IQVIA Holdings Inc. (IQV) Earnings Call Transcript & Summary

Okay. So I'm going to -- we're going to continue where we left off. But -- and that's where this winning strategy by the decade. So there was a lot of innovation that happened in the decade of maximizing brand and patient access. And now we believe in 2023 to 2033, it's the area of strategic finance. It's the decade that elevates the strategic importance of finance and financial operations. That is the future. And this is really driven from the market complexity factors as well as the big squeeze that's happening that we're going to dive into a little bit. And again, these strategies compound over time and early success drivers remain relevant and new ones emerge. So the companies that are able to elevate strategic importance of finance and finance operations, will be able to be -- will be the ones that succeed in the new margin era. Now the big squeeze continues to accelerate margin compression across the industry, and it's happening on both fronts. We have the demand side that's reducing our ability to create demand. It's creating our demand efficiency as lower over time. I'm not going to spend a lot of time addressing that today. And then we also have the margin factors that are squeezing the industry as a whole. I won't spend time talking about the contracting pressures or the highest higher co-pay offset programs of patient affordability, but really focus on the bottom 3 here. Some of the inflation Reduction Act, new deduction programs are being introduced. We continue to have 340B growth in the marketplace, even though there's countermeasures that are happening by the pharmaceutical industry. And one key theme we want to focus on today is really the acceleration of discount stacking. It's a key concept that we want to dive into here. Now the big squeeze by the numbers. Discounts have grown faster than gross sales, 7x faster than gross sales and 13x faster than the rate of inflation. Taking a step back, looking at 2012. On the left-hand side of the chart to 2022, discounts have grown 265%. That is above gross sales for the pharmaceutical industry that have grown 36% and the CPI at that time was 21%. And this is a benchmark of the top 15 pharmaceutical manufacturers that have stayed intact for the past 10 years. Moving on to the right side, looking at as a percent of gross sales, we see that in 2012, that discounts represented about 14% of gross sales. As we move into 2021, discounts represented 30% of gross sales, which was 114% increase. Now we look at some other things that are impacting overall operating profits, it's SG&A. SG&A used to be 24% of gross sales in 2012 and then dropped down to 17%. So that was roughly almost a 30% drop. And then in 2021 -- or I'm sorry, operating profit from 2012 to 2021 dropped from 20% to 14%. So the one thing that hasn't changed yet across the industry is really R&D. R&D stayed relatively flat at 15% and 14%, respectively. And that is really critical because Research and Development and innovation is the lifeblood of the pharmaceutical industry. And what the pharmaceutical industry is about. It's about continue to bring innovative products and solutions to the patients in the marketplace that need them, really, really critical. So this is actually the big squeeze playing out by the numbers. And the big question is, do we believe that the discount kind of growth rate is going to stay on the same track -- trajectory, it's going to slow down or increase. That's a very big question. That moves us on to the next slide here. Again, when we mentioned the new margin era, what we're really describing is the -- it's a simple equation. It's the discount -- existing discount pressures plus new policy deductions really equals this new margin era. And these existing -- we believe that these existing big squeeze forces will accelerate the actual growth of those discount programs. But now we add in net new liabilities into the equation based on policy changes. So as we're taking a look at this waterfall chart here, we continue to expect from a gross revenue standpoint, rebate and contracting pressures continue to increase the impact of 340B program and the growth will continue to increase. We're going to go into a little bit more detail later on about the 340B program. We certainly believe that co-pay programs, patient assistance foundations, and just general launch programs and patient affordability will continue to increase as access kind of weighs down the side. And then gap liabilities is kind of the Part D Medicare redesign is changing the gap liabilities, but making other liabilities emerge over on the Part D redesign side. And then we added net new policy deductions. We have the AMCP removal, we have the Part D redesign, the inflation rebates and CMS price negotiations. Today, we're going to dive into a little bit more detail on AMCP and 340B as we get into these. But these are all net-net pressures and deduction programs that are emerging. It looks really scary on this chart because all of these programs, for the most part, are generally growing in of themselves. But when we take a step back and we look at gross to net from a traditional lens on the left-hand side here, and we look at it like a balance sheet or a spreadsheet, it looks very linear. While most people think of the gross to net funnel on the left-hand side is we have gross sales, then we have a reduction program rebates, Medicare, Medicaid, TRICARE, we have all different types of charge backs. We have our coverage gap liabilities. We have patient