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Understanding the Pfizer Legal Alliance

Regulation at every stage of a product’s life cycle, enormous multi-district litigation—these are only a couple of challenges for Legal Division leaders at one of the world’s largest pharmaceutical companies. LMG Life Sciences Editor Kevin Matha discussed these matters with Ellen Rosenthal (pictured, right), Chief Counsel of the Pfizer Legal Alliance, to learn more about the company’s groundbreaking program to control costs and build a better client-attorney relationship.

The Pfizer Legal Alliance (PLA) is composed of 19 law firms largely used to handle the legal needs of one of the world's largest multinational pharmaceutical companies.

Operating on a flat-fee structure, those select law firms handle nearly 75 percent of all of Pfizer's global legal work. Alliance firms work together with in-house counsel to build cross-firm teams that can provide the expertise and local support needed to address key legal matters facing the company.

Amy Schulman, Executive Vice President and General Counsel of Pfizer, created the PLA to curb cost overruns and, more importantly, to strengthen bonds between the company and its outside counsel. The improved relationship between in-house and outside legal advisors provides Pfizer greater value and improves the quality of legal outcomes. Now entering its fourth year, the PLA continues to control legal costs despite facing extremely challenging legal work within a highly regulated industry.

But to label the PLA a mere "virtual firm" ignores the intricacies of the program's configuration. "It is completely different," Rosenthal explains. "What makes our Alliance so unique is that we are not a 'panel of lawyers.' We have created an institution comprised of all of our law firms and placed them in a very democratic, participatory setting."

PLA Roundtables

That setting relies deeply on collaboration and a shared enthusiasm for improving the client-attorney relationship and is facilitated by a PLA Roundtable that meets monthly. It is composed of representatives from six of the 19 law firms, along with several senior lawyers from Pfizer, and plays an active role in governing the PLA.

"[The Roundtable] speaks for the full complement of the 19 firms," says Rosenthal. "It is the body that sets the strategic direction for the Alliance and makes many of the really important decisions. It is intended to be representative of the full Alliance."

At the beginning of the year, goals for law firms are brainstormed and members choose priorities, all of which are then sent to the Roundtable. The Roundtable provides input and, through this back-and-forth, an agenda for PLA is finalized. This past year was especially exciting for Rosenthal as the Alliance is starting to mesh. "For the first time we decided as an Alliance that it made sense not just to set goals for each of the firms individually but to develop goals for the PLA as an institution."

Cost Savings, Efficiency, and Predictability

The idea for creating such a program is two-fold. Surely, cost-savings is the first and most obvious reason (more on that a little later) but just as important, the program was designed to strengthen bonds between Pfizer and its outside legal teams, and to encourage greater cooperation between the two.

"The primary impetus was a very focused and deliberate intent to create relationships that mirrored trusted advisor/lawyer-client relationships but on a larger scale," says Rosenthal, while also noting that continually putting work out for bid strained those bonds.

The Roundtable platform, along with flat-fee structures based on a portfolio of work rather than being drawn to individual matters, encourages firms to operate more efficiently. In this system, the impediments of an hourly fee system are replaced with a cooperative platform. Firms interact more by managing the yearly agenda and improving coordination, which in turn, saves Pfizer money.

"We have certainly saved money through the Alliance by setting fixed fees and being forced to live within it," Rosenthal believes. "These cost savings have been substantial for Pfizer and I think that's because the flat- fee has taught all of us to practice differently."

Predictability is another benefit for Pfizer and the participating PLA firms. "A huge burden is lifted in the sense that you go through the year knowing what costs will be and not waiting to see if they're going to explode," says Rosenthal. "The firms have a steady source of income and they know what it will be from day one."

But legal matters can often be unpredictable, especially when a massive multi-district litigation pops up on the docket. This, after all, is Pfizer, a company with deep pockets and a number of blockbuster pharmaceuticals. The company is a ripe target for hungry plaintiffs and, since the industry is so regulated, litigation is bound to occur.

"There is never going to be a written agreement or mechanism that really addresses it all," Rosenthal says about potential surprises. "So, we try to build a little bit of room into the annual flat-fee for unanticipated work. If something really extraordinary happens that changes the whole dynamic, the whole balance of the fee, we will make an adjustment at the end of the year."

