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Building effective business development in pharma.

By  Mark Lubkeman ,  André Kronimus , and  Filip Hansen

At a time of rapidly evolving scientific breakthroughs and, coincidentally, of the expiration of many blockbuster drug patents, the key to innovation and revenue growth is pharmaceutical business development. While some innovation and new revenue can come from internal pipelines and assets, business development teams are under intense pressure at most companies to supplement internal efforts with external licensing agreements and M&A. Unfortunately, those teams are frequently unable to deliver the transactions needed for innovation and growth.

Often a major reason for this shortfall is that executive team members are not fully aligned on the role of business development in achieving the company’s strategic priorities. They may agree in theory that business development should pursue partnerships, ecosystems, and collaborations, but that consensus falls apart when it comes to making decisions about specific deals.

We have identified six success factors that enable more rapid and effective decision making, which, in turn, will lead to substantially enhanced business development performance.

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Biopharma m&a and licensing remain strong.

Biopharma M&A deal value more than doubled between 2017 and 2019, from $138 billion to $336 billion, and valuations reached all-time highs. Most of those deals involved midsized biotech companies, for which the average premium paid was close to 70%, with an average EV/sales multiple of nearly 8x. All in all, close to 60% of new therapeutic drugs in the last five years have been externally sourced.

The COVID-19 pandemic slowed biopharma M&A activity in 2020, especially in the first half of the year. But since the core drivers of deals remain intact—scientific breakthroughs, expiring patents, and an increasing focus on key therapeutic areas or on modalities such as cell and gene therapy—deal activity will continue to rebound. A recent example is AstraZeneca’s acquisition in late December of Alexion for $39 billion.

Moreover, biopharma companies can finance transactions cheaply with today’s very low interest rates. They also have significant financial resources to pursue business development. BCG’s ValueScience team estimates that the top 20 biopharma companies have more than $700 billion in cash, short-term investments, and additional debt capacity. But as a result, many companies are pursuing the same assets, driving up valuations and the risk of overpaying.

Six Success Factors for Pharma Business Development While we focus here on M&A, the six success factors we have identified will enable business development teams to create value through both M&A and licensing. (See Exhibit 1.)

1. Prioritize what business development needs to accomplish for the company. Executive team members often have differing views about how to prioritize business units, technology areas, and technology platforms and what types of deals to pursue (early- versus late-stage R&D deals, for example, or transformative versus tuck-in acquisitions). To ensure alignment, it’s critical that team members agree on how and where they want to create value. Will they use business development to generate near-term revenues or to build the pipeline for future innovation? Will they seek to maximize the core, expand into adjacent markets, or explore new frontiers? (See Exhibit 2.)

As part of this prioritization process, the executive team needs to regularly review and agree on how much revenue growth the current internal portfolio or pipeline will deliver. Only then can it determine the revenue gaps that business development needs to address in which specific therapeutic areas or modalities—and with what urgency. It’s astonishing how often management teams are misaligned on this simple setting of objectives, which often results in business development teams wasting time assessing opportunities that are fundamentally unattractive to the executive team and will never get approved. To avoid such situations, the team should ask itself two key questions about every transaction early on: What revenue gap will the transaction fill? And who on the executive committee will champion the transaction from start to finish? By forcing these decisions early, the team can avoid a lot of wasted time.

2. Build relationships with prospective targets. Executive teams should commit to building relationships with potential partners or acquisition targets for two or three years. Proactive sourcing, screening, and relationship building are far better for deal execution than simply showing up at the target’s headquarters with a banker and an offer. An established relationship will give a prospective buyer an edge over other bidders, perhaps even preempting the bidding process altogether. Such relationships can also accelerate due diligence.

Active engagement with potential targets over several years also gives companies a better grasp of the range of potential deals available. It might, for example, make a pharmaceutical company more likely to take small equity stakes in a number of promising biotechs, perhaps supporting Phase 1 trials with its own clinical and regulatory expertise.

3. Agree on how to assess value. Depending on one’s assumptions when valuing a target, the same transaction may seem spectacularly attractive or exceptionally unattractive. So teams need to agree about how they will value all aspects of each deal and then apply that valuation with discipline. Too often, companies end up redoing their analysis and engaging in repetitive decision making because they haven’t agreed on valuation approaches or metrics from the start.

One common valuation pitfall is to focus only on core asset value, that is, the value of the cash flow generated by current and future products in the market. Valuation models need a wider lens, encompassing multiple dimensions of value, including the following:

• Synergies. What is the value of cost, revenue, and capability synergies across the value chain—for example, in R&D, manufacturing, and sales?
• Platform Value. What is the value of the future products a technology platform might make possible?
• Strategic Value. What is the value of preempting a competitor from acquiring an asset, gaining access to a large proprietary data set, or being recognized as a leader in an emerging field?

Because these advantages are less tangible than core assets, large swings in valuation are possible depending on the underlying assumptions. We have found that companies with a clearly defined and endorsed valuation approach are able to use a common “language” in their deliberations, leading to better, faster decision making. These advantages are amplified when the company is highly transparent about the underlying assumptions and entertains a range of scenarios and associated probabilities.

