Off-invoice allowances Price reductions

Rebates Volume discounts

At Corporate Level:

Inclusion or addition toformulary lists

Contract renewal GPO/HMO/PBM Inclusion

At GPO Level:

GPO/HMO/PBM formularylists

GPO/HMO/PBMmembership and productparticipation

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Improve Financial Reporting;

Compliance to Global Policies& Regulations

Improve Top Line Revenue

Generation

Reduce Cost of Contracting &

Compliance

• Full access to SAP master data thatenables real time visibility withseamless connectivity customer,contract & profitability analysis

• Audit to original transaction with noduplication of master data files

• Advanced capabilities in dashboards,simulations, drill down analysis andpricing optimization

• Full global capabilities for multi-divisional, country, currency

• Supports advance reporting scenariosnow emerging in EMEA

• Incorporation of fixed assetamortization for equipment provider leasing and rental contracts

• Seamless deduction resolution from achargeback submission

• Contract profitability "measures" and"policies" that drive workflowapprovals

• Simulation capabilities to modelproposals to determine margin

• Visibility into contract pricing at pointof sales order entry

• Full functionality for salescommissions and incentivecompensation

• Highly scaleable application that canbe run in real time or batch

• Dynamic uploads from Excel for pricing, chargebacks, membership

• Full functionality to handle wholesaler resubmissions

• Complete visibility to how an order was priced based upon contractmembership & eligibility

• Real time web interfaces for contractprocessing & resolution

SAP Solutions for Contract ManagementOur Strategy

Deliver integrated contract management capabilities to

automate processes, reduce over-payments and improve

productivity that result in higher revenues, margins and

improved compliance, at a lower TCO.

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SAP Solutions for Contract ManagementProcesses

Contract & ProposalAuthoring

Compose Draft

Clause Library

Approval Workflow

Bid Award Notification

Contract Execution

& MaintenanceMaintain MembershipPrice Orders

Claims & Tracings

ProcessingReceive & Validate ClaimsSettle ClaimsNotify Wholesaler Resubmissions

Rebate & Admin

Fees Processing

Track Direct & Indirect Shipments

Track Compliance & Performance

Calculate & Settle Payment

Analytics Alerts

DashboardsSimulations

Price Reporting

Price Types

Transaction Types

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SAP Solutions for Contract ManagementEmbedded Solution

SAP Enterprise Portal

Reporting

Info

Cube

Info

Cube

SAP ERP

Master Data

FI

IP

SD

Customer Customer

Info RecordsMaterial

Vendor

Info RecordsVendor

Pricing Rules (Condition Records)

Sales

Order

Agreement (Rules/Cond it ion Records)

Claim

Request

Indirect

Sales Data

IP Document

•Deviated Pricing•Marketing Funds

•Event Allowances

•Reg’l/Nat’l Programs

•Validation

•Calculation

• Acc rual•Parking

•Settlement

•Reconciliation

•Dispute

Resolution•Post-Settlement

Adj ustment

Data

Extraction

Debit Memo

to Vendor

Vendor CR

Memo/Pymt

MM

Vendor

Invoice

Aut omati c Cleari ng o f Dedu cti on

Customer

Invoice

Data

ExtractionPurchase

Order

Data

Extraction

CR Memo/Pymt

to Customer

Expense/Liability

Recognition

Customer Pymt

&/or Deduction

Dispute

Case

SAP ERP SAP Incentives Administration by Vistex and SAP Paybacks & Chargebacks by Vistex

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SAP Solutions for Contract ManagementReporting

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SAP Solutions for Contract ManagementAdvanced Analytics

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Agenda


Experience

Q&A



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Introduction

Doug McPherson – Enterprise Process Architect

Responsible for supporting:

Order to Cash

Finance to ManageProcure to Pay

22 years at Perrigo

Previous responsibilities at Perrigo included SAP Business Analyst supporting Finance, SAP Implementation Team,Credit and Collections Manager

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Who is Perrigo

A comprehensive generic pharmaceutical business providinghealthcare solutions to consumers

