Optimizing your gross-to-net (GTN) performance in the life sciences sector can produce added profitability and can stop revenue leakage while increasing productivity for your organization. Although technology undoubtedly plays a significant role in your workflows and processes, it should not be your primary focus when assessing your current GTN situation and identifying areas where improvements can be made.
Deciphering the interplay between gross and net profits requires an in-depth understanding not only of general market conditions, but also of the specific activities and events that have affected these factors in a particular company. Forbes Magazine offers an explanation of various profit metrics in an article published in July 2013. This insightful overview includes definitions and examples of basic concepts that include the following:
- Gross profits
- Operational profits
- Net profits
Understanding the differences between these types of profit can help your company enhance its GTN performance and can provide added insights into areas of concern for your operation.
GTN optimization is not a one-time event; instead, it is an ongoing process that requires continuing attention from key employees inside your corporate structure. The optimization process generally comprises five key activities:
- Assessment of the current GTN situation
- Recognizing cross-functionality within the organization
- Implementing and maintaining effective communications strategies
- Mapping of standard processes to incorporate cross-functionality within the organization
- Adapting current processes to manage future challenges in the industry
The activities work in a manner that come full circle, from assessing internally at the beginning to assessing externally as the final step. The “loop” of these steps allows organizations to begin again once they have reached the point of external review. These five elements can ensure the most effective optimization of your corporate GTN performance and can provide a solid basis for future growth and profitability.
1. Assessing GTN in Your Organization
Establishing a baseline for your current GTN performance can provide you with added risk management insights that can considerably enhance your potential profitability. Approaching GTN analysis from the risk management perspective allows a greater focus on areas of immediate concern and puts an emphasis on identifying revenue leakage and cost-effectiveness throughout your corporate structure. Ensuring accurate reporting of data is another key concern and should be incorporated into the overall assessment process. This risk management practices assessment worksheet may prove helpful in assessing your company's current GTN situation.
2. Recognizing Cross-Functions within Your Corporate Structure
A key element in GTN optimization is the concept of managing revenue through organic corporate processes. This concept encompasses organizational process management and process governance, two topics that require a thorough understanding of how information flows through your corporate structure and how decision making is handled from the top of the organizational chart all the way to the line employees who make up the bulk of your company's workforce. The interactions between various elements of your corporate structure must be managed effectively and in a disciplined way to ensure that changes to processes and workflows within the organization are communicated clearly and that your company can achieve maximum buy-in from executive-level employees, managers and line staff. By considering your organization as an integrated whole and recognizing the cross-functionality between departments and divisions, you can approach your GTN optimization plans with a greater degree of expertise and strategic acumen.
3. Implementing a Corporate Communications Plan
A well-designed and carefully crafted communications plan can help you to eliminate organizational silos and establish more effective communications between divisions within your company. Identifying the areas of cross-functionality within your organization is only the first step toward improving communications; finding ways to break down barriers and foster collaboration throughout your corporate structure can allow improved control over a wide range of activities:
- Financial processes can be managed more effectively with cooperation between departments to ensure accuracy and speed of processing.
- Team projects can be monitored and streamlined with help from all parties involved, allowing a greater degree of collaboration on these corporate priorities.
- Contract management tasks can receive the attention they deserve from accounting, legal and sales forces within your organization.
By creating a comprehensive plan for communications and collaboration among all units within your corporate structure, you can achieve greater productivity and enjoy enhanced accountability for all company activities, projects and workflows. Remaining mindful of cross-functionality in your corporate environment can provide you with added insights when creating your organization's communications strategies.
4. Mapping Processes for Internal Consistency
Creating a set of best practices that can be regularly applied throughout your organization can ensure much-needed consistency in your corporate communications and practices. This can provide added clarity in your internal activities and can present a professional and positive image of your organization to vendors, current customers and prospective clients. Mapping workflows and processes can allow you to establish and enforce consistent standards for appropriate communications across a wide range of corporate activities. Ensuring proper oversight and accountability for these collaborative efforts and workflows can further increase employee buy-in and can provide valuable feedback on the progress made toward achieving consistency throughout your organization.
5. Adjusting and Adapting to Current and Future Challenges
The final stage of GTN optimization is an ongoing process that involves adjustments and changes to the established best practices in response to challenges already in play or on the horizon. Some of the factors that can necessitate changes to your existing GTN optimization strategy include the following:
- Reduced profitability
- Economic conditions
- Regulatory requirements for cash reporting
- Patent cliffs
- Increasing availability of generic products
- Biosimilar products in major markets
- Healthcare reform requirements
- Extensions of product life
- Increasing competition from specialty and boutique firms
- Moving into global emerging marketplaces
- Price erosion over time
An established and comprehensive communications plan can allow your corporate administration to relay the necessary changes to key personnel within your company and to ensure that all staff members are clear on the new policies and best practices. This can help your company to survive and thrive even in tough economic conditions and downturns within your industry.
An organic and holistic gross-to-net standard that is consistently applied throughout your organization can provide you with valuable insights into your current workflows and areas of concern within your corporate structure. It can deliver added opportunities for oversight and active management. Most importantly, establishing functional GTN standards can position your company to take advantage of opportunities and to meet future challenges in a proactive and effective way.
Want to learn more about gross-to-net strategies? Join us March 17-19, 2014 in Philadelphia, PA at CBI's 2014 Life Sciences Accounting & Reporting Congress where hundreds of industry thought leaders will collaborate to discuss methods to achieve and align financial processes to drive innovation.
(Images courtesy of Getty images and Ian Kelsall via Flickr)
About the Author
Leigh Anne Siino is a Senior Consultant with Paragon Solutions working under the Life Sciences vertical, where she currently is focusing on both Life Science software implementation, as well as financial and operational reporting and analytics efforts.