Over the past few months, a growing number of our pharmaceutical and medical device customers have celebrated the Go Live of Model N Express. What is Model N Express? It is Model N’s new offering [...]
Over the past few months, a growing number of our pharmaceutical and medical device customers have celebrated the Go Live of Model N Express.
What is Model N Express? It is Model N’s new offering which allows tomorrow’s emerging life sciences leaders (pre-market, small and mid-size pharmaceutical and medical devices companies) to benefit from the tremendous value of Revenue Management, at a cost that fits in their budgets and resources, and at an accelerated speed of value.
Model N consolidated all the best practices learnt from larger life sciences organizations in the past 15 years and synthesized them into a set of implementation accelerators and standard operating procedures (SOPs) that allow for faster time-to-go-live.
We consider it a game changer for so-called “mid-market” companies. Until now, limited by both personnel and budgetary resources, companies with revenues under $1B worldwide had to manage commercial contracting and government compliance processes with limited custom internal IT developments, spreadsheets, or even pen and paper! As a result, they were often at risk of overpaying incentive rebates, miscalculating their distributor chargebacks, paying fines for misreporting prices applicable to government agencies, and more.
At Model N, we heard the midmarket needs loud and clear and decided it was time for this important segment of the market – some of the most innovative companies in the industry! – to be able to automate these business critical process and, doing so, to maximize revenues and margins while complying with regulatory mandates.
Eight months ago, we set out to streamline and accelerate the implementation of our Revenue Management offering for the mid-market. The response from the market has been excellent, as both pharmaceutical companies, such as Keryx Pharmaceuticals or Tolmar Pharmaceuticals, and medical devices companies, such as Sizewise, jumped aboard the program.
Through these early customers, we continued to learn about the unique Revenue Management requirements and needs of midsize companies, and further simplified and adapted our approach. In particular we were able to reassert the fundamental pillars of the Model N Express offering:
1. An implementation is only as good as its data. The earlier the data cleansing occurs, the faster the implementation. With Express, we engage on data as soon as possible to remove any possible hurdle.
2. Management education and empowerment is critical for the business to change quickly. The Express methodology comes with a lot of proven industry business processes that companies need to adjust to quickly. With Express, we communicate about this even before the project starts, so that the customer can realign and comply to SOPs.
3. Automated integration effort also needs to start on day one. Defining what processes to automate, what data to map and integrate are intensive exercises that to start quickly in the Model N Express methodology.
4. Start leveraging SOPs even before the start of the project. Aligning everyone on best practices and accelerators before the kick-off day makes for intelligent, efficient discussions during the first few days of the project.
Our goal is to continue to accelerate time-to-value to maximize value for customers. We cannot wait for many more life sciences companies to adopt Model N’s best-in-class Revenue Management Cloud solutions, thanks to the Express offering!
On Friday, January 27, 2012, the Centers for Medicare & Medicaid Services (CMS) published a Proposed Rule in the Federal Register (RIN# 0938-AQ41) to implement the Medicaid Drug Rebate [...]
On Friday, January 27, 2012, the Centers for Medicare & Medicaid Services (CMS) published a Proposed Rule in the Federal Register (RIN# 0938-AQ41) to implement the Medicaid Drug Rebate Program (MDRP) provisions of the Patient Protection and Affordable Care Act (ACA).
While the scope of the ruling is wide-ranging and provides manufacturers with a greater understanding of CMS’ position on critical concerns, it also does not answer many questions and will, in all likelihood, have a significant impact on manufacturers’ rebate liabilities and the cost of compliance. It is important to note that the CMS does not mention anything about retroactive applicability of any conditions in the proposed rule.
The Final Rule was expected to be released in 2012, then early 2013, then August of 2013, then January of 2014, and now as of last quarter this May. You can see the complete list of all the releases by the GSA on RegInfo.gov here and the specific record detailing the May, 2014 date here. Strangely enough the GSA deleted this 5th record on November 16th and then reinstated it on the 19th.
The ACA provisions impact the MDRP in a number of areas including the Average Manufacturers Price (AMP) calculations, Best Price (BP) calculations, and Unit Rebate Amount (URA) calculations. These areas are the basis for Medicaid rebates payable by manufacturers. Once the final ruling arrives, companies will need to quickly update their GP systems to bring them into compliance with the new formulas.
THE TOP 5 PENDING CHANGES
1. The AMP “presumed inclusion” was rejected and manufacturers are expected to trace sales to RCPs.
WHAT DOES THIS MEAN TO YOU?
The need to identify the end customers of retail community pharmacies means manufacturers will be required to develop infrastructure and new data collection processes and significantly change the relationship they have with wholesalers.
