If your Class of Trade (COT) data isn’t clean, your entire revenue management process is at risk.
From chargebacks to government pricing, every downstream calculation depends on getting COT right. And in today’s marketplace, the margin for error is shrinking fast.
With IDNs, specialty pharmacies, and 340B entities reshaping the channel landscape, traditional classification models are being stretched thin. Regulators are watching closely, and manufacturers are expected to prove their classifications are accurate, consistent, and defensible.
Why COT Accuracy Matters
A misstep in COT segmentation is ultimately a compliance exposure. Every classification you make determines who receives discounts, how government prices are calculated, and whether auditors will view your processes as defensible. When the wrong call is made, the ripple effects can be significant:
- Discount misallocations: Extending discounts to ineligible customers or missing them where they’re mandated.
- Government pricing errors: Incorrect AMP, BP, or ASP reporting that invites scrutiny and penalties.
- Audit red flags: HRSA, CMS, and OIG increasingly demand evidence of disciplined COT oversight.
- Revenue loss: Duplicate discounts, diversion, or rebates paid where they don’t belong.
Today’s Challenges
Manufacturers are grappling with a perfect storm of factors that make clean, defensible COT management more difficult than ever. Without modernization, these pressures leave organizations constantly reacting to problems instead of preventing them.
- Channel expansion: Specialty and mail-order models blur traditional eligibility boundaries.
- Entity consolidation: Health system and wholesaler mergers make ownership shifts frequent and hard to track.
- Data fragmentation: Customer records are scattered across CRMs, ERPs, and revenue management platforms.
- Manual upkeep: Spreadsheet-driven updates leave room for delay, inconsistency, and human error.
3 Red Flags Your COT Process Isn’t Audit-Ready
If any of these sound familiar, it’s time to take a closer look at your COT controls.
- Multiple classifications for a single entity (e.g., a pharmacy also listed as a provider).
- Outdated records following mergers or acquisitions.
- Unclear ownership of data across compliance, sales, and finance teams.
Best Practices for Clean, Compliant COT Management
To keep pace with regulatory scrutiny and market complexity, leading manufacturers are adopting disciplined, proactive strategies:
1. Build a Centralized Customer Master. Anchor all COT management in a governed, unified customer master. This eliminates duplications and ensures consistency across contracting, chargebacks, and government reporting.
2. Document Clear Classification Rules. Create standardized, rule-based definitions for each class of trade, backed by written policy. Cross-functional alignment—compliance, sales, and contracting—is essential to avoid interpretation gaps.
3. Automate Updates and Validation. Technology can flag anomalies (e.g., an entity listed under multiple COTs) and automatically update records when eligibility or ownership changes. Automated data feeds reduce lag and human error.
4. Audit Regularly and Defensively. Quarterly or semiannual reviews provide an audit trail of oversight. Involving compliance alongside operations strengthens the defensibility of your process.
5. Connect COT Directly to Contracting and Discounts. COT assignments shouldn’t sit in isolation. Integration with chargeback and rebate workflows minimizes the risk of downstream errors in accruals and reporting.
6. Train Teams Beyond the Basics. Sales, contracting, finance, and compliance should all understand how COT impacts pricing and audits. Shared knowledge prevents mistakes that often stem from silos.
Building for Compliance Confidence
Class of Trade may seem like a quiet data point in the background—but it’s become a frontline control. Regulators, auditors, and payers alike want proof that manufacturers have clean, consistent processes in place.
That makes it critical to move beyond patchwork fixes and invest in a system-driven, audit-ready approach. By modernizing COT management, manufacturers can:
- Reduce compliance risk
- Protect revenue from leakage and misallocation
- Demonstrate defensibility in the face of scrutiny
- Gain the confidence to navigate a shifting regulatory landscape
COT is the foundation. When it’s right, everything downstream—pricing, contracting, government reporting—stands on solid ground.
Ready to Strengthen Your COT Strategy?
RLDatix Life Sciences partners with manufacturers to modernize Class of Trade management, close compliance gaps, and ensure audit-ready processes. Contact our team to learn how we can help you mitigate risk and turn COT into a source of confidence.