Schering-Plough Legal Adopts Model Convergence Program

Monday, May 1, 2006 - 01:00

Editor: Why was the convergence program undertaken?

Sabatino: Schering-Plough has undergone a transformation over the last few years. We have reflected that in the law department by restructuring the process we follow to provide legal services. We are building on the existing talent that was already in the department and recruiting some key new talent. And, we are now taking a much more business-centered approach when we provide legal services to our business colleagues around the company. The convergence process is a natural extension of that. It is how we involve law firms in the effort to be more business-centered.

Braender: Our firm has successfully participated in a number of other convergence programs with different clients in the recent past. We see it as a useful legal services model that will continue to gain more acceptance in the future for larger companies because it allows companies to have more effective control over the legal services provided to them and to develop strategic relationships with outside counsel. By committing to a long-term partnering relationship with our clients, instead of a traditional arms-length relationship, we become more intimately involved in their businesses and are better able to assist them in achieving efficiencies and cost savings. As a member of Schering-Plough's Core Team, we anticipate deepening our current relationship with the company while at the same time gaining valuable experience in the pharmaceutical industry and developing important networking relationships with a prestigious group of law firms.

Editor: How important was benchmarking with other convergence models in deciding on the elements of the Schering-Plough program?

Sabatino: We did some benchmarking and we worked with Suzanne Hawkins who was at Hildebrandt and is now with Huron Consulting. Both companies do work in this area. Susan had been responsible for the convergence process at GE so she brought a wealth of experience to the effort. I also went through a similar and very successful convergence process at Baxter when I was general counsel there.

Editor: Was one of the goals of the program to achieve a significant reduction in the number of law firms? If so, why was this felt to be desirable?

Sabatino: Our goal was to build an integrated team that would operate as a business-centered "virtual" law department focused on Schering-Plough's specific needs. In order to achieve that, we had to reduce the number of firms.

Editor: Does the Schering-Plough program require that the law firms be able to work together to find the best way to achieve the right result?

Sabatino: Yes, the primary qualities we looked for in law firms were collaboration and teamwork skills. Not only as they related to the one-on-one working relationship between the firms and Schering-Plough, but also with respect to the relationship among the members of the Core Team of law firms.

Braender: Our firm frequently works in collaboration with other law firms for various different matters, including litigation and transactional matters. We understand that working as a team with the other members of the Core Team achieves a fundamental goal of the convergence program, to increase efficiency, facilitate communication, and share knowledge and technology for the benefit of the client. We have committed to adopt these same philosophies with the in-house professionals at Schering-Plough.

Editor: Will there be a commitment on the part of Schering-Plough to send work to the Core Team?

Sabatino: We wanted the Core Team to get somewhere between 70 and 80 percent of all Schering-Plough's U.S. legal work - excluding patent prosecution work (but including patent litigation). We are going to actively manage the allocation of work so each of the firms gets a fair share of work based our needs and their expertise and geographic reach. We did not allocate work specifically by geographic region. We do have several firms that will be part of the process in carved-out specialty areas.

Editor: Is the Core Team expected to identify business opportunities for Schering-Plough, legislation of interest to it, litigation against others where amicus opportunities might be present, and situations that might have compliance implications?

Sabatino: Yes, we expect the firms to be involved in helping us with the kinds of things you mentioned. This is an essential ingredient in the business-centered approach that we expect them to have. It is one of the reasons that we like to find firms that have had relevant experience in the pharmaceutical area or with animal health and consumer health businesses. As we launch the program, we are going to spend time educating the firms about Schering-Plough and its business needs. As they become more familiar with our needs, I expect them to look for opportunities for and threats to our business. I also expect them to alert us to any compliance issues that they discover in the course of their work.

Braender: Our philosophy is to be a partner to our clients regardless of their size. We represent our clients to the best of our abilities when we know their businesses and products and their long and short term goals. We have committed to that in becoming a member of the Core Team. As we get to know more about Schering-Plough's strategies and priorities and better understand the changes that Schering-Plough anticipates in its business and in the industry, we will be able to be more responsive and proactive and able to adopt innovative approaches to meeting their legal needs.

Editor: Is risk sharing an important element of the program? Is this accomplished through use of alternative fees?

Sabatino: Yes, risk sharing aligns the interest of the firms with the interest of Schering-Plough. All of the firms have indicated a willingness to enter into alternative fee arrangements. I have used those arrangements in the past in both a litigation and non-litigation context and I believe that they can work. However, they need to be applied on a matter-by-matter basis. Each matter tends to be unique.

