The process of managing pharmaceutical chargebacks creates all kinds of challenges for pharmaceutical manufacturers worldwide. When it comes to increasing efficiency and reducing revenue loss, manufacturers find themselves asking the age old question “to split or not to split chargebacks?” So, what is the best method? From receiving to processing chargebacks each day, it is absolutely critical for manufacturers to understand the best course of action in order to effectively utilize their chargeback system and, in turn, remain profitable.
Most wholesalers generate their chargeback debit memos on a daily basis. The debit memo is represented in the wholesaler’s ERP system along with the line detail. The manufacturer then receives the debit memo/chargeback and validates the lines using their chargeback system.
Ideally, all submitted lines are valid and pass through the chargeback system with no errors. Then, a credit memo is created in the manufacturer’s ERP system that exactly matches the wholesaler’s debit memo. From there, the EDI 849 response is sent back to the wholesaler with the manufacturer’s credit memo number to reference when the wholesaler takes the credit.
When there are no disputed lines on a chargeback, the EDI 849 does not require any line detail to be sent back. The only requirement is the header information, which is mainly the wholesaler’s debit memo number and submitted amount along with the manufacturer’s credit memo number and issued amount. However, when there are disputed lines the original line information along with the standard HDMA dispute code(s), a dispute note, and the manufacturer approved amount must be sent back on the EDI 849 document. From that point the wholesaler will research the dispute and if they feel they are right they will resubmit the disputed lines again. This is known as a resubmission.
Challenges With Splitting Chargebacks Responses
New updates to the standard EDI 849 specifications have added a new HDMA dispute code that represents that a line is Under Review. The intention is to allow manufacturers to create a credit memo for the clean lines and then create a second credit memo for the remaining lines that errored out and took extra time to research.
In theory, this seems to be logical, however, splitting the original chargeback debit memo into potentially two credit memos on the manufacturer side creates problems for most wholesalers. The majority of wholesalers’ systems cannot support this type of splitting and it ends up causing more problems than it solves.
The truth is that there is very little gain to splitting these chargebacks up. In fact, it typically creates more complexity on both the manufacturer and the wholesaler sides. Additionally, it is necessary to respond to chargeback requests in a timely manner. Ideally, all chargebacks are processed and sent back within 2-3 days of receipt. Waiting longer than this window poses the risk of being rejected or ignored. Therefore, sending one credit memo today for clean lines and another 2 days from now for the remaining lines does not offer much of an advantage.
Avoiding Split Chargebacks With The Right System
In summary, there are chargeback systems that allow you to split chargebacks up and promote this as a feature. However, after speaking firsthand with wholesalers, they have expressed that this scenario cannot be handled properly in most cases. As such, they prefer manufacturers to avoid this practice. The best approach is to implement a strict policy of receiving and processing chargebacks daily and responding to all lines at one time within 2-3 days from receipt.
Processing chargebacks used to be the bane of manufacturers’ existence, but technological advancements have paved the way to meet these challenges with efficient, profitable solutions. At EmpowerRM, our scalable automated software has truly broken the mold in chargeback processing. Built on the most advanced web technologies and 100% web-based, pharmaceutical manufacturers continue to flock to our powerful product. Are you ready to join them?
It’s time to take control of your chargebacks. It’s time for EmpowerRM. Contact us today for a free demo.