For pharma, it's getting harder and harder to follow the money

It’s no secret that managing the basic billing, payment collection and reconciliation of the pharma industry is more complicated today. Even before Obamacare (which is expanding both the number and complexity of billing entities), pharma finance departments were dealing with a bewildering array of federal and state programs, and more complicated fee-and-chargeback arrangements with wholesalers. Add to this the variety of patient-support programs, analysis of coupon programs and other financial arrangements, and the overall picture becomes ever more obscure. Nor should the trend toward more—and bigger—penalty settlements in government programs be overlooked.

Compliance advisor and outsourcing contract-administration provider Compliance Implementation Services (CIS; Morrisville, NC) has surveyed the landscape among the clients it serves. Through the end of 2012 (see graph), the number of invoices to be reconciled in just state Medicaid programs, and just for one labeler code (i.e., one type of product) has zoomed from a few tens in 2006 to nearly 175. Other data from CIS suggests that current Medicaid activity is running at 68 invoices per quarter for its clients, which include emerging biotech companies with essentially one product.

Even though this invoice volume is growing, and even though many contracts have gray areas that leave contract terms open to interpretation, all too many companies still run this process off spreadsheets,” notes Karen Brown, marketing VP at CIS. The other choice is to implement complex—and expensive—dedicated software systems, with the attendant IT and staffing requirements. CIS’ offer is to manage the contract administration with its dedicated, proprietary IT system, and deliver results to clients via cloud-based applications. Among CIS clients in the $50-million to $1-billion annual revenue range, the reduction in staffing and IT expense can be from nearly $5.5 million to under $3 million, or 40-50%. A white paper on the topic is available from the firm.