IntegriChain Blog - Building the data-driven life sciences channel https://www.integrichain.com/blog/ Solving market access challenges from operations to insights Wed, 21 Feb 2024 17:25:56 +0000 en-US hourly 1 https://wordpress.org/?v=6.4.3 Navigating the Complexities of Pharma/Biopharma Gross-to-Net Forecasting http://www.integrichain.com/blog/navigating-the-complexities-of-pharma-biopharma-gross-to-net-forecasting/ Tue, 20 Feb 2024 16:17:47 +0000 https://www.integrichain.com/?p=7219 The gross-to-net process, essential for understanding net revenue, demands a keen awareness of every piece of data and business drivers upstream. In this blog, we'll explore the critical considerations for the pharmaceutical and biotech industry and how they can navigate the challenges to drive accurate gross-to-net forecasts, while ensuring net revenue optimization.

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In the ever-changing world of pharmaceutical manufacturing, operational and financial teams find themselves grappling with the complexities of establishing, monitoring, and optimizing product, pricing, contracts, and data sources. The gross-to-net process, essential for understanding net revenue, demands a keen awareness of every piece of data and business drivers upstream. In this blog, we’ll explore the critical considerations for the pharmaceutical and biotech industry and how they can navigate the challenges to drive accurate gross-to-net forecasts while ensuring net revenue optimization.

Understanding the Foundations

The journey of net revenue optimization begins with a meticulous understanding of the gross-to-net line item—its source, timing, frequency, reconciliation, and harmonization. This fundamental knowledge of each product’s distribution strategy, pricing, and third-party contracts sets the stage for effective net revenue management.


Blog Net Revenue Forecasting

Net Revenue Forecasting in a Multi-Dimensional World 

The pharmaceutical landscape has evolved, and manufacturers are fighting for every dollar.  The industry’s counterparts leverage sophisticated modeling and always seem one step ahead. We are challenged to create infinite scenarios based on price, contracts, legislation, as well as product archetypes, patient profiles, dispensing, and distribution channels. Each scenario demands a unique forecasting methodology, adding layers of complexity to net revenue predictions. Linear forecasting is no longer sufficient; the industry now requires a multi-dimensional approach to accurately capture and quantify the dynamics at play.  

Blog Payer 1

Adapting to Product Life Cycle Forecasting 

Gone are the days of forecasting GTN two years out and then growing with inflation. For the industry to fight for every dollar, we need to build and maximize our toolbox and the best tool is interdependent, strategic modeling. GTN forecasts today need to be dynamic to assess the cross-channel impact of each business decision. With the recent IRA legislation, all channels are now price protected and significant potential penalties need to be calculated and assessed. GTN forecasters have been pressured to elevate their game to include more advanced modeling and interconnectivity in their models. CEOs, CFOs, and COOs are requiring long term (10 to 15+ years) net revenue predictions at a detailed level to ensure price and contract optimization.

Blog Industry Legislation

Collaboration across Teams

Net revenue forecasting is no longer confined to the finance and accounting realms leveraging simply dollarized data. Optimizing your net revenue succeeds with collaboration amongst business, market access, and contracts and pricing teams. These diverse perspectives ensure a comprehensive approach, preventing the industry from blindly trending dollars–which typically leads to inaccurate predictions. Breaking apart your GTN forecast into unit and rate perspectives drives forward thinking related to price and volume impacts. An organization’s collective intelligence of their product’s patient, therapy area, and competitive landscape is the recipe for net revenue optimization. 

The Importance of RACI

The RACI (Responsible, Accountable, Consulted, Informed) framework becomes crucial in net revenue forecasting. With the growing prominence of forecasting in small to mid-market businesses, ensuring the involvement of key stakeholders, including market access and business teams, is imperative. Neglecting this collaborative approach leads to downstream errors in revenue predictions.

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Forecasting Liabilities

One of the pitfalls of GTN forecasting is when the stakeholders forget that the output often slides downstream as the basis for your financial statement accruals. GTN forecasts are typically developed for leadership and FP&A type stakeholders and are often an optimistic view. A successful practice in the industry is to ensure there are multiple GTN Forecast scenarios. It’s powerful to have all cross-functional stakeholders present when analyzing the different scenarios to develop the most realistic forecast. The complexity typically arises from trying to predict utilization in the different GTN buckets. Often historical trends are not indicative of the incoming GTN discount invoice, as most product trends are not stable. Pharmaceutical financial teams must navigate these intricacies to accurately forecast liabilities for the current and years to come. 

Scenario Planning and Game Theory Thinking

The most productive conversations often stem from worst-case and disaster scenarios. Engaging stakeholders from various departments in scenario planning ensures realistic assumptions and facilitates better decision-making. Game theory thinking involves modeling from different perspectives—manufacturer, payer, provider, and pharmacy. This approach aids in understanding the economic implications for each stakeholder, especially in scenarios like the Part B ASP model and payer negotiations.

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Conclusion

Pharmaceutical business and financial teams are navigating a landscape of increasing complexity, driven by evolving product archetypes, patient dynamics, distribution channels, and aggressive legislation. Collaborative forecasting, scenario planning, and game theory thinking are becoming indispensable tools for ensuring accurate net revenue predictions. As the industry continues to transform, financial teams must adapt and embrace a multi-dimensional approach to stay ahead of the curve.

REGISTER to attend the RAC Summit to hear Jen speak more on navigating the complexities of gross-to-net or contact her at jsharpe@integrichain.com.  

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New Medicare Part D Agreement, 2024 Pharma Industry Shake-Up and 2023 SPTR Recap http://www.integrichain.com/blog/january-2024-market-update/ Wed, 31 Jan 2024 21:00:28 +0000 https://www.integrichain.com/?p=7187 Discover the latest on the New Medicare Part D Agreement, 2024 Pharma Industry Shake-Up andth 2023 SPTR Recap updates this month.

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Editor’s Note: This month, we offer updates on three topics: Notice of New Medicare Part D Agreement, 2024 Pharma Industry Shake-Up, and 2023 State Price Transparency Reporting Recap. As always, if you have questions on any of the content found in this or previous market updates, please reach out to your IntegriChain Consulting Lead or consulting@integrichain.com and we would be happy to talk you through it.


Notice of New Medicare Part D Agreement

As you are likely aware, a new Medicare Part D Program will be in effect starting January 1, 2025 and will require a newly signed Manufacturer Discount Program agreement by March 1, 2024.

If you have not already started the process or have any questions, please reach out to your Government Pricing Advisory account lead for assistance. 

More information and guidance from CMS can be found here.

2024 Pharma Industry Shake-Up: Navigating the New Terrain of Drug Pricing and Medicaid Rebates

The start of 2024 marked another critical change for pharmaceutical manufacturers. The removal of the Medicaid Average Manufacturer Price (AMP) cap, as part of the American Rescue Plan Act (ARPA) of 2021, has substantially impacted certain name-brand drugs.  This applies specifically to brand drugs that had already hit the rebate cap or experienced price increases outpacing inflation. Before the AMP cap was lifted, rebates given for Medicaid were limited to the drug’s AMP at 100%. However, in 2024, the total rebates were estimated to be substantially higher than the Medicaid gross spending on those drugs. 

The consequences of lifting the rebate cap led some drug companies to lower their drug prices or altogether discontinue certain drugs in favor of less expensive alternatives to mitigate the financial impact of increased Medicaid rebates. The data shows that between December of 2023 and January 2024, 30 brand products taking drug price decreases, which is a new record from a historical perspective. For example, significant price cuts by insulin manufacturers of over 70% Wholesale Acquisition Cost (WAC) reduction have been a direct response to this policy change. 


Price Decreases by Disease Categories

The removal of the AMP cap and the Inflation Reduction Act (IRA) have played a considerable role in the manufacturer’s drug pricing decisions. The IRA requires drug companies to pay a rebate if drug prices rise faster than inflation in Medicare, a requirement that already exists in Medicaid. The addition of Medicare inflationary rebates has slowed the increase of drug prices over time but has also led to lower Medicaid inflation-related rebates. The median percentage of price increases on brand-name drugs in 2024 is at a historic low of 4.5%. In the current policy environment, this trend is poised to continue to track close to inflation as manufacturers’ era of uncapped price increases has come to an end. 

