Company will provide services to manage data and terms of sales contracts
Some call it “revenue management” and some call it “enterprise revenue dynamics,” but what it is is the increasingly complicated process of managing the terms of contracts that bioparma manufacturers set with payers, GPOs, and governments. As the demands for cost control from the payer community rises, manufacturers have tended to write more complex contracts, with volume discounts and rebates tied to matters like formulary placement. Yet, even though revenue, the lifeblood of the company, depend on these contracts, managing them both effectively and profitably is a challenge.
And that challenge is about to ramp up even higher as payments become tied to outcomes from providers like accountable care organizations, says Marc Ginsky, VP and GM of Covance Market Access Services. Princeton, NJ-based Covance has provided managed-markets consulting for many years, but is now stepping more directly in the contract administration aspect of it.
To that end, it will provide, either as an outsourced staffing service, or as a strategic consulting service, contract administration. This administration includes managing chargebacks (which are charges sent in by wholesalers to reconcile price differentials between a buyer’s contract with a manufacturer, and the price to the wholesaler), rebates, and the proper pricing and credits to state and federal Medicare and Medicaid programs. An estimated $50 billion is tied up in these arrangements, says the company.
A key part of this service is efficient use of the software tools that are now available. Ginsky says that Covance will work with the manufacturer’s installed system, but especially for smaller to mid-size companies just gearing up its contract administration function, it will recommend (but not perform the installation of) a system from a business partner, BPI Technologies (Irving, TX), which has a suite of revenue management solutions. “Most big pharma companies have spent millions of dollars to install these contract administration solutions, and we’ve worked with most of them,” says Ginsky, “but the smaller companies have sought our help as they reach commercialization.”