The World in Your Hands: Global Pricing Data Gives Pharmcos a Much-Needed Edge

Pharma companies are under a lot of pressure these days. In the war to gain a competitive advantage, they have to be careful not to fall into price gouging, while grappling with an array of other obstacles: biosimilars, price erosion, international reference pricing and an ever-evolving marketplace.

It’s easy to feel overwhelmed by the application of international reference pricing and its influence on pricing mechanisms across the globe, especially in the wake of its adoption by countries across Europe and also Canada, Japan, South Korea, Mexico, New Zealand and other countries.

How can pharmcos actively and efficiently analyze trends, and determine how the market will react when competing products are approved or launched? Seems impossible, but the tools to do just that are within your grasp. It’s all about leveraging pricing data and using it to identify competitive threats and trends, especially for smaller companies looking for an edge over Big Pharma.

By using a high-quality, robust global pricing solution, pharmcos can optimize their pricing strategy based upon an in-depth understanding of how the global markets work, map international reference rules and define an optimal launch order when marketing a new medication. 

Smarter decision-making tools also enable pharmcos to gain better insights around treatment costs for prevalent diseases. Consider a cost-of-treatment analysis as a way to identify the most effective treatment approach for the same disease. You need the power to analyze key factors, such as unit price, age, weight, patient compliance and treatment duration.

Alliance Life Science offers a high-quality, robust global data solution:

  • Accuracy through expert review
  • Flexibility in data configurability and integration that can be customized to exact needs
  • Freshness, with updates up to five to eight weeks faster than other solution providers
  • Coverage, ranking high in country coverage when benchmarked against the competition
  • Quick and easy access to competitor drug-price information across 80+ markets

Having the most up-to-date and accurate information provides a good benchmark for companies, helping them to minimize revenue leakage, develop effective pricing strategies for new drugs, and manage ongoing pricing and reimbursement changes to maximize revenue.

Read more thought-leadership from Alliance Life Sciences on this topic:

FiercePharma: Want to win on pricing? Take a closer look at the numbers

Contract Pharma: How Pharma Manufacturers Can Gain a Competitive Edge with Advanced Pricing Data and Analytics

WTN News: Global Pricing Data and Analytics: The Defining Factor for Success 

Thoughts and Perspectives on Model N’s Rainmaker 2015

“Change” was a pervasive theme at this year’s Rainmaker conference, hosted by Model N, a partner of Alliance Life Sciences, at the Westin Hotel in San Francisco, California. Model N seemed eager to show that it is evolving, much like the industry it services. The breakout sessions, chaired by Model N employees and representatives of pharmaceutical manufacturers, ranged from software demonstrations and panel discussions to traditional podium speakers.

The new developments exhibited by the company all carried a similar theme of being proactive.  Rather than toe the line or change reactively, a concerted effort is being made to stay ahead of industry standards and forge new best practices. These advances include new customer relationship programs, “Revenue Management as a Service” offering, “Express” implementations, and a new customer relationship management (CRM) platform entitled, Revvy Sales.

Model N prominently displayed its transition into cloud revenue management. Both Adobe and Salesforce were present to share their experience with “Transformation to the Cloud,” providing insight into the tangible benefits. Their latest concept, CRM2, is the combination of CRM and cloud revenue management, although they warned that users should not “cloud themselves into a corner.” In other words, while “speed is the new currency,” such advances should not sacrifice efficiency for the sake of expediency. Clearly, innovation is critical to Model N’s business model, but remains tempered by the necessity to deliver quality service.

While robust in scope, the product offerings from Model N represented only about one-third of what was presented during the event. The balance of the presentations covered a large cross-section of the revenue management space in pharma: commercial transactions, contracting strategies, government pricing policies, gross-to-net analysis, master data management, forecasting, accruals, and global pricing – to name a few. Model N’s theme of “change” was represented across the other presentations, as well. With talks such as “Future of MedTech – Disruption and the Advent of Big Data” and “Cranking up the AMP Volume: A Diagnostic of the New Ruling,” there was a decidedly forward-thinking atmosphere, in terms of anticipating industry trends and hypothesizing solutions to the shifting environments.