assistance foundations we have return, we have cash discounts, wholesaler fees, that gets us to the net sales aspect of things. But in reality, at the Rx level, it's really a series of asymmetrical overlaps. And this is critical because as one program grows and the asymmetry and the overlap of those programs grow, it's not just the program's grow, the liabilities grow with the -- at the same rate that each individual one of those programs grow. It's actually creating a multiplier effect in terms of what the liabilities look like. So now 1 plus 1 doesn't equal 2 anymore, 1 plus 1 might equal 2.5. It might equal 2.7 and as all these different types of programs stack up, it's going to create a challenge for the industry. It's a very good way to think about it. So as we start moving into the real-world gross to net challenges, areas risks and associate challenges, think about the Rx and think about what we just showed about the over -- asymmetrical overlap that occurs. As these new deduction programs begin to intensify, discount stacking, really just decreased the number of positive scripts and deepened the negative magnitude of negative scripts. So big question for you to think about in your businesses, which are my scripts are net positive and which ones of them are net negative. That's a critical question that the industry is going to need to address. So let's start here on the left-hand side of our chart here and start looking at today's net sales. In reality, when we look across all our prescriptions, we have a good portion of our prescriptions that are very, I'd call it positive in terms of having a net sales positive situation. And we certainly will have prescriptions, what I'm going to call the peaks, I'll call it gross net peaks or gross to net mountains were extremely profitable. But we also have prescriptions that are under water and ones that are really negative in terms of the net margin, I call this, your gross net values or you might hear me deem them as your gross net sink holes. So when we think about the business, what's happening, it's not asymmetrical across the board -- I'm sorry, it's not linear across the board in terms of profit. It's very asymmetrical. And what's driving that is the stacking of the rebates and the discounts that occur on any given prescription. Now think about all the -- we introduce all these net new deduction programs into the market as well as the existing forces on those existing reduction programs to continue to evolve and grow, our situation kind of changed a little bit, where we start to have more -- our net negative margin percent of the prescriptions continues to grow, and our profitability, in general, continues to shrink on the net positive prescriptions. We still will have -- part of our business will be very net positive gross to net, net positive, but the percent of business that's more negative will continue to grow. And that's really the heart of the issue that's moving us into this new margin era is that we really need to understand our prescriptions out of a hole and understand all the deduction programs that are associated with each one of the prescriptions and how many deduction programs are associated with each prescriptions? And how much duplication of the deduction programs for each description. And it's really a criticality for the industry to move forward. Now we're going to transition here a little bit and jump into one of the major forces that's introducing stacking of discounts and high growth is the 340B program. The 340B program is now more than $100 billion, which is greater than the Medicaid drug outpatient program. So in 2018, the amount of [ black ] dollars flowing through the 340B program was roughly about $58 billion. And in 2022, almost $106 billion. Amazing growth. It used to be 9.9% of the total sales in the U.S., and now it's 14.6% of the total sales in the U.S. And last year, the 340B program grew at 12.2%. That's even despite a lot of the contract pharmacy exclusion strategies that have slowed the pharmacy growth below 5%. Now if we look on the right-hand side, we start, let's segment, this is the 2022 segmentation of that $106 billion. $28.1 billion of that was in the pharmacy channel. That pharmacy channel is a combination of retail and specialty pharmacies or mail, however you classify them. Where the $57 billion of that was in the hospital setting and almost $18 billion of that was in the clinical setting, and then we have another $3.1 billion kind of would classify all other might be long-term care and some other kind of aggregation of different kind of organizations. But looking at the red dots on the side, we see the 340B program in hospitals and clinics and others were growing roughly around 15%. The pharmacy growth in 2022 slowed down to 4.2%. Now that is significantly down from where it was 2, 3 years ago, where the pharmacy channel growth year-over-year prior to contract pharmacy exclusions entering the market was 36%. It's very important. So our program is very big, getting bigger, continuing to grow. Growth has slowed slightly, but it's still growing in totality, double digits. Now the problem that the 340B creates in addition to the general discount of the 340B program as part of this acceleration of the discount stacking phenomenon that we're seeing going into the future. And it's very interesting because there's -- anyone that's been in the trenches with the 340B program and dealing with duplicate discounts is well aware of pain associated with it, well aware of the challenges with identifying them and