Median Percentage WAC

There are also potential impacts on Pharmacy Benefit Managers (PBMs). Reducing the Wholesale Acquisition Cost (WAC) of a rebated product can considerably impact the product’s rebate yield. If a pharmaceutical manufacturer lowers the WAC of their product, the rebates on discounts they offer may also decrease. PBMs often receive rebates when they promote or include a drug in their preferred list. However, this financial incentive can get complex due to regulatory and market dynamics. Therefore, most PBMs are expected to consider substantial WAC reductions as a market event, prompting them to invoke their contractual provisions and potentially adjust their pricing guarantees appropriately.

The recent elimination of the Medicaid Average Manufacturer Price (AMP) cap is causing momentous and mixed impacts on the pharmaceutical industry. Drug manufacturers are responding by modifying their prices and discontinuing certain drugs to cope with additional rebate costs. Meanwhile, pharmacies and PBMs must acclimate to the shift in drug pricing and rebate landscape.

References:

2023 State Price Transparency Reporting (SPTR) Recap 

As the 2023 reporting season comes to an end, the IntegriChain Price Transparency team would like to provide a recap of the changes to the SPTR landscape. Eight (8) states [California, Connecticut, Florida, Illinois, New Hampshire, New Jersey, New York, Minnesota] have recently issued updates to the SPTR regulation landscape. Below are highlights manufacturers should be aware of:

Most Active State Changes – MN

Minnesota  

SF 2774 – Prohibition of Excessive Price Increases Regulation Suspended

  • On Dec 4th, 2023 a Federal Judge issued a preliminary injunction prohibiting the Minnesota Attorney General from enforcing this regulation. The regulation was set to prohibit excessive price increases on generic and off-patent prescription drugs.
  • The Minnesota court ruled that the law is unconstitutional and unlawfully regulates transactions outside of the state violating the Dormant Commerce Clause.
  • Under this law, an excessive price increase was defined as an increase exceeding
    • 15% of the wholesale acquisition cost over the immediately preceding calendar year; or
    • 40% of the wholesale acquisition cost over the immediately preceding three calendar years; and
    • The price increase, adjusted for inflation utilizing the Consumer Price Index, exceeds $30 for (i) a 30-day supply of the drug; or (ii) a course of treatment lasting less than 30 days.
  • A manufacturer of a generic or off-patent drug was also prohibited from withdrawing that drug from sale or distribution within this state for the purpose of avoiding the prohibition on excessive price increases and could be subject to fines up to $500,000 for failure to comply 
  • SF 2774 also established a Prescription Drug Affordability Board to conduct cost reviews on certain prescription drugs and establish upper payment limits on certain high-cost drug products sold in the state.

SF 2995 – Drugs of Significant Public Interest Reporting Requirement

  • No later than January 31, 2024, and quarterly thereafter, the commissioner shall post a list of prescription drugs that the commissioner has determined to represent a substantial public interest and intends to request data 
  • Inclusion on this list will be based on “any information the commissioner determines is relevant to providing greater consumer awareness of the factors contributing to the cost of prescription drugs in the state”, and the commissioner shall consider drug product families that include prescription drugs:
    • That triggered reporting under the MN SF 2995 price increase and new drug reporting requirements during the previous calendar quarter 
    • for which average claims paid amounts exceeded 125% of the price as of the claim incurred date during the most recent calendar quarter for which claims paid amounts are available; or
    • that are identified by members of the public during a public comment process.
  • Reporting entities that are required to report shall be notified no sooner than 30 days after the list is publicly posted. Reports are due no later than 60 days after the notification
  • Reported information includes description of the drug, direct costs to manufacture, market and distribute the drug, number of units sold, net profits, total rebate payable amount, total sales revenue, and total financial assistance provided during the 12-month period prior to the date of the notification to report, etc.

SF 2995 – Updated Reporting Guidance and Technical Fixes

  • On May 24, 2023, Minnesota signed SF 2995 into law, amending the current Minnesota drug price transparency law. Following this, the Minnesota Department of Health released updated reporting guidance incorporating the changes to Minnesota’s Prescription Drug Price Transparency reporting.
    • Technical fixes to existing reporting for drugs with applicable price increases and introductions for sale including new and revised definitions e.g for brand drugs, inclusion of biosimilars in price increase reporting, incorporation of drug acquisition information into applicable price increase reporting for drugs acquired 12-months prior to increase, registration requirements, additional penalties for failure to register, and additional clarifications.
  • These changes became effective July 1, 2023. The first reporting deadline under the updated guidance is August 30, 2023 (60 days after the effective date of a new or increased price per the MN statute).  

New Kids on the Block – CT, FL, IL, NJ, NY

Connecticut

  • Connecticut amended its existing drug price transparency law on June 27, 2023, signing HB 6669 into law. This bill, effective October 1, 2023, amends the existing trigger for potential inclusion on the state’s annual list of ten outpatient drugs to state drugs are only included if:
    • WAC has increased by not less than 16% cumulatively during the immediate preceding two calendar years; and
    • WAC is not less than $40 for a course of treatment. 
  • The executive director will create a preliminary list and post for public comment. 

Florida

  • The Florida Department of Business and Professional Regulation has published two emergency rules to implement its recent state drug transparency law, SB 1550. These rules provide the process and reporting forms for submission.
    • The reporting forms require manufacturers to submit their current permit information, reporting establishment information, and the required price increase information. The online or printable forms for submitting the price increase report and annual price increase report are available on the Department’s website. These rules were effective July 12, 2023.

Illinois 

  • The Governor of  Illinois has signed HB 3957 into law, prohibiting manufacturers and wholesale distributors from engaging in price gouging in the sale of an essential off-patent or generic drug that is ultimately sold in Illinois.
    • Price Gouging here is defined as “an unconscionable increase in a prescription drug’s price that would result in the WAC of a 30-day supply of the essential off-patent or generic drug exceeding $20 and would result in an increase in the WAC of the essential off-patent or generic drug of 30% or more within the preceding year, 50% or more within the preceding 3 years, or 75% or more within the preceding 5 years, and is otherwise excessive and unduly burdens consumers because of the importance of the essential off-patent or generic drug to their health and because of insufficient competition in the marketplace.” 
  • If the Attorney General has reason to believe that a violation has occurred, they may send a notice to the manufacturer or wholesale drug distributor requesting additional information. The Attorney General may also impose a civil penalty for each violation of the Act. The bill is effective Jan 1, 2024.

New Jersey

  • On July 10, 2023, New Jersey passed a new State Price Transparency Reporting bill, S 1615 which:
    • Requires drug manufacturers to submit new drug and price increase notifications and reports;
    • Establishes annual registration and assessment payment requirements; and 
    • Establishes a Drug Affordability Council to formulate legislative and regulatory policy recommendations related to drug pricing. 
  • The notices for this regulation are required within 10 days of triggering the requirements and the follow up reports are due within 20 days. Failure of a reporting entity to comply may result in a civil penalty. The reporting obligations for this bill will become operative the first day of the thirteenth month following the date of enactment, approximately August 1, 2024.

New York 

  • On December 22, 2023, New York signed S.599-A/A.1707 into law which requires manufacturers to notify the state of:
    • WAC increase of more than 16%, including the proposed and cumulative increases that occurred within the 24 months prior to the planned effective date of the increase, in a prescription drug with a WAC of more than $40 per course of therapy
    • The notice shall include the date of the increase, current WAC, dollar amount of future increase and a statement on whether a change or improvement in the drug necessitated the price increase 
  • Manufacturers are required to provide this notice in writing at least 60 days prior to the planned effective date of the increase
  • Manufacturer notices shall be published within 5 days of its receipt
  • Manufacturers that fail to comply with this requirement may be subject to penalties up to $5,000 per day after the reporting period. 
  • This regulation will take effect 180 days after its enactment, approximately June 19, 2024.

Biggest Turnaround – NH

New Hampshire 

  • On June 20, 2023, New Hampshire signed HB 2 into law, amending one of the state’s price transparency regulations – HB 1280 (RSA 126-BB:9), the state’s Prescription Drug Affordability Board transparency law.
    • HB 2 suspends the drug price notification and disclosure requirements, confidentiality provisions, assessment fee provisions, civil penalties and registration requirements within HB 1280 for the biennium ending June 30, 2025. 
    • The HB 2 amendments do not impact the new drug notification and reporting requirements under HB 703, which are administered by the Insurance Department. HB 2 was made effective July 1, 2023.

