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This article talks about a very important issue for Internet merchants . . . preventing online fraud. Most of the attention in the press surrounding online fraud is focused on consumers…whether its having their credit card numbers stolen by hackers or being suckered into

According to USFDA, a combination product is one composed of any combination of a drug and device; biological product and device; drug and biological product

giving their personal and financial information by a phony email phishing scam. But barely any attention has been given to the other side of the coin…the Internet merchants who are defrauded by crooks posing as legitimate consumers.

One of the first things you need to do

; or drug, device, and biological product and fixed dose combination would include two or more combinations of drug.

Examples of combination products may in

as a merchant to prevent fraud is to always verify who the consumer is. On card-present transactions, this can easily be done by asking for a valid photo identification card, for example, a driver's license or state issued ID card. On card-not-present-transactions, this

lude drug-coated devices, drugs packaged with delivery devices in medical kits, and drugs and devices packaged separately but intended to be used together.

is a much more difficult task for the merchant to accomplish.

There are two basic steps that every online merchant should follow to ensure that the consumer is legitimate.

The first step in preventing fraud in a card-not present environment is called address verificatio

here is enormous increase in the number of combination products entering the market in the recent years. Combination products have proven advantages but fixe

or AVS. The consumer should be required to enter their billing address when they are filling out their credit card information. The payment gateway will then send this information to the payment processor for verification. The payment processor will then pass the address

d dose combinations are still in the process of convincing regulatory authority on their advantages over the single ingredient formulations.

Combination pro

information to the issuing bank who will then match that information with the address information they have on file for that card. The payment gateway will then send back some codes to let you know whether or not the AVS was a match. AVS only compares the street number a

ucts have become life saving products for the pharmaceutical companies who doesn’t have many innovative molecules in their product pipeline and have been inc

nd ZIP code against the information on file with the card issuing bank.. So if the street address was 1234 Main Street and the ZIP code was 90210, the transaction processor would compare 1234 and 90210 with the issuing bank’s information.

Once this process is completed,

easingly used in the product life cycle management. Even the companies having product patents are trying to extend their product life cycle through the combi

ou will get an AVS code that tells you how well the address matched the bank’s records. If you get an AVS code indicating that the address and/or zip code do not match, it is up to you to decide whether you wish to accept the risk and ship the goods to the customer. We r

nation products and maximize the revenues. But the companies involved in this practice are overlooking that they are burdening the patients both economically

ecommend that you do not ship goods in cases where the zip codes do not match. This will not only help to prevent chargebacks but will also prevent problems from occurring if the consumer works during the day. The shipping companies have become so inundated with packages

and physically. They need to rightly judge the benefits of the combination products and they have to even look at the risks involved when combining the produ

from the ever-growing Internet world that they will drop the package at the door, often times not waiting for a signature. Without a signature, you do not have proof of delivery. And without proof of delivery it is very hard to fight a chargeback.

It is important to know

ts. Some of the combination products were well accepted by physicians while others suffered. Companies involved in development of combination products are fi

that AVS has some limitations, because this may impact your decision-making about how to treat bad verification results:

•The AVS system isn't always reliable; bad results can be triggered unnecessarily because people move, or because some people report five-digit zip co

ding difficulty in defining their combination products and facing various challenges from selecting a combination to marketing it.

Following aspects would a

des and some report nine-digit zip codes. This may generate a response stating that the address matches, but the zip code does not match.

•The AVS system can't handle addresses outside the U.S., so if you decide to ship only to addresses with good AVS results, you will r

dd to the challenges in developing combination products:

Which markets to tap where the combination products can do fairly well?
Which combination prod

ule out all international orders. Online merchants typically do not rely solely on the AVS result to accept or reject an order. Most online merchants use the address verification service as part of an overall fraud prevention program and in conjunction with several othe

cts are meaningful and rational?
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin

r tools to help them prevent fraud. Now we’ll talk about the second step in basic fraud prevention – Card Code Verification

To help reduce fraud in the card-not-present environment, credit card companies have introduced a card code program. Visa® calls this code Card V

tions increase the patient compliance?
What would be the developing cost?
How to tackle the risks encountered during combination product developmen

rification Value (CVV); MasterCard® calls it Card Validation Code (CVC); Discover® and American Express call it Card ID (CID).. The card code is a three- or four- digit security code that is printed on the back of cards. The number typically appears at the end of the sign

t?

As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel

ature panel. This program helps validate that a genuine card is being used during a transaction. Card code verification works similar to address verification. The payment gateway passes the code entered by the consumer to the payment processor who then compares it to what

ping new procedures for reviewing their safety, efficacy and quality.

Professional from academic institutions, pharmaceutical industries, health care indust

is on file at the card issuing bank. The payment gateway then returns a code to let you know whether the numbers matched. This helps to verify that the person using the card has the card in their possession at the time they place the order.

We advise all merchants to re

y and representatives from various regulatory agencies are working out to design the regulatory requirements for manufacture and sale of combination products

uire this code for all credit card transactions to help combat fraud. It is important to note however that these numbers can be obtained by fraudsters just as credit card numbers are obtained if they are stored by the merchant. It is for that reason that the card associat

.

As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de

ions prohibit merchants from storing these codes in their system.The use of CVV2, CVC2 , and CID by online merchants has continued to increase, rising from 44% of online merchants using this tool in 2003 to 66% today. It appears that asking for the CVV2 , CVC2, and CID ha

elopment. They need to be wiser in analyzing the market trends and the regulatory requirements.

Companies that provide selfless information through particip

s become standard practice for the majority of online merchants.

So there you have it. Two very basic and easy fraud prevention tools that every online merchant should use to prevent fraud and eliminate chargebacks.

Copyright 2007 Loud Commerce, LLC. All Rights Reserved

tion in industry events and feedback to regulatory authorities would be able to face the challenges and will be successful in developing combination products

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