Managing Trade Terms to increase commercial performance in OTC

Investment Rating - The report does not explicitly provide an investment rating for the OTC pharmaceutical industry Core Insights - The OTC pharmaceutical market is highly competitive, and strong commercial relationships with customers are critical for success [1] - Effective trade terms management is essential for optimizing profitability while providing competitive incentives [5] - A holistic approach to trade terms optimization is necessary to navigate complexities in the OTC market [9] Summary by Sections Commercial Policies and Financial Impact - Commercial policies significantly impact commercial margins, with discounts, rebates, and operational expenditures affecting triple net performance [2][4] - Companies can achieve up to a 20% increase in triple net profitability through optimized trade terms management [16] Challenges in Trade Terms Management - Diverse customer needs, regulatory constraints, competitive dynamics, and the necessity for robust data analytics complicate trade terms management [6][7][8] - A tailored approach is required to meet the distinct expectations of pharmacy chains, independent pharmacies, and wholesalers [6] Benefits of Efficient Trade Management - Transitioning from on-invoice to off-invoice discounts enhances transparency and aligns incentives with sales outcomes [11] - Focusing on sell-out performance improves inventory turnover and reduces overstocking risks [12] - Increased investment in trade marketing boosts customer engagement and drives end-user demand [13] - Customized trade terms strengthen customer relationships and build long-term loyalty [14] Methodology for Trade Terms Optimization - The report outlines a comprehensive methodology for optimizing trade terms, including performance diagnosis, industry benchmarking, and tailored optimization roadmaps [15][19][20] - Financial impact modeling provides clients with insights into potential ROI from gross-to-net improvements [21] Case Study Insights - A case study revealed that a global pharmaceutical client faced inefficiencies in trade terms, leading to a decline in sell-out despite significant gross-to-net investments [24][26] - Implementing seven levers for gross-to-net optimization resulted in freeing up approximately 20% of gross-to-net investments, enhancing sell-out and driving sustainable sales growth [32] Conclusion - OTC pharmaceutical companies must prioritize trade terms management optimization to enhance gross-to-net performance while maintaining competitive commercial policies [33]