Biopharmas: Optimize with gross-to-net and revenue contract management

Biopharma companies preparing to go commercial with new treatments or drugs have a host of pressing business concerns to address. From setting accurate pricing and assessing third-party contracts to weighing complex state and federal regulations, if management of these areas isn’t optimized upfront, the company is exposed to possible risks later.

“A robust gross-to-net and revenue contract management strategy is needed for growing biopharmas, from preclinical to commercial,” says Tom Evegan, strategy and management consulting principal and revenue contract management services leader at RSM US LLP. “This allows companies the ability to holistically manage a variety of operations and strategic initiatives, including contracts with channel partners, product pricing, forecasting, financial reporting and more.”

Weighing risks

The dilemma, says Evegan, is that many biopharma organizations lack the internal capacity to address these areas by themselves because they are often lean organizations focused on their innovation and science, and frequently don’t have the back-office resources and expertise to address the vast demands of reporting and the ever-changing regulatory environment. In addition, the complexity and evolution of government programs make compliance difficult for manufacturers to take on in-house.

Complicating matters further, many biopharma companies are launching unique products commercially—drugs used to serve unmet patient needs—bringing a host of new regulatory, contracting and pricing concerns to bear, with the need for specialized operational management and oversight.

Even for biopharma companies that have already commercially launched their products, extensive reporting is necessary for compliance and contractual purposes, which results in multiple levels of the organization requiring visibility into transactional and financial information that must be accurately captured from several data sources.

In the case of gross-to-net calculations—a key control to manage contracts and set pricing—being off slightly on pricing can start a disastrous chain reaction for a business.

“If your reporting on rebates, and Medicaid and pricing calculations are all slightly off, it impacts your gross-to-net assumptions,” says Joe Goldberg, a director and national life sciences consulting leader at RSM US. “Your cash forecasts will be off, which can really disrupt the business in a number of ways.”

A holistic approach

While gross-to-net and revenue contract management can be the answer to optimization and improved certainty for many biopharma businesses, Goldberg says it’s essential for companies to look for providers that can deliver a number of services in an integrated fashion and not in one-off services.

“Companies working towards a launch have numerous complexities and considerations that span across the entire organization. If possible, they should work with the most strategic vendor,” Goldberg says. “Some providers may say they can offer many distinct services, but a growing biopharma company really needs the multifunctional, seamless team working as one for the client to make this an efficient effort. It’s also key the vendor has deep experience in the life sciences industry.”

Strategic benefits

What can companies expect from a strong gross-to-net and revenue contract management strategy? Benefits include:

• Increased productivity
• Greater data accuracy
• Reduced risk of financial penalties
• Improved regulatory compliance, including revenue recognition reporting
• Smarter analytics for better forecasting and decision-making
• Accurate accruals
• Comprehensive contracts and pricing management and oversight

In the end, the outcome from optimization means ill-timed missteps, miscalculations and surprises could be a thing of the past and progress and profitability are on the company’s horizon.