EDI can automate contract administration, and done properly, it has a dramatic bottom-line impact. Accurate and timely data for a wide variety of contracts, distributors/customers, and products is fundamental. Today’s electronic world has spawned complexity; changes happen at a faster pace. Errors become embedded and difficult to challenge. Successful businesses automate the challenge process using the Internet and EDI to challenge chargebacks.

Timely awareness of erroneous claims or chargebacks provides vendors to large distributors such as AmerisourceBergen, Cardinal Health, or McKesson with the basis for reducing errors. While individual chargebacks might be small enough to ignore, they are large in total and sure to continue without addressing the cause. Often the chargeback itself is incorrect and proper communication with the Trading Partner can clear things up. By addressing the issues that an EDI chargeback brings up, both sides benefit and the business relationship will be more successful.

Overview

Claims, deductions in payments, and other charges based upon lot or expiration dates occur and are frequently wrong. They are difficult to challenge because the data inflow is sporadic and poorly organized. Deductions refer to changes in contracts set in e-mails, faxes, spreadsheets, and phone calls. They then must be organized and compared to contract terms and company records such as shipment data. If a chargeback is incorrect, a claim with supporting documentation must be filed and the sales, shipping, or other department must be notified to prevent further chargebacks. Rebates face similar problems: poorly organized and sloppily prepared claims. These claims must be compared to quantities shipped as an indicator of accuracy. When distributors re-ship to many providers, end user data is needed.

The role of EDI and Electronic Commerce is to speed up the process and reduce errors by sharply reducing data entry. INbound chargeback messages are delivered directly into tables from which reports are written. This is why Reason Codes are crucial and must be clearly explained in claims challenges. Also, the same Reason Code is used differently amongst companies. From the INbound tables, reports can be written, data copied to business application tables, and OUTbound messages generated. Implementing cost can be lowered if you write reports, etc. An example is a sort by Reason Code and amount claimed. The ability to automate challenges means the existing staff can focus upon the more costly chargebacks.

The response for challenged chargebacks and rebates can also be automated. OUTbound messages can be EDI Transaction Sets (documents) such as the Product Transfer Account Adjustment (844) or Product Transfer and Resale Report (867) or automatically generated e-mails or XML documents to auto fill Web Forms.

Contract Administration Data Flow

The fact is that great losses can occur when contract administration is done poorly. This is because improper deductions are not discovered. The remedies could be increasing head count or process automation.

Key challenges include: