Why Q1 Is Critical for Pharma Rebate Management
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Insights & Articles
4 min
Pharma says they want greater competition within the industry and more incentives for pharmaceutical innovation; value-based purchasing agreements can provide both.
Value-based purchasing arrangements first appeared in the European markets in the 1990s, while U.S. healthcare markets did little with value-based contracts for pharmaceuticals until the 2000s. The high cost of new drugs coming to market, large annual increases in existing drug prices, and political pressure from lawmakers on payers to address the high cost of healthcare have encouraged stakeholders to make greater use of value-based purchasing arrangements.
It’s easy to understand the appeal of value-based purchasing agreements for private and public payers. Value-based purchasing is one way both U.S. and European payers are using to reduce overall healthcare spending.
For drug companies, value-based purchasing puts an end to their unencumbered pricing strategy. But pharmaceutical manufacturers realize value-based purchasing agreements are the best way, and maybe the only way, to get their new, higher-priced products covered by payers and into the treatment plans of patients.
How do pharmaceutical companies determine their drug prices?
Pharmaceutical companies are in business to generate as much revenue as possible without jeopardizing patients’ access to their treatments. In the U.S., where drug pricing is unregulated, pharmaceutical manufacturers can charge any price they want for their products. In the EU, member states use regulations such as direct control over pricing, referencing the average price of a drug among all EU members to set a national price, or regulating the drug manufacturers’ profit.
When deciding on a new drug’s retail price, the manufacturer considers several areas of concern such as the drug’s competition, government-granted exclusivity, patents in force, and a drug’s clinical effectiveness and benefit to patient outcomes.
Pricing a drug incorrectly can have severe consequences for the manufacturer’s bottom line. Private and public payers in the U.S. have ways of restricting patients’ access to drugs that they consider overpriced. In European countries, drug manufacturers risk being fined by authorities for unfair prices and excessive price hikes.
Value-based purchasing promotes competition in the pharmaceutical market
In the U.S., there are economic policies and legal loopholes that manipulate competition in the drug industry. The Biden administration considers this one of the key problems to address to support drug pricing reform. The president’s Executive Order 14036, the Competition Executive Order, calls for increased transparency, innovation, and competition.
Even though manufacturers take advantage of U.S. government protections that create temporary monopolies for some drugs, the large industry trade group PhRMA has joined the call for reforms that fix the current distortions in the market that stifle competition.
Manufacturers producing new drugs with in-class competition from other manufacturers—such as generics, biosimilars, or new uses or combinations of older drugs—use the real-world evidence gathered from value-based purchasing agreements to demonstrate the greater clinical value of their treatments compared to their competitors’ products. Data that show a drug’s uniqueness and effectiveness may be used to justify a manufacturer’s higher-than-average price.
In addition, manufacturers hope aligning a drug’s price to its clinical value will shift payers’ focus away from approving treatments based solely on the lowest price to covering similar treatments that might be more expensive but produce better health outcomes for patients.
Value-based purchasing incentivizes research and development (R&D) of new drugs
The post-market clinical data gathered under value-based purchasing can facilitate data-driven drug development. For example, the drug company Novartis published a position paper in which they stated they use real-world evidence to support the development of customized interventions and to invest in research in areas of the highest value for patients.
In the U.S.market in recent years, the number of clinical trials and an overall increase in spending on brand-name prescription drugs suggest that pharmaceutical manufacturers have been concentrating their research and development dollars on new high-cost specialty drugs for complex, chronic, or rare conditions they expect will be the most profitable.
New treatments like these, where the drug’s value is yet to be established for payers, are good candidates for value-based purchasing arrangements. The successful implementation of value-based purchasing contracts—with better health outcomes for patients, cost controls for payers, and fair prices for manufacturers—encourages even more data-driven drug development.
The Lyfegen Platform
Value-based purchasing agreements are a complex but necessary part of doing business for pharmaceutical manufacturers. They provide a framework for assessing a drug’s value using shared outcome measures and provide real-world evidence of the benefits of their products for patient health outcomes. Manufacturers who are unwilling to enter into value-based purchasing contracts with payers may find themselves at a disadvantage in negotiations with other stakeholders.
Lyfegen’s software platform helps healthcare insurances, pharma, and medtech companies implement and scale value-based purchasing contracts with greater efficiency and transparency. The Lyfegen Platform collects real-world data and uses intelligent algorithms to provide valuable insights on drug performance and cost in value-based contracts. By enabling the shift away from volume-based and fee-for-service healthcare to value-based healthcare, Lyfegen increases access to healthcare treatments and their affordability.