Most Likely to Clarify – CA

California

On December 21, 2023, the proposed revisions to CTRx regulations were approved by the Office of Administrative Law (OAL) and filed with the Secretary of State. These revisions will be effective April 1, 2024. Some of these revisions include:

  • WAC Increase Notifications & Reports (Clarification) 
    • Lookback Period: The state has clarified that the WAC increase notifications and reports shall be required for products with a W AC >$40 and a total WAC increase of more than 16% above the wholesale acquisition cost of the drug product on December 31 of the calendar year three years prior to the current calendar year
    • Report:
      • Sales Volume: Manufacturers meeting the reporting threshold shall report the Total volume of gross sales in the US of the drug sold in the US during the one year period prior to the price increase effective date
  • New Drug Reporting
    • Estimated Number of Patients (Clarification): Manufacturers meeting the new drug reporting requirements are to report the estimated annual number of patients in the United States with a condition for which the new prescription drug may be prescribed. This estimated number shall account for the total number of patients with a condition for which the new prescription drug may be prescribed and shall not be limited to or based on the quantity of the particular new prescription drug introduced to market, anticipated to be introduced to market, or anticipated to be prescribed. 
  • Good Clause for Penalty Waivers:
    • A penalty for a late report may be reduced or waived if the hearing officer finds good cause for the late filing of the required report.  
    • Good cause for the late filing of a required report shall be lateness due to circumstances beyond the control of the manufacturer and does not include neglect or administrative inadequacy on the part of the manufacturer or any of its offices, officers, employees, or agents.

For more information, please contact the IntegriChain State Price Transparency team: Price.Transparency@integrichain.com.

GET MORE PHARMA MARKET UPDATES

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Transforming Pharmaceutical Trade and Embracing Innovation in Distribution Paradigms http://www.integrichain.com/blog/transforming-pharmaceutical-trade-and-embracing-innovation-in-distribution-paradigms/ Thu, 25 Jan 2024 16:07:24 +0000 https://www.integrichain.com/?p=7178 Learn about this transformative period which poses both challenges and opportunities, urging stakeholders to adapt and innovate.

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In the ever-evolving landscape of the pharmaceutical trade and channel world, we are witnessing a significant shift toward innovative distribution models. The traditional methods are giving way to more direct selling, with the emergence of new players and a diversification of product archetypes. This transformative period poses both challenges and opportunities, urging stakeholders to adapt and innovate.

Eroding Value Proposition of Wholesale Distribution

The worsening economics of the traditional full-line distribution model is challenging manufacturers in terms of product availability. Over the past three years, emerging manufacturers with innovative products have confronted distribution fees upwards of 15%. But because the generic patent cliff has slowed and costs have risen, wholesalers can no longer afford to distribute big pharma portfolios at a loss and are negotiating significant increases in fees. Consequently, across biopharma manufacturers, we are observing several trends in response, several of which will be addressed in this blog. We’ll cover how manufacturers are overhauling their approach to distribution service agreements, reviewing Fair Market Value (FMV) and bona fide fees considerations, and several other changes – in other communications.

The first major development has been to supplement indirect distribution with direct sales, or in some cases only to sell direct. Smaller manufacturers have trail blazed initially with several configurations depending on their product archetype and access consideration. IntegriChain has observed several agile flexible arrangements including direct-to-regional-pharmacy warehouses, direct-to-patient, and direct-to-cash pharmacy. This shift is not confined to specialty products but extends to general medicine products, signifying a broader industry transformation. More recently, top-10 manufacturers have announced direct-to-patient portals, most notably LillyDirect™ to cover several therapy classes across weight loss, diabetes, and migraine.

Branded Drugs Losing Out at the Pharmacy

Another key driver that underpins shifting channel strategies is due to the stress and economic pressures faced by pharmacies in the current landscape. Pharmacies are closing and retail chains may no longer stock branded products or charge fees on brands because wholesaler penalties for dispensing brands, preferred pharmacy restrictions, or payer DIR fees factored out of the pharmacy’s reimbursement. The bottom line is that retail pharmacies no longer make a profit on dispensing branded drugs, and if they do fill brands, the prescriptions must be clean, meaning the patient has coverage and no onerous restrictions. So why should branded manufacturers pay up to 15% for distribution only to have their products sit in a wholesaler’s warehouse, yet fail to be dispensed to patients? 

Evolution of Digital Hub and Dispensing Pharmacy Workflows

Over the past several years, tech-enabled hub and pharmacy networks gained momentum with newer specialty lite products. We observe three primary approaches – regional digital pharmacies, national digital pharmacies (e.g., Amazon, PillPack), and centralized patient support hubs. Regardless of the approach used, in all cases a digital hub is providing reimbursement support services and then transferring a clean prescription to a national or regional mail or retail pharmacy network. Each model offers unique advantages, from local courier delivery to nationwide mail-order services. There is potential for these models to drive down costs and improve patient experiences, especially in the context of the burdensome prior authorization process.

A tech-enabled approach in these models is essential for both specialty pharmacies and traditional retailers to stay competitive in the evolving landscape. There is potential among these innovations to enhance patient engagement, improve the provider’s experience, and reduce costs on the pharmacy side.

New Technology Providing Opportunities for Disruption

Amidst these challenges, we are seeing the growing role of digital and AI technologies. The fragmentation resulting from the adoption of new channel models presents an opportunity for technology to streamline processes and address business challenges. Various innovators in the pharmaceutical industry – from new PBM plan models to specialty distribution and logistics providers, niche disruptors, online marketplaces, and other innovative players – are contributing to the industry’s revolution by using AI and digital technologies. 

Embracing Change for a Sustainable Future

Embracing change in the pharmaceutical trade and channel is the key to survival. As distribution models evolve, stakeholders must navigate the challenges and seize the opportunities presented by digital and AI technologies. By fostering collaboration and innovation, the industry can build a more resilient and patient-centric future.

To learn more about how our Channel experts can help optimize your channel and distribution strategy, reach out to IntegriChain

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3 Tips to Navigating GTN Year-End Audit Prep http://www.integrichain.com/blog/three-tips-to-navigating-gtn-year-end-audit-prep/ Thu, 11 Jan 2024 13:29:12 +0000 https://www.integrichain.com/?p=7154 For the majority of life science and biotech companies, January is a time of closing the books, wrapping up year end results, and preparing for the annual audit.  This blog is to discuss key considerations from a Gross-to-Net (GTN) perspective when planning and supporting the year end financial audit.

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Key Considerations for Gross-to-Net

For the majority of life science and biotech companies, January is a time of closing the books, wrapping up year end results, and preparing for the annual audit.  This blog is to discuss key considerations from a Gross-to-Net (GTN) perspective when planning and supporting the year end financial audit.

Tip 1: Analyze, Understand, and be able to Explain the Balance Sheet

  • Pipeline Accruals. Understanding total pipeline units in the channel at the end of the year can be critical to a company’s Balance Sheet accuracy. This requires a reconciling Inventory Roll Forward supporting pipeline assumptions. Additionally, units in the pipeline need appropriate future GTN rates applied for more accurate reporting.  For instance, companies with a large Coverage Gap invoice or high Copay dollars ($) in Q1 every year may want to consider adjusting their pipeline accruals, especially if they have significant inventory at wholesalers and downstream. See illustrated example below of the difference in liability a company may have in Q4 vs Q1 invoices. This can have a dramatic impact on pipeline calculations.
Screenshot 2024 01 10 At 10.11.04 Am
  • Open Invoice and Prior Period Lag. Being able to confidently explain the balance sheet with readily available detailed evidence greatly improves year end audit efficiency.  It is important for manufacturers to understand what is being reserved on their balance sheet and why. Here are few questions for companies to think about:
    • Has the company analyzed its Medicaid rebates and identified its prior period lag?  Has the company released open invoices that they do not expect to receive and are they holding open periods that still appear to be missing key states or following lag trend analytics?
    • Does the company have lagging claims for TriCare, Coverage Gap, and Pharmacy Benefit Managers (PBMs) that they have been holding open from the first half of the year that you can close out?
    • If the company analyzes prior trends, are they holding a large enough accrual for open invoices and have they compared open invoices to actual invoices received but not yet paid?
  • Return Accruals. Returns is another GTN line item that can be difficult to manage if a company is not managing data sources well and leveraging benchmarks and data analytics.  This is especially important as launch products start to approach lot expiry.  A returns benchmark and lot analysis can improve returns balance sheet accuracy and help calculate a more accurate return reserve. 

IntegriChain Customer Experience: Being able to explain the Balance Sheet

IntegriChain’s Required Reserve Snapshot is a month-by-month view of a company’s balance sheet. It allows the company to be able to see exactly where their outstanding balances lie, by earned period, by contract, and by NDC, to enable enhanced analysis. Being able to visualize their balance sheet in this manner promotes transparency that isn’t otherwise easily achieved.