the challenges by working with their partners to make sure that their compliance is in order. Now a couple of facts. Let's start off with here. HRSA OPAIS is the official source for 340B covered entity information and qualified 340B contract pharmacies that support those covered entities. It's facts, right. There's also the pharmacies themselves, NCPDP, it's called the DataQ 340B designation. It is a classification that pharmacies can self-identify as if they're a -- what type of -- if there are 340B pharmacy and what type of 340B pharmacy. But that's only recognized by NCPDP not officially HRSA. It has no meaning in terms of determining 340B eligibility. It's self-reported, voluntary and there's no oversight to enforcement. Facts. Now what we did for those on the phone, we took the HRSA qualified pharmacies, and we segmented it by that self-designated the 36 with 37, 38, 39, which is the NCPDP self-designation. A 36 means it's not a contract pharmacy, the pharmacy says and 39 means it serves only 340B eligible patients. So taking a look here in the green, this is the segmentation of the HRSA qualified pharmacies. And we see there's about 17,000 of them, roughly 70% of them that are 340B eligible but their self designation is still their non-340B pharmacy. Very important to know. 4,480 of them, 18% are classified as contract pharmacies in that instance, and then we have 4% that are classified that serve only 340B eligible patients and another 6% that says, yes, I'm a 340B covered entity in-house pharmacy, but I also serve as a contract pharmacy to other players in the marketplace. So really interesting. So now let's take a look at that and segment that $28.1 billion we saw in the pharmacy channel, 340B sales by the NCPDP self designation. And that's about $15 billion of them -- $15 billion worth of 340B sales are coming out of the pharmacy channels that are not classified as 340B from the pharmacy standpoint and that are either classified as a contract pharmacy. And then we have some about $5 billion or actually $4 billion or actually $3 billion in the 39, and we have a larger amount in 38. Very important facts and data points for the industry folks to understand here. And then let's take a look at the PBM's position that's happened in the marketplace and the PBM's position has to anchor contract negotiations on NCPDP designation versus HRSA, which we feel the NCPDP designation is, as we mentioned, has no real meaning in terms of 340B eligibility. And there's a lack of classification for those particular pharmacies that align to the source of truth, which is HRSA for 340B eligibility. Diving into some of the PBMs in terms of their scrubbing process, PBM X, which is a real PBM, we can't really reveal the name, but they actually will, on their invoice rebate payments, they will scrub out NABP Code-39, which we know is only about 4% of the pharmacies in the U.S. PBM Y will scrub out in their invoicing process subclarification 20 code, which is a 340B modifier code that's put on the pharmacy transaction at NCPDP when the pharmacy knows the product is being dispensed from physical 340B inventory, not virtual 340B inventory. And then Health Plan A, there's no scrubbing process, PBM Q, there's mixed messages on what they're doing, we've seen mixed communication. And then read a quote here from one of the PBMs to the industry over one of their demand letters that they sent out as -- where they classify: "Our invoicing practices use rigorous processes to identify and remove all utilization associated with 340B cover entity pharmacy designations as reported by the National Association Board of Pharmacies Data Q, database, PBM X." This is the PBM that we learn uses the 39 code, and they're saying they have big rigorous processes. They're anchoring their processes on an false set of truths -- I'm sorry, inaccurate classification of what the truth is. Now we believe the manufacturer position, the manufacturers are faced even though the ones that have done contract pharmacy exclusion strategies, given the program continues to grow, manufacturers are faced with increased 340B duplicate discounts. The PBM contraction language should be HRSA 340B designation and not NCPDP MPNAPB Data Q 340B designation. Now we believe manufacturers need to continue to invest in 340B scrubbing capabilities as the program continues to evolve and grow and there's potential changes with that program. And then just leaving at the rebate scrubbing, it's not just the financial exercise for the industry. It also prevents anti-kickback [indiscernible] . So here's kind of the challenges that that 340B program and the growth that creates with the industry and some of the stakeholders that are dealing with the duplication issue and the acceleration and stacking of those discounts. And we know with some of those sink holes. Those sink holes are very -- can be very negative because of those -- of some of the 340B stacking of the discounts that occur with double, triple and quadruple discounting that occurs. Now I mentioned the 340B modifier codes here. And the 340B modifier codes are very interesting on the topic of conversation right now because when CMS came out with the Inflation Reduction Act and the IRA or the Inflation Rebate in Medicare, CMS gave initial guidance at 340 modifier codes could be used to prevent duplication between inflation rebates and 340B discounts. So I think the guidance is saying, "Hey, if you're paying a 340B discount, you don't need to pay your inflation rebate or vice versa." Now we start looking at these codes because