Company: HROW
Filing Date: 2025-03-27
Form Type: 10-K
Source: 0001641172-25-000925
Chunk: 1643

Company: HARROW, INC.
Filing Date: 2025-03-27
Form: 10-K
Item: Item 9B
Chunk 1643
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 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. The Company continually monitors chargeback activity and adjusts NPPs when the
Company believes that actual selling prices will differ from current NPPs.

Government Rebates

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

    F-20

The Company participates in the Medicaid Drug Rebate
Program and pays rebates to the states related to Medicaid beneficiary utilization of the Company’s 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 estimate for future
claims that will be made when inventory in the distribution channel is sold through to plan participants. Many of the Company’s
branded products are also covered under Medicare. The Company participates