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Useful Advices - ROI: False Conclusions
Drawing false conclusions from Return on Investment analysis can be embarrassing and it can be costly.
Here’s an example from business in managing risk and calculating Return
Here’s an example from business in managing risk and calculating Return
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
on Investment ROI:
The management of company A wanted to decrease the cost of manufacturing a key product. This was in light of new technologies that had just become availab
The management of company A wanted to decrease the cost of manufacturing a key product. This was in light of new technologies that had just become availab
; or drug, device, and biological product and fixed dose combination would include two or more combinations of drug.
Examples of combination products may in
Examples of combination products may in
e.
They have 60% of the available business with this product and their closest competitor, Company B, has 14% of the market.
Company C has about 10%.
The other 16% is held
They have 60% of the available business with this product and their closest competitor, Company B, has 14% of the market.
Company C has about 10%.
The other 16% is held
lude drug-coated devices, drugs packaged with delivery devices in medical kits, and drugs and devices packaged separately but intended to be used together.
by several small companies that sell a substitute product of lower cost but inferior performance.
Company A calculated the cost of reducing manufacturing cost. They then calc
Company A calculated the cost of reducing manufacturing cost. They then calc
here is enormous increase in the number of combination products entering the market in the recent years. Combination products have proven advantages but fixe
lated the return on investment (ROI). The return was less than the 15% required by company management.
A Board member with an accounting degree and banking experience said th
A Board member with an accounting degree and banking experience said th
d dose combinations are still in the process of convincing regulatory authority on their advantages over the single ingredient formulations.
Combination pro
Combination pro
technology looked “shaky” to him.
Some board members agreed with him.
The company’s engineering director said the assumption was wrong, that the technology would function a
Some board members agreed with him.
The company’s engineering director said the assumption was wrong, that the technology would function 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
s described.
The Board rejected the modernization plan.
Company A continued to undersell company B because of their current lower manufacturing cost.
The Chairman of the Bo
The Board rejected the modernization plan.
Company A continued to undersell company B because of their current lower manufacturing cost.
The Chairman of the Bo
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
rd said, “All is well!”
Company B did the very same analysis at the same time. Company B decided to make the investment because it would lower their manufacturing cost, incre
Company B did the very same analysis at the same time. Company B decided to make the investment because it would lower their manufacturing cost, incre
nation products and maximize the revenues. But the companies involved in this practice are overlooking that they are burdening the patients both economically
ase production capacity, and they would be able to undercut Company A’s current prices by 5%.
Company B used the probable increase of their market share in their ROI calculat
Company B used the probable increase of their market share in their ROI calculat
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
ons.
When Company B completed the improvements in manufacturing, which took two (2) years including planning, they learned that the manufacturing cost dropped another 5% belo
When Company B completed the improvements in manufacturing, which took two (2) years including planning, they learned that the manufacturing cost dropped another 5% belo
ts. Some of the combination products were well accepted by physicians while others suffered. Companies involved in development of combination products are fi
what they had predicted.
They dropped their prices considerably below what Company A was charging.
Their market share increased to 45% during the first six months of the ne
They dropped their prices considerably below what Company A was charging.
Their market share increased to 45% during the first six months of the ne
ding difficulty in defining their combination products and facing various challenges from selecting a combination to marketing it.
Following aspects would a
Following aspects would a
w operation and then gradually increased to 65% during the next two years.
During this period, Company A realized they should have included something in their analysis concer
During this period, Company A realized they should have included something in their analysis concer
dd to the challenges in developing combination products:
Which markets to tap where the combination products can do fairly well?
Which combination prod
Which markets to tap where the combination products can do fairly well?
Which combination prod
ing the probability of their competitors taking market share. They started the modernization of their factory.
The owners of the company were very dissatisfied with the perfo
The owners of the company were very dissatisfied with the perfo
cts are meaningful and rational?
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin
rmance of the company. After sacking the Board and certain members of management, they sold the company to Company B.
To the Chairman of the Board who had said, “All is well!
To the Chairman of the Board who had said, “All is well!
tions increase the patient compliance?
What would be the developing cost?
How to tackle the risks encountered during combination product developmen
What would be the developing cost?
How to tackle the risks encountered during combination product developmen
the owners said, “Farewell!”
Company B accelerated the modernization of the facilities of Company A to increase their production while lowering costs.
This was done in the
Company B accelerated the modernization of the facilities of Company A to increase their production while lowering costs.
This was done in the
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
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
ace of the fact that Company C had lost market share to Company B but had responded rapidly and had just completed their modernization which would help them regain what they h
ping new procedures for reviewing their safety, efficacy and quality.
Professional from academic institutions, pharmaceutical industries, health care indust
Professional from academic institutions, pharmaceutical industries, health care indust
ad lost and perhaps do more damage to Company B.
The war price war was on.
The above example is similar to that given at a management conference on managing technology I att
The war price war was on.
The above example is similar to that given at a management conference on managing technology I att
y and representatives from various regulatory agencies are working out to design the regulatory requirements for manufacture and sale of combination products
nded some years ago in Miami, Florida. The executive who gave the presentation was from the General Electric Company. Unfortunately, I don’t remember his name.
The bottom lin
The bottom lin
.
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
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 is that if your analysis is not comprehensive, and you don’t consider the possible actions of your competitors, you can fail miserably.
You must also consider who has the b
You must also consider who has the b
elopment. They need to be wiser in analyzing the market trends and the regulatory requirements.
Companies that provide selfless information through particip
Companies that provide selfless information through particip
st background and education to make technical decisions and who has the best background and education to make financial decisions. Opinions are not always evaluations.
The En
The En
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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