Year End Audits typically demand that the balance sheet owner be able to speak on behalf of any outstanding balance left on the balance sheet. Having a detailed yet digestible report like the Required Reserve Snapshot allows the balance sheet owner to be able to isolate individual outliers that otherwise would be buried within the data. The report spells out clearly where total balances are coming from, which saves the viewer both the time and the frustration of parsing out which pieces of the data belong where, and why.  

The example below is illustrative of how managing the Balance Sheet by earned period allows companies to identify outliers like the Q1 Medicaid – MCO Reserve that is still holding excess Reserve from the Q1 invoice cycle and the Q2 Managed Care – Commercial that should have been released. 

Required Reserve Snapshot Helps Isolate Potential Problem Areas in a Balance Sheet

Screenshot 2024 01 10 At 10.27.38 Am

Tip 2: Have tools and resources at your fingertips to explain actual discounts/rebates compared to variances at the contract level

  • Actual Invoice data by earned period. Invoice data by earned period is a key report for auditors to understand payment trends especially for rebate channels.  When looking only at actual data by paid period, there are gaps in understanding what is actually open.  Actual data by earned period better supports Balance Sheet analysis and an understanding of lagging claims and open invoices. The ability to provide actual invoice data by earned data and explain data trends can improve auditor conversations. 
  • Analysis over assumption misses (rate vs mix). Additionally, when performing analytics at year-end close of the prior year it’s important to be able to explain misses.  Was an accrual over because the company expected a shift in volume that didn’t occur.  Was the rate too low because the company expected a PBM contract to stay in a particular formulary tier and instead volume of business shifted to a higher tier. Having the ability to quickly dive in to rate/mix misses over the year, better supports balance sheet explanations. 

IntegriChain Customer Experience: Budget vs Actual

IntegriChain’s calculations work off of methodologies called Explain Reports (ERs). These ERs direct IntegriChain’s system, ICyte, to point to specific cells of data that have been uploaded or otherwise maintained by the user. While IntegriChain has Out of the Box methodologies that are aligned with industry standards, ERs are largely customizable.

Screenshot 2024 01 10 At 11.53.52 Am

As there are endless unexpected hurdles and obstacles in the world of GTN, having a tidy and reliable reconciliation process is important to ensure that you’re not tripped up by untimely invoices and are instead appropriately prepared to absorb any deviations from plan. Depending on the frequency preference of the customer, IntegriChain undergoes a monthly/quarterly process of reviewing “true ups” and Balance Sheet Adjustments (BSAs). Any invoice that comes through at an amount different than what was originally forecast will ultimately need to be reconciled, or trued up. What this means is that there will need to be a corresponding accrual or release to align the balance sheet with the payment and accrual activity that has taken place. For example, let’s say you originally accrue $160,000 for Part D utilization for a given period but the invoices for that period come through at $180,000. IntegriChain’s system would automatically flag a true up amount of $20,000. The balance sheet owner would then need to accrue an additional true up value of $20,000. The additional $20,000 that came through in the invoice will flatten against true up leaving the balance sheet clean and whole.  Additionally,  within our application, we’d be able to identify the miss was related to a volume shift from a PBM with a lower rebate rate to a PBM with a higher rebate rate. 

Tip 3: Ensure control documentation and evidence of controls is readily available


As a part of year end activities (and all monthly activities) companies should ensure all controls around the GTN process are operating as documented. Such controls may include:

  • Controls around Data Integrity – A key data control is to ensure transactional data leveraged in GTN calculations is reconciled to the general ledger. This can provide evidence of completeness and accuracy of data in the GTN calculations.  Companies with procedures around data reconciliation decrease their audit risks. 
  • Evidence of Preparer and Reviewer for GTN calculations – Preparer/review procedures may vary company to company, but it is important to keep a monthly record of the preparer and reviewer of GTN calculations. Having appropriate documentation of sign off of financials is a key GTN control process. 
  • Documentation of GTN Assumptions – All assumptions for the GTN close should be documented and sourced accordingly.  This may be inclusive of Inventory Roll Forward analysis supporting demand and pipeline assumptions, GTN mix of business assumptions supported by analytics, and GTN discount rate assumptions supported by contracts and trend analytics. 

IntegriChain Customer Experience: GTN Controls

IntegriChain adheres to SOC 1 Reporting which focuses on financial controls. Manufacturers are able to leverage IntegriChain’s SOC 1 report as confirmation that their own financial controls as they relate to GTN have been fully audited and signed off on. We deliver monthly deliverables to our customers that cover the control objectives listed in the SOC 1 guidelines. Within these deliverables, customers and their auditors are able to see that IntegriChain performs a list of controls and checks that confirm the integrity of the data that is being reviewed. Any and all assumptions and data points that are utilized within a given period’s close are agreed upon and documented for reference during audit periods.

Screenshot 2024 01 10 At 11.58.32 Am

IntegriChain adheres to SOC 1 Reporting which focuses on financial controls. Manufacturers are able to leverage IntegriChain’s SOC 1 report as confirmation that their own financial controls as they relate to GTN have been fully audited and signed off on. We deliver monthly deliverables to our customers that cover the control objectives listed in the SOC 1 guidelines. Within these deliverables, customers and their auditors are able to see that IntegriChain performs a list of controls and checks that confirm the integrity of the data that is being reviewed. Any and all assumptions and data points that are utilized within a given period’s close are agreed upon and documented for reference during audit periods.

Dive deeper into the ongoing discussion about Gross-To-Net strategies and methodologies by attending the RAC Summit, sponsored by IntegriChain. For more information and to register for the March 12 event, click here.

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Medicare Part D Changes, IRA Guidance, & 340B Updates http://www.integrichain.com/blog/december-market-updates/ Thu, 21 Dec 2023 14:19:21 +0000 https://www.integrichain.com/?p=7124 Discover the latest on Medicare Part D, IRA Guidance, and 340B updates this month.

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Editor’s Note: This month, we offer updates on three topics: Upcoming Medicare Part D Prescription Drug Benefit Changes, IRA Guidance Updates, and 340B Updates. As always, if you have questions on any of the content found in this or previous market updates, please reach out to your IntegriChain Consulting Lead or consulting@integrichain.com and we would be happy to talk you through it.


Table of Contents

Upcoming Medicare Part D Changes for Prescription Drug Benefits

Over the past year, we have been considering the impact of the Inflation Reduction Act (IRA) and how the Part D benefit design, including changes to the Medicare Part D Coverage Gap program, will have a massive impact on manufacturers, payers, and patients. Much focus has been on 2025 when the biggest changes begin, but as we head into 2024 we should not lose track of some of the more subtle changes in deductibles as well as the Initial Coverage Limits and Catastrophic Coverage thresholds that occur annually and which also have an impact on manufacturer liabilities.

Figure 1 below shows how these thresholds are increasing in 2024, and these revised thresholds should be incorporated into all Medicare Part D Coverage Gap forecasts for 2024.

The Medicare Part D Coverage Gap

 Catastrophic coverage threshold, initial coverage limit, and deductible Medicare Part D coverage gap threshold changes and predictions from 2015-2025

Figure. 1 – Coverage Gap Thresholds Changes Over Time

Of the various IRA provisions, the one that seems to be a clear win for Part D beneficiaries is the $2,000 out-of-pocket cap. However, the aspect of this change that we see some confusion about is the related provision that will limit increases in the Part D base beneficiary premium (BBP) to 6% growth each year. Importantly, this does not mean that all premiums are strictly capped at a 6% growth.

Under premium stabilization, the 6% limit is applied to the BBP but not to each individual plan’s premium. As a result, for the 2024 plan year standalone prescription drug plans (PDPs) premiums are increasing by an average of more than 20%.

CMS may subsidize the increase in the BBP beyond the 6% cap but the contractual arrangements between CMS and standalone PDPs are complex. The additional premium stabilization subsidy may mitigate premium growth, but the subsidy may not entirely offset premium growth for plans with large premium increases for each patient.

On the other hand, Medicare Advantage Prescription Drug Plans (MA-PDs) have more flexibility to lessen the premium increases. For example, sponsors can use rebate dollars from Medicare payments to lower or eliminate their Part D premiums and the average premium for drug coverage in MA-PDs is heavily weighted by zero-premium plans.

