Pricing and Contracting USA: Key Insights

EncompaaS has just returned from attending its first ever Pricing and Contracting USA Conference for Pharmaceutical Contract and Pricing Managers in New Orleans.

What a momentous week of meeting and speaking with experts from the biggest and most influential businesses in the pharmaceutical manufacturing industry! We thought it would be fun to share three key observations from the conference with those who were not able to attend this incredibly informative and useful conference.

Observation 1

Our first key observation is that most contract managers are still using highly manual and time-consuming methods to identify key data points in the thousands of contracts they manage. Contract managers are tasked to provide sophisticated analysis of incredibly large contracts and documents with a hammer or a chisel, as opposed to highly effective AI tools that can do the heavy lifting on their behalf. The benefits of using modern AI to extract data points from complex and voluminous contracts and amendments have multiple benefits, including:

• Automating tasks of manually identifying critical data points for correlation and roll-up. This allows contract managers to focus on strategic tasks as opposed to spending eight hours a day, five days a week manually identifying data points and entering them into spreadsheets.
• Improving accuracy by eliminating errors and omissions.
• Improving supplier relationships by using automation to ensure compliance and fostering trust.
• Competitive edge by identifying business critical data-driven issues in near real-time.

Observation 2

The second observation is that there is an extreme focus on complex regulations, such as Section 340B. This focus spotlights the minute details to which contract managers and administrators must pay attention.Section340B is a US federal government program that is a darned if I do, darned if I do not opportunity. It gives pharmaceutical manufacturers a highly attractive distribution channel with  a considerable discounted hit on pricing.

The 340B program allows eligible healthcare clinics and hospitals (“covered entities”) to purchase outpatient drugs at a 20-50 discount. More than 50,000 “covered entities” participate in the program, resulting in discounted drug purchasing of more than $40 billion a year. The 340B program drives down the acquisition costs of drugs but not their reimbursements. This has spawned  a true cottage industry of consultants and advisories retained by manufacturers to help wade through the mounds of red tape, regulation, reporting and compliance requirements.

One of our key observations is that programs like this cannot be successfully managed with siloed information. Contract and pricing managers, for competitive reasons alone, must be able to access information across repositories and business organizations. It is not about increasing headcount – that approach is neither sustainable nor problem solving.

Observation 3

As lay people with data management expertise, our third observation is the extraordinary complexity of pricing and contracting. Manufacturers not only have to worry about identifying the right drugs to get into a development pipeline; there is also massive investment required once the drugs make it to the pharmacy.

The cost of supporting distribution, regulation, and compliance directly contributes to the excessive cost of drugs in the United States. The combination of complexity of economics, market structures and government policies make drug pricing and distribution one of the most unsatisfying and extraordinarily difficult business processes imaginable. There is no doubt that AI will play an increasingly vital role on the business side of pharmaceutical manufacturing.