Whether manufacturers are entering new therapeutic categories, exploring new indications for a current product, or looking to acquire a new product through acquisition, portfolio growth presents both opportunities and challenges. 

  • Business expansion may expose gaps within market access infrastructure, data, or expertise. 
  • Patient populations may fluctuate based on archetype, causing changes to contracting, channel design and patient support models.
  • Decisions need to be made faster and based on data and insights.

This creates a tipping point for many pharmaceutical manufacturers’ existing systems and business processes. Managing pharmaceutical Gross-To-Net (GTN) as line items multiply and modeling what-if analysis to support business expansion decisions can become complex and risky without a dedicated platform to help with pharma portfolio management.

As an industry leader in GTN methodology, IntegriChain is uniquely positioned to help manufacturers answer their most pressing GTN questions and stand up sophisticated GTN programs. 

Do I Have the Resources to Handle the Increased Scale and Complexity of My Business? 

Pharmaceutical manufacturers have complex go-to-market models, consisting of an array of payer and channel contracts, patient support programs, government contracts, and other relationships. All of these involve a myriad of fees, discounts, rebates, and other revenue deductions, such as product returns and inventory adjustments, which dramatically impact the net revenue. Pharma GTN processes calculate the true net-price, forecast future discounts, and develop an optimal pricing strategy. However, many organizations underestimate the difficulty and complexity of forecasting nuanced, lagged programs like coverage gap, commercial price protection, market, and product lifecycle events. 

Do I Have the Right Data Feeding My Pharma Gross-to-Net Process? 

Day-to-day GTN processes involve a diverse array of tasks, line items, data, and functional areas. In addition to these operational challenges are ongoing policy changes, healthcare reform, and increasingly complex distribution channels. To successfully address these challenges, pharmaceutical manufacturers need to establish a centralized, automated way to manage these processes and data. For many manufacturers, this requires a necessary shift to a software solution that will drive accurate GTN forecasts and accrual calculations using analytics. It is important to note that quality data is critical for any automated system to be successful. An organization should first make a detailed assessment of its data sources and data quality before choosing an automation solution partner, which will prepare them for the system implementation. The goal of automation is to improve processes, mitigate risk, and deliver complete and accurate GTN financial reporting and analysis. In turn, manufacturers will have a competitive advantage and be able to make informed decisions company-wide.

Am I at Risk for Financial Statement Errors? 

When a CFO hears about financial statement errors, the first thing that comes to mind is the risk of material restatement of prior period financials. However, in the GTN world, financial statement errors are synonymous with GTN accrual true-ups. True-ups are adjustments related to prior periods that need to be made in the current period’s financial statements. GTN true-ups are common throughout the industry and manufacturers are focused on minimizing their dollar impact and frequency.

Prior period GTN true-ups are reported in a public company’s 10-K and 10-Q, and result in heavy scrutiny by auditors. Therefore, the true-ups require a significant amount of analysis and documentation to understand if the drivers are price and/or volume. Therefore, the best approach is to record your original GTN accruals using detailed calculations with transparent unit (volume) and rate (price) details. Separating volume, which is unit utilization, and rate, which is contract rate or prices, drives needed transparency of GTN accruals. When the industry develops detailed GTN accrual calculations on the front end, it is much easier to identify the root cause of the true-up and period-over-period fluctuations.

GTN true-ups are not going away. However, implementing a detailed process and calculation methodology for each GTN accrual is the most effective way to minimize the frequency and materiality of true-ups in the future.

How Can I Reduce Our Audit Risk and Improve Our Audit Readiness? 

Clear systematic documentation is at the heart of compliance. To get audit-ready, manufacturers need to have all documentation up to date and in place.

  • What are the organization’s assumptions? 
  • What analog data have manufacturers used to make these assumptions?
  • What methodologies are manufacturers using to close the books?
  • What are the organization’s inventory levels?