This premium imbalance between PDPs and MA-PDs could amplify as plans assume greater liability for high drug costs above the catastrophic threshold in 2024 and 2025. The increasing availability of low or zero-premium MA-PDs, while PDPs charge substantially higher premiums, may make MA-PDs more attractive from a beneficiary perspective. Enrollment has already been shifting away from PDPs towards MA-PDs and we may see that shift accelerate in 2024.

Medicare Advantage and Prescription Drug (MA-PD) Enrollment

Medicare Beneficiaries Enrollment Trends from 2006-2023

Figure. 2 – Medicare Beneficiaries Enrollment Trends

As MA-PD enrollment continues to expand, it is important for market access leaders to understand the implications on coverage and patient out-of-pocket cost. While MA-PD plans tend to have lower premiums and deductibles, they also have different cost-sharing structures, limits on provider networks, and more widespread utilization management restrictions (such as Prior Authorization requirements).

If you have any questions or want to know more about the overall consequences of IRA specific IRA Part D redesign changes to your business, please reach out to your IntegriChain Operational Consulting point of contact.

References:

IRA Guidance Update 

On November 17, 2023, CMS published several guidance documents that addressed numerous operational matters and at least one meaningful policy issue related to the Medicare Part D Coverage Gap redesign as part of the Inflation Reduction Act. Below we share some of the key points from the latest IRA guidance:  

  • Establishes next steps and deadlines for manufacturers to establish the new Medicare Part D Manufacturer Discount Program (MDP) agreement within the HPMS system:
    • Effective November 17, 2023, the HPMS system allows manufacturers to attest to certain “Ownership Information” used by CMS to determine if and how the MDP phase-in applies for each manufacturer
    • Manufacturers may complete this attestation optionally by December 15, 2023 to receive an early, non-binding determination of the phase-in eligibility by January 31, 2024
    • Alternatively, manufacturers must still complete the attestation, as well as execute the new MDP agreement, by March 1, 2024 to participate in the MDP in 2025
  • Clarifies that if a manufacturer is eligible for the phase-in, the plan will be responsible for the remaining prescription liability (i.e., 9% or 19% in 2025 t).
  • Indicates manufacturers cannot opt out of the phase-in if they are deemed eligible.
  • Confirms CMS will use the existing Third Party Administrator (TPA), Palmetto GBA, to administer the new MDP.

If you have any questions about the latest IRA guidance and policy issue related to the Medicare Part D Coverage Gap redesign, please contact your account representative or send an email to consulting@integrichain.com.

References:

340B Updates: Genesis Case 

The Genesis Healthcare, Inc . v. Becerra court case has caused much chatter in the 340B space since 2018 when HRSA claimed Genesis committed diversion tactics by providing 340B discounted drugs to patients that were not eligible under the 340B covered entity (CE) providers. This was an instrumental case pushing back against HRSA’s ability to put their own guardrails surrounding terms defined in the law.  

On November 3, 2023, the US District Court of South Carolina ruled in favor of Genesis in a landmark ruling indicating that HRSA’s definition of “patient” appears to be inconsistent with the 340B statute definition (see Section 340B of Public Health Services Act). The court also contended that the term “patient” does not have a temporal requirement. Meaning, there is no such requirement indicating a patient must have visited the covered entity a certain amount of times to be considered a “patient”. Although this ruling currently only impacts Genesis and their patients, this could have a domino effect for other covered entities to be able to provide drugs at the 340B price for many more patients than they previously had. 

The Court’s ruling against HRSA defining the term “patient” raises questions about other court cases. Can this also be a precursor to how the courts will rule for the CMS best price stacking proposal and the contention around CMS defining best price? Will the Genesis case impact other existing cases against HRSA (e.g., manufacturers restricting sales to CEs which have contract pharmacies) with the notion that HRSA is overreaching its statutory authority? Will there be more CEs that push against HRSA and their definition of “patient” in the same vein as Genesis in order to expand their patient reach while purchasing drugs at a lower 340B price?  

Reach out to your IntegriChain contact or consulting@integrichain.com for further understanding of the potential impacts of the 340B ruling.

References:

GET MORE PHARMA MARKET UPDATES

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Assignment of Benefit Confusion for Pharma Manufacturers and CMS Eliminates Retroactive DIR Fees http://www.integrichain.com/blog/november-market-update-2/ Wed, 29 Nov 2023 15:02:03 +0000 https://www.integrichain.com/?p=7075 Learn about the updates for Assignment of Benefit Confusion for Pharma Manufacturers and CMS Eliminates Retroactive DIR Fees.

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Editor’s Note: This month, we offer updates on two topics: Assignment of Benefit Confusion for Pharma Manufacturers and CMS Eliminating Retroactive DIR Fees. As always, if you have questions on any of the content found in this or previous market updates, please reach out to your IntegriChain Consulting Lead or consulting@integrichain.com and we would be happy to talk you through it.


Assignment of Benefit Confusion for Pharmaceutical Manufacturers

Manufacturers are familiar with the mechanisms by which physician-administered drugs are reimbursed to payers/SPs or providers via either third-party payer (insurance) “pharmacy benefit” or “medical benefit” vehicles. However, it’s also important for manufacturers to understand the flow of funds and the market dynamics that aid in determining the appropriate price of drugs, specifically as it relates to  expensive oncology drugs.

At a high level, there are three reimbursement avenues for physician administered drugs:

Buy and bill. The physician buys the drug from the manufacturer or distributor and the physician gets reimbursed under the patient’s insurance medical benefit when the drug is administered to the patient.

White bag.  The physician obtains the drug from a specialty pharmacy (SP). The SP bills the patient’s insurance and the pharmacy is reimbursed for the drug.

Brown bag. The patient picks up the drug at the pharmacy and brings it to the provider’s office or clinic for administration. The pharmacy bills the patient’s insurance and is reimbursed for the drug.

In the above options, buy and bill will show up as a medical claim while white or brown bagging will result in a pharmacy claim. From the provider’s standpoint, white or brown bagging does not provide any financial exposure nor avenue for profit related to the drug.

Different stakeholders have different perspectives as to what claim/reimbursement path a script should take based on the financial incentives. Stakeholder financial incentives could vary between different drugs within a therapeutic class or even amongst different patients for the same drug. Providers will look to favor prescribing physician administered drugs which provide them with the greatest reimbursement. Likewise, PBMs and other payers will favor drugs   that provide them with lowest price resulting in the greatest margins after taking into account manufacturer rebates and health plan contractual cost sharing agreements. As a result, a drug’s reimbursement flow may change to better serve one of the stakeholders in the chain without the manufacturer’s knowledge or agreement while possibly sacrificing the overall patient benefit. These changes can impact manufacturers’ over all product profitability. If you are interested in learning more and understanding how the various channels may impact your drug’s market share and profitability, reach out to your IntegriChain Operational Consulting point of contact who can assist in an analysis for your specific drug(s).

References:

CMS Eliminates Retroactive DIR Fees 

In the Medicare Part D space, direct and indirect remuneration (DIR) fees have been typically set up as post point of sale compensation which ultimately adjusts the final price paid for the payer or to the pharmacy for the drug. Examples of such compensation are rebates provided by manufacturers or concessions paid by pharmacies. The DIR is factored into CMS’s calculations of Medicare payments to Part D plans. Unfortunately, since the fees are paid after Part D prescriptions are filled, pharmacies end up with reduced margins on Part D drugs (as they are unable to recoup their costs due to the unaccounted for fees) while at the same time increasing patients’ out of pocket outlay at the pharmacy. As of January 1, 2024, CMS requires that the DIR fees are reflected in the negotiated price the patient pays at the pharmacy counter such that the actual final price is recognized at the point of sale (vs post point of sale). Additionally, CMS requires any Part D plans’ and PBMs’ fees, such as “network access fees,” “administrative fees,” “technical fees,” and “service fees” which are deducted from the cost of Part D drug purchases by pharmacies to also be reflected in the negotiated point of sale price to patients. 

CMS’s intention for the change in DIR fees was two-fold: 

  1. Reduce patients out of pocket costs and
  2. Increase profit predictability for pharmacies

If you have any questions regarding DIR fees, please reach out to your IntegriChain Operational Consulting point of contact.

References:

As always, IntegriChain continues to support pharma manufacturers in breaking down and staying ahead of new regulations. If you have any questions or concerns, please reach out to us at consulting@integrichain.com.

