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 #4 (No EDI Capabilities), 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 chargeback mistake #4, No EDI capabilities.
If you’re unsure of what EDI is or you need help setting up EDI please reach out to us. We offer a fully managed EDI service designed specifically for pharma manufacturers.
Ok, so EDI stands for electronic data interchange and it’s a digital way to trade information back and forth securely between two companies.
It also allows a company to streamline and automate their operations by eliminating manual data entry.
So for chargebacks there are 3 main EDI documents
Now since these numbers might not be familiar to you let's briefly review the purpose of each document.
EDI 844
This is the inbound chargeback request from the wholesaler to the manufacturer. This document will have all of the chargeback information related to the indirect sale, like the contract number, the product that was sold, the purchaser, the quantity, the WAC price, the contract price, and the chargeback amount being requested.
EDI 849
This is the chargeback response from the manufacturer back to the wholesaler. This document will have all the information related to the chargeback response, like the credit memo number that the manufacturer created in their accounting system, the amount that was requested, and the amount that was issued or approved. In addition, if the approved amount is different than the requested amount then you need to provide the line detail related to the dispute along with the standard HDMA dispute code.
EDI 845
This is generated by the manufacturer and sent to the wholesaler when there are new contracts or changes to existing contracts. It contains information like the contract number, the products on that contract, and product pricing, along with the effective dates.
Now all of the wholesalers (Cardinal, McKesson, and ABC) expect the manufacturer to setup EDI with them for chargebacks. In fact, here’s McKesson’s EDI Compliance Policy from their Standard Terms and Conditions
EDI Compliance Policy
Unless otherwise agreed to by McKesson’s Chargeback Management group, the supplier will transact with McKesson in connection with contract administration, pricing, and chargebacks using the following EDI transaction sets in adherence with all applicable HDA EDI standards and data requirements EDI 845, EDI 844 and EDI 849 using version 4010.
Now, as we discussed in mistake #3 in order to properly dispute a chargeback if there’s a discrepancy you need to generate and send an EDI 849 document to the wholesaler. If you don’t have EDI setup and you can’t do this, then you will be placed on auto debit where they automatically deduct the chargeback amounts from your account and you will have no opportunity to dispute any discrepancies.
In addition to not being able to dispute chargeback discrepancies, you could also incur penalties or additional charges for not setting up EDI. Here’s the fee schedule from McKesson’s standard terms and conditions.
I’ve highlighted the chargeback non-EDI transmission fee, which is $2 per line. Now, most small to mid-size pharma manufacturers are doing between 5000-50,000 chargeback lines a month. This non-EDI fee alone could cost you thousands of dollars per month.
So, to avoid lost revenue related to this mistake, we strongly recommend you set up EDI capabilities with all of the wholesalers immediately. EDI mixed with the right chargeback software will enable your company to be more efficient and prevent lost revenue from chargebacks or non-compliance.
So today, we covered Mistake #4 (No EDI Capabilities) in our 5 part series. Hopefully, you found this content useful, and you will setup EDI with all wholesalers to avoid lost revenue.
It’s time to take control of your contracts. It’s time for EmpowerRM.