You don’t know what you don’t know.
Never was a truer sentence spoken when it comes to avoiding pharmaceutical chargeback errors eating away at your already razor-thin profit margins.
The fact is that the chargebacks you pay to your wholesalers are among the largest expenditures in your financial statement. Are you absolutely sure that they’re being processed according to your contracts?
As a small or midsize generic drug manufacturer, you’re constantly struggling to manage numerous contracts with your wholesalers and process volumes of chargebacks. The reason you’re struggling is that you don’t have a contract management or chargeback system in place. Instead, your wholesalers are probably sending you Excel spreadsheets or PDF files of their chargeback requests.
And while your finance people might do some basic checking to ensure they don’t see any discrepancies, without an automated system they can’t possibly check every line with extensive validation. And that means you’re most likely losing money.
If you want to stop the financial losses as well as the administrative work you need to do to handle chargebacks, you have to prevent them in the first place. But that’s hard to do when you’re working with spreadsheets and PDF files.
It makes sense for your chief financial officer or controller to be able to see your current outstanding chargeback liability in real-time. But without an automated system, this will take hours and hours of work each day that could be spent on money-making activities.
Likewise, your finance people have to enter in credits or journal entries for the chargebacks that were received during the month. Typically, they do this as one entry per customer per month and as a result reconciling individual credit memos becomes impossible to accomplish.
Your company works hard for its money. The last thing you want to do is watch your profits slip through your fingers because of revenue leaks.
Let’s take a look at 5 reasons why manual chargeback processing isn’t saving you money:
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- No Disputes
Most of your wholesalers place your company on “auto-deduct” if you’re doing the process manually (or without a system). As a result, you can’t dispute any discrepancies because you’re not following the proper process. Waiving your right to dispute chargebacks means you’re also waving goodbye to your profits.
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- Insufficient Validation
Without a system in place, you’re not sufficiently validating every line against your contracts. Your finance people will probably just skim the Excel or PDF files and confirm that they don’t see any obvious issues. The more chargebacks you receive, the more difficult and inefficient this manual process becomes. It’s also nearly impossible to check for other types of discrepancies, such as missing chargeback reversals related to returns, duplicate chargebacks, double dipping, ineligible members, etc.
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- Incomplete Data
As you know, when you receive data manually you’re getting it in a different format from each wholesaler. So if you want the data complete for reporting, analytics, and compliance, your finance folks have to manually reformat and combine the data into a master spreadsheet. Don’t they have enough work to do? And since some data is received in a PDF format, they have to manually re-key it. Not only that, but since the data is sent via email, it can easily be misplaced or overlooked. But you know what’s even worse? Your profits will disappear along with the data.
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- No ERP Integration
The chargeback process requires your finance people to create a corresponding credit memo for each debit memo you receive from each of your wholesalers. This lets them reconcile the credits that the wholesalers take when making payments. Without this corresponding credit memo, you’re not able to figure out which credits match and which don’t. Sure, you can create credit memos manually but since this process is manual, it won’t scale as your company grows and leads to data-entry mistakes
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- Manual Reporting/Analytics
With massive amounts of data coming in from multiple sources in multiple formats, you’re likely not consolidating it all to a master location. Even if you do consolidate it on Excel, the process will break down once the data starts to go over 100,000 lines. This makes it challenging for you to analyze data year over year or just run basic reports to ensure you’re in compliance with government regulations. Again, this process is all manual, so you have to keep adding data manually to the master source and then rerunning report/analytics. Typically, one Excel spreadsheet can’t even handle more than a year of data, depending on the size of your company.
Let’s review some of the unwanted outcomes the above issues can cause for your company:
Revenue Leakage – Since you already operate on small margins, any lost revenue from chargeback mistakes reduces your profits.
Non-compliance – Any government reporting you need to do has to be done accurately so you can continue to operate and avoid fines. Having incomplete data and no system leads to incomplete or inaccurate reporting, resulting in non-compliance and fines, which cut into your profits and could halt or end your business.
Wasted time – Without a system and automation you have to do everything manually, which wastes time and money and also provides the potential for human error.
Unprofitable pricing – If you don’t have proper reporting and analytics, it’s hard for you to know how to price your products so you can make a profit. This can lead to unprofitable pricing, which if done too often can put you right out of business.
To avoid all these problems, you need software that electronically receives all chargeback requests via EDI (844’s), validates every line thoroughly, and flags any exceptions for you to review. From there, you can investigate and make a business decision as to what to do about each exception. Then the software automatically creates a credit memo in your accounting system for each chargeback and sends back a detailed response via EDI (849’s) to your wholesaler with the credit memo number and the standard HDMA reason for any adjustments or disputes.
Our EmpowerRM software does just what you need to help you remain profitable – manages contract information and automates chargeback processing . EmpowerRM provides advanced 27-point validation, real-time visibility, detailed analytics, and report generation. It minimizes your losses while increasing your profit margins, giving you a competitive edge.
Are you ready to automate your chargeback processing? It’s time to take control of your revenue. It’s time for EmpowerRM. Click here to request a demo!