4. Define integration issues early. Executive and business development teams are frequently so focused on due diligence and valuation that they don’t consider the integration process until after a term sheet has been signed. Integration issues should be considered at the outset, when assessing the deal’s attractiveness and viability, and in parallel with due diligence. Teams should ask such questions as: Will the acquired company be a distinct entity or be integrated into the acquiring company? What governance will be applied to the acquired assets? How will cost synergies factor into the valuation?

Knowing the answers to these questions early on is critical to realizing the full potential of the transaction. Our research shows that successful integration can drive 8% to 10% more value compared with the average transaction. Planning for that success right from the start is essential.

5. Enable agile business development teaming and governance. Even when a company has a clear vision for the transaction, it still needs an agile process and governance to execute the deal quickly and effectively. But because the business development process is highly cross-functional (and often involves many junior-level people), it can be unclear who has the authority to make decisions and who will provide the necessary analytical resources. In addition, preexisting governance committees (such as executive committees) often meet too infrequently to keep up with the fast pace of business development decision making.

To address these challenges, we recommend three best practices:

• Designate resources. Within each function, several senior staff members with business development experience and authority should be on call. This will help build continuity and organizational learning.
• Establish clear processes and responsibilities. All members of a business development project team should be aligned on processes, deliverables, and timelines. That should include who is responsible for what and who has what decision rights. For example, who in R&D will calculate the probability of success of a specific asset under review?
• Create nimble governance. A few members of key governance committees should meet more frequently than the entire group (perhaps even on a weekly basis, depending on deal volume) and have the authority to mobilize the entire committee within 24 or 48 hours if there’s an urgent issue to be addressed.

6. Design an organizational structure suited to strategic priorities. Because companies have different revenue gaps and objectives and use business development in different ways, there is no single “right” organizational structure. One company might focus on early-stage and another on late-stage acquisitions. One company might be looking for deals to strengthen the core business, another to build up new therapeutic areas. A company’s business development organization must be suited to its strategic purpose, whatever that may be. There are three main approaches (with various permutations) to consider:

• Centralize business development in one group. A central function maximizes scale, alignment of activities, and resource prioritization. This setup works well for companies looking to make relatively few late-stage or transformative acquisitions.
• Separate R&D and commercial transactions. Assessing an early-stage R&D acquisition requires a different mix of expertise than assessing a late-stage, commercial acquisition. When a company intends to pursue both types of transactions, it’s best to keep at least some of these due diligence activities separate. But such companies can still centralize certain functions—valuation modeling, for example—in order to maximize scale.
• Separate by business lines or therapeutic areas. It can be sensible to separate business development activities by business lines or therapeutic areas at different levels of maturity. This arrangement works well if a company has a mature business area looking for transformative deals and a smaller business unit looking for technology platform acquisitions. Here again, certain aspects of the business development process, such as valuation modeling, can be centralized for scale and efficiency.

Current market conditions present unique opportunities to tap into external innovation and drive revenue growth, but the inherently complex and cross-functional nature of business development makes it difficult for many pharmaceutical companies to execute effectively. As a result, these companies are not winning the transactions necessary for future success. We believe that the six success factors described above can significantly improve business development capabilities and are worth serious consideration by management teams.

Managing Director & Senior Partner

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The pursuit of excellence in new-drug development

We are living in a time of enormous scientific innovation and promise for improved human health. Our understanding of biology is expanding enormously alongside increased identification of novel targets and their associated modalities. Still, drug-development costs and timelines continue to rise, and the likelihood of success continues to fall. Collectively, the top 20 pharmaceutical companies spend approximately $60 billion on drug development each year, and the estimated average cost of bringing a drug to market (including drug failures) is now $2.6 billion—a 140 percent increase in the past ten years. 1 Joseph A. DiMasi, Henry G. Grabowski, and Ronald W. Hansen, “Innovation in the pharmaceutical industry: New estimates of R&D costs,” Journal of Health Economics , May 2016, Volume 47, pp. 20–33, sciencedirect.com.

The opportunity

We believe the time is right for a true step change in drug development. To make this a reality, holistic transformation is necessary. While there is no silver bullet, drug developers can make a concerted effort to apply and integrate multiple innovations that can transform development. In our estimation, it should be possible to bring medicines to the market 500 days faster, which would create a competitive advantage within increasingly crowded asset classes and bring much-needed therapies to patients sooner. To transform drug development, this acceleration can be combined with improved quality and compliance , enhanced patient and healthcare-professional experience, better insights and decision making, and a reduction in development costs of up to 25 percent.

