Without question, you can make a lot of money in pharmaceuticals. In 2014, biopharmaceuticals alone made $1.2 trillion in the United States. Considering that big footprint for one part of the industry, it’s no wonder many smart people get into the drug business. While there are perks to this work, there are also challenges. For one thing, many banks and credit card processors see the industry as being high risk.
What is it about pharmaceuticals that seem so risky? First, there’s the issue of human contact. Any product that people ingest gets more scrutiny from government regulators than other products. Even drugs for pets need more review than products that dogs and cats don’t ingest. That means there’s a high hurdle for these products to make it onto actual or virtual store shelves.
Even after regulators clear drugs and you can sell them, there’s more scrutiny. Public health teams keep tabs on reports of side effects. There are many stories about huge recalls of prescription and over-the-counter drugs. With recalls, the U.S. Food and Drug Administration (FDA) makes retail pharmacies figure out who got the drug. They then have to call the patients’ doctors. Though U.S. law doesn’t force pharmacies to give a refund for recalled drugs, many do so because it satisfies their customers.
Online drug companies may decide not to give refunds for recalled medicines. This choice may anger customers. As a result, customers could ask for a refund through chargebacks. Even though the vendor doesn’t have to give back the money, the credit card issuer may find the company wronged its customers all the same. This is one example of why pharmaceutical companies need a high-risk merchant account. With this particular account, the processor is less likely to cut them off when there’s a series of chargebacks after a recall takes effect.
The risk doesn’t apply only to retail pharmacies that provide drugs to people. It also hurts retailers that do prescriptions for cats and dogs. This part of the industry faces the same risk of chargebacks if there’s a recall on pet meds. That’s why they also need a high-risk merchant account.
Delivery is another reason credit card processors consider mail-order drug companies to be high risk. Quite simply, the product may never arrive. Weather and other factors may cause a delay, and some packages get lost. Another concern is that packages left on porches or front stoops may get stolen. They may also get ruined while sitting out in the sun or icy weather.
When things go wrong with the delivery, customers ask their credit card company for a refund. This action leads to a chargeback. While processors that offer high-risk merchant account services expect this to happen, typical credit card processing firms don’t. A traditional processor may stop or cancel your account. Read more: e-commerce credit card processing comparison.
Anyone buying prescription or over-the-counter drugs may decide after taking them that they aren’t working. Many factors contribute to how well a drug works. For example, patients have to follow dosing rules. If they’re taking other medicine, those drugs may interfere with the new drug. Claiming their medicine isn’t working, these people may ask their credit card company to give back their money. Once again, the drug retailer faces chargebacks.
Lawsuits are another problem for medication vendors. Have you ever seen ads for law firms seeking patients who took certain drugs? They claim the medication causes serious side effects. Whether the case has merit or not, the idea that medication is creating health problems may spur patients to act. They might want a refund from their pharmacy if they took the drug.
In these cases, the pharmacy faces an investigation from the credit card company. While the credit card issuer looks into the claims, the pharmacy has thousands of dollars on hold. Customers like being able to ask for their money back. But the process places lots of stress on the merchant.
Some companies sell nutraceuticals. This drug group includes vitamins, supplements, and herbal products. It also covers nutrients from food that are put in a liquid, pill, or powder form. Manufacturers say their supplements offer health benefits. But, under U.S. laws, it’s up to manufacturers to make sure their products are safe. It’s only after they reach the public that the FDA can see if they’re harmful.
Because of how the regulations work, nutraceuticals companies may sell products that are under review. They’re then stuck in the middle while different groups sort out whether a product is safe or not. Meanwhile, if people find out from the media or their friends that the FDA is checking the safety of their supplement, they may stop taking it. In fact, they may ask the vendor for a refund. This is another example of a situation beyond the retailer’s control causing chargebacks.
Nutraceutical retailers may also feel the impact of lawsuits. When they’re a part of the suit, these companies may have chargebacks due to the negative publicity of the court case. Their company’s name may appear in news reports, raising the fears of customers.
Many nutraceutical products claim to boost weight loss, muscle growth, sleep, or energy. Even though supplements work best with exercise and healthy eating habits, consumers who don’t see fast or superior results may insist on getting a refund. These customers blame retailers for selling a flawed product. Because of this attitude, nutraceutical companies get more chargebacks than traditional credit card processors want to handle. That’s why these companies need a high-risk merchant account.
High-risk industries such as pharmaceuticals face a higher cost of doing business: insurance may be more costly, some products have a short shelf life, and traditional credit card processing companies may not want to work with them. Let High Risk Pay show you how fast, easy, and affordable it is to set up credit card processing for your drug company. With no application or setup fees and approval within 24 hours, High Risk Pay gets you ready to accept credit card payments from customers.
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