Managing Deductions and Disputes for CVS Pharmacy

Managing Deductions and Disputes in CVS: A Guide for CPG brands

Gaining distribution in CVS retail stores can be a crucial step forward for any CPG brand, allowing the brand to gain access  to more than 74 million CVS ExtraCare customers, and one of the most well-known drugstore chains in the United States. However, with new distribution comes new types of deductions to manage and control. Deductions, which often arise from discrepancies in invoices, logistics, or promotional activities, can significantly impact cash flow, given that up to 30% of revenue is spent in this category.

Successfully navigating this process not only helps maintain your profitability but also strengthens your relationship with CVS. In this guide, we’ll cover how to effectively manage deductions and disputes within CVS, providing strategies to streamline your financial processes.

What are Deductions?

Deductions are amounts withheld by CVS from supplier invoices due to various reasons. These could range from shipping issues, pricing discrepancies, trade promotions, or damage claims. Understanding why a deduction occurs is critical in order to address and resolve it quickly. Let's dive into the various types of deductions.

Common Types of Deductions in CVS

Shortages

Shortages occur when CVS claims that part of the order was missing, which leads to a reduced payment.

When there is a "V", "W", or X on the end of the invoice number, this means that CVS believes that you haven't shipped in full, according to the PO that was signed.

Shipping And Supply Chain Performance

• AI + Vendor Number + Month + Year (AI6789FEB2024) = Appointment Integrity.

This means that there was a no-show or late to the approved appointment at the DC. This can include arrival one hour outside of the scheduled appointment, cancellation or rescheduling request less than 24 hours prior to delivery, or failure to arrive for scheduled appointment

Penalty: $275 per occurrence, no max

• LOG + ID Number (LOG6789) = LOG Expense Offset for CVS managed freight

Logistics Deductions result when a Carrier or Supplier fails to comply with CVS' routing instructions or freight handling requirements.

Penalty: $100 fee per occurence, no max

• SCP + "Charge Number" + OT (SCP1234567OT) = On Time, In Full Expense Offset.

This is the measure of ability to deliver product by the Ship-to-Arrive date and with the purchase order quantities. The PO can arrive on or up to four business days before the Ship-to-Arrive date, excluding holidays and weekends.

Penalty:

• SCP + "Charge Number" + SP (SCP1234567SP)= Small Parcel Expense Offset

The Small Parcel Offset Expense was created to manage and limit the amount Small Parcel shipments because they are more costly and take longer to receive.

Penalty: $5 per case over the limit, up to $150

• SCP + "Charge Number" + AS (SCP1234567AS)= ASN Program (Advance Ship Notice)

This deduction will occur when there is a missing ASN, late ASN, or inaccurate ASN. Inaccurate ASNs can include not meeting all of CVS' technical specifications for readable ASNs.

Penalty: Missing ASN = $100 per PO; Late ASN = $75 per shipment / delivery; Inaccurate ASN = $50 per shipment / delivery.

Obtaining Backup for Supply Chain Performance Deductions

In order to obtain backup for SCP Deductions, follow these steps:

1) Go to the Supply Chain Performance Portal

2) Use the six to eight digit number on your check description to  search for charge details via the 'Find Charges' tool.

To obtain access to the portal,  send the following to  SupplyChainPerformance@CVSHealth.com:  

1) Vendor Name  

2) All Applicable Vendor Numbers    

3) Contact Name (s) – unless otherwise noted you will be designated as the  account admin and will have the ability to add new users to your  account    

4) Contact Email  

5) Contact Phone Number

Co-Op Advertising

Co-Op advertising fees are taken for promotions and coupons that have been agreed upon with CVS. CVS will categorize by the following invoice numbers that start with:

• 00 = Front Store invoices
• 18 = Front Store invoices
• RX = Pharmacy Invoices
• HI = Hawaii Front Store invoices
• NAV = Navarro and Puerto Rico Front Store invoices
• DTS = Diabetic Test Strips
• StrBr = Front Store, Store Brands vendors invoices
• SB = Front Store, Store Brands vendors invoices
• CWP = CVS WorkSmart Program invoices

Returns Deductions

Returned deductions occur when the product has expired, damaged, defect, or otherwise unsellable. Returns invoices numbers will start with:

• CVS
• MCR
• P
• R
• RX MCR
• RX UNSALEABLE

Effectively Disputing Deductions for CVS

Disputing Shipping and Supply Chain Deductions

Shipping and Supply Chain deductions must be disputed through the Traverse Portal.

Disputes are reviewed by individual PO, and processing times will differ based on the program.

• Delivery Appointment Integrity Program: These charges can be disputed in a 6 month window from the deduction date
• On Time In Full and Small Parcel Programs: These charges can be disputed in a 90 day window from the date the charge was created

Any questions regarding Supply Chain performance disputes can be sent to SupplyChainPerformance@CVSHealth.com.

All Other Deductions

Shortage, Co-op, and returns deductions must be disputed in the CVS Vendor Portal, which can be initiated in the Vendor Dispute Management Dashboard.

First, submit the Vendor Credit Memo number into the Debit Memo Reference Number section.

Next, submit up to 500 invoice lines per dispute form attach any relevant documentation such as POD, agreements, emails, etc, and add any comments or clarifications needed.

Conclusion

Managing deductions and disputes with CVS can be a complex task, but with a systematic approach, you can improve your cash flow and maintain a healthy partnership with CVS. Using a deduction management software like Confido can help you automate this process and alleviate the manual hours needed in deduction validation and disputing.

By monitoring your invoices, understanding deduction codes, centralizing documentation, and investing in technology, your CPG brand can stay ahead of deductions and resolve disputes efficiently.

Dedication to these best practices ensures you recover lost revenue while keeping operations smooth.