they are available somewhat in the data. And we looked at them, we segmented them by the percent of prescriptions or claims that were eligible for 340B, and we would deem the transaction eligibility. And we start -- we segmented that by covered entity owned pharmacies, cover entity/contract pharmacies and then contract pharmacies into the cell. And we see that in the in-house pharmacies of the covered entity, there's about 19% of these codes, 19% of the time, the codes are being leveraged. So almost 1 out of every 5. In the covered entity in-house pharmacies that also serve as contract pharmacies to the outside market, we see roughly about 1 out of 10 times the code are being used. But then we look at the contract pharmacies where we see half the volume in the marketplace in terms of 340B and the pharmacy, we're saying, guess what, that's -- they're not very heavily used. So does this look like a viable option for the industry. Big question is the data intentionally being heavily guarded or just not available. Probably both, honestly, very hard on the contract pharmacy side at the time that they're being dispensed is to determine 340B eligibility at that time that the patient is picking up the product, where mostly the 340B eligibility is determined after the fact through a third-party administrator 15, 20, 30, 45 days later. They're saying, yes, that was 340B eligible. Let's go replenish our 340B inventory hit a charge back to those manufacturers for that. Again, there's these sub-clarification 20 codes, the basis cost determination 8 and the base of reimbursement terms is 12. Slightly different variations of what those codes, the 20s being put on by the pharmacy. The 8s and 12s are actually being coded in by the plans themselves. There's a recent white paper released out there on our website about these codes in greater debt detail and depth, feel free to peruse that. But it's also a challenge for the market, and we're trying to prevent those duplication of discounts between these different code programs or the 340B programs. Now let's jump into some news that's hot off the press. Lilly, Novo and Sanofi influence prices by 70%, 75% and 78%, respectively. Big question. Is the gross to net bubble popping, right? Very interesting. And Lilly's price cut was down to $25 a vile and it's -- it's less than Lilly's list price it was in 1999. That's 24 years ago. What drove this decision? Was it Lilly's mission and values? Was is it the new legislation? Was it increased public scrutiny? Was it the net price pressures? Was it a broader PBM strategy? Or was it the AMCP removal in 2024? It could be all of these things. But I think this is a very interesting time right now because what we -- the big question, we think that the industry is going to need to start to ask themselves is not -- should I cut price of my products, when do I cut price, under what circumstance and what conditions do I need to cut price based on the new margin era that we're in. But let's dive into the bottom one, which is the AMCP removal in 2024. So the question is, does the AMCP removal case study, this is [ Vitexa ] , one of our retail products that is heavily discounted and the question we're going to ask when do the economics of a price reduction strategy make sense. under what circumstances? And so [ Vitexa ] here is a very large mature product about $1.7 billion in revenue, but only roughly $300 million, a little less than $300 million in net revenue. And we look across different channels, and we see there's about $218 million in gross sales in the Medicaid channel, and they really have penny pricing. And so the removal of the AMCP pushes based on the historical price increases that this product has taken over the years, pushes this product into a negative 150% situation. And the AMCP for those that don't know, the AMCP removal is just basically saying, "Hey, we used to cap out the price reduction in Medicaid to penny pricing," and wouldn't go below that. But now it goes below that. That's in simple term. They can go to a negative situation. What happens in the AMCP scenario for this brand. The removal of the AMCP basically make a negative 150% situation in Medicaid. And now that makes this entire brand underwater. It goes to losing $327 million in Medicaid wiping out the profitability for the rest of the brands here. So instead of the 300 -- roughly $300 million in net sales revenue, the entire brand is losing almost $30 million in losses for that year. Again, the AMCP erodes all the other profitability in all the other channels. Now what happens after price cut reduction? So list price reductions combined with new contracting strategies to reduce net spread. So let's assume no loss in volume, limited or no contracting strategies and we cut the price of the brand 75%. Well we reduced gross sales down to $425 million, but we end up net-net with $343 million in net sales under this scenario. And margins go from 18% to 80%, and we go from losing money in the Medicaid market to actually making money in the Medicaid channel. Again, very important. We also ran -- we're also running studies. We're going to produce a white paper later this year when we looked across all the products in the U.S. and we looked at them in terms of their discounts. There's 23% to 25% of the U.S. sales that either the products are at penny pricing on Medicaid or almost at penny pricing in Medicaid. That's almost 1/4 of the entire market could have some financial impact here. It depends on what their situation is with those brands and then what their Medicaid