Development excellence: The framework

Reimagining R&D demands transformation of the traditional approach to drug development to allow medicines to reach patients faster, reduce development costs, and improve insights and decision making. Five pillars form the basis of development excellence:

• patient- and healthcare-professional-centered design thinking, incorporated end-to-end from program and trial design to trial execution, approval, and launch
• process redesign, both cross-functionally and within R&D groups, that improves speed of development and builds on research insights
• digital and technology enablement that allows automation of highly repetitive processes alongside generation of new insights and data
• advanced analytics (including predictive modeling), informed through internal and external data sources, that improves decision-making quality and speed
• agile ways of working, with a working model optimized for speed and decision making across the portfolio

A transformed drug-development journey

We use the journey of an asset from investigational new drug to optimized portfolio resource to illustrate how the five pillars can accelerate drug development.

1. Investigational-new-drug accelerator

The space from candidate nomination to investigational new drug presents a unique opportunity for accelerated drug development. Compared with early discovery stages, in this stage, research groups and their work—for example, in animal toxicology; biomarkers; chemistry, manufacturing, and control (CMC); discovery sciences; drug metabolism and pharmacokinetics; protein and cell engineering; and regulatory—are highly cross-functional and less exploratory. This space is thus highly amenable to process redesign that may help reduce the time to the clinic without taking undue risk or compromising insight generation. Potential process improvements include the following:

• seamless transfer of materials, information, and work products across research groups to avoid delays
• clear visibility of the critical path to becoming an investigational new drug and of the contributing activities
• calibration of risk tolerance and agreement on a concrete set of options to execute at-risk steps along the critical path
• use of technology in areas that could benefit from faster analysis and decision making
• detailed examination of processes to identify opportunities for time-saving simplifications
• alignment on the data and activities necessary to develop before the investigational-new-drug stage and those that can wait until further down the pathway

Many of these redesigned processes can become part of the standard manual of operating, while others are project specific or depend on the probability of technical and regulatory success. The calibration of risk tolerance and the alignment on key activity prioritizations depend on both the overall organizational attitude to risk and the specific project (for instance, the level of prior validation and competitive intensity).

2. Agile development

Asset development is highly cross-functional, with many pharmaceutical companies adopting some variation of a core program team. Small, functionally oriented subteams (for example, clinical and CMC teams) typically act independently to prepare deliverables for overall governance discussions. We envisage several changes to an asset’s team structure to harness the benefits of agile development:

• formation of thematic and cross-functional subteams assembled and disbanded based on the deliverable—for example, a presentation, delivery, and dosing subteam would not make CMC decisions in isolation but coordinate with a broader team on the implications of the decision on the program timeline, project competitiveness, regulatory pathways, and pricing
• increased empowerment of subteams and the core program team, with each subteam positioned as the primary decision maker for the asset on a specific deliverable, although major decisions will require the core program team’s participation for endorsement, recommendations, trade-offs, and the connecting of dots among deliverables
• a cultural shift to iterations based on a minimum viable product—one that includes all critical elements without insisting upon perfection or extended chain of approvals—to accelerate development of key deliverables (for example, a clinical-development plan) and maximize outcomes for the overall project early input from internal stakeholders (for example, clinical-operations and regulatory subteams) and external stakeholders (for example, investigators and patients) to embed patient-centricity throughout development plans
• an increased focus on deploying agile methodologies for co-locational and cross-functional teams in areas such as scrum, backlog, “stand-up,” and retrospective
• an assessment and incentive model oriented around overall asset performance alongside consistent, 360-degree review feedback that incorporates insights from the core program team and cross-functional subteams

An agile approach  has beneficial implications for the program strategy, including indication selection and trial sequencing. It combines inputs from internal stakeholders (for example, subteams in commercial and therapy area strategy, market access, competitive intelligence, regulatory, and clinical operations) and external stakeholders (for example, patients, payers, and investigators).

3. Asset optimization and risk strategy

Essential to program strategy are asset optimization and risk management . They will inevitably involve trade-offs—particularly given competitive environmental dynamics, including competitor-product profiles and asset positioning. It is imperative that decision-making and trade-off discussions consider all available data, which may lead to nonintuitive outcomes (for example, a quicker launch  involving a narrow patient population with eventual stepwise expansion of the cohort).

Derived from these strategic choices is the integrated-evidence plan (IEP), developed and updated by its associated subteam. This plan threads the anticipated commercial and medical positioning of the asset with accompanying strategies from teams in clinical evidence, medical evidence, epidemiological evidence, health-economics and -outcomes research, and real-world evidence. As asset pathways become increasingly divergent, the development plans for assets will become more varied. Leaders must emphasize that there is no “one size fits all” approach: teams should tailor evidence-generation activities and timelines for individual programs according to data, risk, and competitive environment.

4. Protocol design and patient segmentation

The clinical subteam is responsible for an evolving, multiscenario approach to trial design and patient stratification (for example, end-point selection and criteria for inclusion and exclusion), with cross-functional input sought as required. The driver of the design choices is a clear plan of anticipated medical and commercial positioning, as assembled in the IEP.

