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When a manufacturer does that occasional bit of bottom-line soul searching, the most fundamental determination to consider is which parts, products, custom

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

ers, projects, and/or jobs are profitable. To this end, Activity-Based Costing (ABC) is used to identify, assign costs to, and report on manufactur

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

Examples of combination products may in

ing operations. To a large degree, ABC is a more accurate cost management system than standard cost accounting in that it is able to identify places where

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

the manufacturing process can be made more effective, essentially by determining the “true cost” of producing a product. Shop floor work centers are parti

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

cularly suitable for ABC because they produce identifiable and measurable units of output. With ABC, management can define processes, identify the cost dri

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

Combination pro

ers of those processes, and determine the unit costs of products for performance based budgets that determine the overall cost effectiveness of a work cent

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

er.

In assigning costs to a work center (a management concept often called cost build-up), work centers are seen as cost centers where c

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

osts are analyzed to determine why they occurred. For these purposes, costs are assigned according to their overhead type—variable overhead

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

here the costs are typically consistent per unit (material, labor, labor benefits, and other variables); and, fixed overhead where the total costs a

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

re more predictable (machinery, lease payments, utilities, etc.), but the cost per unit is a function of where you can set the volume goal or standard. Th

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

setting of a budgeted or standard hours in a work center is very important for pricing purposes and thus will affect how much business you win. If you ba

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

Following aspects would a

se your standard volume on too low a number (for example, say 500 hours per year is only 1/8th the hourly capacity of a 2 shift, 5-day a week operation), t

dd to the challenges in developing combination products:

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

hen your price could be too high to win most jobs. In most cases, it is smarter business to base your fixed cost on a level you would like to achieve

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

>, such as 3,000 hours per year (1 ? shifts). For example, a $40,000 a year fixed cost in a work center will add $80 per hour to the cost of a part based

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

upon a 500 hours per year figure, as compared to $13.33 based upon 3,000 hours standard volume per year.

In essence, estimated volume (what you

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

should be producing) versus actual volume (what you are producing) is the question manufacturers must answer to determine overhead inf

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

Professional from academic institutions, pharmaceutical industries, health care indust

luences on the bottom-line. The most desirable scenario is to have the shop loaded with production in such a way that all overhead costs are totally absor

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

bed in the manufacturing process. Indeed, profit margins are enhanced when overhead costs are over-absorbed into production and standard volume output is

.

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

urpassed. In short, piece output per work center becomes a positive factor when overhead in work centers and cost centers result in both direct (value-

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

Companies that provide selfless information through particip

added) and indirect basis, or over-absorption, per year. In this way, manufacturers cost centers are, in fact, turned into all-important value centers

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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