GET MORE PHARMA MARKET UPDATES

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Medicaid Best Price Proposed Rules, PBMs, Opportunities and Complexities http://www.integrichain.com/blog/october-market-update-2/ Fri, 20 Oct 2023 14:17:55 +0000 https://www.integrichain.com/?p=6980 Learn about the updates for Medicaid Drug Rebate Program Proposed Rules, PBMs, Opportunities and Complexities.

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Editor’s Note: This month, we offer updates on three topics: Medicaid Best Price Proposed Rule, PBMs, Opportunities and Complexities. As always, if you have questions on any of the content found in this or previous market updates, please reach out to your IntegriChain Consulting Lead or consulting@integrichain.com and we would be happy to talk you through it.

Table of Contents:


Medicaid Best Price Proposed Rule: A Paradigm Shift in Best Price Determination

On May 26, 2023, the Centers for Medicare & Medicaid Services (CMS) unveiled a pivotal Proposed Rule within the framework of the Medicaid Drug Rebate Program (MDRP). Titled “Medicaid Program: Misclassification of Drugs, Program Administration and Program Integrity Updates Under the Medicaid Drug Rebate Program,” a large portion of this Medicaid best price rule adheres to routine regulatory adjustments and is an embodiment of pre-existing CMS guidance. Yet embedded within is a groundbreaking proposal set to redefine pharmaceutical industry standards.

The heart of the matter is the determination of the “Best Price” for single-source and innovator multiple-source drugs. Historically, for more than three decades, the Medicaid statute and the corresponding regulation, §477.505(a), define Best Price as “the lowest price available from the manufacturer during the rebate period to any” Best Price eligible entity for the same product unit. As elucidated in the Sheldon v. Allergan case by the Fourth Circuit, when multiple concessions are extended on the same unit to distinct entities, they aren’t aggregated.

The new proposal, however, seeks a dramatic reorientation. It mandates manufacturers to “follow the pill,” “stacking” all rebates, discounts, or other price concessions imparted to any Best Price-eligible entity throughout the supply chain into one unified Best Price, irrespective of whether the concessions recipients are completely independent. The proposed revision of §477.505(d)(3) paints a picture of the newly perceived Best Price by emphasizing the lowest price “realized by the manufacturer.”

Medicaid best price rule graphic - current best price determination: stacked best price discount to a single entity (wholesaler, pharmacy benefit manager, and hospital/clinic
Medicaid best price rule graphic - proposed best price “stacking”: lowest realized aggregated stacked best price cumulative of discounts rebated provided to all entities (wholesaler, pharmacy benefit manager, hospital/clinic) in a single unit sale along a distribution channel.

Not only would the financial repercussions to pharma manufacturers be significant, but they would also face a logistical challenge as current systems are designed to track discounts and rebates by single customer sales transactions, not by “following the pill.” Aligning with the new rule will demand considerable operational changes.

Pharma Manufacturer Considerations

Document Assumptions: Manufacturers should meticulously record assumptions related to their capacity to monitor discounts throughout the supply chain, given the new stacking requirements.

Statutory Inconsistencies: There exists a substantive claim that the altered regulatory definition diverges from the clear interpretation of the statutory definition, considering the historical practices.

CMS contends that the proposal serves as both a clarification of its existing policy and a response to the Sheldon case, which spotlighted ambiguities in CMS’s stacking requirement. However, should CMS cement this proposal into regulation, manufacturers might be primed for legal contention as the clarity and alignment of the new rule clashes with established historical norms.

References:

PBM Market Dynamics Update 

Since our last update in July from IntegriChain Manager Michael Gorokhovsky, pharmacy benefit managers (PBMs) continue to garner focus from legislators, while the changing healthcare landscape is resulting in shifting market dynamics. Legislators have been looking to increase financial transparency, improve drug access, and limit practices that are suspected to drive up payer costs. Meanwhile, PBMs are capitalizing on the rapidly growing specialty market. Some of these quick highlights are described below.

PBMs and Legislators

July 20, 2023: The Federal Trade Commission (FTC) voted to withdraw prior advocacy for limited PBM transparency (FTC Statement: July 20th). The withdrawal for prior advocacy aims to begin unraveling the rapidly changing middleman industry and to get ahead of the eagerly anticipated results of the ongoing inquiry into the Prescription Drug Middlemen Industry, which started on June 7, 2022.

Prior advocacy dating from 2004 to 2017 for limited commercial practice transparency was founded on facilitating healthier market competition. However, this has since been withdrawn based on determinations that the current market dynamics are no longer equivocal to those conditions for the existing stance. The changing dynamics reference the large scale at which PBMs have become vertically integrated with the healthcare market, such as upstream integration with payers and downstream integration with different varieties of pharmacies.

The Commission aims to counteract the habitual reliance on prior work when PBM advocates are engaged in opposition with lawmakers, enforcers, and regulators. These engagements are an ongoing battle within the pharmaceutical market as Congress attempts to address healthcare spending. (Read more at Pharma Drug Costs – House Hearing.)

For more detailed information, see the statements below, which pose examples of how the current FTC investigation is reviewing and considering the behind the scenes effects middlemen have on drug prices and government payers.

PBMs and Market Dynamics

In line with the FTC’s redaction of prior PBM guidance – on the grounds that market dynamics have evolved in the past decade – Nephron Research published an analysis in September that highlights and describes some of these changes. A figure is extracted below that summarizes the changing revenue streams for PBMs over time.

Key Takeaways

As rebates and price protection declined, specialty pharmacies (SPs) now make up the majority of PBM revenue. The following fees make up the revenue:

  • SP dispensing fees, manufacturer invoice discounts
  • SP clinical program fees
  • SP data fees 
  • Copay maximizer retention and admin fees and 340B contract pharmacies 
  • Novel compensation methods are also resulting from data and data portal fees
Source of PBM gross profits over time bar graph: showing a shift from rebates and spread to fees and specialty pharmacy

In summary, the FTC is calling for greater transparency and investigating the impact middlemen have on the price of drugs and their aggregate costs to payers and patients. The call for transparency stems from rapidly evolving PBM commercial practices. Practices have shifted from heavy reliance on rebates and price protection to specialty pharmacy revenue and growing novel revenue sources through data management and contracted entities. With healthcare spending continuing to rise amidst an always-changing commercial landscape, IntegriChain can help you stay informed on the results of the FTC investigation to be prepared for any potential future legislation and subsequent impacts. 

[1] The full list of documents and stances the FTC withdrawals support can be found below.

References:

New Stakeholders Create Both Opportunity and Complexity

Those of us who have been working in the pharma and biotech space for a number of years are very used to thinking about the Big 3 wholesalers, the major PBMs, and the big retail chains. Vertical integration and consolidation across channels have been leading us down a path for years where fewer stakeholders have a bigger influence over the access and distribution of drugs. Over the past few years, however, many small and upstart organizations have been popping up left and right. It feels a little like the big bang… our channels have contracted so much that they are now exploding with small, nimble organizations eager to take advantage of opportunities on which the much bigger legacy organizations have been slower to capitalize.

In the distribution space, we have new specialty distributors that are eager to serve as alternatives to increasingly expensive traditional wholesalers, sometimes focusing on niche disease categories (e.g., anovo, BioCare SD, Optum Frontier Therapies,). In the GPO space, we have organizations that are focusing on a more narrow set of organizations, such as hospice or community care providers (e.g., AllyGPO, Specialty Networks, Asembia). The pharmacy space has been changing in a huge way, with waves of new pharmacy models emerging to fill major gaps presented by retail pharmacies increasing preference for generics and traditional specialty pharmacies struggling to maintain margins. A variety of technology-enabled hubs, digital pharmacies, and cash pharmacies are creating a web of new players in the space that can be overwhelming to navigate (e.g., ASPN Pharmacies, GoodRx, BlinkRx). Even on the health plan and PBM front, we are seeing new market entrants with specific value propositions, such as offering a fee-for-service model that is a stark difference from the traditional PBMs fee structure that is directly tied to WAC (Oscar, Bright Health Group, RxPreferred, Clover Health).

It’s imperative for pharma professionals to be aware of the multitude of new organizations as they present new options for commercialization and patient access. At the same time, these organizations and the associated contracting approaches create new operational and compliance complexity, as manufacturers must evaluate how these organizations, contracts, price concessions, and service fees impact government price reporting, gross-to-net, and contract operations. As always, IntegriChain is standing by to help you navigate the ever-evolving pharma landscape.

As always, IntegriChain continues to support pharma manufacturers in breaking down and staying ahead of new regulations. If you have any questions or concerns, please reach out to us at consulting@integrichain.com.