The IEP undergoes refinement through the asset’s life. For example, while the IEP may not be highly detailed at the beginning of Phase II trial, it will contain clear and strategic insight into planned achievements and ambitions at different stages of drug development. This is an important step, ensuring that a clear direction is evident to allow faster proceedings. The IEP will evolve in granularity and specificity as proof-of-concept and pivotal data become available. This helps avoid commonly observed Phase II and III trial problems, including the “everything under the sun” mentality that can make trials unwieldy and unviable. For example, if an asset is the fourth to market with a superior efficacy and safety profile, it is likely to be second or third in line behind cheaper available alternatives. Hence, organizations can deprioritize a trial involving treatment-naive patients for registration purposes but incorporate it into postapproval, real-world-evidence plans.

Innovative approaches from a patient-centric standpoint could be key accelerants, and pharmaceutical companies are beginning to realize their benefits—for example, in the switch of placebo arms to synthetic-control arms, seamless design for Phase IIB and III trials, and incorporation of digital technology  (such as monitoring at home by app). Such innovations can help ease patient and physician burden while simplifying drug-development complexity and reducing cost. An R&D organization that systematically embeds digital and patient-centered design thinking will ensure that all trials are framed to focus on patient benefits and time savings.

The clinical subteam should closely coordinate with the clinical-operations subteam to simulate, via predictive algorithms, the operational feasibility of design options alongside cost, time, and quality dimensions. This would also include simulation of trial parameters to predict patient and physician experiences in addition to impact on patient recruitment and adherence. By approaching trial design from this cross-functional perspective, it is possible to streamline clinical trials and support a robust evidence-generation strategy.

5. Country and site selection for clinical trials

Country and site selection, particularly within a highly competitive indication, can significantly affect development costs and timelines. While some pharmaceutical companies use historic recruitment data to determine selection strategy, the performance of a site does not necessarily correlate with its previous recruitment success.

Most pharmaceutical companies can achieve a new level of performance by linking internal and external data sets to build a predictive machine-learning model with a higher degree of precision in predicting drivers of site performance (for example, site congestion, protocol parameters, and excitement around the target). Applying these algorithms allows identification of ideal sites and the attainment of recruitment ambitions with fewer activated sites. At this stage, the subteam may benefit from developing a small number of scenarios (for example, one with or without trial sites in Japan and one with a regulatory request for local-population inclusion). The use of predictive models can sometimes help achieve a three- to six-month faster enrollment and a reduced default rate.

6. Chemistry, manufacturing, and control acceleration

With long lead times, CMC can often become the bottleneck in the path to drug launch. This is particularly relevant in early project stages or in situations involving program acceleration. A cross-functional engagement model that involves a CMC subteam and encourages participation from subteams in clinical development, regulatory, devices, and supply chain—and, in some situations, commercial—can enable identification of critical path activities. This iterative, agile operating model can support rapid resolution of open questions to align on appropriate trade-offs (for example, development of backup strategies, transition to standard platforms, timing of final cell lines with the consideration of bridging studies, and up-front at-risk investment).

Organizations can consider combining new ways of working with digitization and application of advanced-analytics techniques (for example, predictive modeling of formulation lock using in silico prototyping and real-time batch monitoring). This approach has the potential to improve quality through proactive identification of delays and deviations (for example, reduction in deviations by 50 to 80 percent and increase in deviation-closure rates to more than 50 percent) and accelerated timelines (for example, from up to six months to one year).

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7. supervision and quality control by a control tower.

A cross-functional control tower typically focuses on the planning and execution of pivotal studies. It also works to provide live data across multiple sites and studies, monitoring trial screening, recruitment, dropout, feedback from patients and physicians, and competitive intelligence. In addition, the subteam accumulates longitudinal data, ensuring transparency within the recruitment process (for example, during monitor visits, protocol-amendment rollouts, and medical interactions with principal investigators).

The control tower amasses a series of initiatives, refined over several trials, to accelerate recruitment. For example, upon identifying trial-recruitment challenges, the subteam rapidly explores a set of levers, including creating a site-specific platinum, gold, and silver engagement model based on predictive analytics of site potential; removing bottlenecks through systematic feedback; streamlining the site-contracting process; leveraging cross-industry tools and data sources to create “referral networks” around trial sites; using data-driven media campaigns; and ensuring clear communication of medical conversations with investigators. It can implement more intensive measures, including opening backup sites and simplifying trial protocols, as needed. Collectively, an effective control tower can improve the recruitment rate for pivotal studies by 30 to 50 percent.

8. Complete redesign of patient and investigator experience

Clinical-trial conduct, from design and site selection to start-up and execution, has evolved over the past decade. Although pharmaceutical companies have tried to build new patient- and site-engagement technologies (for example, patient-engagement and -reimbursement apps, e-consent, and protocol-burden measures) into existing trial processes, this approach is not necessarily effective. In fact, it is likely a key contributor to low satisfaction among investigators and patients, as it requires multiple interfaces and additional trial steps.

