Trade Financials
Products, as they travel throughout the pharmaceutical value chain between manufacturing, distribution, and dispensation, spawn billions of dollars in financials flows each year. Not only covering initial order payments, these financial flows also encompass the reimbursement and incentive programs that companies manage. The impact of these programs on financial performance can be significant. Chargeback claims between a manufacturer and its wholesale distributors may range up to 5% of gross sales. Pharmaceutical returns, while varying widely in volume depending on product type and returns policy, average between 2-4% of originally distributed product. While the causes for financial reimbursement may vary, they share a common need to precisely and efficiently submit and reconcile these claims.
On the surface, trade financial reconciliation sounds like an easy proposition - submit a claim and be reimbursed for it. The reality is that every year, individual companies lose millions of dollars due to the inability of pharmaceutical companies, wholesale distributors, and pharmacy chains to clearly answer the following questions:
- Did the sale or product movement represented on the claim actually occur?
- Are the products on the claim correctly represented?
- Are the terms of sale correct, including trading partners, locations, transaction dates, and product quantities?
- Do the terms of the reimbursement claim correctly match those of the corresponding product transaction?
- Are interrelated transactions, such as negative chargebacks spawned by product returns, captured correctly?
The statistics gathered through several market studies highlight the problem:
- 10-15% of chargeback lines flagged for exceptions
- 40% of product return claims flagged for exceptions
- 30-40% of expected reverse chargeback claims are never received
- 3-5% of pharmaceutical revenue is lost due to various reconciliation process inefficiencies
Being able to get a handle on your trade financial reimbursement process depends upon your visibility and access to precise product data and value chain transaction information. Without it, managing your trade financials can become no better than a guessing game.
Trade Financials - 360-degree Control over Trade Financial Management
Trade Financials enables companies to reach a new level of trade financial management by providing an exactness and efficiency in trade reimbursement previously unseen. By marrying the precise product identification and transaction detail afforded by pedigree value chain master data with a suite of integrated tools to enhance financial claim submission and reconciliation, companies can finally take control over these massive financial flows. The end result: a precision in trade financial management that can be fine grained down to even the individual product package level. Consider it the ability to construct an item-level financial statement for your business.
Trade Financials changes the game by augmenting existing contract management systems in two ways:
Precise Data
Trade Financials brings to bear the precise and reliable information supplied by electronic pedigrees. Product data such NDC, lot number, expiration date, and serial numbers can be correlated directly to reimbursement claims. Transactions that impact products as they move throughout the value chain are clearly identified, including trading partner identification, and precise transaction dates/locations. Finally, related financial documents such as invoices are linked to the product transactions. Compared to existing methods of mapping EDI 852/867 documents to financial claims for reimbursement, leveraging pedigree data reduces errors in claim preparation, eliminates exceptions during claim reconciliation, and provides exact reimbursement credit to be determined.
End-to-End Claim Support
Rather than relying on traditional single-ended methods of financial reconciliation, Trade Financials supports trade reimbursement by supporting both ends of the claim process: Submission and Reconciliation. Companies submitting a claim have an efficient way of providing the evidence to back up the claim by also submitting the appropriate evidence through pedigree data. Companies reconciling such claims can leverage the attached pedigree data to quickly validate the claim and speed exact payment through the process.
Key Benefits
Companies leveraging Trade Financials to enhance their trade financial performance enjoy a variety of benefits, regardless of whether you submit or reconcile financial claims. These benefits include:
Product Profit & Loss Visibility
Gain visibility into product margin impacts as products move through your business. Realize improved predictability of financial results by eliminating errors, reducing exceptions, and decreasing variability in claim closure time. Improve traceability of financial results for use in Sarbanes-Oxley (SOX) 404 compliance.
Trade Financial Insight
Improve insight into the financial performance of your value chain though visibility and analysis along several dimensions, including claim types, product lines, and trade partners.
