Subjects - Business

To be profitable, a business must charge more than its breakeven point for the services it sells. When it comes to pricing a job, what often hinders a contractor from carefully co

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

nsidering the markup for overhead and profit is the competitor who does not take these things into consideration. So-called “low balling” does not assure long-term business succes

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

Examples of combination products may in

s.

You can take your business beyond the breakeven point by knowing your overhead percentage and calculating it into the bids and sale price you offer for your services. Most

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

of us know that overhead is the cost of running a business and includes items such as rent, utilities, office supplies, staff and officer compensation. When you know your overhe

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

ad percentage, you will know exactly how much to mark up the cost of goods or direct expense to break even. Any markup after that is profit. By using the correct overhead percenta

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

Combination pro

ge you will produce more consistent results.

To calculate the overhead percentage for your company, you take your overhead expenses and divide them by the cost of goods sold: O

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

erhead Expenses/Cost of Goods Sold = Overhead %.

A common mistake that can lead to miscalculating overhead percentage is listing liability insurance as an overhead expense rath

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

er than where it appropriately belongs as a cost of goods sold.

Marking up cost of goods by this percentage, will just break you even. In other words, it will produce just en

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

ough money to cover your overhead. Example:

Example A – Breakeven – no Profit Example B - Net Pre Tax Profit of 8.68%
Income $4,027,500 100% $ 4,410,112 100.00%
Cost

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

f Goods Sold $ 3,222,000 80% $ 3,222,000 73.06%
Gross Profit $ 805,500 20% $ 1,188,112 26.94%
Overhead $ 805,500 20% $ 805,500 18.26%
Net Pretax Profit $ 0 $ 382

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

,612 8.68%

Overhead % Calculations: $ 805,500 / $3,222,000 = 25%. The overhead percentage is 25%.

In this example, to reach the breakeven point you would need to mark up cost of

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

Following aspects would a

goods sold by 25 percent to cover overhead. When doing this calculation for your company, use income statement figures for at least a six month period of time, ideally 12 mon

dd to the challenges in developing combination products:

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

hs.

If you are a sole proprietor, your percentage will be lower, as you do not have officer compensation on the Income Statement. To come up with a more accurate breakeven poin

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

t, it is recommended that you add an amount for your compensation to the overhead expenses. As an owner, you need to be earning adequate compensation to be successful.

By knowing

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

your overhead percentage, you can more accurately bid on jobs by adding it to your estimated cost. Using the 25 percent overhead from the previous example, you can calculate th

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

bid/sales price like this:

Estimated cost: $275,000
Overhead % x 1.25%
Subtotal to Breakeven: $343,750
Profit % x 1.13%
Bid / Sales Price $388,438

Many

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

Professional from academic institutions, pharmaceutical industries, health care indust

contractors have different markups for labor and materials, use flat rates or unit prices in bidding – any one of these could leave you wondering how to apply this in your compa

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

ny. If you are doing bidding in any of these ways, make sure to do the numbers in reverse before applying markup for profit. This will ensure you are covering overhead, leading to

.

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

more consistent profits for your company.

In flat rate and unit pricing, it is a good idea to check these figures periodically and ensure the costs are accurate all the way aro

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

Companies that provide selfless information through particip

und.

Knowing your overhead percentage will take you beyond the breakeven point and help you more accurately bid on jobs. Ultimately, profitable jobs will boost your bottom line

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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Businesses face lots of challenges in the international market. Implementing an ISO 9000 initiative is an action-oriented program that refers to obtaining ISO 9000 registration and working with its standards. The ISO certification process starts with pre-assessment audits and passes through on-going maintenance. The process of implementing ISO 9000 includes identifying, collecting and organizing the information required for certification.

Many manufacturers of truck wash equipment make their equipment look really nice some of the units in fact look rather pretty, powder coated and well designed, but they totally miss the point. Too often people manufacture stuff but never use it in real life. Why does this happen?

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