Taking a cleansheet approach to trial design and execution can yield tremendous benefits, such as increasing recruitment and retention rates by improving patient and investigator experiences. Primary research and ethnographic surveys can be used to assess patient centricity and investigator centricity by both identifying challenges in their experiences and serving as benchmarks for future improvements. Solutions can vary, depending on the cause of challenges, and may include the following:

• linking patients with research staff and principal investigators via telemedicine
• using portals to connect investigators and to resolve process bottlenecks (for example, through “just in time” contracting)
• flagging patients with high risk of dropout based on preexisting parameters and then providing physician-appropriate talking points and tools
• replacing additional study visits with home-based visits or remote monitoring (for example, through wearable devices)
• allowing real-time, app-based payment for expenses rather than retrospective reimbursement

9. Submission excellence

Efficient processes for preparation of product-dossier submissions are critical to maximizing the probability of label success. It is possible to deliver consistently on a timeline of ten weeks after the database lock, although this is ambitious.

Achieving an accelerated-timeline goal requires embedding a host of solutions and platforms in dossier-filings teams that span both technology solutions and knowledge-driven assets. Technology solutions could include automated hyperlinking, artificial-intelligence-based writing of dossier sections (especially sections that require less interpretive writing), and a structured-content-management approach to writing. Knowledge-driven assets could include archetype-based filing timelines and a framework for defining the minimum viable dossier.

Changes to working methods are also critical. The core of the filing team should operate as a war room that is led by the regulatory subteam but closely involves multiple other functions (for example, clinical science, CMC, nonclinical, pharmacokinetics, pharmacodynamics, medical writing, and clinical operations). Prior to the start of major dossier-preparation activities, this war-room team will align on a single timeline, critical paths, and cross-functional initiatives to be implemented. The most common cross-functional initiatives could include prewriting portions of the dossier prior to the availability of pivotal data, using a systematic reviewer matrix to accelerate review, and agreeing on key messages based on a number of data scenarios. As the dossier preparation progresses, the team can adjust critical paths in real time to create and integrate “priority lanes” that guide the entire team on prioritization during heavy periods of review—always optimizing for overall timelines while retaining a high level of quality for the review.

10. Portfolio-resource optimization

At the above-asset level, the R&D leadership employs digitally informed governance to review consolidated readouts (from ongoing studies and competitor information) in real time, readjusting priorities and resources accordingly. Upon identification of high-priority projects—such as accelerating the filing of high-potential drugs and reauditing a high-risk site—reassignment of the talent and costs to support them can occur within days or weeks. This often involves a willingness to deprioritize programs, even before asset failure, and a readiness to concentrate a considerable proportion of company resources behind a single asset when justified.

It is critical that leadership incentives align with the company’s development-excellence goals, with performances (and bonuses) closely tied to the metrics of time, cost, and quality in portfolio development. Tough decisions may be necessary to ensure that leaders have the requisite skills and mind-set to succeed in an increasingly agile and digitally enabled environment.

The consolidated impact

The relative impact of the development-transformation levers depends on the specific situation, starting point, and objectives of individual companies. It is important to realize that there is no instant solution that can optimize the time to market, cost, or quality for every company. The majority of these levers are highly effective, and R&D organizations can amalgamate them into their approach across the portfolio (as opposed to a one-off model for an individual asset). Some of these decisions, and the intensity of the levers applied, could accelerate prioritized programs (for example, CMC acceleration with at-risk investment and energy directed toward trial-recruitment acceleration).

Across the board, we have seen that a holistic approach can achieve a 500-day acceleration in the overall drug-development timeline in addition to improved quality and compliance, enhanced user experience for patients and healthcare professionals, better insights and decision making, and a reduction in costs of up to 25 percent. However, this approach requires a commitment from leadership and the implementation of several difficult decisions throughout the development process.

Implementing the change

Achieving a transformation of the drug-development process relies in equal measure on the specific initiatives previously described and on managerial skill and discipline in implementation. Pharmaceutical organizations embarking on the change need to consider several success factors.

It is often useful to set an aspiration for impact on a specific asset in the portfolio and use this as a flagship for broader change. Before transformation of the drug-development journey, it is essential that all stakeholders align on the overall vision for the asset, including on a “from/to” perspective at the individual function level.

Transforming and driving new ways of thinking and working requires a new set of skills. Capabilities that often go amiss include design thinking, patient- and physician-experience analyses, advanced analytics, digitization, and automation. Hiring or building on existing capabilities or employing capabilities beyond the organization’s walls can fill the gaps.

Designing an agile transformation in pharma R&D

At the heart of transformation is the use of technology. Over time, technological skills should go beyond an analytics center of excellence and deploy across the entire organization, establishing an integrated (and secure) data architecture and supporting capability growth.

The explosion in quantity of available data means that the map of ownership is becoming increasingly complex. It is no longer possible for a pharmaceutical company to own all the data associated with its assets, and the linking of multiple data sets and types is just as valuable as the data themselves. R&D leaders must decide which data they will bring in house, which data they will access through partnerships, and which data are less relevant. Drug-development organizations will see a need to create a data strategy alongside their technology strategy to ensure secure, compliant access to the correct data.

