In the absence of direct elasticity measurement, pharma companies need a structured framework for responsiveness to avoid allocating GTN based on history rather than commercial logic
Written by Malika Makhmutkhazhieva
For most pharma companies, Gross-to-Net (GTN) investment represents a significant share of gross sales. Yet decisions about how that investment is allocated across products, channels, and partners are not always grounded in a rigorous commercial logic. Instead, they tend to reflect historical precedent: the same distributors receive similar discounts year after year, the same products carry the same rebate levels, and the same pharmacies receive the lion’s share of investment, regardless of whether the return justifies it.
The fundamental challenge is measurement. Elasticity, the responsiveness of sales to a change in GTN investment, is the right metric to guide allocation decisions. But in pharma, it is almost never directly observable. There are no clean experiments, no control groups, and no real-time feedback loops. Distribution channel complexity further obscures the signal. The result is that most commercial teams are flying blind, allocating hundreds of millions in trade investment based on intuition and negotiation history.
This creates a predictable set of problems:
- Misallocation — Investment concentrates in historically large partners, not necessarily the highest-return ones.
- Value leakage — Payouts proceed regardless of target achievement, with limited documentation of the commercial rationale.
- Strategic drift — Growing channels and high-potential products remain underfunded while stagnant ones are over-invested.
The question is not whether to invest in GTN, it is how to ensure every euro invested is working as hard as possible.
A proxy-based framework for GTN responsiveness
The breakthrough comes when companies build a coherent set of proxies that, in combination, approximate elasticity. The core principle is straightforward: for a fixed total investment, return is maximized when resources are concentrated in the highest-responsiveness opportunities. Reallocation from lower- to higher-elasticity products and channels is therefore the primary value lever.
Two dimensions structure the framework. The first is the nature of the demand dynamic: push versus pull. Push-driven products and channels, where GTN investment directly influences distributor and pharmacy behavior, tend to exhibit higher responsiveness to incremental spend. Pull-driven ones, where brand equity and patient demand dominate, are less sensitive to GTN changes.
The second dimension is the level of elasticity itself, shaped by market penetration, growth trajectory, channel margin structure, and partner capability.
Reading these two dimensions together, push vs pull, and level of elasticity, gives commercial teams a structured basis for prioritizing GTN investment without needing perfect data. Products and channels that combine push dynamics with high elasticity signals represent the strongest reallocation opportunities; those with pull dynamics and low elasticity warrant scrutiny and potential reduction.
The indicators below signal where responsiveness is likely to be highest, and where GTN investment is most likely to generate measurable commercial return.
Exhibit 1: Indicators of push/pull dynamics and elasticity levels — key inputs to GTN investment prioritization
In absence of measurements, companies need to rely on indicators of elasticity
| Elasticity | Push | Pull |
|---|---|---|
| High | Channel/product growing fast; underpenetrated market; tight distributor margin; price competition / higher pass-through / thin channel margins; high skill & will | Low brand awareness; commodity-like products; independent pharmacies with staff autonomy; share of recommendation < share of shelf |
| Low | Evidence of saturation; high market share; low growth; vertical integration / limited pass-through / private labels; price premiums; large channel margins — especially combined with decline | High brand equity; high share of recommendation; habitual / repeat purchase; low category involvement |
Source: Eendigo analysis
From framework to reallocation: a European pharma case
Applying this framework to a European pharma company managing approximately 200M RON in annual GTN investment revealed a substantial and actionable reallocation opportunity, one that could not have been identified through historical allocation logic alone.
The analysis began with a clean consolidation of GTN spend across all products, channels, and partners. Once that visibility was established, the proxy framework was applied systematically: each product and channel was assessed against growth trajectory, market penetration, brand equity, channel margin structure, and partner capability.
The result was a clear differentiation between high-responsiveness and low-responsiveness investment buckets.
High-investment, stagnant products were consuming approximately 30% of the GTN pool with limited commercial momentum, and proxy indicators consistently flagged low responsiveness.
Fast-growing smaller brands with strong push dynamics and thin distributor margins were significantly underfunded relative to their responsiveness profile.
Channel investment was concentrated in the largest established partners, while higher-elasticity regional and independent pharmacy segments received disproportionately little.
Correcting these misallocations, reallocating from low-responsiveness to high-responsiveness products and channels, represents a significant and quantifiable commercial opportunity, as illustrated below.
Exhibit 2: Reallocating GTN investment towards higher-responsiveness products and channels generates measurable impact across sales and margin
Business outcomes of GTN optimization
| Total GTN scope | Reallocation | Sales impact | Profit impact |
|---|---|---|---|
| ~200 M RON GTN pool ~14% of gross sales currently invested in commercial terms across products and channels | ~22–27 M RON Within 1 year ~16–19% of total GTN can be reallocated to higher-ROI products and channels in Year 1 | 1%–3.5% Of Net Sales For OTC products — reallocating GTN to higher response products and channels | 2%–4.5% Of Margin Contribution For OTC products — reallocating GTN to higher response products and channels |
Source: Eendigo analysis
Four principles for commercial leaders
The GTN challenge described in this article is not, at its core, a technical problem. The proxies are not difficult to construct. The data, while imperfect, is almost always sufficient to begin. The methodology is replicable. What makes GTN optimization difficult is not the analysis — it is the willingness to act on it.
Most pharma commercial organizations have built their GTN investment patterns over years, sometimes decades. Those patterns reflect negotiating history, relationship dynamics, and organizational inertia as much as they reflect commercial logic. Challenging them requires not just analytical rigor but the institutional courage to have difficult conversations with long-standing partners, to redirect investment away from products that have historically been priorities, and to accept that the data will never be perfect enough to eliminate all uncertainty.
The companies that get this right share a common characteristic: they do not wait for perfect information. They build a good-enough framework, apply it consistently, and use it as the basis for a structured commercial conversation — internally and externally.
For commercial leaders looking to start, four principles stand out:
- Build visibility first. You cannot reallocate what you cannot see. The starting point is always a clean, consolidated view of GTN spend by product, channel, and partner.
- Treat the proxy framework as a conversation starter, not a formula. No model perfectly captures commercial reality. The value of a structured responsiveness framework is not in its outputs; it is in the discipline it brings to a conversation that would otherwise be driven by intuition and precedent.
- Challenge the largest recipients first. The biggest GTN allocations rarely reflect the highest commercial return. They reflect the longest relationships and the strongest negotiating positions. A structured framework creates the analytical basis to challenge those anchors, and to do so in a way that is evidence-based.
- Govern what you change. Reallocation without governance creates new leakage. Any shift in GTN investment must be accompanied by clearer target-setting, documented rationale, and a monitoring mechanism. Without that infrastructure, the opportunity identified today will erode within a commercial cycle.
Get in touch
Email: office@eendigo-ops.com
Website: www.eendigo.com
LinkedIn: linkedin.com/company/eendigo