It was fascinating to see industry thought leaders discuss the likelihood and practicality of healthcare moving from a Fee-For-Service (FFS) to a Fee-For-Outcomes model in “Life Sciences 2020.” “Maximizing Revenues and Optimizing Customer Experience with Customer Master Data” examined frequently overlooked ways of streamlining business efficiency by improving data cleanliness. Hearing about more precise indirect sales management in “Updates on 340B Eligibility,” and creative managed care rebate solutions in “Innovative Contracting Strategies,” provided keen insight into optimal commercial operations.

Perhaps the most engaging aspect of these discussions was the spirit of knowledge-sharing that made them possible. Through the collaboration of various industry stakeholders, the insights gleaned from the conference were both eclectic and comprehensive. If current expectations become reality, the revenue management space in pharma will undoubtedly face a number of interesting developments in the future.

Optimizing Contract Management and Operations

For the Managed Markets division at a pharmaceutical manufacturer working in silos, along with an exclusive focus on individual responsibilities can lead to downstream issues if not properly aligned with the needs of other groups. When the Contract Management, Rebate Processing, and Government Pricing teams work harmoniously together, optimal efficiency can be achieved across the division. However, failing to do this can impact processing speed and integrity, squander company time and resources, and incur unnecessary financial penalties.

Strategies and Language

The life cycle for managed care contracts begins with the negotiation of the paper contract. This is critical for the groups implementing contract strategies to have an understanding of the downstream impact this can have on the organization. Prior to entering into contractual agreements, knowledge of the gross-to-net and government pricing calculations needs to be effectively communicated between all involved groups. Since contract management groups are seldom involved in day-to-day operations, creative and innovative pricing strategies, which appear to be saving the manufacturer money, may actually be extremely problematic. Potential savings can be lost due to language that is left open to interpretation.

Revenue Management System Setup and Maintenance

The majority of Life Sciences companies purchase a revenue management system for administering contracts with Managed Care Organizations (MCO) and Pharmacy Benefit Managers (PBM). While the benefits of these systems are evident – accurate calculations, prompt payments, and a centralized secure data warehouse – it is only with the proper configuration, realistic contract strategies, and efficient processes that a manufacturer can see the true benefits. To configure these environments most effectively, it takes years of industry and system specific experience and continuous communication between all parties involved. Without such coordination, the system may seem, at best, burdensome, and at worst, create a significant bottleneck in the rebate payment process.

While there are a variety of ways to set up a contract in a system, it is critical to understand the manufacturer’s long-term needs in order to develop the most efficient setup.By effectively translating the terms of a paper contract, a consequent improvement can occur to the bottom-line as a result of minimizing late fees and eliminating unnecessary headcount. While processing time varies by the complexity of the contract, failure to perform adequate evaluation is often the catalyst for future dysfunction.With contracts configured in the optimal format, an experienced rebate analyst should be able to process submissions against even the most complex agreements in less than 90 minutes. Spending more time than that is likely the result of a poorly configured contract.

Downstream Effects

Oversights that may seem minor in the initial stages can trigger a ripple effect that has significant consequences. Vague contract language can have the greatest impact on an organization and end up costing millions of dollars in additional rebates. It is recommended that the Government Pricing and Contract Management teams collaborate to develop the proper language within contracts. Once this is completed, the Rebate Processing team can configure systems properly and work to ensure all necessary calculations such as the Average Manufacturer Price (AMP) are accurate. Understanding the impact and interplay between contract negotiations, day-to-day operations, and Government Pricing is a crucial component to achieving long-term success.

