http://investors.acrux.com.au/DownloadFile.axd?file=/Report/ComNe...

http://investors.acrux.com.au/DownloadFile.axd?file=/Report/ComNews/20131121/01468221.pdf

This is from the 2013 AGM - may help

To help you interpret our quarterly results, I would like to explain briefly how the health system works in the US. The US health system is unique in that it currently operates using private health schemes which are typically provided as part of an employee’stotalremuneration package. These schemes are managed by Commercial Managed Care entities (‘CMC’), including Pharmacy Benefit Managers (PBM). Each PBM has its own formulary, which is a list of pharmaceuticals reimbursed by the insurer to the insured party. Typically, if a product is not on the list, then it is not covered by the employee’s insurance. Pharmaceutical companies wanting to have their product(s) listed on the formulary of a PBM have to negotiate with that PBM. The efficacy and safety of the product(s) are key drivers for inclusion, but where there are several alternative products available (which is generally the case), a percentage of the cost of the product, which is referred to as a rebate, is negotiated. After a patient has filled their script for the product and claimed this expense on their insurance, the PBM retrospectively claims the agreed rebate from the Pharmaceutical Company. Because of the complexity of the system, this claim is generally made approximately six to nine months after the product script has been filled. The actual rebates payable to the PBMs by the pharmaceutical companies cannot be calculated in real time. The pharmaceutical companies have to 7 forecast or accrue what rebates they expect to pay to each PBM to calculate each quarter’s net sales. The level of net sales of the product also has to incorporate the costs of vouchers or co‐pay cards that are instrumental in establishing market share when new products are first launched. The actual costs associated with the co‐ pay cards are difficult to establish accurately on a monthly basis during the initial launch period due to the distribution arrangements for these cards. As a result, accounting entries to correct accruals for rebates on sales are made as claims patterns emerge and are typically made later in the calendar year in which those sales are made. These accounting entries provide adjustments to accruals in both recent and preceding quarters.