Gross-to-net pricing is software that works out a medicine's net price: the amount a drug company really receives after all the rebates, discounts and fees it owes. The gross price is the list price that the company sets. The net price is what is left after the payments. The difference between the two is called the gross-to-net gap. The calculation is enormous in the United States, where these products are mainly sold.
The gap exists because many parties are owed a part of the list price. In the United States, the lists of medicines that insurers pay for are run by pharmacy benefit managers (PBMs). A PBM is a company that decides, for a health plan, which medicines the plan pays for. A drug company pays the PBM a rebate, a sum paid back after each prescription, so that its medicine stays on the list. Wholesalers, the distributors that supply pharmacies, receive fees and discounts. Some hospitals may buy at lower prices under a federal programme, and the drug company refunds the wholesaler the difference. This refund is called a chargeback. Many companies also give patients copay cards, which pay part of the patient's own share at the pharmacy.
Consider an asthma inhaler with a list price of $500 a month. Every month, the software collects data on every inhaler dispensed. The data comes from wholesalers, from pharmacies and from specialty pharmacy hubs. The software applies the terms of each contract. For a typical prescription covered by a PBM, the rebate is 40%, or $200. Wholesaler fees and discounts come to $25. The copay card costs the company $35 on average. So the company keeps about $240, less than half the list price.
The hardest part is checking the claims. Each quarter, a PBM sends a rebate invoice that covers millions of prescriptions. The software matches each line with the company's own dispensing data and with the contract. This is reconciliation: matching two sets of records and explaining every difference. Without it, a prescription listed twice, or a patient claimed by two programmes, would be paid for twice.
The software then sends the amounts the company expects to owe to its enterprise resource planning (ERP) system. So the finance team can record them before the invoices arrive. It also sends net prices to pharma commercial analytics, because a forecast of inhalers sold means little without the money that each one earns.
India works differently. Most Indians pay for medicines themselves at the chemist, so there are few insurer rebates. The National Pharmaceutical Pricing Authority (NPPA) caps the prices of many essential medicines, and the margins of stockists and chemists follow set rules and trade practice. So an Indian drug company's gap between the list price and the net price is much simpler to calculate.