Digg It - Business

When you create your profit and loss statement to assess the health of your business, you will see:

Sales minus Cost of Goods Sold equals Gross Profit.

You pay for all of your expenses with the gross profit. If you are finding that your gross profit is not enough to cover your expenses

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

, you have two options, you can either raise gross profit by increasing sales or lowering cost of goods sold, or you can lower your expenses. Certainly, that's an over simplification, the art of business management is in the hundreds of nuances held within those two options. For this ar

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

Examples of combination products may in

ticle, let's assume that your expenses have been carefully streamlined and that you are doing due-diligence in your purchasing habits. Therefore, let's investigate the pricing end of the equation.

How you set your prices may be one of the most important management decisions you make as

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

an owner or manager of a retail flower shop. A tremendous amount of work goes in to running a flower shop, wouldn't it be a shame to under price your products and not be able to make ends meet? On the other hand, over pricing and putting yourself out of the market before you even begin

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

would also prove to be disastrous. Market conditions and your competition will, in large part, determine your pricing. Bear in mind, though, that depending upon these items only, without analyzing the actual cost of the products you are selling could cause you to loose your shirt. Prici

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

Combination pro

g strategy can be a complicated thing in a retail flower shop. This is because there are perishable items and skilled labor to be factored in along with the raw cost of goods.

Let us consider each of these factors one at a time. We'll begin with the cost of goods sold (COGS) because th

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

at is the most straight-forward of the three. The cost of goods sold is the price you paid for the item that you are selling, plus any cost associated with buying and owning that product until such time as you sell it. If you were selling widgets, and you purchased a widget for three do

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

llars, your COGS would be $3. In the flower business, you'll need to add the cost of your fresh flower preservative or any other product that you must add to the flowers to make them saleable. In the case of an arrangement, your cost of goods includes the flowers, container, preservativ

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

e, and ribbon or accessories.

Secondly, with perishable items, you'll have a certain amount of shrink, or loss of product. Take time to analyze the amount of product that you loose. For every $100 worth of fresh flowers you buy, you should factor in approx 5% loss for shipping and norm

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

al damage. You will also need to find out your own shop's loss factor. Let's say for this example that you loose 10% of your fresh flowers because they are not sold before they go out of date, or because they are wasted or broken in the shop.

Now, let's look at the components of a fres

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

flower arrangement. We'll use some industry standards as a jumping off point for setting the price. Fresh flowers: If the flowers cost $10 at wholesale, you'll add $1.50 for shrink, .10 for preservative. Multiply by two to get the retail price of the flowers: $23.20 Container: The v

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

Following aspects would a

ase cost you $2.00. Multiply by two to get the retail price: $4.00 You'll be putting in a bird, a bow and a butterfly, which will cost you $3.00, so your retail price on those items is $6.00. This gives us a total retail price of $30.20. We're not done yet!

Third, the cost of the ski

dd to the challenges in developing combination products:

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

lled labor that was used to create the arrangement must be considered. Look at your business plan and calculate the cost of your labor as a percentage of your total sales. Let’s say your labor costs are 12% of your total sales. You'll need to add this labor factor into every item you s

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

ell. If you'd like to be able to sell giftware items without adding labor, you'll probably need to do a little more analysis to figure your design labor cost as a total of your total sales. This number is probably more like 20% to 25%. Let's go with 25% for this example.

Now the math

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

gets a little more complicated. You need to find the selling price that reflects a 25% labor cost. Dust off your algebra I text and solve this equation:

Cost + (PRICE+(PRICE *25%))=PRICE

Or

$30.20+PRICE*.25=Price

Don't panic! The easier way to do this math is to just divide 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

ost by whatever percentage you need to add to the labor factor to make 100%.

$30.20/.75=$40.26

If we were using the 10% labor factor, the math would be: $30.20/.80=$37.75

Factor in your market considerations and do your research on your competition. Set your price accordingly. Follo

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

Professional from academic institutions, pharmaceutical industries, health care indust

w up with continued analysis and adjust the labor factor or the multipliers you use in the formula as needed until you find that you have the results required to cover your expenses. For example, you may find that you need to multiply your costs by 2.5 or even 3. You may find that your

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

skilled labor is actually a 30% factor, or even a 10% factor.

Finally, we have not addressed delivery. That's a topic for another article, but do remember to consider where the money is coming from to cover the cost of delivery. If you include delivery in with your regular expense (whi

.

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

ch you should), you'll need to either add a delivery charge, which in effect is just raising the retail sell price, or, you'll certainly need to use a larger multiplier, closer to three than two.

In summary, you can analyze pricing from dawn to dusk, in fact, many people make a career of

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

Companies that provide selfless information through particip

it! I recommend that you set a formula based on your best research. Make the formula simple enough for your entire staff to follow. Most importantly, don't stop there. Be diligent about checking your numbers on your profit and loss statement, and adjust the formula as often as needed

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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