Advice You - Business

When I ask my accountant, he tells me that Profit equals Revenue minus Costs. He then spoils this simple equation with two caveats:

Revenue
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
> is the cash flowing into your bank - this is sales without the bad debts, returns or shrinkage.

Costs include your materials,

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

Examples of combination products may in

abour and energy bills as well as everything else needed for long-term trading such as your contingencies, investments, replacements, training, and insurances.

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

So how do you determine your price?

If you were my client and I was helping you to calculate your sales price, does that mean that can you si

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

ply take the cost of the goods or services that you are selling and add on the Profit you choose?

No - though you are in business for profit, your other go

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

Combination pro

ls might include growth, long term survival, avoiding competition or managing tax. So deciding your business objectives will change the price you set for yo

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

ur products and services.

As I work with small businesses, we often have to look at a range of pricing strategies to figure out which will allow them to reach 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 chosen goals:

1. Pricing low for market penetration

You may want to gain new customers quickly, perhaps when you are entering a new market. Therefore, y

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

ou lead with a low-priced product to build your clientele and then in a separate sales cycle target these customers for sales of your more profitable products or s

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

rvices.

2. Pricing to be market competitive

You may want to compete for tenders, proposals, auctions or other situations where you are forced to offer sim

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

lar products to your competitors so that the buyers can select on price. So set a competitive price to get selected and afterwards you can look for ways to adjust

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

Following aspects would a

your costs - through volume discounts, payment schedules or value engineering.

3. Pricing high to maximise your profits

You may have a product or service

dd to the challenges in developing combination products:

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

hat is unique or new, with no local competitors, giving a short-term opportunity to get high profits before copycat products dilute your market. Therefore, increas

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

e the profit per sales unit, keep your supply cycles tight and ensure you are not left with unsaleable goods when your monopoly runs out.

4. Pricing to make a

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

ransparent profit

You may want to set a price that your customers see as honest and reasonable, say with a key major customer or group of customers, where tru

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

t is important. So set a 'cost plus 15%' price to make an acceptable profit on top of the input costs that you allow your customers to audit.

5. Pricing for ma

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

Professional from academic institutions, pharmaceutical industries, health care indust

ximum profit and maximum sales

You may want to generate the maximum profit without losing customers along the way. This might follow your initial product laun

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

h as you start to emphasise how the benefits you offer differ from your competitors.

Choosing the right strategy

Using one of these five strategies helps

.

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

my clients to move from a simple profit structure to using price in their marketing strategy to achieve specific business goals.

Of course, the chosen stra

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

Companies that provide selfless information through particip

egy is only good until your market conditions change. Then you need to reconsider your goals and re-apply the pricing strategies that will get you there profitably

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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Advice You - Pricing Strategies, Revenues, Costs And Profits: How Does Profit Connect To Your Sales Price

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