Increases in Contract Volume and Complexity Major Concerns for Life Sciences Organizations

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Annual Revenue Management Survey reveals manufacturers are struggling to reduce government pricing risks and reign in lost revenue.

We believe that this trend could lead to a 'mass customization' of contracting, with companies managing large volumes of contracts at the individual institution and provider levels. In such an environment, organizations will need to change their approach from contract management to holistic revenue management.

A majority of life science manufacturers anticipate increases in contract volume or complexity in coming years, according to a Life Science Revenue Management Best Practices Survey sponsored by Model N and CSC Global Health Solutions (NYSE: CSC). Now in its fifth year, the unique survey provides pharmaceutical and medical technology companies the opportunity to benchmark their revenue management best practices while highlighting how they can improve regulatory and contract compliance, customer satisfaction, and overall margins by prioritizing process and systems improvements.

Participants in the 2007 survey included a healthy mix of market segments: Fortune 100 medical technology and pharmaceutical companies; mid-market and emerging biotech and pharmaceutical organizations; manufacturers and distributors; and generic and branded companies. In total, this year's survey garnered responses from more than 60 pharmaceutical, biotech, and medical technology manufacturers.

Anticipated Increase in Contract Complexity Parallels IT Expenditure Plans

Data from the 2007 survey shows some continuity with major themes from the previous year as well as some new trends.

In addition to concerns over growing contract complexity and volume, survey results indicate that pharmaceutical companies are struggling to effectively reign in lost revenue from non-compliant contracts and overpayments on administration fees, rebates, and chargebacks. More than two-thirds are planning to upgrade their pricing and contracting systems in the next year.

In the medical technology industry, institutional contracts are growing more dominant as non-contracted business registers an almost two-thirds decrease from the previous year. Much like their pharmaceutical industry counterparts, medical technology companies list contract non-compliance and rebate and administration fee overpayment as major concerns. Almost half are planning to upgrade their pricing and contracting systems in the next year.

Overall, the survey shows continued adoption of custom or packaged solutions in life sciences, but also indicates manual systems remain widespread in many revenue management business processes. A high correlation is found between revenue management deployments and lower revenue leakage. In addition, larger organizations are leading the way in migrating to custom or packaged solutions.

"The fact that we continue to see the number and complexity of life science contracts increase every year is indicative of the highly competitive nature of the industry and the need for health care payers/providers to aggressively manage costs," said Robert Matsuk, Pricing and Contracting Solution Director at CSC Global Healthcare Solutions. "We believe that this trend could lead to a 'mass customization' of contracting, with companies managing large volumes of contracts at the individual institution and provider levels. In such an environment, organizations will need to change their approach from contract management to holistic revenue management."

"The life science industry is facing growing demands for pricing transparency, risk sharing agreements, and greater data integration from its customers -- and sell-side IT solutions have traditionally lagged in automating the buy side and supply chain," stated Gopkiran Rao, Senior Director of Life Science Industry Marketing at Model N. "As this survey confirms, many organizations are highly dissatisfied with their ability to support optimized contracting and pricing. With contracting playing a more pivotal role in the revenue life cycle, life science organizations must reconcile competitive and reimbursement pressures with the demand for contracting fairness and CFO mandates for accurate revenue planning and tracking."

To access an associated web seminar or additional results from the survey, please click here.

About CSC Global Healthcare Solutions
CSC's global healthcare business is dedicated to creating superior performance for leading organizations through the solutions and services it provides across the life sciences, provider, payer, federal, and state markets. Its mission is to enhance the quality of care delivery and clinical outcomes by providing improved performance through interoperable, standards-based information systems and optimized management processes. The organization has established a worldwide track record of success in helping clients achieve superior results through its innovative solutions and thought leadership. For additional information, visit http://www.csc.com.

About Model N
Model N is the leader in Revenue Management solutions, offering an integrated suite of applications for analytics, pricing strategy and execution, contracts, compliance, rebates, fees, and chargebacks optimized for the industry practices of Life Sciences and High Tech companies. Enabling the creation of a seamless, end-to-end process from price setting through settlements payment, Model N's uniquely integrated approach eliminates revenue leakage and delivers the visibility and controls needed to avoid the risks of non-compliance to government reporting regulations such as Sarbanes-Oxley and government pricing requirements. Customers include: Boston Scientific Corporation; Bristol-Myers Squibb Company; Cypress Semiconductor Corporation; Intersil Corporation; Linear Technology Corporation; Medtronic, Inc.; Microchip Technology, Inc.; Micron Technology Inc.; Ortho-Clinical Diagnostics, a Johnson & Johnson company; ON Semiconductor, Inc.; and Pfizer, Inc. Model N is located in Redwood Shores, California. For additional information, visit http://www.modeln.com.

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