A better approach for life sciences pricing and reporting challenges

Jan 10, 2021

New module strengthens analytics and insight at a reduced cost

Selling in life sciences requires sophisticated automation that aligns with a complicated distribution network. Manufacturers sell to multiple wholesalers (with whom they directly contract) and end buyers (with whom they indirectly contract) comprised of buying groups, large retail chains and government entities. Managing the transactions for chargebacks, rebates and fees that accrue for anticipated deductions is critical for avoiding costly missteps.       

The difference between the gross price—or wholesaler acquisition cost (WAC)—and the indirect sales price is charged back to the manufacturer. Moreover, rebates and fees are also paid based on contractual obligations, Medicare and Pharmacy Benefit Manager (PBM) contracts that can total up to 60% of gross revenue. Careful accounting for the expected costs, adjudicating the chargebacks for accuracy and calculating the gross-to-net revenue is key in accurately setting pricing and complying with and reporting to the government.

To further complicate matters, life sciences companies often use third-party contract management systems to support the complexity of compliance. These systems must integrate massive amounts of transactional and master data into an enterprise resource planning (ERP) platform to properly account for, accrue and manage revenue, including items, direct sales, customers, contracts, pricing, shipments, chargebacks, fees and rebates. 

The goal is for all the various data sources within a life sciences company to merge and be reported in the gross-to-net, as noncompliance or inaccurate calculations can result in significant sanctions and fines and threaten the future of the company.

A simplified solution to a complicated challenge

In conjunction with industry experts, RSM has developed an integrated, user-friendly and cost-effective contract, chargeback, rebate management and government pricing system. Our team worked directly with leaders from life sciences companies and Microsoft, as well as contract management advisors, to develop the process within Microsoft Dynamics Finance and Supply Chain and eliminate expensive third-party systems and complex integrations.

Dynamics Finance and Supply Chain now can deliver built-in contract maintenance, chargeback processing and rebate management capability with full EDI support. The integrated solution can also manage your government pricing and 340B reporting while providing extensive gross-to-net analytics and reporting.

In addition, the Life Sciences Contract Management (LCM)  module enables accounting for key areas, including revenue leakage and what-if scenarios, integrating advanced analytic functionality directly into the ERP solution with Microsoft reporting-out tools, such as Microsoft Dynamics 365 and Microsoft Power BI.

Additionally, the module is the first scalable LCM solution on the Microsoft Azure network. If you have an internal IT worker, they can create customized queries; you’ll not only have a set of analytics included to start with, but the opportunity to perform your own what-ifs and deep-dive analytics based on your product mix and customer mix.

Growing companies need the power and flexibility to perform and develop analytics in near-real time—you can't wait a month, or even a week, for a solution or an update from a vendor; at that point, the information has lost its value. Having access to the Microsoft environment and reporting tools like Power BI allow you to access, evaluate and analyze your data nearly immediately.

Beyond enhanced analytics, functionality and insight, the LCM module delivers results at a lower cost than other common third-party solutions. While initial integration costs may be similar, changes to the environment or additional functionality typically comes at a steep cost with many third-party platforms. However, with Microsoft, you can add incremental tools and services to your subscription at reasonable price points, without having to wait until the next budget cycle.

With Microsoft and the LCM module, as you look 3–5 years down the road, you’ll have a more accurate, effective and scalable analytics and tools platform at a fraction of the cost of other solutions on the market. 

Calculating chargebacks, gross-to-net and pricing, as well as their related reporting requirements, is common for life sciences companies. However, with the significant potential implications of inaccurate data and noncompliance, a strong solution at a much lower price point can offer timely insights and better protect your organization.