It’s highly ironic that after all the effort going into launching a product, energizing a sales force and informing the general public, many pharma companies pay too little attention to how the sales contracts by which the products are sold get written and administered. And while an IT company like Model N (San Ramon, CA) which sponsors an annual survey on the subject (with CSC, the IT services firm) has an obvious benefit in highlighting shortcomings here, it is reporting data from the contract administrators themselves. And they are worried.
The 2009 survey (highlighted at the Commercial Contract and Chargebacks meeting of CBI, June 23-24, Philadelphia) noted that there are more contracts, and more complexity, than ever: the median number of contracts is 100, and 35% of respondents expect complexity to increase in contracts with government, MCOs and retailers. Essentially all of the respondents (from more than 70 biopharma companies) said they experienced some revenue leakage; with losses ranging between 2 and as much as 26% of contract value. Errant chargebacks, unapproved pricing, errors in calculating incentives, and discounts to ineligible parties are among the causes. Even so, a third of companies track contract compliance less than once a year, and 35% of companies monitor compliance on fewer than half of their contracts.
About a third of respondents use manual processes or spreadsheets to monitor contract performance; a third use their ERP system or a custom revenue-management system. Model N says that 23% of respondents use a packaged revenue-management system comparable to what it offers. That points to a significant unmet need in the marketplace, which Model N and others will hope to take advantage of.