A core part of transformation—in both scale and shape—is the desired cultural change. Working in agile and cross-functional ways can help break down silos, facilitate decision making based on ambiguous data, and create ambitions for rapidly iterative work. Further, decision makers must be open to a more data-driven way of working, accepting potentially nonintuitive conclusions and being comfortable taking calculated risks. These changes can only happen with full leadership buy-in, empowered teams, and aligned evaluation and incentive models.

Lessons from development-excellence transformations

As several players explore the potential of development excellence to transform their R&D engines, we see a few common success factors:

• End-to-end view of scaling across a capability, function, or asset—and eventually across the R&D function. When designing an end state, organizations with the most successful efforts have a clear, value-backed business case to ensure organizational buy-in that acts as a North Star for decision making throughout the company.
• Patient-centric view to provide a clear vision of what the future organization will look and feel like. When implementing a transformation, an agile approach to rollout can maintain momentum through sprints, quickly gaining input from users and developing a rapid blueprint of the future state of the organization. 2 Aliza Apple, Harriet Keane, Rachel Moss, and Valentina Sartori, “ Designing an agile transformation in pharma R&D ,” July 2019.
• Focus on engagement and skill development. It is crucial for companies to recognize the importance of organizational engagement (at all levels) and investment in the appropriate capability building.
• Ability to leverage innovation from beyond the pharmaceutical industry. The skill of applying lessons from other sectors is particularly relevant in the space of analytics and digital (for example, analytical techniques and data storage). But it also applies to themes such as patient centricity: pharmaceutical companies can learn much from other highly customer-centric industries on creating a seamless user experience.

Getting started with development transformation

There are multiple ways to begin a development-transformation journey:

• Asset-led acceleration. Select an asset (or program) anticipated to deliver outsize mid- to long-term value. Then deploy transformational initiatives against the asset—throughout R&D functions and across all capabilities (such as agile, design thinking, and advanced analytics). Demonstrate tangible results with one high-priority asset and create near-term value and a desire for an approach that can span the portfolio.
• Functional reinvention. Choose a priority function and deploy all development-excellence pillars (patient-centric design, process redesign, digital, analytics, and agility) to deliver something truly exceptional. For example, a company could seek to achieve excellence in trial delivery across multiple elements, including reinvention of the patient journey, advanced analytics to inform site selection, and a control tower to manage real-time quality risks.
• Capability engine. Identify one flagship capability to embed across all areas—for example, an end-to-end, agile transformation to change the methods for asset team formation, material development, and decision making across an entire R&D organization. Further, use digital as a catalyst for growth by investing in associated capabilities across all aspects of R&D (for example, automation, artificial intelligence, and digital patient engagement).
• Fast-track implementation of a proven use case. Use known, high-priority use cases within a function to drive change and capture quick wins. Such an approach is the least transformative but may act as a pilot for broader transformation.
• Holistic R&D transformation. Drive a holistic transformation across all functions and capabilities—a multistep journey for the entire R&D organization to drive top-down change throughout all aspects of development. This requires both support from the CEO and R&D leadership and a belief that the transformation is important to the future of the company.

The approaches we described represent different levels of ambition and appetites for change. Pharmaceutical companies with new energy spurred by recent leadership changes could be amenable to adapt the holistic R&D transformation, the capability-engine approach, or the functional-reinvention approach. Those with a pipeline-asset-driving, disproportionate potential value could use it as the burning platform to take an asset-driven approach. Those that have invested many years in building a specific capability could opt for a more targeted use-case implementation. Whatever the specific approach, adopting a transformative development journey will help achieve the core ambition of the pharmaceutical industry: the development of effective and innovative medicines brought to patients with efficiency and timeliness.

Gaurav Agrawal is a partner in McKinsey’s New York office, where Harriet Keane is an associate partner; Maha Prabhakaran is an associate partner in the Silicon Valley office; and Michael Steinmann is a senior partner in the Zurich office.

The authors wish to thank Matthias Evers, Edd Fleming, Peter Kristensen, and Martin Møller for their contributions to this article.

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How to create a smart integrated drug development plan including considerations for cell and gene therapies

by Diane Seimetz

The transition from R&D stage to clinical stage is an important phase in drug development. While R&D focuses on identifying promising product candidates, drug development requires a diligent approach across various disciplines in a highly regulated environment to bring promising drug candidates to the commercial stage. On this path, an integrated drug development plan (IDP) is an extremely useful tool to increase the overall success rate. This is true for the development of all drugs but is even more important for cell and gene therapies, where conventional development paradigms often don’t apply, and where more tailored approaches are needed.

For the creation of an IDP all development disciplines such as manufacturing, nonclinical and clinical development as well as regulatory affairs should be involved (see Figure 1). Even for early-stage programs commercial aspects such as target countries for commercialization, the competitive environment as well as pricing / reimbursement aspects should be considered. The IDP is a living document that will need to be updated as the development progresses. Therefore, starting as early as possible is more important than striving for the most perfect and complete document from the beginning.