Data for all these areas need to be available to management and – particularly if a manufacturer is publicly traded – to regulators as well. The right GTN business partner can help manufacturers develop and maintain the core documentation required – which, ultimately, will help manufacturers move toward a successful launch.

Can I Accurately and Rapidly Model Proposed Price Changes and See Their Impact on GTN and Government Pricing Calculations? 

Accrual strategies are typically based on assumptions or analogs – or a mixture of both. Analogs to other therapies in the market can help manufacturers set a solid accrual baseline with confidence. But in cases where a new therapy is highly innovative – or even revolutionary – what precedents can manufacturers look to? 

In such cases, it is often possible to find analogs in the industry for discrete aspects of the drug the organization is producing. Perhaps, a manufacturer’s product shares a common delivery mechanism with other drugs that can provide a relevant returns analog. Or maybe the product targets people 65 and over – in which case other drugs focused on the same demographic may provide a relevant coverage gap analog. 

Reducing the risk of GTN accrual errors and improving overall contract decision-making by providing finance and market access teams a consistent way to visualize, extract, and integrate data into existing workflows will improve the accuracy and predictability of accruals and forecasts. Real-time analytics empower operational and finance teams to make informed, educated business decisions. Proactively analyzing this data as it occurs drives better understanding and product profitability. Manufacturers can then leverage these insights to enable teams to evaluate their pricing and contracting structure. 

Participation in major government programs such as the Medicaid Drug Rebate Program, Public Health Services, Medicare Part D Coverage Gap, and the Federal Supply Schedule (FSS) Service are important to consider in launching a new therapy. With the understanding that participation in certain programs may require participation in others, decisions need to be made based on visibility into all available options and an analysis that considers the impact on long-term commercial strategies.

Why IntegriChain? 

IntegriChain uniquely offers a robust set of pharma gross-to-net applications for managing accruals, forecasts, and GTN analytics. These applications sit on ICyte, the industry’s only purpose-built drug commercialization data and analytics platform. This means all of a manufacturer’s channel, patient, pricing, and contract data can automatically feed their GTN processes. This automation dramatically improves cycle time, reduces manual and error-prone data management, increases forecast accuracy, and creates a transparent, efficient, audit-ready process for manufacturers of all sizes and complexity. IntegriChain also has a wide range of GTN consulting services that can be tailored to meet the needs of any size pharma manufacturer with any type of product archetype.

If you have questions on methods to improve or benchmark your GTN processes, please reach out to your IntegriChain Consulting Lead or consulting@integrichain.com and we would be happy to talk you through it.

Hear more from Jen Sharpe, VP of Gross-To-Net Consulting:

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About the Author

Jen Sharpe

Jen Sharpe

Vice President, Gross-To-Net Consulting

Jen Sharpe leads the Revenue Analytics Collaborative, an industry group of 800+ professionals, and IntegriChain’s Gross-to-Net initiatives. She has been in the pharma GTN since 2001, spending a decade in Big Pharma implementing one of the first home-grown Gross-to-Net forecasting and accrual development applications. Jen is a trusted business partner in commercial and government data, forecasting, accrual management, analytics and reporting, and a frequent industry speaker.

About the Author

Andrea Zagarola

Andrea Zagarola

Gross-to-Net Consultant

As a Gross to Net Consultant, Andrea focuses on Gross to Net projects and data analytics. She works with customers on a variety of engagements which include assessments, roadmap to launch and associated systems implementations, and staff augmentation services. Andrea has been a consultant with IntegriChain since May 2019. Her prior experience includes 13 years at Ernst & Young in assurance and advisory business services managing financial audit engagements and four years as a finance consultant focusing on SEC and Sarbanes-Oxley matters for a publicly held corporation. As an Audit Committee member of a NJ hospital system for 10 years, Andrea worked collaboratively with management and the auditors, overseeing the financial reporting and disclosure process. Andrea is a licensed Certified Public Accountant in NJ and is a member of the AICPA and NJCPA.