In the pharmaceutical industry, tens of billions of dollars are circling the drain each and every year due to revenue leakage. Yes, you read that correctly…billions. What’s worse? That lost revenue typically comes in the form of superficially insignificant leaks. As a result, the leaks get ignored or disregarded and that makes it nearly impossible to plug the costly holes.

It’s typical in the pharmaceutical world for a product to be released into the distribution channels with disproportionate revenue coming back from it. From retailer incentives to government entity rebates, chargebacks are inevitable. Adding to that mix things like expired product, overstocked product, and unsold inventory, means that revenue leakage is bound to occur.

Unfortunately, this “inevitable” revenue leakage accounts for more than 4 percent of pharmaceutical industry revenue. Now that’s what we would call a massive plumbing problem. Revenue losses are no stranger to pharma companies around the world and their effect on the industry is one of seismic proportions.

So, what is the solution? How does the pharma industry combat these leaks and address this major revenue loss issue? The best place to start is to identify where the leaks are coming from…

Primary Causes of Pharma Revenue Leakage

Overlooked elements of contract pricing variables, sales processes, contract renewal management, and organizational proficiency all play a role in creating revenue leakage sources. Each pharmaceutical company will point to specific issues that may contribute to their particular leakage issue, but almost all pharma revenue leakage falls into the following main causes:

• Chargeback discrepancies – flagged chargebacks can be dealt with in a number of ways, but the biggest losses stem from unresolved cases that are either written off or split between the manufacturer and the wholesaler
• Lost reverse chargebacks – once a product is sold a chargeback is filed, but when the product is then returned a refund of the chargeback is generated
• Duplicate chargebacks – if a product is returned to the wholesaler and then resold, a chargeback is then generated twice
• Discrepancies in returns – sometimes full credit is pursued when only a portion of the order was returned
• Rebate errors – between incorrect use of standardized codes and a general lack of standardization, rebate errors are extremely common
• Hidden shortages – when a customer claims that their order was partially filled, they then attempt to make a partial payment.

The revenue cycle is only getting more and more complex, pushing manufacturers to quickly find an immediate and favorable solution to revenue leakage. Research shows that revenue leakage may go undetected until it has reached a point where 5 percent of the company’s bottom line is impacted. This has an enormous effect on a pharmaceutical company’s ability to succeed and an even bigger impact on the pharma industry all together.

Fighting Revenue Leakage with EmpowerRM

With the price of prescription drugs rising, revenue leakage for pharmaceutical manufacturers is bound to skyrocket even further. As such, it is critical for pharma companies to take control of their revenue, thus avoiding revenue leakage and increasing overall profits.

At EmpowerRM, we are truly changing the game in Pharmaceutical Revenue Management. Our scalable automated processing system allows our customers to focus on growing their business, while our software focuses on chargeback processing and revenue management.

Are you ready to take control of your revenue? Contact us today to request a demo!