LS&HC Horizons 2023 - Flipbook - Page 35
Hogan Lovells | 2023 Life Sciences and Health Care Horizons | Transactions
35
Implementation of master supply agreements:
a clash of theory and practice
One standard tool in international procurement
is “framework” or “master” supply agreements
(MSA), establishing uniform terms and
conditions governing the entire supply
relationship between contractual partners and
individual purchases made thereunder.
As straight-forward as such a centralized
approach may sound, it may clash with the
reality of pharmaceutical companies and how
they are organized. Specifically, while MSAs are
normally agreed on a group level by the group’s
parent company, they are often implemented
by the group’s country organizations,
functioning as the group’s purchasers.
This, however, creates a risk if the group’s
purchasers are not sufficiently familiar with the
MSA’s terms or, in the worst case, deviate from
those terms when effecting their individual
purchases with the supplier, e.g., by providing
their own standard terms and conditions.
In that case, the entire purpose of a MSA may
fail. In case of a dispute, the parties may have
to engage in lengthy preliminary discussions on
which terms and conditions apply to start with,
and which is the competent forum to decide
their dispute.
Dr. Inken Knief
Partner, Munich
There are two key safeguards to counter
the risk of group entities creating their own
patchwork set(s) of terms and conditions:
Define the scope of the MSA: When
drafting the MSA, clearly define the scope
of application. Ideally, provide for the default
rule that all of the group’s purchases with
the supplier fall within the scope of the
MSA. If possible, exclude the possibility to
incorporate standard terms and conditions
for individual purchases throughout the
lifetime of the agreement. If entities other
than the contracting parties are involved
in the implementation of the agreement,
clearly define their role, e.g., as third party
beneficiaries; and
Communicate terms of the MSA within
the organization: The MSA, its terms, and
any formal requirements for placing purchases
under the agreement should be clearly
communicated to the group’s purchasers.
No separate terms and conditions should be
incorporated during the lifetime of the MSA,
unless coordinated with the parent level.
Arne Thiermann
Partner, Hamburg
Sophie Thiel
Counsel, Munich
