Friday, September 17, 2010

MDRP 2010 Conference - Best Practices in Bundling and Discount Reallocation

Jennifer Norton – I-many

Healthcare reform is making your contracts more complex and there is more scrutiny around pricing and bundling seems to be an easy target for audit.

First you must identify the bundle. This can be done by various parts of the organization and you need to establish ownership of this action. Is it the responsibility of the GP staff? Or is it the Commercial contracts department? What about legal as this is a legal requirement? And in identifying the responsibility of determination of bundles you also should understand the corporate position on what is considered a bundle. If your company does not have such a position, you should consider gathering the troops and making that determination for moving forward.

Second you need to reallocate the bundle using an algorithm. This process is something that should come from these teams listed above including your counsel. Because bundling components could be across types such as sales, admin fees, rebates, and chargebacks, there are real world issues with the timing of data and the type of data you will be using. Do you reallocate by product or do you reallocate by price concession type? If you have intertemporal bundles do you use a rolling-average calculation? And how many times do you go back to recalculate a specific quarter? Are prompt pay discounts considered part of a bundle for your products? How about Tiers? What if your WAC changes mid-period? And, goodness gracious, what about if you have overlapping bundles?

And how often do you do these reallocations? Daily, weekly, monthly, quarterly, or yearly? And what if you own one of the 5i drugs or have RCP drugs; are you unbundling across the two separate AMPs you will be calculating? There is also a new industry trend between walk-in pharmacies, clinics, and PBMs (CVS being an example)… are those units now part of a bundled situation?

Finally you need to analyze and store your results. Storage of this information is extremely important. Just as the need to be able to rebuild your AMP calculations, you also need to be able to rebuild your unbundling reallocations in the future for audit purposes. Once you have formed an assumption about how you view bundles and how you reallocate them, be sure to document, document, document.

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