Company: HROW
Filing Date: 2025-03-27
Form Type: 10-K
Source: 0001641172-25-000925
Chunk: 407

Company: HARROW, INC.
Filing Date: 2025-03-27
Form: 10-K
Item: Item 1B
Chunk 407
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 customers establishing prices for products which the indirect customer purchases
through a wholesaler. Alternatively, we may pre-authorize wholesalers to offer specified contract pricing to other indirect customers.
Under either arrangement, we provide a chargeback credit to the wholesaler for any difference between the contracted price with the indirect
customer and the wholesaler’s invoice price, typically Wholesale Acquisition Cost (“WAC”). Prior period chargebacks
claimed by wholesalers are analyzed to determine the actual net price per package (“NPP”) for each product. This calculation
is performed by product by wholesaler. NPPs can be affected by several factors such as:

·Changes
                                            in customer mix

·Changes
                                            in negotiated terms with customers

·Changes
                                            in the volume of off-contract purchases

·Changes
                                            in WAC

As necessary, NPPs are adjusted
based on anticipated changes in the factors above.

The difference between NPP and
WAC is recorded as a reduction in both gross revenues in the consolidated statements of operations and accounts receivable in the consolidated
balance sheets, at the time revenue is recognized from the product sale. We continually monitor chargeback activity and adjust NPPs
when we believe that actual selling prices will differ from current NPPs.

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Government Rebates

Government rebates reserve consists
of estimated payments due to governmental agencies for utilization of our products by beneficiaries under such governmental programs.
The two largest government programs are Medicaid and Medicare.

We participate in the Medicaid
Drug Rebate Program and pay rebates to the states related on Medicaid beneficiary utilization of our products. Medicaid rebates
are billed within 60-90 days of the end of the quarter in which the product was dispensed to a Medicaid beneficiary. Medicaid rebate
amounts per product unit are established by law, based on the Average Manufacturer Price (“AMP”), which is reported on a
monthly and quarterly basis, and, in the case of branded products, best price, which is reported on a quarterly basis. Medicaid reserves
are based on expected claims from state Medicaid programs. Estimates for expected claims are driven by patient usage, sales mix, calculated
AMP or best price, as well as inventory in the distribution channel that will be subject to a Medicaid rebate. As a result of the delay
between selling the products, dispensing the products and rebate billing, the Medicaid rebate reserve includes both an estimate of outstanding
claims for end-customer sales that have occurred but for which the related claim has not been billed, as well as an