exposure is. Very important. So thinking about this, in the future is really interesting. Let's move into kind of how do we combat demand and margin pressures. So the big thing is, do you know where your negative sink holes and positive peaks are on your business due to the stacking of the discounts. On the left-hand side, we have the asymmetrical discount stacking. On the right-hand side, if we flip it, it's very hard to understand on the left-hand side. However, if we take a 3D image of them, we flip it on its head, we can start to see things a little bit different. We say, "Oh, man, we have these negative valley peaks and [ gross ] from sink holes, and we'll have these positive gross -- gross to net peaks." So it's really important for us to understand what this looks like and enable this capability for us to start looking at it. We're going to need to know where our gross net and mountains are and where our gross net sink holes are on our business for us to be effective in the future. And we need to either figure out how to avoid those sink holes or fill them in with very innovative strategies and commercial decisions. Now before I turn it over to John to walk us through some of the operational aspects of this, thinking about what manufacturers need to do to make themselves successful. The first is manufacturers need to organize themselves to address these challenges to present the discount [indiscernible] . And the first thing is, first, we must see it, we have to connect all this deduction program data. We have to integrate and enrich all the financial data. And then we have to leverage that data that we connect. That creates enabling new opportunities for both revenue leakage as well as commercial decision-making. And then we have to deploy these orchestrated financial solutions in the marketplace that drive both strategic and financial insights across both operations and commercial decisions. And what we need is real-time gross-to-net insights of every TRx will be needed to win in the new margin era. Those that get there first will have a competitive advantage. Those that get there first will have a competitive advantage. And this is the new era of strategic finance and operations. And I'm going to turn it over to John Lewis to walk us through the rest of the presentation.

Good deal. Thanks, Shiraz. So when we take a step back and we really think about the new innovative solutions and approaches that manufacturers can deploy, there are often really 4 areas that need to be addressed that can help position organizations for success. The first is really related to an organization's data strategy and really their ability to uncover these new insights that Shiraz just recently referred to. Typical challenges in this space, however, though, are am I leveraging the correct data? Is it complete? Is my data connected across deduction programs at the script level? Are my insights organized not only by specific personas and business groups, but are they universal across the board with the single source of truth? The second area is really associated with business process automation or perhaps really the lack thereof. And common issues in this area are really around do I have the resources to address these complex processes? Are my processes scalable and flexible to adapt in regulation change environment? Do I also have an integrated approach across business processes? And when I mean an integrated approach, I'm talking about, do I have my forecasting and planning and my finance functions, talking and leveraging the same system to have visibility to real-time information across the board? The third area is really all about improving accuracy, specifically around how best to manage reserves associated with these complex deduction programs. This honestly is often the most nuanced and complex area when managing gross to net. Typical pain points and concerns really are around, am I accruing at the proper level of detail, which we'll kind of talk about here in a little bit. Are my reserve balances in a good place? Am I seen favorably or unfavorably? Which leads to the idea of the concept of am I at risk for financial statements. How tight are my reserves? Do I feel confident in those? The last area that we're going to talk to is the one that's really at the forefront this year, and it's really related to decision making. Really, this is about ensuring that you have the proper frameworks in place to make confident data-driven decisions. Common issues and concerns in this area are around is my strategy really removing these access barriers while also balancing profitability. How do I best support short-term and long-range planning, including regulation changes, price inflation penalties that are in the forefront? And then also how do I then adapt to things around regulatory change such as Shiraz mentioned, around AMCP removal? These are all things that we need to kind of organize around. So now let's dive a little bit deeper into these areas really to understand how some innovative approaches can be deployed. First area I'd like to focus on is ways to really improve data connectivity and enrichment processes. So when we look across the industry, the health care industry as a whole, I think we can all agree that there -- there -- I think we all can agree that there's an effective data strategy that is important to succeed. Really, there's a high percentage of industry that also believes that analytics and AI ML processes are key to achieving these goals that will ultimately help drive better financial results. However, what