Established Portfolio: Channel agreements Health REview

The client, a large pharmaceutical manufacturer with a well-established broad portfolio of pharmacy and medical benefit products, desired a review of their current specialty distributor and specialty pharmacy agreements. They looked to determine whether during the negotiation and addition of multiple amendments in recent years if these existing contract terms and conditions were in reality as fair and balanced between the manufacturer and the channel partner as required by their compliance team. 

This assessment would also review the current contracted measures and metrics to ensure optimal partner performance along with a review of the current distribution and dispense fees being paid to these partners. The goal of this was to ensure there exists an equitable and appropriate fair value exchange for the services being required by the manufacturer to support the patient and product journey.

 CDT Pharma Strategies conducted a comprehensive assessment of all existing specialty distribution (SD) distribution service agreements (DSA), and the specialty pharmacy (SP) dispense agreements to identify any potential areas of opportunity and enhancement to both contracting language and/or measures and metrics to bring these agreements to current best in class.

• Assessed if the agreement language, terms and conditions were aligned between the existing channel strategy, product and patient requirements.

• Identified multiple agreement opportunities for potential contracting amendments. This includes enhanced language to support fair and balanced terms and conditions (including correcting misaligned payment terms (SD/SP paid for product purchases in 60 days / Manufacturer paid service fees in 30 days). 

• Identified multiple new bona fide services to assist the patient and product journey while moving all services away from any perceived channel concessions or discounts including all off invoice and prompt payment terms.

• Based on their vendor-provided fair market value (FMV) report CDT suggested multiple language and fee structure changes for negotiation to bring their current agreements into better FMV compliance and support of an appropriate fair exchange for the services provided by the channel partners.

 • Through amendments to both the specialty distribution and specialty pharmacy agreements aligned these agreements to the overarching channel distribution and dispense strategy.

• Implemented new bonafide services to better support the patient and product journey
• Delivered significant gross to net savings (300 bps per unit) across the product porfolio and an immediate positive impact on working capital through a combination of enhanced agreement language and a reduction in the effective distribution service fees.