GET MORE PHARMA MARKET UPDATES

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Gross-to-Net Trends in 2023 http://www.integrichain.com/blog/gross-to-net-trends-in-2023/ Tue, 10 Oct 2023 15:59:28 +0000 https://www.integrichain.com/?p=6944 In the pharmaceutical and biotech sector, "gross-to-net" (GTN) now goes beyond managing manufacturer discounts. It covers revenue management, reporting, and analytics. The Revenue Analytics Collaborative (RAC) started surveying members in 2014 to document successful GTN practices and trends, fostering industry expertise sharing and tracking data related to trends.

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In the pharmaceutical and biotech industry, the term gross-to-net (GTN) has developed into  more than just the financial management and forecasting of manufacturer’s discounts. The GTN umbrella encompasses all aspects of revenue management, reporting, and analytics. To add value to the industry, the Revenue Analytics Collaborative (RAC) began surveying its members in 2014 to document successful GTN practices and trends. The RAC exists to share expertise between top industry professionals in addition to tracking data and benchmarks related to industry trends.

Automation of the gross-to-net process is fast becoming necessary to keep up with the ever changing landscape in pharmaceutical commercialization.

GTN Automation

As the GTN bubble grows to over $204 billion1 with net revenue declining each year, GTN automation is essential to achieve transparency and accuracy.  In order to see our industry progress in GTN automation, let’s dig deeper into the 2023 survey responses from RAC members.

In 2015, only 3% of those polled had a digital initiative in place. In this year’s poll, 53% were exploring the option. A third of those polled already have an automated system in place. 

Gtn Automation 1

Despite the complexities, many manufacturers still choose to use manual, Excel-based processes to  manage their gross-to-net processes. A majority of those polled still use Excel/Access for their accrual and forecasting process. However, this number is steadily decreasing. In 2019, manufacturers with no manual processes were over 90%, and today it’s only 67%. 

Why aren’t more organizations automating GTN? The industry’s GTN community has significant barriers to digitalizing their GTN. Automation is often a decision that needs to be made company-wide, as it affects the entire organization’s bottom line and brings about financial challenges that affect gross-to-net optimization. 37% reported that the time and effort to implement GTN automation was their number one obstacle. Budget was the second reported obstacle with 26% feeling it was an obstacle. 

Gtn Automation Obstacle

The hot topic for 2024 will be the optimization of GTN without digitizing it. It’s not easy, or ideal, but many of you out there are getting it done.

Top Challenges

Data collection and reconciliation is the top challenge seen by our poll participants. This is likely due to a large number of those in revenue analytics who are leaving large pharma organizations and moving to smaller companies; they are having a more difficult time wrangling data from various inputs. We  used to see a lot of need around forecasting, deal analytics, and closing the books, but in the past few  years, these processes have become automated or semi-automated. 55% struggle with GTN forecasting, while 45% struggle with GTN reporting and analytics.  

Which GTN process or task would you most like to automate?

Gtn Most Liked

Which GTN line is most painful to you? 

Gtn Most Painful

Managed care rebates are difficult for manufacturers as those contracts typically have three distinct pieces to manage and predict: base rebate, administrative fee, and price protection impact. 

Medicaid fell in terms of difficulty and tied with Managed care at 25% finding it the most painful. 70% of  respondents in 2019 listed it as their most painful line item, and while certainly not as painful as it used  to be, it is certainly difficult to predict due to lag times and many manufacturers are able to reconcile this using claim level detail.  

Process Insights

It is still an industry favorite to benchmark where Contracts & Pricing operations lie within your organization. Here is a quick snapshot for 2023. Even though government pricing and rebate adjudication are very compliance and operational tasks, we see the industry still holding tight with responsibility in the Finance Accounting area of 50% and 40%, respectively.

Government pricing experts are often experts in not only government pricing but a multitude of areas  including government programs and FSS. As a result, we see a surge in business process outsourcing  for both government pricing and rebate adjudication as well. Having the right ecosystem partner is not  only important for audit readiness but is also necessary as GTN expertise is often hard to find and many companies, especially smaller pharmaceutical companies, often have trouble managing it in-house. 

Personally, in my career I’ve seen outsourcing become wildly popular in the pre-commercial/biotech/small manufacturer landscape in the Contracts & Pricing operations arena. My virtual travels via the Revenue Analytics Collaborative network yield or reflect an industry rate of 9 out of 10 manufacturers outsourcing in the pre-revenue and small manufacturer space compared with roughly 50% of the industry a decade ago. 

What’s your biggest struggle to achieve net revenue optimization? 

Channel forecasting to include Medicaid expansion, coverage gap, price protection, and other factors are the top struggle for RAC members. Data collection, integrity, and analytics were a concern for 29% of those polled. Overall manual data input and process troubled 24% of the respondents.

Things to Think About

GTN in the past 20 years has taken on a whole new meaning. Gone are the days of ‘green shade accountants’ managing GTN like an operating expense. GTN has been a rollercoaster ride for the past two decades, and I passionately believe that staying connected as an industry is one of the best ways to manage and optimize your GTN. In closing, my personal recommendations for anyone managing GTN would be:

  • Benchmark your organizational design and close/forecast processes with the industry
  • Assess the risk related to your current GTN methodologies
  • Analyze all of your GTN contracts to see if they are even profitable
  • Show and tell your key stakeholders your GTN and average selling price by channel. 

Armed with this information, industry professionals gain the ability to find the optimal point between the net price and patient access  and adherence.  

Join us at the Pharma BioTech GTN Summit on November 13 for our hot topics sessions Monday afternoon at 4:30PM. We’ll be chatting about topics such as Month end close and calculation of GTN, Reconciling Pipeline against Sales and Demand, Managed Care payments for 340b contracted pharmacies, and more. 

The RAC exists to share knowledge between leading industry professionals in addition to tracking  data and benchmarks related to industry trends. Our research shows that digitalization is in the process of hitting its stride. Our goal is to help industry professionals get to the next step of finding the optimal equilibrium that continues to maintain high standards for patient care while driving company growth. 

About Revenue Analytics Collaborative

The mission of the Revenue Analytics Collaborative is to facilitate timely and anonymous knowledge  sharing amongst Pharma industry colleagues working in Commercial Contracting, Government  Pricing, Gross-to-Net and Trade/Channel business and financial roles. Join us today at RACollab.org.

Sources:

  • Drug Channels Institute, 2023
  • Revenue Analytics Collaborative Benchmark Survey 2023
  • Revenue Analytics Collaborative Industry Benchmark Survey, 2015 
  • Revenue Analytics Collaborative Industry Benchmark Survey, 2019 

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Inflation Reduction Act Updates http://www.integrichain.com/blog/september-market-update-2/ Wed, 27 Sep 2023 13:25:03 +0000 https://www.integrichain.com/?p=6922 Updates on the Inflation Reduction Act.

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Editor’s Note: This month, we offer updates on one significant topic: Inflation Reduction Act. As always, if you have questions on any of the content found in this or previous market updates, please reach out to your IntegriChain Consulting Lead or consulting@integrichain.com and we would be happy to talk you through it.

Table of Contents:


2023 Pharmaceutical IRA Updates

There has been much movement in the IRA space this summer – below is a summary of updates since our last recap in June 2022: 

  • The first list of the top ten (10) drugs covered under Medicare Part D as Negotiation Eligible for 2026 was released. The products selected include:
    • Blockbuster diabetes drugs including Januvia and Jardiance
    • Leading heart and blood drugs including Xarelto and Eliquis
    • And a handful of other psoriasis and blood cancer therapies
  • To find out more details about the first 10 drugs, you can access it here.

The IRA Negotiation Timeline & Process

The IRA negotiations will occur in 2023 and 2024 with any negotiated prices becoming effective beginning in 2026. CMS will publish any agreed-upon negotiated prices for the selected drugs by September 1, 2024. For future years, CMS will select up to 15 more drugs covered under Part D for negotiation for 2027, up to 15 more for 2028 that include drugs covered under Part B and D, and up to 20 more drugs for each year after that.

