Pharma Contract Sales Issues |
Prepared by Dr. Alexander Werner. KB# 10003. |
This article is based on a case study presented by Dr. Alexander Werner at the conference on “Chargebacks and Commercial Rebates” by the American Conference Institute, New York. The study used Pharma Suite software, developed by Relasoft Solutions Inc. |
A large portion of sales in pharmaceutical industry is conducted indirectly through wholesalers. GPOs enter into contract agreements with a distributor and sets contract prices for the products GPO members want to buy. This contract information is eventually loaded to all or some wholesalers buying from that distributor, and customers get their contract prices when they mention the contract at the time of purchase.
Wholesalers acquire their products from the distributors at Wholesaler Acquisition Cost (WAC).
Our company conducted a research on the dynamics of pricing in order to detect the frequency of such data errors, and to evaluate their overall impact on the bottom line. The research was made on sales and chargeback processing data, as well as on pricing and cost histories, collected for five years. |
Case study includes two parts:
The pharmaceutical distributor of our case study has 163 currently open contracts with GPO and 1,386 active NDC included into the current contracts. |
The following chart shows WAC changes per NDC over 5 years period.
Only 40% of NDC retained the same WAC price for over 5 years. 60%, which is 800 NDC, had it changed at least once, and each third NDC, roughly 500, had it changed twice or more.
The changes in contract price show that only a quarter of products on a contract will have its price changed within the contract term and yet this quarter means tens of thousands contract terms (40,000 out of 147,000).
In comparison, changes in Product cost happen in 90% of cases, in roughly 1,200 (179+999) products out of 1,300 (1,308).
Number of NDC x Number of Contracts |
To start, let’s look into cases of WAC being lower than the Contract Price. As we see from the table, this type on an error happens in 0.8% of pricing conditions set on NDC level.
Losses on system running without pricing checks can be called “tragic”. |
The conclusions of the study are:
To find out more about the pricing monitoring tool, please contact Alexander. |
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Alexander Werner, Ph.D, is a founding partner and the chief software architect for Relasoft Solutions Inc, the company specializing in software for Healthcare Management industry. Relasoft main product Pharma Suite includes modules to process several typical tasks in the pharmaceutical environment: Chargebacks, Rebates, MDRI and Coverage Gap Discount program for Medicaid, Sales Commission, Business Intelligence and reporting systems. Here are the links for more info on Pharma Suite and to contact Alexander. |