Ellen Rosenthal on the adaptability and implementation of the Pfizer Legal Alliance at other companies

Why should other companies adopt a similar structure?

It's a fantastic way to get legal services that integrate your in-house counsel with outside counsel on a level that really is unprecedented.

Our in-house lawyers have strong relationships with our firm lawyers and I think that is really what you want from outside counsel, at least we do. You gain an able, highly developed, and highly sophisticated team of internal and external lawyers who are able to focus on our most pressing matters without a ticking of the clock. There is just so much to be gained by it.

People need to put aside whatever fears they have. If it doesn't work for you, you can always go back to the traditional billable hour.

Why do you think companies haven't put more pressure on firms to do something like the PLA?

I think it's a mix of different things. I think that some companies probably like being able to hire or fire counsel. They don't want to be wed to a preset group for whatever reason, and they like the flexibility and control. They just prefer that over the focus on relationship building that we value in the PLA.

Any other reasons?

I think another reason is that some of them are waiting to see how Pfizer does and waiting for us to produce data they can study.. I've heard this a lot when I have spoken on panels. But, what we did was not data driven. It was really a leap based on a conviction that it's a better way to receive legal counsel.

I hear that people are trying to mine their own data to understand what they pay for services, and where they might find cost efficiencies. I still think that a leap is necessary to make a change that goes beyond demanding discounting of hourly billing rates, maybe a leap to something different. But I don't think it's far from any general counsel's radar. They are all looking at some way of doing things differently.

Do you think the Pfizer Legal Alliance model can be implemented at other companies?

Absolutely! I don't know that everyone would adopt the full package because I think there are different aspects of it that some corporate cultures may not be suited for.

For one thing Pfizer has an integrated legal budget. Our legal budgets don't track our business units, for example, so we have more flexibility. But we absolutely think that this approach can work for other companies with significant legal issues and some level of predictable legal spend because you are committing the money upfront.

Do you think a PLA-type platform can be implemented at smaller companies? Does size of the company matter?

There is no reason it couldn't be done with a smaller company that has a somewhat predictable amount of legal work. The one thing you don't want to do is commit to a particular legal budget when you really have no idea what is going to happen from year to year. One year might be a very small amount. The next year might be 10 times that. You want some consistency.

What kind of advice would you give to another company hoping to create a similar platform?

Take the leap! Instead of waiting to get everything in perfect order, take the leap and work out a lot of the details as you go. It is going to be different for every company and we make operational and strategic adjustments constantly as we learn.

It's like a startup–it's always going to be a little bumpy in the beginning. We've gone through some bumps, but the Alliance is running very smoothly now and is has become a part of the Pfizer culture. We hung in there.

If you're not afraid of retreating on something you set out to do, you can always go back and start hiring firms by the hour again.

PLA Composition
The PLA currently comprises 19* law firms that perform legal work for Pfizer:
Boies Schiller & Flexner Bradley Arant Boult Cummings Clifford Chance DLA Piper
Goodell DeVries Leech & Dann Hughes Hubbard & Reed Irwin Fritchie Urquhart & Moore Jackson Lewis
Kaye Scholer Kirkland Ellis Ropes & Gray Shook Hardy & Bacon
Skadden, Arps, Slate, Meagher & Flom Torys Tucker, Ellis & West Watkins & Eager
Wheeler Trigg O’Donnell White & Case Williams & Connolly
* Three of these firms, Bradley Arant Boult Cummings, Watkins & Eager, and Irwin Fritchie Urquhart & Moore operate as a single entity (“BWI”) in their interactions with Pfizer and the PLA. For this reason, Pfizer often refers to the 17 law firms in the PLA, with BWI representing one firm.

Law Firm Participation

Developing such a program requires trust from all parties according to Bill Ohlemeyer, partner at Boies Schiller & Flexner, one of the 19 firms working within the Alliance. "A relationship means: you've got to get to know the parties, you've got to develop some familiarity, and some level of trust," Ohlemeyer explains. "You have to have confidence that when problems arise (and they will) that you work them out."

Pfizer was a new client for Boies Schiller & Flexner but transitioning to the PLA was not very difficult according to Ohlemeyer. The way the firm staffed most projects complemented the program and the PLA created a steady, long-term client relationship. Firm management was quick to embrace the project.

