Life Sciences companies Model N, Inc. and HighPoint Solutions recently published their Revenue Management Best Practices Survey, reporting that a majority of Life Sciences companies predict an increase in contract volume and complexity. The survey provides Biopharma and Medical Technology companies with an opportunity to understand industry trends and assess their Revenue Management practices against industry competitors.
The survey – now in its eighth year – provides insights into industry segment-specific organizational and process dynamics, emerging customer and market drivers and Business Intelligence and technology trends.
Model N and HighPoint discuss contracting and deal effectiveness, contract performance, regulatory compliance and analytics integration to measure financial accuracy. Systems upgrade plans also include Software as a Service (SaaS) evaluation and adoption. Sixty companies participated, representing a cross-section of Life Sciences, including Generics, Branded ,and Specialty manufacturers as well as Medical Device, Durable Medical Equipment ,and Medical Surgical companies.
According to the survey, 65 percent of Biopharma respondents feel that retail contracting is more complex and Managed Care contracting and related utilization data-driven programs consume more resources.
The survey also says that Med Tech companies overwhelmingly see the institutional market putting the greatest burden on manually intensive operations with 88 percent of respondents stating that GPO, IDN, and local contracts will increase substantially in scope and volume.
Unlike previous survey results, Med Tech and Branded Pharma companies reported distributor and wholesaler contracts as high focus areas while Generics companies reported government programs as the area of greatest risk.
There was revenue loss from contract non-compliance. 55 percent of Generics companies and one-third of Med Tech and Branded Pharma respondents are unable to determine what percentage of contracts are compliant to committed market share. The average estimated non-compliance rate was 18 percent of annual committed contract revenue with high-end estimates nearly 35 percent.
"The data in this year's survey results points to more targeted investments in analytics that deliver operational and strategic insights and enable smarter decision making, including deal management and offer analysis; rebate accrual, validation and payment analysis; and price and contract performance assessment," stated Gopkiran Rao, Senior Director of Marketing at Model N.
Other results regarding Revenue Erosion from Customer and Channel Incentives and Settlements Overpayments indicated that respondents thought the number of pricing and incentive structures uniquely developed for negotiation or contracting is increasing, leading to large number of year-over-year variation.
In the area of system upgrades and SaaS, companies said new product launches, platform upgrades and responses to health care reform and other regulation would drive the bulk of IT spend, upgrades and investments over the next 12-18 months. Fifty percent of all companies stated they were implementing SaaS solutions across various components of the revenue life cycle.
"In such an environment, organizations will need to change their approach from ad hoc deal execution to a holistic Revenue Management approach that balances the need for quick wins with long-term engineering of sales, pricing, and channel strategies to address emerging trends such as risk sharing and new contracting paradigms," said Rao.
"This survey shows that a broad spectrum of Life Sciences companies are concerned that they will be expected to do more with less as both contract volume and complexity continue to grow," commented Robert Matsuk, Chief Strategy Officer at HighPoint Solutions. "Eroding brand advantage, lower global barriers to competition, and expectations of return from customers demanding partnerships with suppliers underscore the industry's highly competitive nature as well as the need for manufacturers to aggressively recalibrate how deals are done."
Edited by
Braden Becker
