Hi, I'm Matt Hoenig with EmpowerRM, welcome back to our five part series on chargeback mistakes that cause revenue leakage for pharma manufacturers.
Today, we’re talking about mistake #3 Delayed Chargeback Responses, but before we do don’t forget to like this video and subscribe to our channel so we can deliver more helpful content like this.
OK, so today we’re talking about mistake number three, delayed chargeback responses.
So when a manufacturer receives a chargeback request from a wholesaler, they need to process that request and send a response back to the wholesaler, typically within 5 days of receiving the chargeback request.
Now, let’s look at the actual language used in a wholesaler’s terms and conditions. This section was taken from McKesson Supplier Standard Terms and Conditions.
Section 4(Chargeback Submissions and Disputes) under Schedule C, which is Contract Administration, Pricing and Chargebacks reads:
Wow, Five days (not business days, but 5 days).
That’s not a lot of time to respond to a chargeback request, especially if you have chargeback exceptions that you need time to research before responding.
Or if you received a chargeback on a Friday and didn’t even see it until Monday.
You’ve already lost 3 days.
In addition, to dispute a chargeback discrepancy, you need to have EDI capabilities and you need to send a properly formatted EDI 849 document back to the wholesaler. Without EDI capabilities you will be placed on auto debit and the wholesaler will automatically deduct the amount from your account and you lose the opportunity to dispute any discrepancies.
Now, I’m sure we can all agree that these terms and conditions are very one sided in the favor of the wholesalers. However, between the big 3 (Cardinal, McKesson, and AmerisourceBergen) they represent over 90% of the distribution of pharmaceuticals in the U.S. With stats like that, it’s almost impossible for a pharmaceutical manufacturer to be successful without the wholesalers. This is especially true for small to mid-size generic pharmaceutical manufacturers.
Recommendations
So to avoid lost revenue from chargeback delays, we have 3 recommendations.
One is to have EDI set up. You have to be able to receive an EDI 844 document from the wholesaler and be able to send a properly formatted EDI 849 document back to the wholesaler in order for disputes to be accepted.
Make sure you’re processing chargebacks daily. No matter how big or small you are and no matter what your chargeback volume is.
It’s important that you process daily, giving yourself plenty of time to review and respond to each chargeback.
Try to get the responses back within two days of receiving the chargebacks. If you’re processing daily, most chargeback responses should be sent back the same day. This will ensure your chargeback responses aren’t late and you don’t lose revenue due to delayed chargeback responses.
So today, we covered Mistake #3 (Delayed Chargeback Responses) in our 5 part series. Hopefully, you found this content useful and will implement these suggestions to avoid chargeback response delays and lost revenue. Go ahead and like this video and subscribe to our channel so you will be alerted when we post Part 4.
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McKesson will submit chargebacks to the supplier on the difference between the invoice price for the product and the applicable contract price using the EDI 844 chargeback transaction set.
Any good faith chargeback disputes will be reported by the supplier using the EDI 849 chargeback reconciliation transaction set and shall include accurate line detail of the disputed lines within five days following Mckesson’s original chargeback submission or 10 days following Mckesson’s chargeback resubmission.
Disputes which do not comply with the requirements of this section will not be eligible for reversal or repayment by McKesson without McKesson’s specific approval.