Government and Commercial Pricing & Contracting
Due to increased scrutiny on the life sciences industry, it is more important than ever to have strong contracting and performance management strategies. A negotiated commercial agreement must take into consideration government best-price implications. Following signature, not only does a life science company need to understand and manage individual terms across their inventory of active contracts, but it also must stay current with reporting obligations they are subject to when participating in related government programs. With laws and regulations constantly changing and gradually shifting towards more stern enforcement action, it is crucial that life sciences companies rise to the occasion.
Despite the number of challenges, there are great opportunities for life science companies that do this well. Through the implementation of strong commercial contracting strategies combined with proactive contract management across commercial and government programs, a life science company is at much less risk of being subject to hefty fines, penalties or even potential debarment from government program participation. Further, effective contract management strategies can help verify that all transactions are appropriately tracked. With the tight margins that many life science companies face, incorrect tracking of transactions can mean the difference between meeting their financial targets or not. Furthermore, doing this well can help a life science company build or maintain a strong brand reputation, ultimately leading to improved sales opportunities.
Due to the increasingly complex supply chain of life sciences products, it is more important than ever to establish contracts that set clear expectations through a strategic lens that considers the rules and regulations that influence pricing. Contract development is complex due to the number of stakeholders that need to be considered such as the government, pharmaceutical companies, health plans and the public. Life sciences companies must keep the entire ecosystem in mind.
Baker Tilly’s life sciences team can provide solutions to support each of your contract strategy needs:
Build strength across commercial contract networks with government pricing considerations in mind.
Attain accurate and timely pricing insights, adjustment calculations and scenario analysis capabilities that offer additional visibility into pricing practices, while tying together relevant data across disparate information systems.
Numerous complex government programs can make up a significant share of overall product sales for life science companies. Participation in government programs, however, requires life sciences companies to follow strict guidelines and regulations, which often require regular self-reporting on a multitude of complex calculations in order to remain compliant. To safe guard the future health of their products, it is crucial for life sciences companies to have a clear understanding of what is expected of them and establish proper steps toward compliance for each government program, with tight controls and proactive monitoring for potential compliance and ethics risks.
Baker Tilly’s life sciences advisory and support solutions team stays current with rapidly changing government program regulations and we help our clients interpret, implement and comply with program requirements. Our wide breadth of service offerings include:
Establish program enrollment for emerging companies as well as methodology and policies creation and reviews, managed services solution for calculations and claims payments for emerging and existing pharma and biotech. Government pricing modeling can also be completed to assess various commercial price strategies before they are implemented.
Provide program stand up, compliance, audit services and the development of integrated reporting capabilities that support regular information sharing to the CMS Drug Data Reporting for Medicaid (DDR) system and CMS ASP.
Support program stand up and ongoing compliance to 340B Drug Pricing Program through development and review of policies and procedures, internal controls, testing of 340B transaction record accuracy and corrective action planning when necessary.
Assistance with Federal Supply Schedule (FSS) proposal and renewal package preparation, contract negotiations, and development and deployment of post-award compliance programs. Customized tools for other federal government agencies (OGA) contract pricing, statutory pricing, non-federal average manufacturer price (non-FAMP) and federal ceiling price (FCP) reporting, Price Reductions Clause (PRC) monitoring and compliance and revenue maximization. Assistance with Trade Agreements Act (TAA), Industrial Funding Fee (IFF) reporting, and contract management and administration.
Fully understand the administrative, reporting and other obligations included in federal agreements and contracts, including the timeline of when funds are dispersed and the preparation for a government audit.
As the volume of specialty and high price pharmaceutical and medical device products grow, life sciences companies will have billions of dollars at stake each year. This, along with the sheer volume of stakeholders in the life sciences supply chain cause challenges in managing the commercial contracting life cycle. In order to succeed, the life sciences industry must make it a priority to develop strategies for accurately tracking transactions to ensure they are receiving accurate reimbursement based on detailed analytics. From the point of initial contract negotiation, terms must be laid out clearly and appropriately followed. Post signature, life sciences company can reduce risk through the adoption of analytics to help ensure the terms of these contracts are being adhered to.
Baker Tilly’s life sciences team offers a start to finish approach for commercial contract compliance and ethics needs, including:
Provide transactional reviews to determine whether chargebacks are appropriately applied, especially to specific customer types (e.g., non-contract sales) or when a product is returned. Our comprehensive reviews cover the whole life cycle of product distribution including contract management (EDI 845), chargeback management (EDI 844), inventory management (EDI 852), and sales (EDI 867). We also perform additional wholesale distributor reviews including, but not limited to, pricing compliance (e.g., wholesale acquisition cost, contract customer pricing, public health service act, etc.), price protection reconciliations, deductions testing and distribution center audits.
Provide support in modeling rebate scenarios and drafting contracts that contain clear language to reduce ambiguity when calculating the rebates. We also offer full rebate payment reviews including, but not limited to, monitoring for rebate eligibility, claims adjudication, best price audits and administrative fee audits to identify discrepancies between what is being claimed and what has actually been earned.
Assistance with compiling a catalog of services to be tested, determining of the legal prongs of the Bona Fide Service Fee (BFSF) test and fair market valuation (FMV) calculation, and creation of work process tools to facilitate compliance with the Centers for Medicare and Medicaid Services (CMS) BFSF test.