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Who is Perrigo

Founded in 1887

Largest Manufacturer of Over the Counter Pharmaceutical and Nutritional Private Label

Over 2.5 million square feet

Publicly held since 1992

Over 6,000 employees worldwideRunning SAP solutions since 1998 (currently runningSAP R/3®)

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Who is Perrigo

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Perrigo Implementation

Vistex (SAP R/3)

Claims Processing(Adjudication)

Manual ClaimsSubmission

GPO

Membership(SAP Vistex)

Contracts(SAP Vistex)

Billbacks Processing

Billback Document

Settlement doc (CreditMemo)

EDI 844

(Inbound ChargebackClaims)

EDI 849Outbound claimsReconcilication

Claims ReconciliationPaper Output

ChargebacksContract MgmtMembership

Mgmt Business Analytics

844 Inbound EDI TransactionContractMembershipChargeback Claims (Adjudication) Billback / Settlement

849 Outbound EDI Transaction

Scope

Processes

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Extensive use of EDI at PerrigoSales Order (Standard and Vendor Managed Inventory)

Invoices

ASN’s

Purchase OrdersMany others…

Utilization of EDI transactions within the SAP Implementation

844 – Inbound document from wholesaler

849 – Outbound document to wholesaler

845 – Contract Add/Change/Delete – Future Transaction

Business Warehouse Implementation

Standard Extractors

Complete Analytical Environment

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Critical Success FactorsBusiness Process Blueprinting

Business and IT involvement

Expert Chargeback Experience

– If you don’t have this in house, hire it or contract – Don’ttry and figure it out through the process

Development Resources

– ABAP™ development resources are required for defining

several portions of the applicationConsulting Assistance – We had a great resource

Master Data

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Critical Success Factors - Master DataGPO / Indirect / Vendor – Customer Master Records

– Different Account Groups

– DEA/HIN – Customer Master Characteristics

Material Determination – NDC to Perrigo Part number mapping

– NDC Formats (11 or 12, dashes or no-dashes)

Pricing Data

– Pricing Reference Material

Have a solid strategy for data migration (TransactionHistory / Master Data) as well as a good way to create thenew records (CATT / SAP LSMW / SAP BW / Data

Cleansing)

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Critical Success Factors - Training and Change Management

Ensure you have a Training Environment

Utilize Live Data (Parallel Implementation)

Solid Training Plan

– Contracts

– Membership

– Chargebacks

Ensure proper business processes are in place

– Membership Add/Change/Delete

– Paper Claims

– Significant process change, make sure they’re ready everystep of the way

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Critical Success Factors – Organization

Important to keep the Adjudication and Membershipfunctions closely tied together (organizationally). Contractscan be separated.

Contracts represents a larger learning curve than themembership / adjudication process. Has each team hadSAP exposure prior to this project?

Try to move forward with a phased roll-out. There weremodifications to the business process (master data issues)that were easier to manage is small chunks. Try and not“big-bang” this kind of roll-out.

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Measuring Success

600,000 Lines processed per month

<1% Manual Processing Rate

7 Days to process a claim prior to SAP

Claims processed by 11:30 am same business day

Standard Extractors for SAP BW worked very well

Build out the SAP BW and SAP NetWeaver BI environment

to track your success

Value of an integrated solution

– Pricing, Material and Customer Master Data, FinancialIntegration

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Agenda


Experience

Q&A



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Introduction

Joined BSN medical Inc., in 2006

18+ years in Life Sciences industry

Career experience includes:

R&D systems design and development – 3 time R&D 100 award recipient

Product management

Sales and business development

Current responsibilities include:

“Traditional” sales and business development activities Coordination of activities for:

– Analysis & reporting teams

– Contracting teams (local and national)

– Claims team

– Sales development team

Doug Ferguson – VP, US Sales & Business Dev.

