With schools now back in session, it’s an appropriate time for us to lay out our syllabus for the coming weeks for our discussion and dissection of a typical managed care rebate contract.
We are going to borrow, shamelessly, the concept of posting every Monday on a new topic, like noted venture capitalist Fred Wilson did at his blog AVC with MBA Mondays. For those of our readers not familiar with Fred Wilson, here is how he described his MBA Mondays series:
Every Monday I’ll write a post that is about a topic I learned in business school. I’ll keep it dead simple. And I’ll try to connect it to some real world experience.
We are going to try to the same thing here with Managed Care Contracting Mondays. The title is a little bit wordy, but we think it conveys what we hope to accomplish.
Over the next several months, we will walk through various provisions of a typical formulary or distribution contract between a drug or device manufacturer and a managed care entity, whether it’s a PBM, health plan, GPO, government payer, or wholesaler. And with respect to rebate contracts, we’ll get into various differences between contracts with commercial plans, and those for Medicare Part D or Medicaid lines of business.
One initial observation for both managed care entities, as well as manufacturers, is the importance of working from a template agreement. While we think that many entities working in this space have taken the time to develop solid templates, we continue to be surprised by the number that have not.
The use of a template can be helpful for a number of reasons: (i) it may reduce the amount of time to negotiate a formal understanding between channel partners; (ii) it ensures consistency in basic terms between customers; and (iii) the uniformity in terminology facilitates understanding and clarity between an entity’s business and legal teams.
So, beginning next Monday we will embark on our dissection of a managed care contract. In no particular order, here are some of the topics and provisions we expect to cover:
- Term and termination
- Audit rights
- Assignment and change in control
- Product disadvantaging and/or restriction
- Product intervention/communication/messaging
- Dispute resolution
- Most favored nations clauses
- Price protection
- Formulary placement (tier placement)
- Best price
- Administrative fees
- Regulatory (i.e., anti-kickback) safe harbors
- Product transfer
- Generic launch
- Duplicate discounts
Note that this is merely a high level list, and a number of these topics may actually require several posts to cover adequately, like regulatory safe harbors and tier placement issues. That said, we also likely have left some off our preliminary list that may be of interest to our readers.
Let us know in the comments if you have any concepts to add and we’ll be sure to add them to the syllabus.