Useful Advices - Business

The corporation is probably the mother of all limited liability entities. The case law is vast and the complexities are many. However, a corporation can be

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

a great business form if you know the differences between the various types of corporations.

Corporations are subject to double taxation. A dollar earned by

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

Examples of combination products may in

the corporation is taxed once as a corporate earning and then taxed again upon distribution to shareholders. However, this is not true for all types of corp

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

orations. An S-corporation (named after sub-chapter S in the relevant IRS code) is a pass-through entity. This means that the corporation is taxed as a part

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

ership. Therefore, no double taxation! Unfortunately, with benefits come disadvantages. I do not have the IRS code book open in front of me, but I think so

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

Combination pro

me of these disadvantages include, amongst other things, limitations on the number of investors you can have (I think you can only have seventy-five (75) inve

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

stors for an S-corporation), and limitations on who can invest (no other entity, such as another corporation or limited liability company, can be a shareholde

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

r).

Keep in mind that when you form your corporation with articles of incorporation, filed with your Secretary of State, you do not form an “S-corporation.”

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

Subchapter S status is received from the IRS, not your state! However, some states require that you state your intention to be an S-corporation in your artic

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

les of incorporation. Therefore, check your local laws!

A close corporation is very similar to a subchapter S corporation, but with stricter limitations (fo

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

r example, I think some close corporations can only have thirty-five (35) investors). A great advantage exists with close corporations. Close corporations d

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

Following aspects would a

o not have to engage in corporate formalities. Why is this important? When somebody sues the corporation and tries to pierce the corporate veil (meaning the

dd to the challenges in developing combination products:

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

claimant is trying to “pierce the veil of limited liability” and hold the shareholders personally liable), one factor, of many, the court considers in determi

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

ning whether to pierce is whether the corporation engaged in corporate formalities. If a corporation engaged in corporate formalities (conducted annual meeti

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

ng, recording minutes, etc.) this lends support to the conclusion that a corporation did not misuse the corporate form and, therefore, is less likely to have

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

its “veil” pierced. If you have a close corporation, corporate formalities do not have to be conducted, and a court cannot hold that against you should any l

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

Professional from academic institutions, pharmaceutical industries, health care indust

wsuits arise.

A closely held corporation is a term of art. There is no special filing or advantage to a closely held corporation. A closely held corporatio

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

n is one in where the shareholders and the directors are the same people. Usually about five shareholders will exist, and each will also be a director, if no

.

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

t also an officer, of the corporation. In case you are wondering, shareholders elect directors and directors elect officers.

This post is intended to give y

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

Companies that provide selfless information through particip

ou a brief overview of some of the corporate forms that exist. Like always, check with a professional before trying to form one of these entities by yourself

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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