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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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.

For more information on our Contract Operations & Performance Services, visit http://www.alscg.com/expertise/contract-strategy-operations-and-compliance/contract-operations-performance-services

 

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.

For more information on our Contract Operations & Performance Services, visit: http://www.alscg.com/expertise/contract-strategy-operations-and-compliance/contract-operations-performance-services