Pharmaceutical companies around the globe are facing a 'perfect storm' of expiring patents, tighter regulatory constraints and increasing buyer demands, putting unprecedented pressure on price and margin strategies.
In response, they are becoming increasingly aware of the importance of putting in place automated revenue management solutions, which provide the centralised transparency and control of pricing essential to optimise revenues and minimise margin erosion.
Sector-specific solutions such as global pricing management and international reference pricing tools ensure that real time data is always made available, to ensure intelligent decision-making across all areas of bidding, tendering and contracting.
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James Robinson, director of solutions at revenue management specialist Model N, tells us more.
TechRadar Pro: What current technology solutions are used to support processes such as pricing in pharma/healthcare?
James Robinson: Individually, new commercial and regulatory pressures are significant: together, the combination of expiring patents, tougher pricing pressures and legislative constraints are turning upside down established ways of managing pricing and profit strategies.
Pharmaceutical companies are having to respond by adopting new revenue management solutions. Replacing previously opaque and localised pricing activities, new automation tools ensure timely and informed centralised decision-making, so increasing revenues and margin, minimising price erosion and ensuring regulatory compliance.
Products include Revenue Management, Global Pricing Management (GPM) and International Reference Pricing (IRP) – designed to counteract the practice of individual payers (usually governments) comparing the price they pay for individual drugs with that in a selected number of other markets.
Each solution is designed to ensure that comprehensive, accurate and timely data is available to decision-makers, enabling them to make intelligent pricing decisions based on a full understanding of the implications across different markets in every case. Best practice solutions are also backed up by consultancy device and support from third-party specialists with extensive sector—specific expertise.
TRP: How effective are these technologies in supporting the supplier as the commercial environment changes?
JR: The benefits are substantial and measurable, helping firms build a strong business case for investment in automated revenue management.
For example, analysis of successful implementations has shown efficiency savings of between 40-70% in pricing administration, and the accuracy of price and revenue forecasting improved by 80-90%.
Putting in place appropriate processes to manage, monitor and control pricing, discounting and incentives can deliver a 2-5% reduction in incentive overpayments and a 1-3% improvement in overall margins.
A head of international pricing at a Fortune 500 biopharma company has confirmed: "We reduced our average year-on-year price erosion in Europe by 45%." For a multi-billion euro business, this equates to an annual saving of tens of billions.
TRP: How sector-specific are the technologies currently deployed in pharma/healthcare?
JR: Solutions have been developed to meet the unique dynamics of the global life sciences sector, as suppliers look to move from fragmented, localised, one-off pricing solutions to a fully-integrated, enterprise-wide approach to price and margin optimisation.
For example, revenue management solutions enable the centralised visibility and management of complex multi-division, multi-country operations, involving on-invoice and off-invoice free goods, step pricing and volume discounts. They also overcome poor hand-offs in bidding, tendering and contracting, minimising revenue leakage and optimising profit opportunities.
Global pricing management drives consistency across all markets, assesses the impact of pricing decisions and ensures compliance with individual governments and regulations.
And international reference pricing (IRP) solutions offer a single centralised repository to manage all aspects of local market pricing and optimise launch date sequencing and pricing to maximise revenues.
TRP: What can suppliers learn from other sectors (e.g. FMCG, airline management) in which CRM and pricing systems are more advanced and responsive?
JR: Within every sector, developments in technology directly reflect the priorities of the industry they support. In strongly consumer-focused markets such as airlines, hotels and consumer products, for example, in which product lifecycles are typically short, best practice systems and processes have evolved to enable companies to be commercially agile and responsive to change.