Useful Advices - Business

One of the biggest problems in any growing business is the long delay it typically takes to get paid. It is not uncommon for it to take 60 to 90 day

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

s from the time a company completes a job or contract to the time when the company actually gets paid. Ninety days is almost an industry standard in

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

Examples of combination products may in

erval from receipt of a service or goods by a large commercial customer to the time that payment is sent out.

In the meantime, the companies' employ

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

es are expecting to get paid on time; which is usually weekly, and most of the operating expenses need to be covered on a monthly basis. Some of the

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

bills even need to be paid right up front. It can be tough for a growing or new company to make ends meet before the 90 days are up and the payments

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

Combination pro

start coming in.

To help cover this financial gap an industry called factoring has emerged. Let's use an example to explain how factoring works. L

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

t’s say company A makes and sells super computers. They make a computer, sell and ship it to company B and soon after send out the bill for the comp

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

uter. Now by standard industry practice, company B usually does not have to start making payments for 90 days. This is where factoring enters in.

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

third company, company C, is the factoring company. The factoring company is usually a financial institution or bank of some sort. The factoring c

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

mpany pays company A up to 85 percent of what is owed them by company B right up front then and there. They hold out a percentage, usually 15 percen

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

, to cover any disputes that may arise between A and B. Once company B gets around to paying for the super computer, the payment gets sent directly

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

Following aspects would a

o the factoring company. Company A never sees the check sent out by company B. Basically company A's accounts receivable are transferred to the fac

dd to the challenges in developing combination products:

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

oring company. The factoring company then sends the 15 percent that was held out to cover disputes to company A, minus their factoring fee for all o

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

this. The factoring fee is usually 1.5 to 2 percent. They basically cover company A for the payments that are owed them. They act as an intermedi

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

ary between A and B to help smooth everything out financially.

Of course, a big consideration for the factoring company is the financial reliability

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

of A and B. If B is very reliable and pays its bills on time, then the factoring company will probably give company A better factoring fee rates. I

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

Professional from academic institutions, pharmaceutical industries, health care indust

A's super computer is very reliable and never causes problems for its customers, then the factoring company will probably reduce the amount it holds

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

out to cover disputes.

So why wouldn't company A simply borrow money from the bank? Actually, factoring is a specifically targeted way of borrowing

.

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

money. Because it is an ongoing relation between A, B and the factoring company the rates are generally lower and the amount that A can borrow is ge

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

Companies that provide selfless information through particip

erally more compared to a basic bank loan. Plus, it gives A more time to spend making super computers; and less time worrying about collecting bills

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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