As a follow on to our recent blog series on Pricing, we will now focus a series on the critical importance of having an integrated Pricing, Contracting and Channel strategy (“PCC”). In pharmaceutical commercialization, the Value Proposition serves as the foundation for all PCC decisions. It defines the clinical and economic benefits of a therapy and guides market positioning. The decisions required within PCC are inseparably linked, with the Value Proposition playing a critical role in shaping each. Alignment is vital for financial efficiency, provider reimbursement stability, compliance risk management, and to maintain optimal market access.
𝐓𝐡𝐞 𝐈𝐧𝐭𝐞𝐫𝐜𝐨𝐧𝐧𝐞𝐜𝐭𝐢𝐨𝐧 𝐨𝐟 𝐏𝐫𝐢𝐜𝐢𝐧𝐠 𝐚𝐧𝐝 𝐂𝐨𝐧𝐭𝐫𝐚𝐜𝐭𝐢𝐧𝐠
Pricing and contracting strategies must align to support commercial success and compliance. Pricing decisions should consider both statutory and discretionary price concessions required, such as Medicaid , 340B , commercial payer/PBMs, and providers as well as bona fide service fees. These concessions directly impact net pricing, government price calculations and overall contracting strategies. BioPharma must design contracts that balance competitive pricing with sustainable profitability and meet compliance requirements.
𝐂𝐡𝐚𝐧𝐧𝐞𝐥 𝐃𝐞𝐜𝐢𝐬𝐢𝐨𝐧𝐬:
Channel related decisions significantly affect both pricing and contracting strategies. The choice of distribution models and required services using 3PLs, wholesalers, specialty distributors, specialty/retail pharmacies, and/or direct-to-patient channels have cost implications which can include price concessions and bona fide service fees. The payments associated with services such as distribution, cold-chain storage, special handling, and patient support hubs must be accounted for when establishing list prices to understand net revenue implications and any impact on government price reporting calculations.
𝐈𝐧𝐭𝐞𝐠𝐫𝐚𝐭𝐞𝐝 𝐒𝐭𝐫𝐚𝐭𝐞𝐠𝐢𝐜 𝐀𝐩𝐩𝐫𝐨𝐚𝐜𝐡:
To succeed in the current pharmaceutical market, BioPharma must integrate pricing, contracting, and channel decisions cohesively. This involves:
– Modeling to assess the impact of various PCC scenarios
– Aligning payer contracting strategies with overall market access goals to ensure sustainable pricing and provider reimbursement
– Factoring channel related payments to understand and maintain profitability while remaining market competitive
𝐒𝐮𝐦𝐦𝐚𝐫𝐲:
By employing an integrated approach for PCC decisions, BioPharma can navigate the evolving market landscape with competitive advantage more efficiently, ensuring optimal patient access while maintaining financial sustainability and maintaining compliance.