we see in practice though really is that different parts of the organization are still continuing to operate in silos with no real data strategy to integrate these data sets across the functional areas. In order to meet these new pressures discussed earlier, these data ecosystems must be connected across the organization and inform one another real time. So now when we look at this image here, I'm sure we've all seen a similar slide to this and the one I'm presenting. What you see on the slide here is on the left is you have your typical revenue management data sets stemming from MDM components, contract terms and conditions across your demand, your sales data set. And then you'll see at the bottom right, your typical rebating categories around commercial, Medicaid, Medicare, covered gap, patient assistance programs. Once all of these are in place, those, these data sets right are the most likely made available to the business groups through analytical tools for gross to net and financial reporting. Although this is key to kind of establishing your data strategy, it's really not enough. This is where the industry really need to think through the best ways to incorporate these enrichment algorithms that we've discussed that connect data across these programs. So if we take a look at this slide and we take a step back, if you look at data -- if you look at data conventionally, we'll see that data historically is inherently disconnected. Really on the left, left-hand side, you'll see that it's often siloed and incomplete. And in reality, that's really how it was intended. This obviously will impede how manufacturers can take these solutions all the way on their own. But really, what you'll see here is this really can create a conflicting view on product performance due to the inability to connect deductions across the script level. In order to remove these barriers, remastering financial data at the claim level is critical to understanding true profitability. And if done correctly, this can enable unique insights. So now let's take a look into the next section and really let's focus on some strategic insights. Now assuming the data connectivity and enrichment processes were part of your data strategy are in play. Let's look at some of the new insights that can be -- that can help to optimize. What I'd like to cover first here is something around the concept of what we refer to as value over volume. When you account for the impact of discount stacking that we discussed earlier. So working with the assumption that gross to net deductions are connected at the claim level, claims can be aggregated and analyzed at the subnational level, including anything from ZIP to county to state to region. So when we look at few -- so if we look at a few of the areas highlighted on the chart, where you can really begin to uncover some unique gross to net insights. So for example, on the left, if we look at territory A, you'll see that their net sales percent is relatively low. However, when we dig a little bit further into this territory, you'll see that this is really driven by high rates of co-pay parts than the patient assistance program, which ultimately erodes margins compared to other areas. So in contrast, if we look at another area on the top right territory C, what you'll find is that it may produce lower gross revenue compared to other states or other regions. It's -- this is because they were able to achieve higher margins because of low cost and lower discounting programs. Lastly, in the bottom right, if we look at the ZIP code associated with territory B you can actually dive a little bit deeper and evaluate patient assistance and adherence patterns and really begin to analyze the impact of that -- those controls and those patient behaviors that it has on a brand's financial performance. So as you can see across some of these examples, when financial data is connected, each geographical area can have a unique gross-to-net story, where different strategies actually are really needed to overcome these access hurdles and grow sales. So let's move into another insight and kind of build upon one of the earlier ones that Shiraz alluded to around the AMCP removal. So evaluating the impact of AMCP removal is another example of how this data connectivity at the geography-based level can help derive unique insights when you're beginning to plan for a lot of these regulation change. On the graph on the left, you'll see a breakdown of net sales by state when accounting for all scripts associated with the Medicaid program. As you can see on the left, based on each state's population, the gross-to-net profile is going to look drastically different ranging all the way from the teens to the 20s to the 30s in net sales and profitability. However, when you take a closer look at Vermont, all right, you can see that this state has roughly $20 million in net sales pre-AMCP removal. However, if you're able to deploy a methodology to evaluate what the impact is of the AMCP removal, you'll be able to model out the impact of across Vermont pre and post AMCP removal. So as we move to the right, you see in the bottom portion, Vermont's projected sales when the AMCP removal is in place actually drastically reduces the -- and actually drives net revenue negative, which ultimately erodes that product's margin across all customer segmentation. All right. So let's move on to the next section, really related to digitizing operational processes before we kind of close out this part of the section. In this section, I'd actually like