Data-Driven Insights

Channel Collaboration Series: Making Pharma Trade Agreement Management Collaborative

May 21, 2015   |   Sunay Shah

This is the first in a series of posts on making channel collaboration a reality, driving efficiencies in how healthcare products reach customers.

The key success factor of any relationship is communication, and that certainly holds true when we examine how pharma manufacturers partner with their wholesalers and distributors. The common goal of both manufacturers and their trading partners is to ensure that patients receive their prescribed medication in a timely manner. It is the path the drug takes from leaving the manufacturer to ending up in the hands of the patient where collaborative channel management adds significant value to consumer access.

Manufacturers and their trade partners work closely to define the parameters and metrics they will measure to ensure maximum value is extracted from the channel when they structure their pay-for-performance contracts. The metrics that are selected and how they are measured vary greatly between manufacturers as there is little evidence of what metrics drive value extraction from the channel. However, through the use of tools such as IntegriChain Scorecard, manufacturers and their trade partners can have very meaningful conversations about performance in the channel and ensure maximum value is extracted.

Trendspotting and Early Issue Detection

Whether employing monthly or quarterly payments, having routine weekly or biweekly conversations between manufacturers and trade partners can help each party. Running Scorecards during the reporting period can help identify trends and help manufacturers and trade partners address any concerns or trend breaks before the reporting period is over.

For example, let’s assume it is the second month of a quarterly measurement and payment period. Running a Scorecard for the first month can facilitate conversations about the specific metrics that might not be meeting performance thresholds to realize incentive payments. This conversation can help drive trade partner behavior to address issues, improve channel efficiency, and help the trade partner realize an incentive payment. In addition, having these conversations on a routine basis during the quarter can help close the payment window as issue resolution is not occurring at quarter close but rather during the quarter.

Collaborate on Adjustments

Inevitably a manufacturer will have situations in which a product goes on backorder or experiences delays that prevent the manufacturer from supplying product to its trade partners. It is valuable to communicate this information to trade partners so they can focus more attention on other products and not troubleshoot supply shortages that exist due to manufacturer supply constraints. Timeliness of communicating this information is important so trade partners can take these appropriate actions and allocate resources efficiently.

An adjustment is also necessary when a Data Completeness miss was caused by a manufacturer EDI mapping error. In this situation, it is not fair to penalize a trade partner for missing this incentive payment for an error caused by the manufacturer. Once again, regular conversations between manufacturers and their trade partners can help clarify and adjust the metric.

Quarterly Business Review (QBR)

By working through daily business management issues throughout the quarter, the QBR can focus more on strategic issues, such as product launch, loss of exclusivity, patient journey, marketing initiatives, and top-to-top alignment. If tactical issues are not addressed during the quarter, they will surface during the QBR and strategic discussions are limited or delayed.

The relationship between manufacturers and their trade partners is complex: there are many moving pieces that must be aligned, and the key to success is routine, frequent, open communication. Having regular meaningful meetings between manufacturers and their trade partners can help address the tactical issues that are inherent to this complex relationship quickly and efficiently. This will lead to improved channel performance, shortening of the payment window, and maximization of the manufacturer’s investment in the channel. In addition, successful management of these tactical challenges will allow QBRs to be more strategic and drive continued value extraction from the channel – ensuring patients receive the prescribed medications in a timely fashion.

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