Operating at an optimal capacity is a feat all companies nominally strive to attain, but few are able to achieve. Alliance Life Sciences can help you establish practices that are proactive and communicative to benefit you company across the spectrum of contract life cycle.

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Gross-To-Net Survey Uncovers Challenges in Industry Maturity

Financial accruals have become a major headache for corporate finance teams in the Life Sciences industry as they are increasingly difficult to manage, and can lead to major business issues if calculated incorrectly. These accruals are an important part of compliance with Generally Accepted Accounting Principles (GAAP). Funds are set aside to cover the financial obligations associated with sales, from promotional programs, rebates and discounts. The data associated with these programs, must be gathered and then amounts to set aside must be determined based on past and future projections.  Often times, the data for each type of program is captured in different places within an organization making it hard to manage.

Any calculation errors can have a significant impact. If the accrual percentage is too high for rebates and promotions, funds are essentially being taken away from other areas of the business, such as research and product development, which can help grow revenue. But if enough isn’t reserved, manufacturers could find themselves in a cash crunch, and money will need to be borrowed to cover obligations. If the amounts get to be too large, it can also be considered a “material impact” item for earnings reports.

Alliance conducted a survey in which various Pharmaceutical companies were asked four questions to gain a deeper understanding of the majority in their Gross-To-Net processes.  After reviewing the results, few organizations have fully automated Gross-To-Net solutions which can be leveraged for strategic pricing and trend analysis.  Organizations focus the bulk of their time on aggregating data to provide basic forecast and accrual information, restraining their ability to use this data for strategic analysis around pricing and other areas.

While automation of the fundamental processes is still in its infancy, the primary goal by those pursuing it, is the reduction of cycle time. But accuracy must not be sacrificed for speed, meaning any automated solutions must maintain or improve forecast and accrual accuracy.  Currently, companies are focusing on improving the underlying models, which proves to be an important step on the path to automation. Leading companies are recognizing the strategic value of this data and making the investment in its strategic use, even in the absence of automated solutions. The key objectives found in this survey are depicted in the image below.

image 1

Beyond the need for automation, the number one priority is to assess the readiness and rationale for automation in analytical capabilities. This acts as the key driver for generating business insights in the following areas:

  • Revenue growth through WAC price optimization
  • Impact of contracting especially price protections on the net revenue
  • Insights of contracting strategy on Medicaid & PHS liabilities
  • Insights from deep dive diagnostics

Following this as second priority is the desire to get full time employees focused on deriving business insights from the data, rather than spending all their time crunching it. Many organizations are spending more time and money on the mechanics of the accruals – the number crunching – than on understanding what the data is telling them. They’re missing an opportunity to analyze the accruals to see what promotions and programs are really driving the business, helping them expand market share and drive revenue.



International Reference Pricing

International Reference Pricing is a complex issue faced by Pharmaceutical companies which has a large effect on a drug’s lifecycle. The price for a drug is often set by referencing the price of a similar drug in various countries. In a reference pricing system, equivalent medicines are put together in a reference group which are defined by either active substance, pharmacological class, or therapeutic class. This system puts pressure on pharmaceutical companies to compete with the reference priced product but also reduces competition.

An optimal price management strategy for a marketed product must constantly look at pricing trends of competing products within the market. Access to authentic, current, and historical prices for competing products empowers companies with the information necessary to ensure that their own strategies are headed in the right direction and allows them to make adjustments when necessary. They also need to monitor responses by competitors to price actions taken for their own products. In addition, competitor drug pricing data is needed for a multitude of modeling exercises such as pharmaco-economic and budget impact exercises.

