Whether you are managing strategic relationships with a contract research organisation, other key suppliers or licensing out the manufacture and distribution of branded drugs, pharma companies have a number of important, interlocking agreements with third parties.
The contracts that underpin these arrangements are critical to the ongoing relationship and yet we often see the necessary review and monitoring of these contracts neglected in an increasingly busy and resource constrained world.
Our experience shows that the environment is often complex where errors are common and left unchecked quickly become material to both parties.
The pharma sector is unique in many ways. Branded drugs sold by pharma manufacturers go through a labyrinthine distribution process involving several entities before reaching retail, each contributing to the Gross-to-Net reduction in selling price. There is also the power play for market share, the formulary placement and other forces that mandate the need for discounts, chargebacks and rebates.
Royalty auditing is therefore particularly relevant in this environment, but to audit in this space effectively requires a thorough understanding of the pharma marketplace so that compliance or otherwise with key contractual terms can be properly ascertained by the audit process and truing up by corrective audit findings can be achieved.
The complexity and level of materiality of the key relationships in the pharma sector also means that contract auditing will be a cornerstone of a successful business’s assurance programme.
Typical areas of focus include contractual provisions for inflation and exchange rate variations, volume and price relationships and the complex area of pass-through costs and most favoured customer clauses.
Benefits not only include recoveries of lost profits but a greater level of transparency of the operational aspects of the business relationship which invariably uncover additional opportunities for our clients. In addition, with the greater level of transparency afforded by the audit, we are able to offer advice on streamlining and improving the contracting process for both new and existing contracts.
Best practice sees a routine programme of both royalty and contract auditing for all key contracts with important trading partners which not only gives assurance that contractual terms are being respected but can also be a helpful income stream as errors are identified and claimed.
Our team has a deep experience of the pharmaceuticals industry and we are well-placed to carry out the audits for you on a global basis, providing one line of communication to manage the process seamlessly and focus on areas likely to lead to quantified findings. Our reports are concise and clearly set out the basis of claims, together with supporting detail.
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