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DISTRIBUTION FEE RANGE ASSESSMENT GUIDES NEGOTIATIONS

How a large manufacturer was able to leverage benchmark fee ranges to better negotiate distribution agreements.

SITUATION

A large pharmaceutical company was preparing for upcoming negotiations with specialty distributors (SDs) and full-line wholesalers (FLWs), and was seeking insights into how their fee schedules could be benchmarked against their peers using several different contract parameters

The manufacturer shared the basic format of the agreements, key services they were hoping to benchmark, and approximate sales forecasts

For benchmarking, the manufacturer hoped to review accurate ranges for manufacturers whose distribution agreement overall value fell within low, medium, and high fee structures.

Archbow completed an initial intake with client to align on project goals and request specific data to gain a better understanding of current agreement structures

Archbow used past distribution experience and conducted interviews with industry executives to gather intelligence on overall fee structures, how wholesalers viewed certain contractual points, how sell-side COGs are factored into negotiations, how relationships with wholesaler ancillary businesses are perceived, and if there were any additional services the manufacturer could be taking advantage of within their existing or future contracts

Archbow compiled data and research to facilitate project goals and provide recommendations for the client.

APPROACH

RESULTS

Archbow delivered a detailed assessment that provided:


  • Key assumptions used by Archbow to determine recommendations

  • Key insights into distribution companies, focused on how they view contract and fee structures, sell side COGS, price appreciation value, and other subjective measures like ancillary business support and overall relationship status

  • Scorecard of service categories for SD and FLW benchmarked into Low, Medium and High, based on overall value of agreement and Archbow assumptions into how agreements were split by service category

  • Summary of how distribution companies perceive the manufacturer as compared to peers