Don’t Fall Asleep on Your COT (Class of Trade)

Class of Trade (COT) is probably not something you give much thought. You may have had a conversation with your GPO early on in your pharmacy’s life, but perhaps the subject hasn’t crossed your mind in a few years. It might be time to revisit the concept and have a few more discussions with your business partners about this important topic.

What Is Class of Trade?

Class of Trade (COT) is a term commonly used in the pharmaceutical industry to categorize different types of buyers based on their business characteristics and purchasing behaviors. In the context of long-term care pharmacy, COT refers to the various types of facilities or settings where medications are provided and billed. The best way to think about it is to imagine all the trade channels that prescription drugs travel through from the factory to the patient’s bedside. There are institutional classes of trade, such as hospitals. There are also wholesalers, retail pharmacy, specialty pharmacy; various divisions within each of these may fall into their own COT, such as for-profit, not-for-profit, and government facilities. The main idea is that each COT contains entities that are alike in their function and operation and don’t compete directly with entities outside of their own COT.

Who Determines Your Class of Trade?

The manufacturer has the responsibility of establishing the classes of trade they will use and the types of facilities that will be assigned to each class. The number of classes varies between manufacturers, but a key point is any pricing variation based on COT must not result in offering different pricing to entities that are in competition with each other. This would likely be seen as a violation of the Robinson-Patman Act, which regulates price discrimination in interstate commerce. Read more >