Useful Advices - Business

Are you doing business overseas and your supplier has asked you for a letter of credit? Do you own a distributor, wholesaler or re

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

-seller and have a large purchase order where you need a letter of credit to pay your suppliers?

As the number of national and 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

ernational transactions grows, so does the number of suppliers that are asking to be paid with a letter of credit. A letter of cre

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

it is a financial instrument that serves two purposes. It ensures that your suppliers get paid (that’s why they ask for them). It

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

lso ensures that you get the goods you bargained for – otherwise the suppliers will not get paid. It protects both of you.

Letter

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

Combination pro

of credit come in many flavors. The most common are:

Revocable Letter of Credit: A revocable letter of credit allows the

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

ssuer to modify it, amend it or even cancel it. Since a RLC can be modified, most suppliers don’t like it because it increases the

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 risk.

Irrevocable Letter of Credit: An irrevocable letter of credit does not allow for amendments, modifications or canc

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

llation unless there is agreement by the parties. Since it is a form of guaranteed payment, many suppliers prefer this type of pay

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

ent option.

Standby Letter of Credit: A standby letter of credit is a payment guarantee – rather than a payment mechanism.

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

Under the terms of the agreement, the supplier can draw on the letter of credit if the client does not pay.

Transferable Lette

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

Following aspects would a

r of Credit: A transferable letter of credit can be revocable or irrevocable. This type of LOC allows the recipient to transfe

dd to the challenges in developing combination products:

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

part or all of the benefits to another party.

Qualifying for a letter of credit is not always easy. It requires one of two thing

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

. First, the business owner can deposit the actual amount of cash needed for the transaction with the bank or financial institutio

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

that issues the letter. This, of course, is very expensive. A second option is to have a bank give you a line of credit, and issu

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

the letter of credit using the line of credit as collateral. Although this is the most common method of financing a LOC, it is al

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

Professional from academic institutions, pharmaceutical industries, health care indust

o the hardest because your business must qualify for bank financing.

There is another trade finance option though. It is called p

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

rchase order financing. Purchase order financing is ideal for companies that have exhausted their bank resources. The purchase ord

.

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

r funding company provides you with the necessary letters of credit to pay your suppliers using your purchase order as collateral.

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

Companies that provide selfless information through particip

The transaction is settled once your client pays. Purchase order funding is the ideal tool to grow your business to the next level

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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