Class Of Trade (COT)

Class of Trade (COT) is a way to identify functionally similar pharmaceutical purchasers. COT assignment is the act of researching and assigning a purchaser to a group that best represents its role in the supply chain.

Examples of Classes of Trade:

It sounds easy, and for the most part it is. But COT can be fraught with peril for the uninitiated. After years of doing COT assignments, building systems to manage COTs, and managing the fallout from when assignments go wrong, we have learned a very important survival tip: Do not underestimate the importance of COT assignments.

COT is one of the best examples of the 80/20 rule in our industry. 80 percent of the work is for 20 percent of the assignments. While the majority of COT assignments are obvious, those that are not require a person to exercise a level of deductive skills that only come from experience. The subjective nature of COT assignments, the skill of the person making the assignment, and the COT tools at their disposal, can have a dramatic effect on the quality of the final product.

Tips for COT Assignments:

Sometimes businesses just won't fit inside of one category. Some considerations when deciding on the final COT for these entities are:


Be able to explain the consequences and the reason behind the multiple COT options. What evidence backs up these multiple options?

Where are COTs used

The Centers for Medicare and Medicaid Services (CMS) define regulations and guidance using general terms like wholesaler, hospital, retail community pharmacy, and others. It is the manufacturer's responsibility to ensure that purchasers are categorized appropriately and consistently.

Government Pricing Calculations such as Average Manufacturer Price (AMP), Non-Federal Average Manufacturer Price (NFAMP), and Best Price (BP) use Class of Trade assignments to determine if transactions are included in the calculations.

When doing the Government Pricing calculations there are two subjective areas; 1) Deciding on the methodology, and 2) Assigning the COTs. You only have to do the methodology once. Assigning COTs is a continuous process, and as such is one of the riskier parts of performing those calculations.

In some contracts certain members of a buying groups can have special pricing or contract terms by being part of a certain Class of Trade. For example, all teaching hospitals might receive an extra 2% off for one of the products.

Legal documents or conversations with internal or external council regarding CMS regulations, Government Pricing, and Contracts will normally include a healthy dose of Class of Trade.

Manufacturers can aggregate sales data using Class of Trade to analyze their sales channels. It's quite common for manufacturers to want specialized reporting or analytics with this capability.

Custom Schema

Every manufacturer, 3PL, and business process outsourcing firm has their own internal COT schema. They can vary in granularity and nomenclature. Since COT can be used for many purposes, and those purposes may have evolved over time, COT schemas can look quite different.

If too many people try to use it for too many things, a COT schema can quickly degrade. Manufacturers can use groupings devised by external providers that may or may not match their business needs. Many COTs can be grandfathered in because of legacy systems or decisions that were made a long time ago.

A common paradigm is COT schema translation. Being able to define one schema in terms of another is a tremendous boost to efficiency. Under normal circumstances you need to define a schema using a finer-grained schema than the one you are trying to translate.

COT cleanups are always a good idea if you are planning to do a Government Pricing recalculation. Arrow IBT has extensive experience in ongoing COT assignments and COT cleanups at any scale.