to focus on a few areas where I believe there's real opportunity to improve accuracy through these digitized processes. So the first one I'd like to review is really related to the forecasting and planning process. By normalizing these processes across customer and product portfolios, you can actually establish a repeatable framework to analyze gross-to-net and ultimately identify where these profitable peaks and valleys are truly occurring. In the top left of this image you'll see that the forecasting process is organized by customer channel and then later segmented out by product portfolios in a subsequent step. By incorporating detailed contract terms into the forecasting and planning process, you can leverage these methodologies to accurately calculate volume in net sales at a very granular level of detail and then aggregate up as needed to look at gross to net from a variety of angles. If you see in the images on the bottom left and then also on the top right that by forecasting that this unique combination of customer, product and deduction program, you really enable true visibility to the demand and profitability drivers at the gross to net waterfall level with any intersection of customer and product. And it's truly at this level of detail that really makes identifying these peaks and valleys possible. The second area I'd like to quickly discuss is really around managing reserves. And at what level of detail we're sure balances are in a good place. Similar to the forecasting example, building your reserves from the most granular level possible, truly is really the best way to establish confidence that your reserves are sitting in a favorable position. In the illustration above, you'll see that the financial close process in the top left is to really organize by accrual methodology. And then later, we move in and segment the accrual methodology based on customer and program. In the image in the top right, that represents a payment true-up process, where the reserve was originally billed based on the lowest level of customer and product and deduction program. So with going with this approach, you're able to look at the images at the bottom of the page where you can see the customer -- and you can see which customers and products are truly driving that reserve balance within a specific Medicaid program. Now if you focus on the specific invoicing and redemption period within this chart, which is quarter 3 of '22, you can see how the reserve balance has evolved over time. By tracking the initial accruals that were booked, layering in any reforecast adjustments to the reserves and then finally, laying in payments. And from this analysis, you can see the variance and the associated true-up at each unique level of customer, product and program. This ultimately leads to an improved reserve accuracy by program and helps to build that confidence that your reserve is sitting in a favorable manner. Lastly, all right, before I turn it back over to Shiraz for closing comments, I'd like to discuss a few critical components to consider when we build out detailed scenario modeling frameworks. The typical modeling approach -- the typical modeling frameworks are structured really around specific archetype. With the most common approach is focused on contract strategy and optimization scenarios. So when we think about optimization considerations, really, there's 4 components that need to be included. First is the one kind of indicated in the top left related to market constraints. Do we have visibility to the appropriate market sizing? Have we layered in competitor assumptions about if we do specific contracting changes, how will they react? Do we have elements to model out what regulatory changes may do more long term versus the way they exist today? And then also, do we have percents of business and payer mixes baked into these models? The second area is really around brand dynamics, really about how do I truly account for market share that I believe that can be captured. This also includes the elements of layering in different price points over time for a given product. So this is where you really need to take into account all the new legislation around inflation and CPI building associated with your contract or excuse me, your pricing strategy. Also, do you have ways to look and account for different trade-offs between rebating and fee? And how do you account for savings programs and patient assistance programs to help support patient economics? Thirdly is really around access control. Really, what do I -- do I have curves, as I would say, baked into the process to model out what specific access controls will do to patient rejection rates kind of step-throughs those sorts of things. And then also do these controls impact patient cost sharing? So what does the cost profile look like associated with this various access points? And then lastly, the fourth component of the modeling framework is really around patient economics. I mentioned rejection rates, but let's carry that a little bit forward. Do you have curves in play that can model out based on analogs about how the product -- or excuse me, how the patients trend over time as it relates to adherence, persistent and overall abandonment for that product? So when you think about putting together these new scenario modeling frameworks, these are really 4 of the core components that you really need to think through about building into the process. Now lastly, okay. Let's assume you've incorporated these 4 components into your modeling framework. What types of