sales/revenue forecasting and contract analytics that ... · pdf filesales/revenue forecasting...

1

Sales/Revenue Forecasting and Contract Analytics that Drive Profitability

March 16, 2015

Presented by:Jag Rajan

VP of Finance

2

TABLE OF CONTENTS

Sales Forecasting Drivers 1

Gross to Net Sales Drivers 2

Other Key Drivers 3

Questions 4

3333

SALES FORECASTING DRIVERS

4


Base Business

Existing Product Portfolio

Product category – OTC , Brand and Generic / Authorized Generic

Current market share and projections

Number of competitors and future approvals pending

Current product pricing and expectations

Customers terms and conditions

Change in customer landscape

Manufacturing and supply chain plan

5


Future Outlook & Opportunities

R&D and BD

New launches

Filing category and status

Product usage

Launch strategy and timing

Market segment – customer class of trade

Manufacturing and supply chain plan

6


Key Factors

Forecast at customer product level

Customer usage and TRx trends

Authorized generics – limitations and pitfalls

Uninterrupted supply and ramp up capability

Product costing

Internal communication and documentations

Medicaid and Medicare

Automation

Gross to Net Drivers

7777

GROSS TO NET SALES DRIVERS

8


What is Gross to Net Sales?

Revenue is reported per US GAAP principles taking into account customer terms

Net Sales = Gross Sales less the following adjustments:

Chargebacks / Charge back bill back for retailers

Rebates / Admin Fees

Sales Returns

Medicaid/ Medicare Part D/ Tricare/ Public Health Service/ Non-FAMP

Promotional Discounts

Service Fees, Re-distribution Fees and other fees

Patient Assistance Program (“PAP”) and Coupon Discounts

Revenue Elimination

Price Equalizations

Payment Terms

ChargebacksChargeback

Bill Backs for Retailers

Rebates /Admin Fees

Sales Returns

Gov’t Programs & Other

PromotionsNet Sales

GrossSales

9



Rebates /Admin Fees

Sales Returns


PromotionsNet Sales

GrossSales

Gross Sales - what the customer is invoiced

Wholesalers are invoiced at WAC

All other customers are invoiced at a customer specific direct price (not WAC)

Factors affecting pricing

Numbers of viable suppliers

⎻ 4 plus will drive down pricing rapidly

Types of formulation

⎻ Oral solids – easy to enter market – highly commoditized

⎻ Injectable and Inhalation – difficult to enter – less commoditized

Timing

⎻ FTF and few new entrants keeps the price high

Supply/shortages

⎻ Seamless supply keeps pricing stable

• Penny Pricing for Brand and AG

• PHS and FSS pricing due to additional discount


10



Rebates /Admin Fees

Sales Returns


PromotionsNet Sales

GrossSales

Chargebacks / Chargeback bill backs for retailers

One of the largest sales adjustment component that impacts profitability and Cash flow

70% of Generic / authorized generic business will be impacted

Monitoring wholesaler inventory (852/867) is critical to sales forecasting

Review of Charge back data is required to understand and analyze distribution channel

Roll forward of Wholesaler inventory is vital to validate reversals

Review of Retail Direct price to indirect pricing is mandatory with change in landscape

Chargeback rates are based on customer terms and/or historical trends

WAC to contract price spread impacts cash flow and profits

Automation is vital to prevent auto deduction and calculating rebate pay outs


11



Rebates /Admin Fees

Sales Returns


PromotionsNet Sales

GrossSales

Rebates / Admin Fees

Second largest sales adjustment component

Rebates can be purchased based, Sales out, VIR, Managed care, Medicaid/ Medicare

Review customer terms to ensure that rebates are adjusted for price EQ’s and Returns

Capture rebates in RFP and at order level to reflect accurate NSP

Rebates to Wholesalers shall be based on channel ratio and requires periodic updates

