LifeSciHub is Working to Increase Small Business Access to Mid-Large Sponsor Project Work and “Spend”

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LifeSciHub is a strategic response to the Great Resignation.  Many happy and thriving independent experts may not realize how challenging it is for drug sponsors to find and engage independent experts.  There are two reasons for this:

1) Many independent experts work mostly with small pharmbio, because there are far fewer administrative hurdles to go through, small pharmbios are more flexible, nimble, etc.

2) Most independent experts find work primarily by word of mouth via relationships developed over a long and industrious career.  Many are being engaged directly by highly empowered decision makers at the Dir, VP or Executive level.  To these independent experts, regardless of the hiring entity company size, the engagement seems easy, their decision maker was able to bypass many if not all of the internal administrative barriers.

Regardless of how it seems, any hiring entity, big and small, is like a swan floating placidly across the water.  Below the surface they are pedaling furiously to make things happen.   The cost of Human Capital is almost always the biggest expense any company faces.  Therefore, there is tremendous pressure brought to bear on hiring decisions, of any kind.

In an effort to control costs, as they must, pharmbio companies intentionally put up barriers to hiring decisions.  This usually starts when a company reaches mid sized (see LifeSciHub’s Tier Definition).

Barrier signs

  • The first sign of a Barrier is when hiring decisions are required to involve other internal parties, such as HR, Procurement or maybe even Finance.
  • The drug sponsor starts to develop a “Preferred Provider” list, designed to shrink the number of vendors, because keeping track of them all is a big challenge for Procurement.  Procurement starts to route all “spend” to those preferred providers, even if it means paying more for those preferred providers to act as subcontractors (and therefore mark up outside services they otherwise wouldn’t provide by 30% or more).
  • IT systems are put in place to manage all HR activities, including budget and compliance.  These systems grow in complexity as the sponsor grows.  Procurement becomes ever more vigilant to ensure all spend goes through these systems.
  • Anything outside of Procurement’s systems and oversight is called “Rogue Spend”.  Whole departments are created to identify, control and, ideally, eliminate “Rogue Spend”.
    • By the way, when a business side (line function) decision maker brings in an expert quickly and easily, seemingly hassle free, this is usually because they figured out a way to bypass procurement oversight and systems, most likely by using a budget allocated to a category other than labor, such as using an SOW for a capital budget allocation.  When a business decision maker is high up and savvy enough to command budgets with confidence, this is still possible.  Again, at smaller companies few if any of these barriers exists.
  • One of the biggest barriers is related to human capital compliance.  Mid-large sized companies are utterly terrified of something called “Worker Classification” risk.  This is when a temporary worker feels that they carry all the expectations and responsibilities of an FTE, but they are paid as temps and receive no employee benefits from the company, such as health insurance, vacation, etc.  There have been notoriously large class action lawsuits brought to bear.  The most famous was Microsoft.  The bigger the company, the greater lengths they go to avoid this risk.  This is the primary reason many mid-large pharmacos will only pay by w2 regardless of employment status.  They think w2 protects them from worker classification risk, because it at least ensures the taxes get paid, so will get the government off their backs.  Or so the thinking goes.
  • Procurement, as an organization, deals with very, very large numbers- tens if not hundreds of millions of dollars.  Subsequently, Procurement always thinks big.  Procurement likes large vendors that can solve a wide variety of problems.  So the small business is at a tremendous disadvantage.
  • Sponsor Legal likes big organizations too, because if something goes wrong, they can attempt to recover much more money from a big supplier than from a small supplier.
  • Sponsors have attempted to solve some of their resource scarcity challenges by creating a “contingent workforce” category.  On the surface most contingent labor looks and feels exactly like full time employment- 40 hour work weeks and w2, it’s just that an “Employer of Record”, i.e., a middleman, pays the worker’s benefits and vacation.  This ensures the sponsor will never be sued by these workers.

Why so many barriers?  Because it is actually extremely difficult for the sponsor to truly understand how much money is being spent on human capital.  Without that clarity, it is virtually impossible for a company to measure the value its human capital is creating, or not, and make informed strategic decisions designed to ensure the company’s future health and profitability.

If all workers were FTEs (full time employees) it would be easy to know and understand the cost/benefit of human capital.  However in today’s day and age some company workforces are almost 40% non FTE, whether due to outsourcing or contingent labor.  The upper management thinking goes like this:  “What they heck are we paying this 40% for?  Why can’t our own people do all of this work?  Something must be wrong with this picture.  We need to get this under control.”

LifeSciHub has observed that few if any mid-large sized drug sponsors are well positioned to engage the independent small business workforce.  For one, none of us independent consulting practices of 1 care to be paid by w2.  We prefer 1099 because as a fully incorporated small business, we deserve all the tax deductions directed at businesses.  This is part of the reward for operating as an incorporated small business.  The economy relies on small businesses and entrepreneurship.  As small businesses we assume a much higher risk than someone who operates as an employee.

Furthermore, we are all small independent businesses because we chose to decouple ourselves from the corporate ladder.  Being paid by w2 negates our rightful tax advantages while protecting the sponsor from a risk that doesn’t exist.

Part of the problem is that the decision making and spend is being done and controlled by people who are, themselves, full time employees and probably always have been.   Despite the popularity of the Great Resignation, it is still very hard for full time employees- who are very comfortable and strongly prefer being FTEs- to imagine why anyone would not want to be an FTE.

Part of LifeSciHub’s advocacy work is to educate drug sponsor decision makers and procurement on best practices and strategies for engaging the independent workforce, and for embracing the resource-transience state modern business is in.  All business is uncertain, but one thing seems to be very certain- the days of 30+ year careers at the same company, and the generous pensions that go along with that, are almost non existent, and show no sign of returning.

LifeSciHub is working to address the above barriers for mid-large sponsors.  We believe that small business is where innovation happens, it is where excellence happens.  Mid-large pharma are denying themselves whole swaths of excellent resources by not having a fit-for-purpose mechanism to engage small business.

LifeSciHub’s goal is to put in place an MSA with all drug sponsors, giving each immediate access to the entire LifeSciHub membership, which is vetted and onboarded with agreements.  In the heat of the drug development moment, parties should not be wasting time negotiating terms like mutual indemnification!  In the LifeSciHub model, all of the Agreements are handled upstream.  The only thing that has to happen at project time is an SOW.

Comments and suggestions welcome!

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