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The first quarter of the year is a pivotal time for the pharmaceutical industry. As budgets are finalized and contracts renegotiated, Q1 sets the stage for how effectively organizations manage rebates, optimize costs, and deliver value.
For those navigating the complexities of pharma rebate management, Q1 offers unique opportunities to streamline workflows, review existing agreements, and ensure every rebate maximizes its potential. This period isn’t just about planning, it’s about implementing smarter processes to stay ahead in an increasingly dynamic healthcare landscape.
Why Rebate Management Deserves Q1 Attention
Q1 is the ideal time to evaluate rebate performance from the previous year. Were the agreements aligned with expectations? Did they deliver the promised value?
By assessing past performance, teams can identify underperforming agreements and opportunities for improvement. This ensures resources are allocated to agreements that drive measurable results.
Rebate workflows are often complex, requiring significant manual effort for tracking, reconciliation, and reporting. In Q1, organizations have the opportunity to implement systems that:
Streamlining workflows early in the year creates efficiencies that save time and resources throughout the year.
The first quarter is also critical for renegotiating rebate terms with manufacturers and payers. Updated contracts may include:
Teams equipped with data from previous agreements are better positioned to negotiate terms that align with strategic goals.
The Role of Technology in Pharma Rebate Management
Technology is transforming how organizations approach pharma rebate management. Tools like those offered by Lyfegen enable teams to:
For example, Lyfegen’s platform simplifies rebate tracking and provides actionable insights, ensuring organizations maximize their rebate potential while minimizing inefficiencies.
Start your year smarter!
Q1 is the time to rethink and refine your approach to pharma rebate management. With smarter workflows, clearer insights, and a focus on data-driven strategies, your team can unlock measurable savings and operational excellence.
Book a demo today to discover how Lyfegen’s solutions can simplify your rebate workflows and set you up for success in 2025.
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Rising drug costs continue to challenge healthcare systems worldwide. In the UK, the proposed Voluntary Pricing Access Scheme (VPAG) and the NHS’s Accelerated Access Collaborative (AAC) are clear signals of the need for sustainable, transparent approaches to branded medicine pricing. These frameworks aim to control costs through 2028 while ensuring patient access to innovative treatments. Drug rebate management solutions are key to navigating these evolving frameworks. By automating complex workflows, providing real-time insights, and streamlining rebate tracking, these tools reduce administrative burdens, enhance transparency, and unlock significant cost savings.
Key Benefits of Modern Drug Rebate Management Solutions
Traditional rebate management involves resource-heavy processes prone to delays and errors. Modern drug rebate management solutions automate tasks like reconciliation, reporting, and contract tracking, enabling healthcare providers to focus on negotiating better contracts and ensuring compliance with policies like VPAG.
Rebate platforms provide granular visibility into contracts, helping organizations identify cost-effective therapies and maximize rebate potential. This transparency aligns with NHS AAC’s goal of improving value and ensuring public funds are spent efficiently.
Access to live rebate and claims data allows stakeholders to evaluate agreement performance and adjust strategies quickly. With real-time insights, healthcare providers can ensure rebates are optimized, costs are minimized, and patient access is preserved.
This capability supports NHS AAC’s commitment to accelerating access to innovative medicines while maintaining value for taxpayers.
Delayed reconciliation often creates inefficiencies and compliance risks. Modern drug rebate management solutions provide real-time rebate tracking and payment reconciliation, ensuring accurate auditing and faster resolution of discrepancies. These features are critical for meeting the transparency and accountability goals of initiatives like VPAG.
Why Now?
The VPAG and AAC frameworks prioritize:
Modern drug rebate management solutions directly address these priorities by simplifying rebate processes, supporting compliance, and enabling healthcare providers to align with evolving regulatory frameworks.
Smarter Practices in Action
Lyfegen is an all-in-one platform designed to streamline rebate workflows, improve transparency, and deliver actionable analytics. By leveraging tools like Lyfegen, healthcare organizations can navigate regulatory changes like VPAG with confidence, ensuring efficient operations and measurable savings.
Looking ahead
As healthcare systems face rising costs and increasing complexity, adopting a modern drug rebate management solution is no longer optional, it’s essential. These tools provide the automation, transparency, and real-time insights needed to comply with frameworks like VPAG while driving cost savings and supporting innovation.
Ready to simplify your rebate workflows? Sign up for a demo today to see how smarter solutions can transform your strategy.
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