Perform monthly Roll forward to ensure reserves are adequate

Review customer rebate invoices for completeness

Automation is highly recommended to manage effectively


12



Rebates /Admin Fees

Sales Returns


PromotionsNet Sales

GrossSales

Sales Returns

Impacts bottom line to a significant extent

Based on return policy with the customer and product shelf life

NDC change / Discontinuation/ losing Primary position triggers larger returns

Ensure customer maintain direct price in their system when the above happens

Sales forecasting and monitoring of customer purchases and inventory levels is critical to maintaining a low return ratio

Monitor Wholesaler customer inventory for potential returns

Evaluate return authorization (“RA”) for provisions

Maintain and track special reserve for recall / import ban related

Tracking TRx for new brand launches to support revenue recognition

Tracking returns at batch/ lot level ensures accurate processing

Reserve rate is established based on historical returns and market behavior


13



Rebates /Admin Fees

Sales Returns


PromotionsNet Sales

GrossSales

Government Programs & Other Promotions

Medicaid and PHS (340 B)

Medicare Part D and Tricare rebates

Utilization based rebate and PAP

Observations for Government programs and other sales promotions

Look for best price and penny pricing impact on business

Keep an eye on inflation penalty and NFAMP to FCP spread due to WAC increase (should maintain only 24% spread)

Review Managed care agreements for price increase penalty clause as it can adversely impact best price and Medicaid rebates

Estimate Medicaid rate at product level based on historical trends for Generics

Estimate TRx in pipe line based on TRx sold to TRx consumed to estimate for (1) Medicaid rebates, (2) Medicare Part D, (3) Tricare rebate, (4) Utilization based rebates and (5) PAP for Brands

All Government pricing programs are based on actuals, driving need for automation


14


Authorized Generics

Has all the characteristics of a NDA

Compete in the Generic space

Priced on similar terms as a Generics drug

Generally governed by a Generic agreement

Obtain Brand TRx data on Medicaid and Medicare

Proper pricing strategy across customers is critical

Price spread in excess of 23.1% will trigger higher Medicaid rebate

If the product is a large Medicare part D consumption drug, then the timing of the launch is crucial as Part D reimbursement can completely erode profit margin and impact cash flow

15151515

OTHER KEY DRIVERS

16

OTHER KEY DRIVERS

Customer Consolidation

Reference: GPhA Annual Meeting 2015

85% of the US generic market consolidated to 4 buying consortia

15% of Europe added to the US consortia

17

OTHER KEY DRIVERS

Customer Landscape

CVS Group ECONDISC

CVS Retail 16% Express Script - MO 12%

Caremark - MO 6% Kroger Retail 3%

Cardinal / Geneteco WH 8% SuperValu Retail 2%

Total CVS Group 30% Total ECONDISC 17%

ABC - Walgreens Total Wal-Mart 5%

Walgreens Retail 13%

ABC - WH 7% Distributors

Total ABC - Walgreens 20% ANDA 3%

Premier 2%

McKesson, Rite-Aid, Optimum Rx Optisource 3%

McKesson - WH 8% Total Distributors 8%

Rite-Aid Retail 7%

Optimum Rx - MO 3% Total All Others 2%

Total MCK, Rite-Aid, Optimum Rx 18%

CVS Group, 30%

ABC -Walgreens,

20%

McKesson, Rite-Aid, Optimum Rx,

18%

ECONDISC, 17%

Wal-Mart, 5%

Distributors, 8%

All Others, 2%

Customer Landscape

18

OTHER KEY DRIVERS

Manufacturers’ Focus

Quality, Quality, and Quality

Control costs

Vertical integration

Portfolio optimization

Ample inventory

Uninterrupted supply

Speedy ramp up time for new pick ups

New product launches

First to File

Exclusive positions

High barriers to entry products

M&A

Brand/Specialty products

Strategic pricing

19

QUESTIONS?

For further inquiries please contactJag Rajan, VP of Finance

(E) [email protected] (P) 904.226.8062

sales/revenue forecasting and contract analytics that ... · pdf filesales/revenue forecasting...

Documents