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My business is profitable, why bother?

Yes, but is your business profitable enough? Even when you earn a decent living now, you cannot be quite sure that your business is as profitable as it ought to be.

You know your price is right when you can say yes to the following questi

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

ons:

Are you sure that you will be able to retire comfortably?
Are you sure that you will be able to make the investments in the coming years, necessary to continue your business?
Are you sure that you will be able (financially) to hire the people you need?
Are y

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

Examples of combination products may in

ou sure your business is profitable enough for a possible future buyer?

Are you making a decent living yourself?

Are there any existing loans and can you service them?

Is your business competitive?

How can you be sure of these things? In g

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

eneral terms the answer is very simple. You can be sure of these questions when your turnover is sufficient to cover these points. Turnover is the product of quantity sold and price per unit. Let us focus on the price. Selling enough of your products or services is not the subject of th

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

is article.

What should be covered by the price you ask for your products or services? Let us look at the questions mentioned above. For each item we will determine the annual figure. When we have all these yearly figures, we add them up. This total represents the sum of all

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

Combination pro

the annual costs and the reservations we have to make each year.

Your retirement.

Whether your are saving money in the bank or pay an insurance company, this money must be brought up by your business.
Determine the sum you save or pay (or want to) annually for your

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

retirement.

Investments.

Usually the yearly contribution to the Capital Replacement Reserve is the total of depreciations (writing off investments) and therefore related to the installed base (of machinery).
This method is based on historical data. Depreciations

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

concern investments done in the past.

There is a better method that looks into the future:

Decide what time-horizon you will use. Say 10 years.
Take a spreadsheet and occupy 11 columns, 1 column for description and 10 columns for a 10 year period, one column per year.

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

Write down your planning for future investments. One row for each item. Take the yearly inflation into account.

Add up each column. Totalize the columns, now you have the grand total of future investments for the coming 10 years.

Divide this total into 10, resulting in t

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

he average annual investment.

Personnel.

Make al list of your staff members followed by their annual salary. Depending on your local circumstances, you have to take the following items into account:
Social security insurance.
Medical costs insurance.

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

Sickness, average number of days per year, per employee.

Holidays.

Courses.

Travel allowance.

All these items add up to the total annual cost of personnel.

Management fees.

The annual sum of money you should take out of yo

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

Following aspects would a

ur business to live from.

Existing loans.

If there any loans write down the sum you pay back every year and the interest.

Out-of-pocket costs.

Add up all costs your business makes (except the items mentioned above), including the costs of product

dd to the challenges in developing combination products:

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

ion or those of service delivery.

Required or desired annual profit.

Add up all these figures and you will have the yearly sum your business should earn, in order to reach the goals you have set. We call this total: Competition Base.

Is your price right and is y

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

our business competitive?

The answer to this question will be given by a comparison with your competition. Say that you own a consulting business. Let us assume that the average fee per hour for your type of consulting is $125. Your Competition Sum totals $934,200. You bill 7200 hour

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

yearly. Your fee per hour should be $934,200/7200= $129.75. We call this fee: Competition Factor. Perhaps your real fee is about $125 per hour then you are loosing money.

Your Competition Factor is too high. How to get it down? There are several ways to reach this goal:

Cost cutting.

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

Look at your costs with a critical eye.

Work more efficiently in order to bill more hours, and/or increase sales.

Is the average sickness figure in your business higher than that of the competition? If so, look hard to find the cause.

May be, the costs and terms of an

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

Professional from academic institutions, pharmaceutical industries, health care indust

existing loan are too high. Can you renegotiate or refinance it?

Summary.

Does the price you ask for your products or services cover your goals and your needs and your costs?

List all the items your business has to pay for yearly. This list includes provision for re

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

tirement, annual average investment, personnel, management fee, servicing existing loans, total out-of-pocket costs and required/ desired profit. The total sum of these items is the Competition Base.

Divide your Yearly-Billed-Hours into the Competition Base giving the Competition Factor. Compar

.

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

e your Competition Factor with the average fee per hour of your competitors. Your Competition Factor should be lower. If your real hourly fee is lower than your Competition Factor then you are loosing money, whether your accounts show it or not.

If your Competitive Factor is too high you can lo

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

Companies that provide selfless information through particip

wer it by cost cutting, efficiency improvement, improving working conditions and refinancing.

The example we used above is based on a hypothetical consulting business. For a production business we can use the same model, albeit perhaps a bit more difficult in the case of multi-product processes

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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