2. Non-5i drugs not distributed through RCPs are given a new category of eligible purchasers.
WHAT DOES THIS MEAN TO YOU?
The specific non-5i drugs have not been defined, nor has who exactly the non-RCP entities are. Even so, manufacturers will be required to categorize the purchasing entities to permit the calculation of AMP for these drugs.
3. 5i “not generally dispensed” status proposed to be continually reassessed by manufacturers.
WHAT DOES THIS MEAN TO YOU?
This will require new administrative process(es) and would be an added compliance risk. Also validating and changing on a monthly/quarterly basis would cause the AMP to vary greatly and make the additional rebate comparison to base date AMP variable highly erratic.
4. CMS proposes to expand the Rebate Program to include the U.S. territories – both for rebates and for calculations.
WHAT DOES THIS MEAN TO YOU?
Manufacturers will need to include Puerto Rico, the Virgin Islands, Guam, the Northern Mariana Islands and American Samoa in their definitions of “States” and “United States.” Adding these new territories will require new policies, procedures, additional headcount, and training programs in order to cope with these changes.
5. Referral to the OIG and significant civil money penalties are proposed for late filers.
WHAT DOES THIS MEAN TO YOU?
If a Manufacturer does not submit monthly AMP, monthly AMP units, quarterly AMP or quarterly Best Price within the 30-day reporting window, CMS will report them to the OIG and will subject late filers to civil money penalties of $10,000 per day per drug.
These changes will have a significant impact on manufacturers, from the way they shape their infrastructure, prepare for increased compliance requirements, as well as their ability to evolve existing wholesalers’ relationships to secure data requirements. At the forefront will be the creation of new capabilities in workflow design and in the adoption of technology enabling teams to minimize undesirable impact. The Model N’s regulatory solutions, by design, are able to help deal with the majority of the changes. Additional enhancements are being expedited to allow companies to meet the challenges of the Final Rule. Model N is committed to its partnership with the life sciences industry and help companies stay ahead of the game.
The 12th Annual Pharmaceutical Industry Audit reports that the US Pharmaceutical industry has had a very tough year. The challenges came from a number of different areas: post-recession strains [...]
The 12th Annual Pharmaceutical Industry Audit reports that the US Pharmaceutical industry has had a very tough year. The challenges came from a number of different areas: post-recession strains on public budgets and private-sector employment as well as the steepness of the patent cliff from 2010-2012. The Editor in Chief of Pharmaceutical Executive stated that there was one signal message from the survey, “today’s race to the top of the league charts belongs to the swift, where you claim your destiny by controlling the ability to price.”
For many in the pharmaceutical industry revenues are down and margins are being squeezed. The leaders are those who have the ability to set prices above the market with less or no discounts, resulting in minimizing overall gross margin erosion.
This year’s audit covered the following areas: Annual sales, Enterprise value, Enterprise value to Sales, Gross Margin, Sales to employee, Net income to assets, Sales to assets, Net income to sales, & SG&A expenses. What resonated with me is that one of the major indicators of success was found to be gross margin. While this is not surprising, in and of itself, it’s the differences among those seeing increases or steady gross margin and those seeing losses that is truly eye-opening. The top 5 gross margin leaders were:
At the other end of the scale we have gross margins for Sanofi=18.43%, Mylan=17.43%, Novartis=16.65%, Actavis=9.19%, and Hospira=3.55%.
Vadim Zlotnikov, Chief Market Strategist at Alliance-Bernstein stated that, “pricing power is the key to sustainable earnings growth. There is clear evidence that shares of companies with pricing power dramatically outperform their peers.” The companies who managed the best were the ones that controlled prices by reducing margin erosion.
The leading manufacturers that maintain or even increase their gross margins follow three best practices including:
• Reduce price erosion using business intelligence with their contract management
• Reduce or eliminate maverick pricing that impacts overall product pricing
• Maintain or increase gross margin through more innovate contracts and pricing
Let’s dive a bit deeper into each of these best practices…
Many manufacturers have silo’d systems for their pricing, contracts, and settlement management systems. But those that have an integrated solution can leverage business intelligence tools that allow them to better manage and negotiate their prices over the product lifecycle. This allows them to have much higher gross margins than their competitors.
Maverick pricing by sales is the bane of many manufacturers, leading to a significant loss of gross margin when those prices are used against their government contracts for best price. The best way to avoid this issue is with a contracting solution that not only forces compliance to pricing guidelines but also has easy workflows and alerts for reviewing and approving/disapproving price changes. In addition it needs to have embedded within it best practices for complex contract deals.
