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A frequent cause of personal financial difficulties is the failure of a business and the attendant business-related liabilities personally owed by the company owner. These individuals mus

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

t often file for bankruptcy or make a proposal to their creditors as result of business-related debts.

Debtors completing their bankruptcy/ proposal often wish to start up another busine

; 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 sometime in the near future. The expected question then arises: how can they creditor-proof themselves in the event that their new business fails? Here are some ideas:

1. Consider inco

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

porating the business. Incorporation will provide the owner with a level of creditor protection - most of a corporation's obligations are limited to its assets so this structure can provi

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

e protection for personal assets. This structure also has income tax benefits, which will not be discussed here, (this subject warrants its own article which will be published at a later

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

Combination pro

ate).

2. Always pay statutory debt on time, specifically:

Payroll source deductions;
Goods and Services Tax collected;
Provincial Sale Tax collected; and

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

Employee wages and vacation payable.

In Ontario (and in certain other provinces), corporate directors can be personally responsible for these debts, notwithstanding that t

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

e business is incorporated.

3. If the owner is using his or her own funds to invest in the company, it's advisable to do so in the form of a loan to the company secured by a charge over

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

he assets. A lawyer should ensure that the proper documents are prepared and that the security interest is properly registered. In the event the company fails, the security interest will

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

ave a priority over all unsecured creditors with respect to realizing on the company assets.

If the loan is not properly documented and registered, the owner may become an unsecured cred

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

tor waiting in line to be paid with all the other creditors in the event of business failure.

4. Consider acquiring personal assets in a spouse's name or a family trust. Such assets do n

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

Following aspects would a

ot form part of the transferor's bankruptcy estate and are therefore not subject to claims of estate creditors.

5. If the company owner is putting away money for retirement, consideratio

dd to the challenges in developing combination products:

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

should be given to investing in RRSPs that are exempt from claims; for example, segregated funds. The distinction between segregated funds and mutual funds is that segregated funds are i

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

surance contracts. The Ontario Insurance Act provides that:

"where the beneficiary of the

insurance contract is a spouse, child, grandchild or parent of a person

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

hose life is insured... the rights and interests of the insured in the insurance money and in the contract are exempt from execution or seizure..."

Therefore, insurance products hel

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 RRSPs will be exempt from seizure by creditors.

6. If one can avoid doing so, personal guarantees of a company obligation should not be given to suppliers or a landlord unless it is

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

Professional from academic institutions, pharmaceutical industries, health care indust

absolutely necessary.

Conclusion

With some foresight (what's the worst that can happen, and how do I avoid it?) and careful planning using the applicable initiatives ou

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

lined above, one can create an effective creditor-proofing strategy that will enable the company owner to ready him or herself if things don't go as well as expected.

Creditor proofing i

.

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

best undertaken at the start of a business venture - when there are few assets and no claims outstanding. By the time a claim occurs, it may be too late to move assets beyond the reach o

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

Companies that provide selfless information through particip

creditors.

Disclaimer

This article is an overview rather than a complete analysis. Before applying any of these suggestions, consult your professional advisor.

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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