International Reference Pricing best practices allow pharmaceutical companies to:

  • Assist in defining an optimal global pricing strategy through the identification of pricing trends for competing products in key markets
  • Stay ahead of austerity measures across key markets by tracking changes such as price cuts, margin changes and more
  • Maintain the most current, as well as historical, exchange rates to facilitate conversions to standard currencies

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Drug Life Cycle Pricing Challenges

Pharmaceutical manufacturers face challenges during all the phases of the drug life cycle in accurately pricing their products. When launching a product, many companies struggle to answer questions around optimizing launch sequence by country, collecting the necessary insights into the impact of launch pricing, and ways of dealing with unexpected changes in plans.  When dealing with price maintenance and compliance, the concerns heighten as millions of dollars can be lost annually in unnecessary price erosion. The risk of fees and penalties arise as an issue in government pricing, and forecasting reference price quickly and accurately becomes difficult.  Advancement of the product’s maturity through its lifecycle raises similar questions when loss of exclusivity occurs.

Launch sequence is a complex analytic problem typically “solved” in a
simpler Excel model, but a better algorithm can yield better results. Automated
price optimization processes can create 0.1% to 0.2% increases in your main
portfolio, 1% to 2% improvements in product maturity, and 1% improvement in
launch planning. Automation of the maturity phase of your products can add as
much value as your top sellers and be as profitable as a blockbuster, but is
inefficient to manage in the same manner because of many more products and
pricing decisions.

Pricing, Reimbursement & Market Access is historically under invested in IT Spend relative to its impact when compared to other departments such as Sales & Marketing. The following issues are typical within the department:

  • Excel-driven processes are the standard for calculations.
  • No commercial software available causing large development efforts necessary for advanced analytics.
  • Business rules were dynamic and expensive for IT for support in a system.
  • Historical year-over-year IT budgeting remains relatively stagnant.

Why it’s time to change:

  • Accessible analytics are now on the market and are end-user friendly.
  • Successful pricing optimization software implementations have been completed in other industries, i.e. Retail and commercial airlines
  • Payer influence is much greater than 15 years ago, and they are driving the need for optimization causing a shift away from the traditional promotional model.

Alliance’s PriceRight solution has some of the most sophisticated and innovative price analytic features, accompanied by unique capabilities from planning to launch, through operational price and tender management, into generic erosion and loss-of-exclusivity. The capabilities ensure that we don’t just address your needs, but invent better pricing approaches.

PriceRight offers more accurate, insightful analytics that reduce erosion and drive more to the bottom line. The open platform is critical to adapting to change because of the regulatory environment that spans at least 50+ major markets for most pharmaceutical companies. PriceRight helps companies manage their pricing throughout its lifecycle, and enables global market access, all in a single integrated suite.

Revenue Enhancement through Rebate Process Improvement: Part 2

Optimal Stage

The most common issue experienced is overbilling with many industry factors being the cause. The most prevalent form of overbilling comes from incorrect invoice data. Performing manual and automated validations are the most effective way to find, reject, and correct these errors.

A typical checklist of validations might proceed as follows:

  • Import into a revenue management system
  • Evaluate detail data to find ineligible plans, incorrect NDCs, ad outdated products.
  • Discard and exclude the above data from rebate payment.
  • Conduct aberrant quantity check.
  • Cross-examine the units against the Rebate Days’ supply.
  • Send request to customer to make the appropriate changes to units not consistent with the correct unit of measure (UOM).
  • Check submitted Prescription ID for validity and run against a list of all valid pharmacies.
  • Evaluate the formularies to determine whether plans are matched to the correct tier.
  • Run a duplicate check to identify data that appears more than once in the current file or any preceding quarters.

Figure 2 below depicts a real example of how a manufacturer appropriately optimized their invoice validation and rebate payments. Although invalid lines can be corrected and resubmitted, the manufacturer has visibility to the rejections and can estimate submissions based on behavior patterns of their customers.  This process allows utilizing dollars for an additional quarter to their advantage rather than prematurely paying an inflated rebate amount.

figure 2

Savings and Continuous Improvement

Quarterly trackers and dashboards, for example, allow data to be collected and measured against performance metrics in real time. Data from submissions and settlements provide useful statistics when properly leveraged. The fuel for continuous process improvement is to properly manage company growth; the insight gained from the available data provides the needed tools.

