Top 10 Factors to Consider When Choosing Pharmaceutical Chargeback Software
Pharmaceutical chargeback software is a key revenue management tool. The importance of the chargeback processing is high due to several aspects of its impact on company business development: 1) Indirect sales channel is the main channel for most pharmaceutical manufacturers and the only channel for a large number of them. 2) Financial impact of chargebacks on the total revenue is huge, as chargebacks often are up to 30% of WAC, and more. 3) Indirect sales data serve as a basis for a sales monitoring tool, product pricing strategy and rebate calculations. 4) Chargebacks are often the most significant price concessions in Government Pricing calculations.
The best practice on choosing software to process chargebacks is to see how the software addresses all data, business and regulatory requirements for all of these aspects.
From one side, under-developed chargeback software systems often cause revenue leakage, require additional processing staff, and unable to give answers to critical analytical questions and come with high customization costs.
On the other side, the top price software may come with unjustifiably high licence costs, with unnecessary modules and features left unused, be overly complex and mandating an extended learning curve and with prohibitively high customization costs.
Based on our experience of working with pharmaceutical manufacturers, pharmaceutical 3PL companies and government pricing specialists, we determined ten major factors, which, hopefully, you will find helpful when choosing the pharmaceutical chargeback solution that is right for your company.
1. Utilization of EDI and Support for Other Chargeback Formats
Pharmaceutical manufacturers receive their chargebacks as in-bound EDI 844 documents and send chargeback reconciliation files as out-bound EDI 849 files. Data coming through EDI needs to be “translated” – converted from EDI-based format into a format understood by ERP import tools.
EDI translation relies on building EDI maps. A map is built for each document and wholesaler and defines all data elements that are imported into ERP. Some wholesalers submit a number of optional fields in their EDI 844, while other wholesalers do not.
These optional elements may be useful in chargeback validation and must be utilized in all cases when they are submitted.
It is essential for the manufacturer to check with pharma chargeback software vendor which optional elements their software supports.
Besides EDI, the chargebacks may be sent as CSV or MS Excel files. Even the wholesalers capable of using EDI from time to time send their chargebacks, especially resubmissions, in MS Excel formats. And to make it even more exciting, different divisions of the same wholesaler may send chargebacks in different formats!
An established pharmaceutical manufacturer knows in which formats the chargebacks are received. Therefore, it is a good practice to check how the software processing software reads all chargeback files.
Relasoft chargeback processing software reads all mandatory and options data info coming through EDI imports any files in CSV and Excel formats.
2. Chargeback Validation
Incoming pharmaceutical chargebacks need to be validated to ensure that the pricing is correct, the customers and products are eligible to be sold on the contract, the chargeback is not a duplicate, and so on.
The list of EDI 844-supported validation rules for pharmaceutical chargeback is listed at https://relasoft.net/validating-pharmaceutical-chargebacks/.
A manufacturer may have specific business rules that have to be enforced. For example, some chargebacks should be calculated based on distributor pricing. Sometimes a submission requires a unit conversion between quantities reported as packs vs each, and so on.
Implementing validation by certain codes requires extra effort, like getting additional data sets, deeper integration with ERP and additional processing.
The software vendor should clarify, which standard and manufacturer-specific chargeback validation rules are supported by their software, and which ones are not.
Relasoft chargeback software can utilize all validation codes. When working with Relasoft, the pharma manufacturer has full control over which validation rules are implemented, and which checks are skipped.
3. Integration with ERP
A chargeback processing solution should ensure that 1) ERP information required to process chargebacks is read from ERP, 2) Information to create credit memos is passed to ERP, and 3) Accounting provisions for chargeback can be built.
The level of integration with ERP depends on the tasks of integration and on what information is stored in ERP. Usually the data exported from ERP include customer and product master lists, wholesalers and distributor pricing and records of credit memos created for approved chargeback debit memos.
When the pharmaceutical chargeback software comes as an enterprise solution that includes Government Pricing, the list of data elements exported from ERP becomes much longer.
