Gross-To-Net (GTN) Modeling

Designing a dynamic tool for detailed gross to net revenue modeling

All major pharmaceutical and biotech companies require an adaptive platform which would provide a clear view of flow of company’s Gross-to-Net financials. The “Gross to Net” (GTN), in its essence captures droppage accounted via promotional discounts and rebates.

Viscadia has developed a GTN calculation platform to analyze the demand and pricing KPIs in an all–encompassing interactive GTN dashboard. It is designed to address all nuances related to federal rebates per US government policies.

Challenge

Federal Channels

• Accommodating inputs around varying federal discounts across different channels

Inventory Consideration

• Effectively incorporating inventory dynamics across channels and understanding demand distribution across channels

Average Selling Price (ASP)

• Formulating a relationship between Wholesaler Acquisition Cost (WAC) and various rebates and chargebacks to estimate Average Selling Price (ASP) across channels

Approach

Channel Segmentation

• Accommodated various channels across nodes of distribution network during the flow of the drug from the manufacturer to the patient

Discount Calculations

• Incorporated operational nuances in the tool for different federal and non-federal channels to derive respective rebates/discounts

Standardization Route

• Created a robust methodology to enable the user to function at the Stock Keeping Unit (SKU) as well as the Standard Unit (SU) level across various channels

Forward-Looking Tool

• Ensured the tool is equipped to forecast GTN for forthcoming years, thus enabling the user to devise well-informed strategies

Central Repository

• Created a one-stop repository for all the KPIs related to GTN for downstream usage by finance and forecast teams

Scenario Modeling

• Provided functionality that provides the user the flexibility to configure and compare different what-if scenarios on the fly

Outcome

End Deliverables

• A comprehensive tool with insights and outputs enabling analysis of GTN evolution over time
• Accounting summary to help visualize the flow of discounts from top line to bottom line across each indication & channel, as well as at the overall level
• User manual providing extensive documentation of model design and operation to facilitate easy knowledge transfer

Key Highlights

• Formulated ASP calculation and contractual relationship between Clinics & Group Purchasing Organizations (GPOs)
• Provided functionality to define custom drug distribution network, input pricing, and SKU assumptions as required to understand discount impacts on Net revenue

Impact

• Immediate impact: GTN would serve as an end-to-end tool to understand revenue droppage across various ends and channels and shape commercial strategy
• Long Term Impact: GTN optimization would enable company leadership to make informed decisions, not only to drive the bottom-line growth but also to enhance competitive market positioning