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Agilent Betting Pharma Industry Will Adopt Comprehensive Asset-Management Programs

This story originally appeared in Biocommerce Week, a newsletter that has been discontinued.
 
Agilent officials believe that the comprehensive asset-management programs that it and a couple of key competitors have launched over the past couple of years are winning over a cost-conscious pharmaceutical industry, and will eventually be used by a growing number of large and mid-tier firms.
 
Last week, Agilent announced that it had expanded its Intelligent Services program to cover its full line of 1200 and 1100 Series liquid chromatography products. The program, which provides web-based, remote instrument monitoring and diagnostics capabilities for Agilent’s instruments, will eventually be expanded to include other vendors’ equipment covered under Agilent’s Lab Resource Management offering.
 
Agilent, along with rivals Thermo Fisher Scientific and PerkinElmer, has embraced an asset-management model that is relatively new for the life science tools industry and extends far beyond traditional service contracts. It follows a paradigm established among hospitals in the broader healthcare industry.
 
“Realistically, we’re looking at about a 10-year lag from where the healthcare industry was,” said Brent Saliman, worldwide program manager for Agilent’s LRM business.
 
The model, which is riskier for customers than standard service contracts, essentially turns over the whole lab to a single provider. In return, the customer is promised cost savings, on-site service, and a significant decrease in the time necessary to deal with individual service contracts.
 
As with similar programs rolled out over the past couple of years by PerkinElmer and Thermo Fisher, Agilent places engineers and administrators at customer sites. Right now, Agilent is focusing on instrumentation for the markets in which it competes.
 
“We have now developed in house the ability to directly provide service on more than 100 modules of HPLC, GC, and mass spectrometry instrumentation,” Saliman told BioCommerce Week. “We have invested not only in inventorying parts and leveraging Agilent’s existing order-fulfillment infrastructure, we actually now have over $1.2 million worth of repair service parts for non-Agilent equipment, and that’s something that nobody in this business can begin to tout.”
 
He said having these parts stocked at Agilent facilities and at customer sites means the firm can “get our customers up and running as quickly as possible,” and offers an advantage over just-in-time delivery.
 
Saliman said, in general, Agilent does not buy parts directly from the equipment vendors, ordering instead from multiple supply sources. He also noted that one of Agilent’s primary competitors is vehemently opposed to this service model, and has refused to sell parts directly to Agilent.
 
“The reality of the situation is they don’t have to,” said Saliman. “They’ll sell them to their distributors, who will sell them to us.”
 
He said the firm also has asset-management capabilities that enable the firm to track assets within a customer’s environment. One of the things that the firm can do is identify equipment for which a customer may be paying service fees, even though that piece of equipment has been decommissioned.
 
“We developed internally our own asset-management portal that gives customers the ability to see at a glance where all of their equipment is, service histories on all of that equipment, our performance against our service levels, and to overall evaluate” each equipment’s reliability.
 
Saliman said Agilent’s LRM business currently services roughly 50 customers, including about a dozen of the world’s top-15 pharmaceutical companies. He said the firm has LRM staff deployed across North America, Europe, and Latin America.
 
The LRM business has more than 60 engineers trained on Agilent and non-Agilent equipment, he said. He also noted that the firm’s compliance program has been fully integrated into the LRM offering.
 
Saliman said the value proposition of the asset-management business may differ depending on the client, but cutting expenses is the key issue for the biggest pharma firms.
 
Relying on a single provider allows customers to leverage their economies of scale and provides them with on-site resources, he said, which allows them to lower their costs, while removing the expense of travel and delays in service-response time.
 
Industry Shift?
 
According to Saliman, when Agilent first started approaching customers about managing their assets, some of these potential clients had service contracts with more than 150 equipment manufacturers. He said that trying to negotiate contracts with all of these vendors was complex and troublesome.
 
“But procurement is just one side of the equation,” said Saliman. “The other side of this is really the end users, which have a couple of different goals depending on what type of lab they’re operating in.
 
“If they’re operating in a regulated lab the risks of moving toward an asset management type of model are substantial unless they have faith and confidence in the auditability of the compliance side,” he said. “If they’re operating in a non-GMP type of lab they have a little more leniency. Those were some of the early adopters” of the program.
 
Saliman said a unique aspect of Agilent’s asset-management program is its Intelligent Services Platform, which is a remote monitoring and diagnostic solution. He said this gives end users the ability to immediately troubleshoot from their desk before checking out the equipment.
 
Saliman claimed that Agilent’s model has been so successful that rival Thermo Fisher has essentially replicated it with their new asset-management and services offering.
 

It’s an all-or-nothing game, and seems to have flipped like a light switch over night. Now all of the large pharmas have these initiatives in play.”

As reported by BioCommerce Week two months ago, Thermo Fisher unveiled a new asset-management program that offers similar services to the ones being offered by Agilent (see BioCommerce Week 3/28/2007). And both programs are similar to PerkinElmer’s OneSource Laboratory Services program (see BioCommerce Week 6/28/2006).
 
“What’s been fascinating for us is the speed with which the North American market has changed and the size of that change,” said Saliman. “Prior to a year and a half ago, the North American market could be characterized as being very, very cautious. The end users were reluctant to let anybody in to service the equipment except the people that they trusted. Solutions in this space that offered on-site resources were in their infancy.”
 
He said that when the three major competitors started offering these types of services over the past couple of years, the service providers went from being told that it was too risky of a model to “suddenly getting multi-site, multi-state, complete lab ownership deals. It’s an all-or-nothing game, and seems to have flipped like a light switch over night,” said Saliman. “Now all of the large pharmas have these initiatives in play.”
 
Saliman said part of the reason for this was the widespread downsizing in the pharmaceutical industry. He said most of the pharmaceutical firms that Agilent talks with are looking to cut costs between 15 percent and 30 percent. “It affects instrument sales. It affects anybody that sells anything into these companies, and service is the easy target to start with,” he said.
 
“Once you get through the procurement threshold, preferences are based on the experiences [customers] have with the service providers as a company and particular technicians,” said Saliman.
 
He said the asset-management model that is being employed by Agilent, PerkinElmer, and Thermo Fisher will undoubtedly change as these firms receive more customer feedback.
 
“Although there are a number of us that have been playing in this game for a few years, the rapid expansion into ‘own it all’ … will leave a lot of us to develop capabilities outside of our normal standard services,” said Saliman.
 
He said it will be interesting to see how others, including Applied Biosystems, Waters, and Shimadzu, respond if this model becomes more commonplace. “Right now, customers are not very happy to be held captive by their manufacturer because they won’t play in the service model the companies want them to play in. So, it’s an unknown,” said Saliman.
 
Within the next two years the instrument vendors will have an answer from the market as to which asset-management, or service model, they prefer, he said. “If people fail in this space, the model won’t last. People are not willing to put their businesses at risk for a few dollars of cost savings.”
 
Saliman said the next target for Agilent’s asset-management program is the mid-tier pharma firms, which will require a different formulation because there aren’t the economies of scale that are present with the large pharmas.
 
He said that although there are three main players employing this asset-management model, the competition could really be shaken up if GE decides it wants to become more involved.

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