Contracting Strategy:  An Essential Link in Pricing, Access, and Commercial Growth

As a follow-on to “Is Your Access Strategy Aligned?” and “Pricing Can’t Be Set in a Vacuum” (in the notes section below) we now focus on contracting. Effective contracting translates strategy into access and optimizes net revenue.

Contracting can span payers, providers, and channel partners. To ensure access, reimbursement, and compliance, manufacturers must integrate this strategy across all three dimensions within a unified pricing, contracting, and channel (PCC) framework. While contracting may be a critical component of an access strategy, manufacturers may also receive contract requests from partners regardless of need, and these requests need to be considered carefully since decisions to contract are very difficult to reverse.

Payer/PBM Contracting

Contracting should be a supportive tactic to the broader access strategy and not every medicine needs a rebate. Medicines with strong clinical data, clear differentiation, and that address a high unmet need should drive favorable payer coverage. However, in competitive markets with less differentiation, contracts may be required to enhance access. They should be selective, and scenario modeled so manufacturers can ensure:

• Mutual value and sustained profitability
• Performance requirements (e.g., formulary status, volume/market share, warranties) align with commercial goals
• Terms do not trigger undesired government penalties and/or compliance concerns
• Statutory concessions (e.g., Medicaid best price, 340b, IRA) are considered
• The overall value proposition is preserved

Provider Contracting

In buy-and-bill markets, provider economics impact uptake, and contracting needs are shaped by:

• Therapeutic area norms
• Site of care (does ASP-based reimbursement support practice economics?)
• Competition

Performance criteria, ASP erosion and net cost recovery are key strategy considerations that must be carefully analyzed before making provider contracting decisions.

Channel Contracting

Distribution and pharmacy related terms typically focus on daily operations (e.g. order processing, fulfillment, inventory management, data), but manufacturers can also consider terms that proactively protect against competitive actions.  Effective channel contracts can provide competitive advantage based on:

• Medicine’s profile and handling requirements
• Price & volume expectations
• Site of care
• Performance criteria that efficiently enhances patient care
• Contract structures that recognize the difference between fee-for-service and price concessions

Contracts must ensure efficiency & compliance while driving optimal patient experiences.

Bottom Line:

Contracting is a critical component of a manufacturer’s commercial strategy.

Across the commercial stakeholder landscape, every contract must align with the medicine’s overall value proposition, pricing strategy, and market access objectives. Misalignment invites compliance risk, material financial erosion, and patient access barriers. Please contact us at info@A3Access.com if you need help with your contracting strategies and/or execution.