Friday, December 02, 2022

Developing a Channel Strategy that Optimizes Gross-to-Net

Today’s guest post comes from Deepak Thomas, Founder and CEO of PHIL Inc.

Deepak explains how a manufacturer’s net revenues are affected when that manufacturer helps patients access, afford, and adhere to medication therapy. He provides three suggestions for building a channel strategy to optimize gross-to-net while also improving clinical, financial, and operational outcomes.

Click here to learn about PHIL’s access and commercialization solutions.

Read on for Deepak’s insights.

Developing a Channel Strategy that Optimizes Gross-to-Net
By Deepak Thomas, Founder & CEO, PHIL Inc.

Downward pressure on net sales is an ongoing problem for life sciences companies. It’s crucial for brands to understand the gross-to-net (GTN) challenges that manufacturers face and how they can improve their channel strategy to optimize GTN.


Numerous factors impact a life science company’s GTN, which is the difference between the wholesale acquisition cost (WAC) and a manufacturer’s net sales.

Distributor rebates, 340B Drug Pricing Program rebates, negotiated price reductions, and copay assistance can significantly reduce the net revenue manufacturers realize for their brand-name drugs. The fact is, many companies today are experiencing declining net drug revenue as they offer larger rebates to offset increases in list prices, as depicted in this chart from Drug Channels:

[Click to Enlarge]

There are two major changes in the environment that underlie the challenges companies are experiencing:
  1. Consumer expectations. Innovations, fueled by mobile technologies, over the last decade have removed a lot of friction from buying experiences and enabled more informed decision-making, which has become part of the standard buying experience today. Consumers expect to know upfront how much something costs, how conveniently they can obtain it, and when they can expect to receive it.

    The pharmaceutical industry is decades behind when it comes to meeting consumer expectations. Failing to deliver that frictionless, consumer-centric experience creates barriers that keep patients from starting on or properly adhering to their prescribed therapies.

  2. Prescription coverage. As drug costs have continued to rise, payers have instituted stricter formulary requirements—particularly for expensive specialty drugs—that must be met before they cover a therapy. In these cases, the prescriber must follow the appropriate processes to get a patient started on their therapy.

    While the technology to create “back office” efficiencies around administrative workflows is prevalent across many industries, this is not often the case in healthcare. The lack of process optimization means a smaller percentage of prescription drugs get covered by payers because of the friction involved in the approval process. This means the manufacturer often ends up subsidizing a greater percentage of scripts than would have otherwise been covered thus impacting their gross-to-net.
The impact of both these challenges is multiplicative. If a company loses a few scripts due to a friction-prone path to access, it is also losing the subsequent refills. And if a high percentage of those scripts are not covered and the manufacturer steps in to subsidize a much higher percentage than planned, these factors represent a greater magnitude of diminished net revenue to pharma brands.


Multiple entities are involved in getting a patient on therapy between the manufacturer and the payer. The better manufacturers understand this and seek to employ various mechanisms to help patients get started on therapy faster, adhere to treatment, and access it more affordably.

Surprisingly, many prescription delivery models are antiquated and misaligned with the needs of today's patients and prescribers. As a result, some of the manufacturer's distribution costs may not be commensurate with the value added. In other words, some entities capture disproportionately more value than they contribute.

It's essential that the distribution channel aligns with the value each stakeholder contributes to achieving the end goal of ensuring patients receive the right therapy at the right time and at the right price.


There are three key considerations when designing a channel strategy to optimize GTN:
  1. Always put the patient-turned-consumer at the center. Beyond a traditional patient-centered approach, manufacturers must recognize that the patient is also a consumer who wants a more modern way to access their medications and be informed as to what’s happening behind the scenes. Provide them with the digital experiences that are familiar to them and assist them with accessing therapy.

  2. Address the healthcare provider experience. Make sure providers have modern tools to streamline and facilitate their efforts to meet payer requirements so they can help their patients get started and adhere to prescribed medications.

  3. Create an incentive-aligned distribution channel. All stakeholders along your distribution channels should be working toward the common goals of getting scripts covered and making sure that most patient access dollars go to the patient to underwrite the cost of their care.

Many pharma companies today are not taking full advantage of digital technology. The good news is that while technology has failed the industry for several decades, in the last five to six years, there have been clear strides, especially with consumer- and prescriber-facing innovations.

The new technology hype cycle is behind us, and solutions are now production-worthy in a way that they’re able to impact lives at scale. It may take a new mindset, but by embracing innovation and implementing the right tools, pharmaceutical manufacturers can improve clinical, financial, and operational outcomes.

PHIL can be a game-changer for life science companies looking to meet patient expectations and positively impact outcomes while optimizing GTN. With a digital, frictionless experience, providers can more easily meet payer criteria and get their patients on therapy quicker. Patients can better access, adhere to, and afford their medications while staying informed along the way.

Learn more about PHIL.

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