An Innovative Approach to Contract Alignment and Chargebacks

A new, shared industry solution is helping with contract alignment and chargebacks.

By: McKesson Health Systems Editorial Team

Read time: 2 minutes

Inefficiencies and disputes among trading partners cost the pharmaceutical industry an estimated $500 million in resources each year*. This can leave healthcare providers like health systems burdened with an estimated two million re-bills as a result of pricing errors and contract misalignment. Over the past two years, McKesson has taken a lead role, in collaboration with Chronicled along with pharmaceutical manufacturers and buying groups, in defining requirements and testing the technology for commercial use.

A digital solution

Chargebacks happen when wholesale distributors sell medicine. But pricing and eligibility contracts are negotiated separately, which can complicate transactions, leading to chargebacks. To help smooth the contract alignment and chargeback process, a new, shared industry solution on the MediLedger Network, part of Chronicled, aims to improve pricing quality and alignment among trading partners by implementing chargeback accuracy through blockchain technology. The solution will also reduce complexity of procurement for health systems as they face challenges with re-billing due to pricing errors. The effort toward optimizing the process is expected to reduce errors by 98% on the MediLedger Network.

Why it matters

As the first blockchain solution for contracting and chargebacks, this collaboration marks a digital transformation across the pharmaceutical industry. The technology aims to provide the following benefits:

  • Create an estimated $500 million in value by eliminating duplicate effort between trading partners and other efficiencies within the pharma contracting and chargebacks process
  • Reduce complexity of procurement for health systems, lessening issues with re-billing/add-billing due to pricing errors and misalignment
  • Decrease the current industry average chargeback/pricing error rate of around 4% to less than .1%

In speaking about the technology, Justin Bowers, vice president, contract administration and finance operations, McKesson shared,

“Blockchain is empowering us to evolve so there is a single source of truth for the network of decisions rather than siloed processes. I’m proud to see us breaking down those barriers to better the industry,” said Justin.

Read more about McKesson’s involvement with the working group.

Learn how McKesson partners with health systems to achieve more.

* According to MediLedger Network estimates.