New contracts, products, and revised payment terms can significantly alter the way a company operates. Successful adaptation to these changes means continuous savings. Failure results in substantial and often unrealized losses.

Figure 3 below presents another real example of validating incoming invoice data excluding a large sum from a quarter of paid rebates. Manufacturers can preserve revenue on a continuous basis each quarter by employing these process techniques.

figure 3

Effective revenue management is about ensuring that optimal controls are in place. Maintaining status quo is easy, but it comes at the expense of ignoring process shortcomings that erode Organizations often miss the opportunities to improve their processes and incur revenue leakage. Therefore, it is critical to determine its place in the rebate processing lifecycle. Exploring the associated optimization strategies initiates growth in a way that is both measured and proactive, augmenting efficiency while yielding significant bottom line results.

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Revenue Enhancement through Rebate Process Improvement: Part 1

Administrative tasks associated with rebate processing aren’t typically viewed as revenue generators however, when managed effectively, they can provide benefits and contribute to the bottom line.  Left overlooked, a business can encounter compliance issues, misallocate time and resources resulting in financial losses. Standardized rebate calculation processes, validation and analytics become necessary for successful practices.

Maturity Assessment

Many organizations start with one product that can be easily managed with manual
processes, however, company growth soon renders effective management of
submission details impossible to efficiently maintain. Understanding gaps that
require remediation helps develop guidelines for process improvements. Maturation
requires small improvements in stages adding forward-thinking and cumulative
value. Scrutiny is key to the progress making verification of rebate submission
details to be a highly recommended practice.

Assessment of contract strategies, number of products, and transactional volumes are required and consider when moving from simpler to more advanced processes. Stages should be evaluated before moving on to determine if it’s financially viable and realistic given existing resources.

Figure 1 depicts a typical maturity curve when developing a standard rebate processing procedure. Standard progression starts with basic “Pay-To-Invoice” methodology, followed by systematically calculated rebates, then achieving optimization with validations to control revenue leakage.

Figure 1

Exploring the transition, it is important to remember each has its distinct advantages and shortfalls and an optimal state will vary by organization. Understanding the entire spectrum will determine when a change is needed.

Foundational Stage

The pay to invoice methodology is the easiest and least intensive way to meet the terms and conditions set forth in the contract language.  Rebate payment, issued without investigation, based on the Pharmacy Benefit Manager or Managed Care Organization’s invoice interpretation and calculation. Compliance and prompt payment are not issues, but accuracy suffers resulting in the largest amount of revenue loss. Manual analysis overcomes this issue but is impractical when dealing with larger amounts of data.

Invoices vary containing only a few easily scrutinized records or several hundred lines of summarized data. The latter shows an analyst cannot determine the accuracy of the invoice if multiple pricing strategies are being used, like base rebates, price protection, market share rebates, and admin fees.

Operational Stage

Calculations are needed to translate contract terms.  Ongoing maintenance is critical because the precision of not updated calculations deteriorates rapidly.  When contract terms are computed, a basis of comparison is established to measure submitted data. By comparing an invoice to an internally calculated standard, analysts determine the correct payment more efficiently.

Metrics are implemented to systematically gauge performance levels when an operational foundation is established. These measurements provide the analytics to support decisions, launch new projects, allocate resources, and provide insights into revenue trends.  Routine checks of process efficiency is crucial to ensure that standards are effectively keeping up with new strategies. Pushing aside these checks for other tasks provides detrimental results.

In our next post we will discuss the Optimal Stage and Continuous Improvements.

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International Reference Pricing: Why It’s Essential to Your Success

There has been a lot of focus on international reference pricing in the pharmaceutical industry lately. The goal, of course, being to benchmark yourself against competitive products to ensure that you can obtain the highest amount of market share in any given country.

Access to authentic current, and historical, prices for competing products empowers companies with the information necessary to ensure that their own strategies are headed in the right direction and allows them to make adjustments when necessary.

They may also monitor responses by competitors to price actions taken for their own products. In addition, a multitude of modeling exercises such as pharmaco-economic modeling, analogue analysis, and budget impact modeling, often require competitor drug pricing data.

To give you the bigger picture, access to competitor pricing data is essential for:

  • Defining an optimal pricing strategy
  • Evaluating pricing trends of competing products
  • Monitoring responses by competitors to price actions taken for the company’s own products
  • Modeling exercises such as pharmaco-economic modeling, analogue analysis, and hospital or payer budget impact modeling
  • Tracking austerity measures; impact at country level ie price cuts, margin changes
  • Tracking reimbursement decisions and prescribing restrictions
  • Monitoring pricing policies and trends in key markets/therapy areas

For more information, take a look at our international reference pricing products.

Membership Data Management: The Potential of Automating the Process

Proper management of membership data poses a significant operational challenge for pharmaceutical manufacturers.  Membership data is submitted by Wholesaler, Distributor and GPO (Group Purchasing Organization) customers in the form of “rosters” that are used by Manufacturers to determine eligibility for contract sales when adjudicating chargeback and rebate transactions.  Membership data also serves a second, and equally critical purpose, to assist Manufacturers in designating customer trade class for use in regulated price reporting and sales and marketing activities.

The first challenge in managing membership data is addressing the overwhelming volume of data received.  Most often rosters are sent via email to a processing specialist in the contracts and/or chargeback processing area.  A full listing is provided at the inception of the contract, and then updates detailing additions, changes and deletions to the listing are provided on a periodic basis, typically monthly.  The data then has to be aggregated, cleansed and added to the company’s customer master before it can be used to process transactions.  Even if the member has been previously recorded in the customer master, the accuracy of assignment cannot be guaranteed as a change or deletion may have been submitted by a wholesaler, distributor or GPO client for the current reporting period.

To lend perspective on the volume of members (and corresponding data), take for example a recent study published on GPO membership.  According to Becker’s Hospital Review as of September 2010, the five largest GPOs including Novation, Amerinet, Premier, Broadlane and MedAssets experienced recent growth in membership, totaling over 232,000 members on a combined basis.  Most pharmaceutical manufacturers will contract with several, if not all of these major GPOs.  Now add to that number the total members of the wholesaler and distributor sales channels, and it is not unreasonable to expect that total membership will exceed 200,000 to 500,000 for the average manufacturer.

In addition to the sheer volume of data, another key challenge relates to the quality of data received.  Most often the membership data is submitted in mixed electronic formats and contains only a handful of core elements.  The data includes unique identifiers, such as DEA and HIN numbers, accompanying demographic data elements such as class of trade, mailing address and contact information.  In many cases a manufacturer will receive membership information for the same entity across two or more rosters.   What is the appropriate action when the data is conflicting, especially when the conflict relates to class of trade designation?

Given the potential for data inconsistencies, the most critical challenge is mitigating the compliance risk associated with the use of membership data for regulated price reporting purposes.  In terms of accuracy of trade class designation, the onus is on the manufacturer to validate its accuracy, not on the Wholesaler, Distributor or GPO organizations that submit the data.  The information is often collected from their members and passed through as-is to the manufacturer.

When preparing regulated price calculations, manufacturers are required to use all data available during the reporting period to provide their best estimate for each required price type.  Currently there are a myriad of third-party proprietary data sources available to support validation including the HIN database, the DEA CSA database, the Hayes Directory, the NPI database and the PHS covered entity database to name a few.  Given the prevalence of these third-party proprietary data sources, it begs the question as to whether third party data validation is not just the industry best practice, but perhaps is an “unwritten requirement” for manufacturers.

For further reading on this topic, take a look at our white paper which digs deeper in the issues and proposes an automated process to mitigate the risk, increase quality and decrease effort.