insights and business questions can you address? What is the impact of total share and volume when an access change occurs? And what does that look like over time? Another business question is what is the impact of a new brand share in volume? And how does this translate into annual sales by period, by product, by payer? Lastly, what are the breakeven points, which is kind of one of the more interesting areas in my opinion, of doing modeling across the various scenarios? So do you have the mechanics to understand what is the maximum rebate that the manufacturers should offer to retain that existing net revenue? And then also, what is the appropriate rebate to pay for current formulary standing and does it make sense to pay it? And then lastly, there are business questions you'll need to answer to ensure margin and profitability is preserved. So when you bring all this together, this should give you the framework, leveraging these 4 components to address not only new regulation change, but other market dynamics that are in play. Okay. With that, Shiraz, I think I'll turn it back over to you.

Thank you, John. Yes. Just before we wrap up, just some final thoughts on the new margin era and where we are as an industry. So as we enter into the era or the decade of strategic finance and financial operations, really, pharma's new mission is the bigger, this is bigger than any individual function -- there's all these complex market dynamics. It does require enterprise mentality to move into the strategic finance era. And so it cuts across operations. It cuts across the contract operations, it moves into commercial decision-making and you really need a top-down buy-in from leadership to connect all the deduction programs available. It's possible, it's hard and it's -- you have to start -- you have to crawl, walk, run to get there, but it has to be driven from the top down and it's bigger than an individual function. But it's the most important thing we're going to have to do. We're going to have to look at every single TRx that comes in. And we're going to have to know, okay, what deductions are associated with this TRx? Is there a rebate? Is there a coverage gap liability? Is it a 340B? Do I have some sort of inflationary penalty? Is there something else? Is there some cost program associated with this? Is this transaction also duplicated in my patient assistance program? Is this data being sold to an aggregator that's putting another rebate out there for it? Those are all the questions that people are going to have to answer as we move into the next decade. And again, it's the data infrastructure. So we have to enrich, integrate and connect all the liability data sets to gain higher definition picture of the payer, prescriber the geography, the TRx, the transaction itself. And it requires modeling, integrating, fill in the gaps of different data, but also requires us to figure out our contractual terms and conditions with all the stakeholders in the marketplace holding them accountable for putting in some sort of requirements into this because it supports a need for us moving into the future. So it does require a much bigger and broader strategy and you have to carry on and execute those strategies across the organization, which is part of the big opportunity here in the mission for pharma. Now once we do that, we really need to digitize the financial processing, right? The discount stacking and market complexity and the push for greater agility and proactive speed to make financial decisions. So if we can't see it today, we can't act on it, and we can't change our behaviors. If we can see it, we can leverage the data, we can start to make commercial decisions that really commercial and operational decisions that help the industry move forward in what I call the new margin era. And then it all has to do with mitigating the big squeeze. So once you see it, you have visibility into it, you're driving into commercial decisions. How do you align on these internal strategies, the balance the need for driving patient access while preserving the margins of your business? Again, us as IQVIA, me as an individual. We're doing everything we can to help the industry address these unmet needs. And the reason why we're doing it is because we want to make sure that innovation is continued to be funded inside the pharmaceutical industry as a whole. Again, it was the funding of R&D is sitting between 14% and 15% of gross revenue. We need to make sure that it still sits in that same framework. We don't want innovation to stop because society as a whole benefits from the innovation that the pharmaceutical industry is actively pursuing. Now the next series of our Market Access Center of Excellence master class, is really driving into more details about what this volume, the value looks like at a physician level. How do you get there? How do you use it? How do you make decisions? Order some case studies. So 2 colleagues of mine, Saniogi and Maggie Brown will be walking you through the detailed masterclass of jumping into the weeds of saying, what does all this look like at a physician level? How do you see it? How do you use it? And how do you make decisions off it? Very, very important work. It's going to be a very, very great presentation. I highly admit that everyone signs up. It's April 12th at 1:00 PM. So thank you for the opportunity to share with you our thoughts about the new margin era and all the challenges and some solutions. Feel free to ask any questions. We will follow up. Thank you very much. Have a great day. Bye.