Model N offers tools for managing international reference pricing

Cloud-based system will enable global pricing managers to analyze regulatory trends and simulate the effects of pricing changes

In many nations with single-payer (government) funding of pharmaceutical purchasing, the practice of “reference pricing” has been commonplace. Government negotiators will gather a basket of pricing patterns among other nations, and use some formula to arrive at a desired price point. Meanwhile, individual country managers of multinational pharma companies, dealing with market dynamics within their territories, have tended to make pricing decisions based on local conditions. The result: a decision made in one country can significantly affect pricing in other countries, without the multinational anticipating such effects.

To address this situation, as well as to have more resources to manage an ever-tightening pricing vise, Model N is now offering an international reference pricing module, Model N IRP. Based on surveys of its existing clients (who use Model N for managing analytics of revenue from contracts), global pricing managers are “underequipped” to collaborate across regions, and unable to make fast, data-driven decisions, says Arnaud Grunwald, a senior director at the Redwood Shores, CA, firm. Model N IRP features a user-driven configurator for inputting the rules that would affect a manufacturers’ pricing programs, easy-to-use interfaces, and output to both desktop and mobile devices. The configurator also enables users to perform what-if analyses of pricing decisions. Pharma companies are also on the hook to national agencies to report accurate pricing data, and the program can assist in meeting that requirement.

Model N IRP has already been rolled out to a handful of existing Model N clients; this summer, the program has been updated with user enhancements. In one case, Model N has been able to document a reduction in price erosion by 40% (from 2.5% to 1.5%)—a multimillion-dollar result for the client. Grunwald says that by and large, each client needs to input his or her own international pricing rules, but that the company is discussing the possibility of shared rules information among clients, brought together via the SaaS format of the program.

At the same time, Model N is also offering an enhanced service for scrubbing pricing data coming from pharmacy benefit managers (and others) in the US, as well as where such data are available internationally, in order to manage contracts, chargebacks and other financial transactions more effectively.