Class of Trade Methodology: Education and Adherence on the “Front Lines”

| September 23, 2007                               

CLarissa Crain, CIS Compliance Specialist
clarissacrain@cis-partners.com

Class of trade designation and customer management are best maintained when government programs staff work with customer service to ensure proper designations and treatment of customers.

Most often class of trade (COT) designation is made by a company’s customer service staff. Because a customer must be set up in the customer master list prior to processing an order or chargeback request, it is important that customer service and chargeback processors on the “front lines” have the ability to add customers quickly and efficiently. COT is an important part of a customer’s profile and also has a significant impact on government pricing. Often times this impact is not fully understood by customer service staff and therefore errors in designations occur.

Government pricing calculations include or exclude data based on class of trade. In the most simplistic sense, incorrectly assigned or multiple classes of trade can lead to incomplete or inaccurate data—a False Claims Act violation. To avoid this risk, definitions and controls around the designation of class of trade should be implemented through the development of a Class of Trade Methodology. Government Programs staff should be responsible for defining COT and providing proper information and training to customer service staff. While the customer service staff should be encouraged to determine COT by referencing COT definitions, they are also encouraged to contact government programs staff if they do not know how to classify a particular entity.

Customer Service Representatives (CSRs) and Chargeback Processors should be educated, to the extent possible, on the role of COT in government calculations. An understanding not only of COT definitions, but also of the impact of incorrect information is important. CSRs should be trained to avoid duplicate records. Multiple entries for one customer can lead to risk of more than one COT being assigned to a given customer. Multiple COTs put the company at risk of not properly assigning customers for purposes of AMP calculations, again opening the door for a potential False Claims Act violation.

Developing, implementing, and monitoring adherence to, a COT Methodology can be challenging. Receiving a full commitment to adherence by the customer service department is the cornerstone to success. However, even the tightest policy cannot completely mitigate the risk of human error, therefore monitoring of the customer master list is important. For many companies this is difficult, as they lack the resources to validate a customer master list that can contain thousands of records. Yet, the risk remains.

As the government increasingly continues to hold companies accountable for False Claims Act violations, COT becomes an area in which they are likely to look. For many companies it is an overlooked element, where gaps in process and validation may exist. Is your company taking a proactive, collaborative approach to COT on the “front lines” and throughout the business?



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