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Figure 1: Key elements of an integrated drug development plan

A useful way to start creating an IDP is by having the goal in mind, i.e. the product intended to be developed for commercialization in defined countries /regions. This goal can be visualized in the form of a target product profile (TPP). The TPP comprises, often in a tabular format, the value proposition under consideration of the competitive environment, target indication(s) and population(s) for development incl. desired efficacy and safety profile, route of administration as well as dosing strategy. Furthermore, target countries or regions and pricing should be considered. A TPP template is provided in [1].

For cell and gene therapies which are based on a particular platform a platform specific TPP can be a useful starting point for an IDP. The platform specific TPP can be leveraged for all product candidates derived thereof.

The quality part of an IDP outlines the proposed manufacturing approach as well as the control strategy for the drug substance and the drug product. The manufacturing approach will need to consider the involvement of potential contract manufacturing organizations (CMOs) for the entire product or parts of it that are not manufactured inhouse.

Important points to consider for the manufacturing approach of cell and gene therapies are the source and quality of starting and raw materials. As the manufacturing process has limited capacity to clear adventitious agents or impurities, a high quality of input materials will have to be ensured. For allogeneic cells as starting materials specific regulatory requirements for cell sources and testing requirements should be considered from the beginning (for example, products derived from embryonic stem cells may not be approvable in some countries due to ethical/legal reasons).

For the control strategy a diligent approach including a phase appropriate plan towards the potency assay will be needed. While for early phases of drug development a surrogate measure of functionality may be considered appropriate, a potency assay measuring the biological activity of the drug will be needed. As these assays are truly product specific and challenging to develop, this should be planned well ahead.

The nonclinical part of an IDP outlines the proposed in vitro and in vivo studies planned to address pharmacology, safety and toxicology. Important questions guiding the nonclinical development are for example (1) how does the drug work and for how long, (2) are there relevant animal models available for pharmacology and safety assessment (3) what is an appropriate dose and regimen, (4) what are potential safety concerns and uncertainties, and (5) how can the risks and uncertainties be mitigated when progressing to the first in human clinical studies.

For cell and gene therapies animal models are often not readily available or not meaningful at all due to the lack of target expression or substantial differences in the functionality of the immune system. Therefore, in vitro and in silico models (e.g. for off-target predictions) should be considered as useful tools for tailored nonclinical development.

The clinical part of an IPD outlines at least the first in human study and, depending on the stage of development, further clinical studies up to approval and beyond for potential follow-up commitments. For cell and gene therapies the first in human study is typically performed in an indicated population. The limitations of the nonclinical development program will need to be reflected in the clinical study design, e.g. by defining the most appropriate starting dose and sequencing between patients. In the case of autologous cell-based therapies the patient is part the manufacturing process. This requires a dedicated and diligent set-up of a patient to patient logistics chain. This is often underestimated in terms of complexity and cost. Furthermore, all concomitant procedures required for the collection of patient cells as well as administration of the product itself (e.g. depletion therapies) have to be considered for the overall benefit-risk of the product.

Due to the long, sometimes life-long, persistence of certain cell and gene therapies the safety follow-up time can be considerable and will need to be planned well ahead. E.g. for genetically modified cell products the commonly requested follow-up time is 15 years. The effect size that can be achieved with gene therapies is remarkable. Therefore, early approval strategies which include post-approval commitments are warranted. While this is a huge strategic advantage, it poses challenges on the set-up of the manufacturing and control strategy.

The regulatory part of an IDP outlines the regulatory tools that are available in the target territories and assesses the suitability and most favorable timing of these tools for the product candidate. The IDP typically comprises the regulatory interaction strategy, dedicated regulatory programs as well as submission strategies. Of note for cell and gene therapies, due to the innovative nature, several regulatory agencies offer early interactions, e.g. pre-scientific advice in EU member states or the INTERACT meeting with the FDA. Furthermore, regulatory interactions on platforms and innovative manufacturing strategies are offered. In a highly regulated field such as drug development the regulatory strategy is of utmost importance. Crafting the most successful strategy is artwork.

Biopharma Excellence has comprehensive expertise with the creation of smart IDPs. Interested in learning more about how YOUR program can benefit from our expertise? Get in contact with us.

References:

[1] Seimetz, D. The key to successful drug approval: an effective regulatory strategy. In: Life Science Venturing. Wiesbaden: Springer Fachmedien Wiesbaden; 2017:139–165.

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How to Turn An Innovative Drug Candidate into a Commercial Success – The Product Development Plan Explained

Without doubt, biotech startups and smaller pharmaceutical companies have become the major drivers of innovation in the pharmaceutical industry. In 2020, 63% of approved new therapeutic drugs in Europe and the US came from small-to-medium enterprises. Yet for every success, there are countless tales of defeat. How do investors and executive managers bridge the gap between identifying a promising drug candidate and turning out a commercially successful product? While there is no simple answer to this question, one thing is certain: behind every successful new drug, there is a well-crafted product development plan (PDP). In this article, we explore why and how to use this pivotal tool to formulate a winning drug development strategy.