In regard to the list that was published by CMS, pharma manufacturers need to enter into an agreement to negotiate by October 1, 2023, and submit specified information by October 2, 2023. CMS will make a written offer by February 1, 2024, and will include a justification based on factors they are required to consider. The manufacturer has one month to accept or make a written counteroffer. If the counteroffer is rejected by CMS, they will intend to hold one to three meetings with the manufacturer within 30 days of receiving the counteroffer. For the initial 2026 price year, the meetings will conclude by June 30, 2024. If a meeting is held, CMS will send a manufacturer a “Notification of Final Maximum Fair Price” before negotiations are completed. This notice would be sent by July 15, 2024, and the manufacturer would have until July 31, 2024, to accept or reject the final offer and negotiations will conclude by August 1, 2024.Manufacturers whose drugs are selected for the program have the option to decline to participate only if they withdraw all of their products from the federal health care programs altogether. If manufacturers continue to participate but do not comply with the IRA’s negotiations process or maximum fair price determined through the process will face monetary penalties.

Manufacturers whose drugs are selected for the program have the option to decline to participate only if they withdraw all of their products from the federal health care programs altogether. If manufacturers continue to participate but do not comply with the IRA’s negotiations process or maximum fair price determined through the process will face monetary penalties.

IRA Lawsuits Against the CMS

Along with the publication of the first ten (10) negotiated drugs came eight (8) lawsuits against CMS from selected manufacturers, which are detailed below. The Department of Health & Human Services (HHS) lawyers pushed back on the lawsuits and requested the courts to dismiss the claims indicating “This status quo is unsustainable; the IRA seeks to correct course,” in regards to the cost of spending for drugs.

  1. First Amendment – Compelled Speech. Manufacturers claim that by forcing them to agree to a process called “negotiation” to determine a maximum fair price, the IRA would be compelling their speech in violation of the First Amendment.
  2.  Fifth Amendment – Uncompensated Takings. Manufacturers allege that the IRA would be violating the Fifth Amendment by requiring them to sell their patented drug products at a significant price discount under threat of coercive penalties, which amounts to the government “taking” without “just compensation.”
  3. Fifth Amendment – Due Process. It’s alleged that the IRA violates the Due Process Clause by directing the HHS to set Medicare prices without proper safeguards such as administrative or judicial review.
  4. Eighth Amendment – Excessive Fines. For three cases, manufacturers claim that the IRA’s excise tax provision acts as a penalty rather than a true “tax” and punishes manufacturers that don’t agree to the negotiation process or the maximum fair price. They claim the penalty is grossly disproportionate to the conduct that it punishes and is unconstitutional.
  5. Non-delegation/Separation of Powers. Many plaintiffs allege that the IRA unconstitutionally transfers legislative power to CMS, an executive administrative agency, in violation of the principles of non-delegation and separation of powers.
  6. No Legislative Authority. The plaintiffs allege the “excise tax” is unauthorized by any enumerated power of Congress and is unconstitutional.
  7. Unconstitutional Condition on Medicare and Medicaid Participation. Alleges the IRA unconstitutionally conditions the manufacturer’s ability to participate in Medicare and Medicaid on the “relinquishment” of their constitutional rights.
  8. Violation of the Administrative Procedure Act (APA) and Medicare Statute. A plaintiff has filed a complaint against the Centers for Medicare & Medicaid Services (CMS) regarding its final guidance on implementing the Program. The complaint alleges that CMS’s final guidance is a legislative rule that requires comment under the APA and Medicare statute. It imposes legally binding obligations that are enforced through the imposition of ‘excise tax’ penalties and civil monetary penalties. Since CMS issued its final guidance with sections that were not subject to a comment solicitation period, its implementation of the program will violate the APA and Medicare notice-and-comment requirements.
    • CMS has also begun publishing the list of drugs and their manufacturers that are incurring the new Part B Inflation Penalty Rebate. This new form of posting publicly could likely be expected for drugs that incur the similarly new Part D Inflation Penalty as well. As the Part D penalty is assessed annually, we will need to wait ‘[no] later than 9 months after the end of each applicable period’, which means as late as June 2024, to see if CMS continues to publish the list of offending drugs.
    • In August, CMS released draft guidance on a payment smoothing plan for Part D enrollees. The proposed guidance included more than 50 pages of details on the payment plan, but the big takeaway was that the use of the payment plan by enrollees did not affect the True Out Of Pocket (TrOOP) accumulator in any way. That is, the full out of pocket expense realized at the point of sale will apply to the TrOOP in the month it was incurred, regardless if it is then smoothed for the patient over the remaining months of the year. The plan will be responsible for covering the full cost at the point of sale and providing a statutorily defined payment plan to the enrollee. More details can be found in the draft guidance released here. 

The IRA continues to have a large and lasting impact on our industry. During IntegriChain’s upcoming Access Insights Conference in November, we will dive deep into the implications of IRA updates on pricing, data, and operations.

References:

As always, IntegriChain continues to support pharma manufacturers in breaking down and staying ahead of new regulations. If you have any questions or concerns, please reach out to us at consulting@integrichain.com.

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Improving Gross-to-Net Estimates through Better Channel Analytics Part 2 http://www.integrichain.com/blog/improving-gross-to-net-estimates-through-better-channel-analytics-part-two/ Tue, 29 Aug 2023 14:32:23 +0000 https://www.integrichain.com/?p=6899 This is the second installment of our two-part blog post covering our webinar series discussing the advantages that channel analytics and downstream inventory analytics have when it comes to gross-to-net calculations.

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This is the second and last installment of our two-part blog post covering our webinar series discussing the advantages that channel analytics and downstream inventory analytics have when it comes to gross-to-net calculations. 


The Importance of Channel Analytics to Gross-to-Net

Manufacturers of brand products typically utilize a demand-and-pipeline accrual methodology to support monthly and/or quarterly accrual processes. This allows them to calculate more precise accruals and maintain visibility of the balance sheet at each NDC and contract level. This methodology, however, requires reliable demand and inventory data. Utilizing channel analytics provides insights into demand and total pipeline inventory. 

Total pipeline inventory consists of distributor inventory and downstream inventory. In Gross-to-Net (GTN), manufacturers take the monthly total pipeline inventory values, demand values, and apply GTN assumptions such as contract rate, utilization mix, and WAC price.



Inventory JPG

End-to-End Roll Forward Enable Gross-to-Net Stakeholders

End-to-end Inventory Roll Forward support is a service IntegriChain provides for our ICyte Platform customers who leverage our GTN, Channel Data Aggregation, and Inventory Analytics solutions. This provides our customers with the tools they need to align pipeline and demand figures that improve the gross-to-net close process. End-to-end inventory roll forward provides data that confirms the inputs of inventory pipeline demand sales, providing full GTN visibility. GTN users can take the Roll Forward report to build confidence in accuracy and eliminate gaps within the Distributor Channel.

A robust end-to-end roll forward enables manufacturers to reconcile to revenue recognized in the period while also accruing to appropriate estimates for pipeline (distributor inventory, downstream inventory) and demand. This deep dive roll forward builds confidence in channel data as we are easily able to isolate and explain data discrepancies. 

In the first session we looked at common distributor variances in reporting of inventory.  Some of those variances are: 

  • Wholesaler Inventory Roll Forward
  • Cross data validations 
  • Monthly Sales reconciliation to Wholesaler Receipts

Estimating demand and downstream inventory has been a challenge across the industry for decades. Common methodologies that leveraged today compromise the ability to accurately estimate demand and inventory levels downstream. In a use case shared during the last webinar, we applied IntegriChain’s methodology and expertise to triangulate data points and as a result, this customer was able to decrease their reserves drastically. We often see the pain points pharmaceutical Finance teams have, in terms of identifying how much inventory is in the pipeline and how this explains the need for a data-based approach for estimating downstream inventory.

Common ways manufacturers estimate downstream inventory are:

  • Applying wholesaler to downstream
  • Pharmacy survey methodology that doesn’t cover any atypical distribution
  • 3rd Party roll forwards

There are multiple use cases IntegriChain’s Inventory Analytics provide in addition to accrual management. It helps manufacturers in forecasting, syndicated data adjustment, and with the ability to understand market events. IntegriChain does not use projected demand data but rather a data-based approach in estimating downstream inventory. Our downstream inventory roll forward estimation process highlights the use of our National Data for the Net Sell-In component paired with Pharmacy Claims Data from our partnership with PurpleLab. Our industry based assumptions are also gathered from our Analog Benchmarking and market insights

In conclusion of this webinar series, the we presented a full end-to-end Inventory Roll Forward model that incorporates best practices discussed in both Wholesaler reporting as well as Downstream estimations.  These are critical components as we look to optimize our GTN models regarding total pipeline, gross sales recognition, and demand.  In case you missed this series and have questions regarding these topics, please catch us at our Access Insights Conference in November.

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