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Building A High Tech Gross-to-Net Strategy From Your Price Waterfall

September 3, 2019

In part one of this series, Cesare Rotundo, VP, Product Management, explores why many high-tech and semiconductor companies don’t explore the real problem found in a complete gross-to-net strategy.

In his post, Understanding True Net Price, Tony Romito, Managing Director, Accenture states, “the rising proficiency of revenue management explores beneath the surface of this long-standing assumption to answer a very valuable, yet elusive question – what is the true net price?”

While gross-to-net (GTN) has been a big topic in the Life Sciences industry, is it top of mind in High-Tech and Semiconductor companies? According to IQVIA, Discounts, rebates and other price concessions on brands reduced absolute invoice spending by an estimated 28% to $344 billion.[1]

Gross-to-Net has reached a level of significance in the high-tech industry. However, it doesn’t have the same recognition. Many high-tech and semiconductor companies focus on portions of GTN such as list price, discounts and special pricing, but not all aspects of a complete gross-to-net. The price waterfall shows the elements that affects profitability between base-to-list price through a manufacturer’s pocket margin and may be used to show additional measures such as distributor margin as depicted below.

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While discounts and incentives can make or break high-tech manufacturers performance, each company pursues its own approach to managing them, often less interested in the ability to extract value providing a complete gross-to-net strategy.

Can Gross-to-Net in High-Tech and Semiconductor companies be more complex than Life Sciences? In part two, we’ll share recent research, discussions from customers and recommendations on how to build a realistic gross-to-net strategy.

To learn more about your true gross to net and what you’re missing with your price waterfall, click here. For more information on Model N, go here.

 

[1] Medicine Use and Spending in the U.S. – A Review of 2018 and Outlook to 2023, IQVIA Institute, May 2019

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