Companies face a difficult situation when long-time employees leave taking the institutional knowledge with them or because their current systems do not allow for industry best practices for sophisticated contractual negotiations. Both of these can lead to a reduction in overall gross margins due to poor negotiations and imperfect contractual provisions. The best companies have a pricing and contract solution that is both simple to use and also has superior flexibility to store and learn from previous negotiations and develop complex contracts.
To provide an answer to this overall problem of gross margin management across a product lifecycle, Model N delivers an integrated Channel Management solution combined with the industry’s best practices for KPI dashboards and Business Intelligence. Our solution can significantly reduce price and margin erosion as well as revenue leakage from incorrect rebates and chargebacks.
Resources: Revenue Management for Pharma
I regularly speak with strategists at global pharma companies and, lately, the close relationship between global market access and global pricing has often come up. The success of a new drug [...]
I regularly speak with strategists at global pharma companies and, lately, the close relationship between global market access and global pricing has often come up. The success of a new drug depends on positive health outcomes, of course, but also on positioning, competitive pricing and many other components that bring about effective reimbursement from increasingly cost-conscious payers, be they public or private. We all know the heydays of the 1990s and early 2000s when most drugs would be reimbursed by payers without problem are long gone. As a result, Market Access teams continue to rise in importance.
The Market Access folks are involved pre-launch in demonstrating the clinical and economic value of a drug. In the simplest of terms, their goal is to arrive at a win-win for the company and the payer, which ultimately translates to a win for the patients. Critical also is their ability to establish a favorable landscape for pricing managers who handle ongoing global pricing strategy and execution after launch. But there’s a lot that can go wrong in this process.
To succeed, Market Access teams need resources and insight across a vast network of stakeholders. Years before a product launches they’re working with the clinical team to position trial studies’ results, shape the target product profile, and with the regulatory teams to assemble the global value dossier in such a manner that the drug achieves as broad an indication as possible on label. All the while, they work under stringent timelines with different authorities such as the FDA, EMEA, Ministries of Health or other government entities. Once the label is approved, the pricing conversation begins. This is a very busy process with strict dates to respect on the way to a final launch date. Any delay may lead to loss of revenue through delayed launches but also through the complexities of international reference pricing. For instance, a late launch in France could result in a lower price for the subsequent launch in Belgium. It’s the Global Market Access team’s job to keep everyone coordinated around the timeline to prevent delay that affects revenue and price.
While Market Access teams have a fairly defined skillset and processes for bringing a new drug to market, I observe that most of them do not yet have systems to effectively collect and share market access data across the organization. Global Market leaders acknowledge that their teams are underequipped in this area: many use Excel worksheets or PowerPoint templates in a share drive to coordinate activities involving hundreds of people across the organization in order to launch a new product in dozens of countries in a matter of a few months. Everything is ad hoc and they have not defined consistent data and key performance indicators (KPIs). What it boils down to is a lack of visibility and measurability across the organization.
What I believe is needed is a shift in data consolidation, reporting, metrics and tools to support Global Market Access excellence and enable these teams to operate optimally. At Model N, we have developed a system that enables users worldwide to consolidate and share a product’s or an indication’s market access information in every country including milestone dates such as expected global value dossier submission, expected response/questions, as well as expected price conversation and launch dates.
It consolidates to a calendar in which all relevant stakeholders across the global organization – from affiliate government affairs to the Global VP of Market Access – can view the latest status of how dates stack up across countries, how actual achievements to date compare to expectations, and can identify and mitigate delay risks. Having visibility of this timeline across countries is very useful and we’ve seen a great deal of excitement around this. But this is just a starting point, and Model N is gearing up to provide more value to Global Market Access teams with these two main objectives:
• Consolidate market access information consistently (same definitions for all) and establish business governance and monitoring processes in order to streamline/optimize access timelines, identify opportunities and mitigate risk, prioritize and/or anticipate resourcing.
• Increase account rep effectiveness, by sharing knowledge and best practices: Today, everything is silo’d and there is very little cross-country knowledge sharing in terms of material, methodology, message and innovative strategies.
In my opinion the top capabilities that such a solution should help facilitate are:
• Information management and reporting that allows for true global brand-level market access planning, process and performance, including segmentation at the country or state or even account-level, if necessary, to ensure information is available at the relevant level of granularity
• Dynamic collaboration and process management that alerts teams of important changes, expedites proactive response, runs data verification workflows regularly to ensure accuracy and timeliness of data
• Analytics and reporting including KPI measurement that captures the relevant data and establishes consistent, measurable metrics (e.g. number of patients covered, level of access, delta vs. analog products, number of days price approval vs. industry benchmark)
• Visibility and dashboards for better communication across borders concerning delay risks and delta between expected and actual performance
I’m interested in what you think. What other capabilities would you want to see in a solution for Global Market Access teams?