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The first point to make about Royalties is that good Franchise systems should look at them not as a payment but rather as a remittance. It is the Franchisor’s share of the inc

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

ome derived from customers or clients. The Franchisee collects that fee along with all other revenues from the customer.

It’s an important concept because it emphasizes that

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

Examples of combination products may in

the customer ultimately pays for everything, including the Franchisor’s royalty, the Franchisee’s overhead, all costs of sales, employee’s salaries, and the Franchisee’s profi

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

t. Therefore it’s all about the customer – as it should be.

The Franchisee should want the Franchisor to earn a significant amount of royalties because that’s really the oil

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

that makes the engine run. Each Franchisee collects and remits a small portion of that oil to the Franchisor. All elements of the system can continue to improve as long as the

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

Combination pro

royalty stream is strong.

The Franchisor’s royalty will be based on the fact that they have provided a system and strategy that has ultimately served the customer. The Franc

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

hisee delivers that system to that customer. The royalty represents the Franchisor’s share based on the various parts of the Franchise system, which has four elements.

The fo

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 elements of a Franchise are:

a) Brand
b) Operating System
c) Support System
d) Franchisee

Brand – the name associated with the services delivered in a memor

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

able and satisfying experience to the customer

Operating System – institutionalizes the excellent service delivered in a memorable experience so it can be done over and over

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

again from Franchise to Franchise in a consistent manner

Support System – helps the Franchisee get better and better at delivering the service in a memorable experience – hel

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

ps a Franchisee improve their performance

Franchisee – the individual motivations or reasons for being in a good system, as well as the talents and experience delivered to th

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

Following aspects would a

e business.

The Operating and Support systems will generally provide access to advice at the level of professional consultants in the fields of marketing, management, adverti

dd to the challenges in developing combination products:

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

sing, execution of the delivery of the product or service, customer support, etc. The cost of these types of consultants on the open market will often far exceed the value of

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

the royalty fees that are remitted by the Franchisee that participates in a system that delivers these items from a position of experience. In fact, it’s the exact experience

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

he Franchisee requires as opposed to open market advice.

Now here’s the test. If each of the four elements of a Franchise system is evaluated in terms of the percentage of co

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

ntribution to the overall success of the business, then the royalty can be assessed in a proper light. Many people will say that each of the four elements contributes equally

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

Professional from academic institutions, pharmaceutical industries, health care indust

– or 25%, to the overall success. That means that the Brand, Operating System, and Support System provide 75% of the success formula. Therefore, as long as the royalty is less

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

than 75%, it’s a good decision to participate in the system. That’s a little silly, but it emphasizes the point.

Most royalties range from 2% to 10% depending on the type of

.

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

system, so as long as the Franchisor’s systems contribute 10% or more to the success of the business, it makes sense to participate, and remit the collection of royalties to

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

Companies that provide selfless information through particip

the system.

To receive a free copy of an E-Book titled ‘Franchise Opportunity – Making The Right Decision’ by Dennis Schooley, email that request to corp@schooleymitchell.com

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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