Company: HROW
Filing Date: 2025-03-27
Form Type: 10-K
Source: 0001641172-25-000925
Chunk: 783

Company: HARROW, INC.
Filing Date: 2025-03-27
Form: 10-K
Item: Item 4
Chunk 783
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 a matter arising from the current period audit of the financial statements that was communicated
or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial
statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit
matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical
audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Product
Sales Deductions – Branded Products

Critical
Audit Matter Description

As
described in Note 3 to the consolidated financial statements, sales of branded pharmaceutical products are subject to variable consideration
due to chargebacks, government rebates, returns, administrative fees and other rebates, co-pay assistance and prompt pay discounts (collectively,
“sales deductions”). Management estimates the sales deductions by product using information related to patient usage, sales
mix, wholesale acquisition cost, calculated average manufacturer price or best price, inventory levels in the distribution channel, expected
claims, actual returns experience, contracted rates, estimate of program participation and redemption and invoices outstanding. Management’s
estimate can be affected by changes in customer mix, changes in terms with customers, changes in volume of off contract purchases and
change in the wholesale acquisition cost, among other items. Management utilizes the services of a third-party professional services
firm to estimate rebates and chargebacks associated with sales of its branded pharmaceutical products.

We
identified auditing the estimates of product sales deductions for certain branded pharmaceutical products related to chargebacks, government
rebates, administrative fees and other rebates and co-pay assistance as a critical audit matter given the significant judgment required
by management in determining assumptions such as inventory levels in the distribution channel and estimated patient usage. In addition,
estimating the product sales deductions for government rebates requires significant judgment related to the estimates of outstanding
and expected future claims for end customer sales. Auditing these assumptions required a high degree of auditor judgment and subjectivity
and extensive audit effort.

How
the Critical Audit Matter Was Addressed in the Audit

Auditing
the assumptions used in determining the product sales deductions included testing the design and operating effectiveness of management’s
controls over the product sales deductions, including controls over the relevance and reliability of external data, the assumptions used
to estimate these sales deductions, and management’s retrospective review of the estimates. Our procedures also included