Advice You - Finance

When that nasty letter arrives from the IRS or your state’s auditing division informing you that an audit is on the way, how do you respond? I’l

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

l take care of it myself with my internal staff? I call my accountant and fax over the notice? Ignore it, and hope it’s forgotten?

Regardless o

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

Examples of combination products may in

f whether or not you are concerned with IRS deductions/income, sales/use tax, or employment issues, it’ll be the best use of your time and money

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

to request your qualified accountant to conduct a thorough “pre-audit” of the years to be reviewed…and potentially the subsequent and previous

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

years should you have a consistent potential exposure.

A thorough “pre-audit” will identify potential tax causing exposures, allow you and your

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

Combination pro

accountant the time to prepare documentation to support your issue (if found), create a strategy for the audit to mitigate the potential issues

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

during the governmental review. When the auditor sees that your information is out of control, disorganized, can’t answer questions, they just s

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

eem to laser in on their work. If they see documentation prepared, it’s organized, they have a place to work with your accountant present (at al

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

l times) – not the owner- either at the accountant’s office or your place of business (preferably the accountant’s office), there is a greater 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

hance of success.

20 years ago, I represented a large residential development and construction company. In pre-audit we found a number of perso

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

al items such as his wife’s clothing and trips to Europe among many other potential issues. We had a potential problem. We made sure that the sa

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

Following aspects would a

mple homes had closets filled with clothing, that the trips had some documented relationship to their home design and to the furnishings of the

dd to the challenges in developing combination products:

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

sample. We had a strategy of giving the auditor a tour of the models, then worked off site at the accountant’s office. In the end, the issues we

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

re still the issues, but the client received a “no change”, not because of lies or destroying documents, but by preparation, designed work flow,

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

and by providing pre-prepared documentation.

When you “skim” cash in substantial amounts, run your new home through the cost of goods sold (or

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

in one case a yacht), buy expensive jewelry for your spouse, take little salary or distributions and run all of your personal expenses through t

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

Professional from academic institutions, pharmaceutical industries, health care indust

he company, you run the risk of fraud, enormous penalties, back and forward interest, or potentially litigation and/or jail time, and personal a

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

nd business embarrassment or ruin. There are so very many ways to avoid taxes, defer income/taxes and to maximize deductions. In the end, the co

.

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

mbined tax rates (state, local, federal) of the worst taxing parts of the country are still under 50%. Best advice - learn how to make more mone

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

Companies that provide selfless information through particip

y so that the taxes almost become irrelevant.

Look for tips in this and future newsletters on HOW TO MAKE MORE MONEY on your current activities

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 - It Just Makes Sense, Avoiding & Dealing With An IRS Audit

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