Braender: Our intent is to provide fee arrangements that are competitive with other Schering-Plough providers in the network. What is important to us is that the value of the relationship is appropriate and significant for Schering-Plough and our firm, not the profitability of each and every matter on which we work.

Sabatino: Lori touched on a key goal of the convergence process, which is to create a win-win for the firms as well as Schering-Plough by managing cost in an effective way and at the same time creating opportunities for the firms to have a greater amount of business.

Editor: Will information be exchanged with Schering-Plough and among the law firms about best practices to achieve cost saving and greater effectiveness?

Sabatino: Yes, there are two different aspects. One is sharing work product on an ongoing basis. The other aspect is sharing learnings from experiences. Based upon my experience at Baxter, I expect the members of the Core Team to share not only work product, but also best practices and lessons learned.

Braender: As a Schering-Plough partner law firm, we would expect to exchange materials from our accumulated repository of non-privileged materials with in-house counsel and the other members of the Core Team to avoid unnecessary research and drafting. We will also be offering Schering-Plough lawyers and lawyers from the Core Team participation in our in-house training programs, which qualify for CLE requirements in New York.

Editor: What about electronic billing?

Sabatino: It will be a key feature of the program. We have already implemented e-billing with a number of our firms. It will accelerate the clearance of bills as well as better tracking of matters and how we are spending our money.

Braender: Our firm is already involved in Schering-Plough's electronic billing program. It has been a very efficient and seamless process for our firm.

Editor: How will the contacts between Schering-Plough and the Core Team be handled?

Sabatino: We will expect to have one or two primary contacts at each of the firms that will interface with us on a formal basis. The key contacts from each of the firms will be part of an oversight committee. They will meet quarterly and, as part of our business-centered approach, an important focus will be on educating the oversight committee about Schering-Plough's needs and plans for the future. The oversight committee will look for best practices and how the Core Team can help promote diversity and other policies of importance to Schering-Plough. Over time, we expect to create other formal opportunities for the Core Team and Schering-Plough lawyers to interact.

Editor: Will Schering-Plough's international legal work be handled by the Core Team?

Sabatino: We looked at the elements of the convergence process that might be applied to the firms handling international matters. Although the Core Team will focus on U.S. matters, a number of members of the Core Team have an international presence and we will use them for our international work as appropriate.

Editor: Does being part of the Core Team help the members gain new clients?

Sabatino: As we gain experience with these firms, I will look forward to recommending members of our Core Team to my colleagues.

Braender: Being a member of the Core Team is a valuable position in the legal community. It validates the quality of our expertise and indicates that we are willing to be innovative with the delivery of legal services to clients. It gives us a visible and credible position in the marketplace as a member of a prestigious group of skilled and highly qualified law firms.

Editor: Will the Core Team be expected to be supportive of Schering-Plough policies with respect to such issues as diversity and community service (including pro bono)?

Sabatino: The promotion of a diverse work environment is one of our core values. One of the chief criteria for being chosen as a member of the Core Team is a clear commitment to diversity and we will measure performance going forward. In other areas such as community service we have partnered with firms in the past and expect to continue to do that with members of the Core Team.

Braender: Our firm wholeheartedly supports Schering-Plough's commitment to a diverse work environment and knew it was an important factor in the selection process. We recognize the importance of diversity in our firm and actively promote diversity through specific programs in place to recruit, mentor, retain and promote diverse attorneys.

Editor: Describe the current relationship between Schering-Plough and Pitney Hardin. Lori, will you serve as engagement partner?

Sabatino: Pitney Hardin has done a variety of work for us. They have been particularly involved in our animal health and consumer business on the commercial side. They have done a lot of real estate work for us particularly in New Jersey. We need to be mindful of the laws that impact us as a New Jersey corporation and we look to Pitney to help us through that as well. We also work with them on some of our environmental matters.

In terms of the relationship, Pitney is a Core Team member and that relationship will be broadened as we expand the work in the Core Team across all the areas that are critical to us.

Braender: Pitney Hardin has represented Schering-Plough for many years in various different and diverse matters. As a member of the Core Team, we look forward to deepening the relationship and expanding our representation of the company.

As to the question you specifically directed to me, I am only one of the engagement partners for Schering-Plough. We have appointed a very significant service team of lawyers internally for this initiative. The service team leader within each department will coordinate with Schering-Plough lawyers and staff to appropriately assign work based on the skill and experience of our lawyers, with the goal of bringing the best value to Schering-Plough and building on the relationship that we have already established.

Please email the interviewees at thomas.sabatino@spcorp.com or lbraender@daypitney.com with questions about this interview.