Sales/Revenue Forecasting and Contract Analytics that Drive Profitability. March 16, 2015 Presented by: Jag Rajan VP of Finance

Transcription

1 /Revenue Forecasting and Contract Analytics that Drive Profitability March 16, 2015 Presented by: Jag Rajan VP of Finance 1

2 TABLE OF CONTENTS Forecasting Drivers 1 Gross to Net Drivers 2 Other Key Drivers 3 Questions 4 2

3 SALES FORECASTING DRIVERS 3 3

4 SALES FORECASTING DRIVERS 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 4

5 SALES FORECASTING DRIVERS 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 5

6 SALES FORECASTING DRIVERS 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 6

7 GROSS TO NET SALES DRIVERS 7 7

8 GROSS TO NET SALES DRIVERS What is Gross to Net? Revenue is reported per US GAAP principles taking into account customer terms Net = Gross less the following adjustments: Chargebacks / Charge back bill back for retailers Rebates / Admin Fees 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 Net Gross Chargebacks Chargeback Bill Backs for Retailers Rebates / Admin Fees Returns Gov t Programs & Other Promotions 8

9 GROSS TO NET SALES DRIVERS Net Gross Chargebacks Chargeback Bill Backs for Retailers Rebates / Admin Fees Returns Gov t Programs & Other Promotions Gross - 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 9

10 GROSS TO NET SALES DRIVERS Net Gross Chargebacks Chargeback Bill Backs for Retailers Rebates / Admin Fees Returns Gov t Programs & Other Promotions 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 10

11 GROSS TO NET SALES DRIVERS Net Gross Chargebacks Chargeback Bill Backs for Retailers Rebates / Admin Fees Returns Gov t Programs & Other Promotions Rebates / Admin Fees Second largest sales adjustment component Rebates can be purchased based, 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 11

12 GROSS TO NET SALES DRIVERS Net Gross Chargebacks Chargeback Bill Backs for Retailers Rebates / Admin Fees Returns Gov t Programs & Other Promotions 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 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 12

13 GROSS TO NET SALES DRIVERS Net Gross Chargebacks Chargeback Bill Backs for Retailers Rebates / Admin Fees Returns Gov t Programs & Other Promotions 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 13

14 GROSS TO NET SALES DRIVERS 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 14

15 OTHER KEY DRIVERS 15 15

16 OTHER KEY DRIVERS Customer Consolidation 85% of the US generic market consolidated to 4 buying consortia 15% of Europe added to the US consortia Reference: GPhA Annual Meeting

17 OTHER KEY DRIVERS Customer Landscape 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% Distributors, 8% Wal-Mart, 5% All Others, 2% CVS Group, 30% 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% ECONDISC, 17% McKesson, Rite- Aid, Optimum Rx, 18% ABC - Walgreens, 20% 17

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 M&A First to File Exclusive positions High barriers to entry products Brand/Specialty products Strategic pricing 18

19 QUESTIONS? For further inquiries please contact Jag Rajan, VP of Finance (E) (P)