Ariba Offers Remedy for Prescription Drug Ills.

Company Outlines Best-Practice Processes for Sourcing in Low-Cost Nations to Help Pharmaceutical Firms Drive Savings and Innovation While Minimizing Risk and Maintaining Quality Standards

SUNNYVALE, Calif. -- With expiring patents and growing gaps in revenue a reality in today's global pharmaceutical industry, an increasing number of drug manufacturers are beginning to evaluate their supply chains to identify any and all opportunities for savings so that they can continue to bring innovative products to market and remain competitive. With greater frequency, pharmaceutical firms are seeking new sources that can deliver key inputs such as active pharmaceutical ingredients (APIs) at a lower total cost than their current suppliers. And in many cases, they are looking abroad. While there are great gains to be had from sourcing in low-cost countries, there is also substantial risk. As part of its Category Chatter series, Ariba, Inc. (NASDAQ:ARBA), the leading provider of spend management solutions, has created a podcast aimed at helping companies understand these risks and develop sound strategies that enable them to reap the cost-saving benefits of sourcing in emerging nations without sacrificing the quality of their products.

"As the costs of healthcare continue to soar, pharmaceutical companies are taking aggressive steps to revamp their cost structures," said Christopher Merchant, Director, Healthcare Sector, Ariba Spend Management Services. "But they face a unique challenge in that while seeking ways in which they can generate savings, they must also identify and resolve any areas in the supply chain that might present risk, as the consequences of contaminated products can have a dramatic effect on the global population."

To help do this, Ariba has compiled a list of steps that pharmas can take to enforce their quality standards when sourcing APIs abroad:

1. Do Not Let the Government Do the Work for You

Pharmaceuticals should always hold its API sources to a higher standard than those set by the Food and Drug Administration (FDA). As stringent as FDA directives may be, approvals can be attributed to political and other factors that may prevent proper scrutiny and exposure of substandard operations.

2. Invest in Building a Strong On-The-Ground Presence

It can take a pharmaceutical company several years to identify API sources in low-cost nations and get them operating smoothly and in compliance with quality standards. Consequently, a serious commitment must be made upfront, to build a strong on-the-ground presence to manage the process. Walking suppliers through processes and procedures a few times or conducting random site visits isn't enough. Suppliers must be monitored thoroughly and regularly to ensure they don't cut corners or misinterpret expectations.

3. Limit Number of Offshore Partnerships

Every year, new API sources sprout up in low-cost countries covering a wide variety of specialty chemicals. This presents an opportunity to diversify the supply chain and maximize cost savings by partnering with dozens of suppliers. However, given the tremendous time and financial commitment involved in developing each API source, it is wiser to emphasize quality over quantity. Instead of trying to cultivate the same high standards within many suppliers and risking a weak link, concentrate on one or two key suppliers to ensure quality and safety over the long haul.

4. Emphasize Safety in Supplier Selection

The best way to create and enforce high standards is through a rigorous and thorough process to identify the right suppliers. One way to do this is to make safety a key criterion for selection in the initial Request for Proposal. This not only makes suppliers aware of safety from the get-go, but sets a baseline that can be used to measure performance on an ongoing basis.

5. Be Patient

Companies that have successfully integrated low-cost country suppliers into their supply chains did not do so overnight. Pharmas must give themselves adequate time to build supplier networks that take into account their unique needs, challenges and risks.

"Successful offshoring will be a key driver of success for drug companies in the long term," Merchant said. "Pharma companies that invest in solutions and processes now that enable them to evaluate and manage new markets and sources of supply will ultimately realize the greatest benefits that low-cost regions can generate down the road." For additional insights, visit Ariba Category Chatter and download the podcast, at http://www.ariba.com/learningcenter/chatter.cfm.

About Ariba, Inc.

Ariba, Inc. is the leading provider of on-demand spend management solutions. Our mission is to transform the way companies of all sizes, across all industries, and geographies operate by delivering technology, service, and network solutions that enable them to holistically source, contract, procure, pay, manage, and analyze their spend and supplier relationships. Delivered on demand, our enterprise-class offerings empower companies to achieve greater control of their spend and drive continuous improvements in financial and supply chain performance. More than 1,000 companies, including more than half of the companies on the Fortune 100, use Ariba solutions to manage their spend from sourcing and orders through invoicing and payment. For more information, visit www.ariba.com.

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Safe Harbor Statement under the Private Securities Litigation Reform Act 1995: Information and announcements in this release involve Ariba's expectations, beliefs, hopes, plans, intentions or strategies regarding the future and are forward-looking statements that involve risks and uncertainties. All forward-looking statements included in this release are based upon information available to Ariba as of the date of the release, and we assume no obligation to update any such forward-looking statements. These statements are not guarantees of future performance and actual results could differ materially from our current expectations. Factors that could cause or contribute to Ariba's operating and financial results to differ materially from current expectations include, but are not limited to: the impact of the credit crises on Ariba's results of operations and financial condition; delays in development or shipment of new versions of Ariba's products and services; lack of market acceptance of Ariba's existing or future products or services; inability to continue to develop competitive new products and services on a timely basis; introduction of new products or services by major competitors; the ability to attract and retain qualified employees; difficulties in assimilating acquired companies, long and unpredictable sales cycles and the deferrals of anticipated orders; declining economic conditions, including the impact of a recession; inability to control costs; changes in the company's pricing or compensation policies; significant fluctuations in our stock price; the outcome of and costs associated with pending or potential future regulatory or legal proceedings; the impact of our acquisitions, including the disruption or loss of customer, business partner, supplier or employee relationships; and the level of costs and expenses incurred by Ariba as a result of such transactions. Factors and risks associated with its business, including a number of the factors and risks described above, are discussed in Ariba's Form 10-Q filed with the SEC on August 7, 2009.