When the pharma manufacturer has an ERP support team, the integration on the ERP side is usually done by that team, and the only issue to clarify if the chargeback software vendor will comply with data submission formats requested by the ERP support.
Some chargeback software vendors have completed solutions for particular ERP.
Relasoft interfaces with numerous ERP, including SAP, Infor, Sage, Great Plains, Navision, and has tools to process chargebacks daily and to reconcile chargebacks with direct sales.
Relasoft Pharma Suite specialized modules support complete integration with Quickbooks Online and Quickbooks Desktop. We may provide complete integration for other ERP as well, this is something to discuss.
4. Support for Government Pricing
Pharmaceutical Chargeback processing must be done with a consideration for Government Pricing and Compliance. For example, it is critical to ensure customer eligibility for transactions done on PHS contracts and to run pricing integrity checks on government contracts.
It is also critical for the chargeback processing software to postmark any changes done as line corrections.
The software vendor should be asked how the data for the Government Pricing are prepared and what validation specifics the chargeback processing provides for Government Compliance.
Relasoft chargeback processing software has been proven to be 100% compliant with all government regulations and has been successfully used with Government Pricing systems to calculate AMP, Best Price, Non-Federal AMP, RPU/URA and other pharma metrics.
5. Efficient Processing
Chargeback processing software is efficient, if it is capable of quickly processing large volumes of data, has auto-correction tools, automates processing of resubmissions and avoids data entry redundancy.
The volume of submitted chargebacks is large, and the number of monthly chargeback lines can reach a million. Pharmaceutical chargeback software must be able to process high volume of data at an acceptable speed.
Wholesalers often submit incorrect contract numbers and NDC, report quantity using wrong unit of measure, and so on. Doing manual correction even for a hundred lines is not an option. The chargeback processing software must therefore have fully automated self-correction tools.
Once wholesaler receives an EDI 849 chargeback reconciliation file, it can make the correction and resubmit the chargeback. The number of corrections can be significant. Therefore, the good chargeback solution has to be able to automatically process resubmissions as well.
3PL pharma companies and manufacturers, tracking different labeler codes in different companies, need to eliminate redundancy in the shared data entry.
The vendor should demonstrate which auto-correction features the software has, how resubmissions are handled, and how much time does it take to process daily load of manufacturer’s chargebacks.
Relasoft Pharma Suite has a rich set of features to correct chargeback errors automatically, resubmissions are processed automatically as well. We are happy to load as much data into the system as users want us to load for a trial run, and show how the true processing is done.
6. Interface
The two main modern software interface types are browser-based and Rich Client.
The advantages of browser-based interface are that it allows users to connect to an application through a browser from any computer and any place in the world, without any installation done on their computers.
Browser-based interface has its disadvantages: it is usually slower,because each new request to the hosting server requires verifying security credentials, which is not required from applications running locally.
Browser-based interface cannot show multiple windows at the same time. The closest it can do is to open multiple browser sessions, but moving data between them is impossible.
Browser-based interface, obviously, depends on the quality and speed of the internet connection, and 404 errors happen even to the best web servers…
Finally, any internet application is exposed to hackers, and significant cost of the development must be allocated to implementing robust security and its updates. Applications running locally do not have this issue, and will cost less assuming the same set of features.
The advantages of Rich Client interface are its speed, reliability, ability to show multiple windows at the same time and copy/paste between them, and a full immunity to hackers.
The disadvantages of the Rich Client interface is that the software may runs on a specific operating systems and can be accessed only through the company network.
Pharma Suite relies on the Rich Client interface, because software speed and reliability is critical, all users have access to the company network. The software requires no at all, or minimal installation depending on the manufacturer IT preferences.
7. Analytics and Reporting
Good pharmaceutical chargebacks processing software should show all aspects of processing, indirect sales analysis and some forms of reconciliation between 844 and 867 data and between direct sales and chargeback data, and be capable to transfer all relevant data to the company CRM.
Sophisticated BI measures should be shown on dashboards on customer, product, contract and wholesaler levels.
The users know best what type of data they need to see, and can ask vendors for the corresponding reports.