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Recognized Leadership in the Med / Surg

& Home Medical Equipment Marketplaces

Compression Therapy Products –Jobst® Compression Hosiery,

Anti -Embol ism Stockings, & Compression Bandages

Wound Care Products –Coverlet® First Aid Dressings,

Surgical Dressings, & Fixation Aids

Fracture Management and Bracing Produc ts –Orthoglass® Splinting Systems, Delta-Lite® Cast Tapes,

Specialist® PoP, & Actimove® Orthopedic Soft Goods

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Who is BSN medical

2001 – formed as a joint venture between Beiersdorf, Inc. and Smith & Nephew, Inc.

2006 – launched as a fully independent entity

Fully integrated global company today

Total workforce of over 3,000 employees worldwide with sales and marketingoperations in 38 countries

Annual sales in excess €600 million ($200M+ in U.S.)

World-class, purpose built manufacturing facilities in 11 countries

13 logistical centers located around the globe

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Positioned to Serve the World

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BSN Medical Implementation

Chargebacks Contract Mgmt (Direct & Indirect) Membership Mgmt Rebates (Direct & Indirect) GPO Admin Fees Sales Commissions Business Analytics

844/867 Inbound EDI Transaction(s)

Contract Membership Submission Chargeback (Adjudication) Indirect Sales Tracings Billback / Settlement

849 Outbound EDI Transaction

Scope

Processes

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BSN Medical Implementation

Utilization of EDI transactions within the implementation

844 – Inbound chargeback claims request from distributor

867 – Inbound sales tracings from distributor

849 – Outbound document to distributor

845 – Contract Add/Change/Delete

40-45 GPO contracts active at any time – must be used by SDfor order/invoice pricing as well as by IP for claims/rebates

Monthly membership updates from GPOs with up to 10Kmembers – 99% of updates submitted in form of Excel files

Challenge to prevent distributors from “cherry picking” from

multiple GPO contract (every hospital a member of 3+ GPOs)SAP Business Warehouse Implementation

Standard Extractors

Complete Analytical Environment

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Critical Success Factors:

General

Business Leadership and IT Support

Master Data Cleansing & Harmonization

– material

– customer

– contractsIn-house chargeback claims processing knowledge –

migrated two separate BU legacy systems to SAP solutions

Flexibility of software to support dramatically differentbusiness models: direct vs. indirect contracting

Consulting Assistance – IP knowledge/expertise, coupledwith broad SAP ERP understanding (especially SD) + ABAPskills

Communication/coordination between IP, SD, FI consultants

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Training & Change Management

Ensure you have a Training Environment – 25% on how to use the s/w and 75% on how the business processes

have been re-engineered

Utilize Live Data (Parallel Implementation)

Solid Training Plan – Contracts

– Membership

– Chargebacks

Ensure proper business processes are in place

– Membership Add/Change/Delete

– Paper Claims

– Significant process change, make sure they’re ready every step of theway

– Handling of exceptions (Pareto’s principle)

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Organization

Important to keep the Adjudication and Membershipfunctions closely tied together (organizationally). Contractscan be separated.

Circumstances may prevent a phased implementation &

deployment strategy … Mitigate the risks associated with“big bang” go live by extensively testing systemfunctionality, user training/documentation, businessprocedures – especially if you can’t run parallel

Concentrate on the exceptions and “outliers”Promote a “no return” mentality and high organizational

commitment to success (“burn the ships”)

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Results

Went “live” in May 2008

After: 90% automated (most manual intervention due to material dataquality issues)

Key metric of success: ability to process/settle all claims in same monthsubmitted/received

Number of sales commissions administrators decreased from 3 FTEs to

.5 FTE Able to utilize one Agreement to control pricing, govern chargeback

claims, calculate direct/indirect rebates, GPO admin fees, etc.

Standard Extractors for SAP BW worked very well

Build out the SAP BW and SAP NetWeaver BI environment to track

your success

Value of an integrated solution

– Pricing, Material and Customer Master Data, Financial Integration

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Agenda


Experience

Q&A



Thank you

Todd Snow

Life Sciences Industry SolutionDirector

SAP

[email protected]

Doug McPherson

Director, Enterprise Business Architecture

Perrigo Company

[email protected]

Doug Ferguson

VP, U.S. Sales & BusinessDevelopment

BSN Medical

[email protected]

mailto:[email protected]






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