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Impetus for Change
The ever-changing dynamics of the healthcare landscape present pharmaceutical manufacturers with a series of challenges and opportunities. It has never been more important to create an innovative and efficient distribution strategy for your organization that both mitigates unnecessary costs and provides the product to more patients.
Below are key issues that will be discussed at the conference:
- Explore strategic distribution models including direct-to-pharmacy, direct-to-patient and specialty opportunities
- Understand how the ACA and Patent cliff will impact your distribution strategy
- Redefine relationships with wholesalers, retailers and 3PLs
- Determine the most effective channel configuration for your product
- Effectively prepare for changes on the horizon
To register or learn more about the conference, please click on the banner above or click here.
Tony's second blog entry, Optimizing the Returns Mangement Process Can Create Better Demand-Driven Signals, is up! Here's a portion of his blog post:
Too often do we discuss the process of managing change versus actually leading change. As leaders, the burden falls upon us to lead change. It is up to leaders to show the “why” of change. So many initiatives fail, not because they are not properly executed against, but because the people living with the results of the initiative never accepted the premises of the initiative to begin with. While the bottom-line is an important driver in all change, understanding how that change will affect individuals, processes, organizations, and shareholders is just as important—and in some cases, more important.
Throughout my career, one common thread comes through clearly: I have had to lead change. From my time at West Point, to my various corporate positions, change has been a constant companion. When I joined the pharmaceutical industry, I learned this industry has a different mindset for change: change is usually driven by regulatory bodies. When change comes through those channels, it usually costs an organization millions of dollars. When professionals within organizations try to unilaterally push change in this industry, it’s like a salmon swimming up river; it’s a very frustrating process to manage so many stakeholders, all of whom have different incentives for not wanting to change, but one thing still holds true: the philosophies of leading change are valid for individuals, corporations, and all industries. Change must occur at the speed of culture.
In keeping with the theme of my initial blog topic: creating a demand-driven supply chain, I would like to discuss returns. This, arguably, is one of the least understood aspects of the pharmaceutical supply chain. Most companies will say that they are doing a good job managing returns—that they have a handle on it: it’s roughly a predictable 2% of sales. First of all, I believe any return should be viewed as an opportunity to increase the efficiency of your supply chain. Returns cost organizations money throughout the supply chain. The entire supply chain—from the manufacturer to retailer—should view returns as a negative event—not a profit center.
To read the entire blog entry, please click here!
Linear B Exchange's, Tony Jackson, is part of a new blog! Here are some words about it from Tony, along with the direct link to the blog:
The team at Linear B Exchange has been given an extraordinary opportunity to have a forum to ensure our message has industry-wide reach; ValueCentric recently announced that the portal,ValueCentric, is LIVE!!!!! VCIQ is a new and innovative portal, created for pharmaceutical-industry professionals, to be a unique focal point for industry information, news, and opinions; it is designed as a single repository to track important industry news and events, healthcare insights, and unique services that will bridge the world of general business information with specific healthcare channel management metrics. VCIQ is a healthcare intelligence online destination, designed to enhance the awareness of, and access to broad media content (traditional and social), along with original content from guest industry bloggers that impact business activity.
In keeping with our belief that the pharmaceutical industry has to change, our first blog topic is titled, “Creating a Demand-Driven Pharmaceutical Supply Chain: Phase I – Ensuring Market Access” and can be found here. Over the next few months, I will continue to outline my thoughts and opinions on how to go about creating a demand-driven supply chain, as it relates to the pharmaceutical supply chain. As always, I welcome comments and can be reached at firstname.lastname@example.org.
Brand Rx manufacturers are under pressure industry-wide to help reduce the cost of healthcare. Unfortunately, healthcare seems to be primarily defined as the drugs patients take versus the total cost of healthcare. Where possible, brand Rx manufacturers are being challenged around their drugs’ cost. Case and point, there is a class-action lawsuit aimed at the very source of compensation between a brand Rx manufacturer and wholesaler. While these Fee-for-Service agreements have provided stability in governing the interaction between both parties, they are also problematic in how the distribution services compensation is calculated.
The lawsuit states “Beginning no later than 2004, Defendants and the pharmaceutical industry’s wholesalers began executing and implementing distribution services agreements (‘Service Agreements’). Service Agreements provide for a new trade structure known as ‘fee-for-service.’ Service Agreements generally obligate manufacturers to pay a fee to wholesalers (also referred to herein as ‘distributors’) in exchange for services the wholesalers provide (the ‘Service Fee’). The Service Fee is typically an amount equal to a set percentage of the wholesalers’ gross purchases of the manufacturers’ products.”
“Defendants use these Service Fees to artificially lower their reported AMPs, which enables them, in violation of law, to materially underpay rebates to the state Medicaid programs. Each of the Defendants execute this fraud through one of two schemes: a) the ‘Discount Scheme,’ or b) the ‘Service Fee Scheme’.”
So what is the problem? Paying more fees to continue to fund a model that is close to being unsustainable, especially when product is being sold at “WAC-minus” pricing. So what is the solution? Migrate current agreements to a cost-per-unit model that is a true value-based agreement.
This has been the cornerstone of Linear B Exchange's approach. In our white paper, "A Practical Roadmap to Evolve FFS Agreements to a Cost-per-Unit Model," we outline a strategy to achieve this objective. While Linear B Exchange cannot help manufacturers with the past, we can help you protect your organization from future lawsuits related to these types of claims.
To view the lawsuit, please click the following link: http://www.impetusforchange.org/storage/class-action-lawsuit/Case%20208cv05135ER%20Doc%2045.pdf. You can also access the lawsuit at http://www.paed.uscourts.gov/us01001.asp, and login to PACER. While your organization may not be named, this lawsuit has the potential to open Pandora's Box for additional class-action lawsuits. The most troublesome situation is the wholesaler “Cost Minus” business model for selling brand Rx drugs downstream; this practice will inevitably lead to additional trouble in the industry, from a sustainability standpoint to potential government rebates issues.
If you are interested in learning more about Linear B Exchange and would like a courtesy copy of our white paper, "A Practical Roadmap to Evolve FFS Agreements to a Cost-per-Unit Model," (an organizational value of $1,000) please e-mail Alex at email@example.com.
Please note, our white paper, "A Practical Roadmap to Evolve FFS Agreements to a Cost-per-Unit Model," is intended for branded Rx pharmaceutical manufacturers, and we reserve the right to decline sending an individual a copy if they’re not a branded Rx pharmaceutical manufacturer.
If you would like to post a comment to a specific blog topic anonymously, please e-mail Alex, and Linear B Exchange will post your comment anonymously.
Linear B Exchange is a veteran-owned company.