Some vendors do not create off-the-shelf reports, and choose to give report-building tools instead. Our concern is that gathering data for some reports includes sophisticating filtering and table joins, will cause a significant learning curve for the users and be made with errors.
Relasoft chargeback processing software comes with numerous reports, covering all possible filtering and grouping options to “slice and dice” the data by any dimension, as well as with MS Excel-based dashboards showing BI measures and KPI, specific to pharmaceutical industry. Pharma Suite has a channel to pass data to CRM, including a complete solution for CRM Salesforce.com.
8. Costs
The costs of a pharmaceutical chargeback processing software implementation usually include: one time setup fee by the vendor, yearly licensing by the vendor, third-party licenses for the required software and third-party fees for EDI translation and sometimes transmission.
8.1 Software Licensing
Different vendors have different fee structure, and fees vary greatly between the vendors. The fees may be charged for each user license, per products, per transaction line, etc.
8.2 EDI
Different EDI vendors have different rates for transmitting and translating the documents. If the chargeback software vendor recommends a particular EDI vendor and you expect a high volume of chargeback, it is a good thing to compare the volume-based transmission costs.
Another EDI-related expense is EDI translation maps. Chargeback-related communication with each wholesaler requires two or three maps, built at a price range of $600-$1,500 per map.
8.3 Software Setup and Integration
Many manufacturers prefer to get enterprise level software, doing all typical processing tasks, like Medicaid invoice processing, rebate calculation, Gross-To-Net analysis, etc. The setup costs on a “package” deal are better, than purchasing each module separately, and from different vendors.
It is easier and less costly for the vendor build the whole interface with ERP at once for all modules.
8.4 Third-Party Licenses
The costs of third party licenses are often overlooked, yet they may present a significant expense. For example, a license for a database server may cost company tens of thousands of dollars yearly.
Manufacturer should request from the vendor the costs of licenses for all third-party tools that vendor’s software requires.
8.5 Customization Costs
A need for some customization comes often.
Exorbitantly high software developer costs charged by some vendors effectively preclude creation of features delivering convenience and efficiency to the users, and thus seriously affect their performance.
Relasoft offers great discounts on purchases of the whole Pharma Suite, which comes with all modules, usually utilized by the pharmaceutical manfucturers: Contract Administation, Chargebacks, EDI Translation, Commercial Rebates, Government Pricing, Medicaid state invoice processing, Medicare Coverage Gap invoice processing, Managed Care rebates, Gross-To-Net Profitability Analysis, and Account Receivable Analysis.
Relasoft sometimes caps the costs of Pharma Suite integration with the manufacturer’s ERP.
Relasoft tries to minimize license fees, payable to third parties. For example, a free edition of database management tool works just fine for small manufacturers. At medium and bigger manufacturers we share the servers with other applications, and thus our users also don’t incur these additional costs.
Relasoft Pharma Suite software comes with a complete EDI mapping and requires no EDI volume-based fees whatsoever.
Relasoft software development rates are competitive even against rates for software developers on a contract, charged by placement agencies.
9. Software Deployment
Pharma manufacturer may have preferences on where the chargeback processing software is deployed: on the company network, in the cloud, on a hosted server.
Relasoft Pharma Suite support all deployment options and is deployed according to the manufacturer’s preference.
10. Trial Period
It is not easy to fully comprehend the functionality and efficiency of the software during traditional one or two demo sessions. Reviewing the long list of features is helpful, but does not show the system limitations, especially with processing real-life size worth of data..
Vendors should be asked for a “Trail Period”, during which the company can cancel the deal if the software features and speed are not up to the task.
Relasoft always agrees to give “Trial Period” to pharma manufacturers.
Conclusion
Choosing software to do complex processing is not a simple task, requiring a good planning and preparation on the buyer’s end.
The ten factors address the main issues in choosing pharmaceutical chargeback processing software.
If you have any questions about Relasoft Pharma Suite or pharmaceutical chargeback processing, please call us at 416-783-1027 or email me a.werner@relasoft.net.