The PLA is not the right fit for everyone, especially for some of the larger firms. "I think that at a certain size it becomes difficult because there's a lot of pressure within the firm to put larger numbers of people at lower levels of experience to work," Ohlemeyer explains. Similarly, Rosenthal heard that the Pfizer team employed by larger law firms can find themselves on "somewhat of an island" internally.

Two original PLA member firms have left the Alliance. "The cultures in the firms that left didn't quite adapt, we didn't mesh for various reasons," Rosenthal said. "They did excellent work for us and we were very pleased with their quality of their work, it was just not the best fit with the PLA model as whole."

"It's like a marriage –it sometimes takes hard work to sustain a strong relationship," Rosenthal explains, using a metaphor she attributes to General Counsel Amy Schulman. "We work hard to build and maintain close relationships with the Alliance firms, but it takes work. By making that commitment, we are not going to replace a firm because we can move on to someone who can give us a better rate tomorrow. In return, we get lawyers less anxious about business development and more focused on providing us with better legal work because they invest in the long-term view of serving our needs."

That marriage was a little bumpy at the earliest stages of development because Pfizer's in-house team felt unrestrained. Without having to bill work anymore, it became an "all you can eat buffet approach." This was addressed by retraining the staff and reminding everyone not to take advantage of the flat-fee structure.

"We are not in the business of putting our firms out of business," Rosenthal notes. "We want them to be thriving in their work for us five years from now. These are flat fees and in order for this to work, it has to work for the firms, and it has to work for us."

Despite those hurdles, Ohlemeyer remains highly optimistic about the PLA, especially deviating from the billable hour. "Many corporate departments are uncomfortable leaving the billable hour," he notes. "It has all the hallmarks of mediocrity: everyone has the sense of how to do it, they've done it for a long time, it's easy to understand, and it's easy to apply. But having said all of that, it doesn't necessarily make the best way to value service."

Associate Development

Associate's hourly rates, often maligned by clients as on-the-clock training, are part of the law firm model. The PLA's associate development program confronts the issue by helping firms develop talent through the Alliance.

"It's great!" says Ohlemeyer about the program. "That's the part of the PLA that has been under published and underappreciated. There are a variety of programs that are designed to give opportunities to younger lawyers and less experienced lawyers in ways that will help them develop into better lawyers."

Each Alliance firm can nominate a rising star (who is likely to make partner) for a two-year term sitting on an Associate Roundtable. Nominees are paired with a Pfizer mentor and given certain predefined projects. For example, associates create and conduct a two-hour monthly CLE program for the in-house team at Pfizer and other attorneys working within the Alliance.

"That is something that most associates have never had the chance to do, to present on a topic of their choice to an entire in-house staff of a major client," Rosenthal explains.

In other instances, the Alliance has leveraged this associate program to handle enormous, time-sensitive legal matters, while giving younger attorneys opportunities for growth and development. In a massive product liability case, Pfizer was directed to complete hundreds of depositions in a short two-month timeframe, which included deposing plaintiffs. In order to comply, Pfizer assembled a first-of-its-kind "army" of 52 associates and put them through a two-day boot camp, covering the facts of the case, and teaching them how to take depositions.

"We sent them out to take those depositions," explains Rosenthal. "And for junior associates who have never had a chance to do that, they loved it. We did an evaluation of the program afterwards, and every one of them were just thrilled for having that opportunity. We got those depositions done in time and the quality was really solid."

Many of the associates being trained by Pfizer are likely to make up the next leadership generation of the Alliance, so initiatives like these are an investment in the long-term client relationship.

Closing Statement

As more companies seek to control legal costs, the Pfizer Legal Alliance provides a promising template for doing so. Based on trust and building cooperation, the platform has built-in programs that foster a long-term client-attorney relationship.

Lower cost for the company is balanced by predictable work-flow for outside firms, and both benefit from development programs aimed at building a lasting business engagement.

"We are committed to our firms," Rosenthal explains. "The long-term result of that is we are getting better legal work and these firms know Pfizer: they know our in-house lawyers, they know how we do business, and they understand our industry. That is where it harkens back to the old-fashioned trusted advisor relationship. We see them as a known and trusted extension of our in-house legal group. That is value you don't get unless you work on the relationship."


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