What is a Product Development Plan (PDP)?

The PDP is a strategic document that creates a detailed and comprehensive picture of the development strategy. It serves as a step-by-step guide to arrive at the envisioned drug product. For each stage of the development process, the PDP clarifies the major goals and critical success factors, specifying how success will be measured and what needs to be done to mitigate any risks.

A well-designed PDP not only increases the chances of success, it also plays an important role in helping the program teams reduce cost of goods, maximize efficiency and shorten time to market.

The PDP: Where Opportunity Meets Reality

Bringing a beneficial new drug or therapy to patients is an exciting opportunity and a worthy goal, but not without significant risks. For the best chance of success, it is imperative to start out with a realistic understanding of what lies ahead, and a solid plan of how to arrive at an end product that is not only marketable but will give a healthy return on investment.

Even with sound science and technology as the starting point, turning a lead candidate into a commercially viable drug is no easy feat. It is a multidisciplinary effort that requires extensive planning and coordination, as well as a clear vision of the end goal.

As we saw previously, partnering with more experienced industry players who have been there before and know what to expect is one way that smaller biotech companies can improve their chances of success. Another is to make sure there is a sound product development plan (PDP) in place from the start.

The News No CEO Wants to Hear

Imagine having spent several years and several million investor dollars to get a drug candidate successfully through phase 1 clinical trials, only to learn that your manufacturing process is not suitable for commercial scale production or that the COGS is too high.

Or perhaps your new gene therapy turns out to be the next Zolgensma, with a price tag of over $2M per patient. Will the benefit to patients justify the price of your product? Will insurers agree to cover it? If not, it may mean going back to the drawing board to rework the formulation or the manufacturing process.

What if you had to tell stakeholders that there would be a massive delay in bringing your product to the market because you did not correctly anticipate pivotal next steps and investments?

All of these scenarios are catastrophic for any company, but in particular for smaller companies that pursue a product strategy rather than a technology platform strategy.

For companies relying on Big Pharma partnerships, Menzo Havenga, President & CEO of Batavia Biosciences offers these additional words of caution:

“If at the heart of your company strategy a big pharma partner is imperative, then please note that they will take a meticulous look at the manufacturing process underlying your Phase I clinical data. Should there be any risk that the process cannot be scaled to final commercial volume, they may find the return on investment disappointing.”

Scenarios like this happen far more often than you might think, especially when developing complex biological products or advanced therapeutics, where there may be no established manufacturing or commercialization paradigms, and the path to regulatory approval is uncertain.

Where does it all go wrong? More often than not, the cause of costly delays and roadblocks can be traced back to inadequate planning or failure to fully appreciate the commercial aspects of the program and their implications in product development.

What is the Role of the PDP and Who Will Use It?

Given that a typical drug can take over a decade and more than $2 billion to develop, business leaders need to be fully aware upfront, before spending money, of what they’re getting themselves, their teams and their stakeholders into. The PDP lays everything out on the table from the start, so that the chance of success can be accurately assessed. This starts with being brutally honest about capabilities, weaknesses and deficits, as well as any challenges and risks they face.

As the program unfolds, executive management, potential partners and investors need to be presented with all the relevant facts and information required to decide whether the investment is a viable one, and whether all the criteria have been met to progress to the next stage gate.

In addition, teams executing on the plan will need to have clear guidance on strategy and know what steps to take at every stage of the development process in order to gather the right information and achieve the end goals. They will need to follow the metrics to success, understand what contingency plans are in place, and know when to act on them should things go wrong. A good PDP helps ensure timely action so that there is a smooth transition between phases. In particular, it helps your teams understand how any proposed changes will impact the program as a whole, so that they can make mission-critical decisions without delay.

On this point, Christopher Yallop, COO of Batavia Biosciences comments:

“As any cyclist knows, if you are on your bike and looking only at the tarmac you will not see the bus coming around the corner! It’s imperative when developing a drug that you see the road ahead and steer when needed. That’s where the PDP is essential.”

Finally, Program leaders must of course have sight of the big picture to be able to delegate responsibilities and coordinate the activities of all the relevant teams—including finance, marketing, non-clinical and clinical development, quality assurance, and regulatory affairs. They can refer to the plan to check whether teams are on track to meet important milestones and deliver to specification and within budget.

The PDP is the central command station that makes all of this possible.

The Benefits of Creating a PDP for Your Drug Candidate?

A PDP should meticulously map out the journey of a drug candidate, from early-stage research through commercialization. By charting the course, it paves the way for smoother navigation, optimal resource allocation, and informed decision-making.

A PDP is more than just a roadmap – it’s a strategic compass guiding drug developers to achieve the desired outcomes efficiently. Here are some compelling reasons to consider crafting a PDP for your drug candidate.

• Provides clear guidance at each stage
• Serves as a reality check
• Facilitates communication
• Improves alignment
• Drives agility and sound decision-making
• Increases efficiency

What Should Be in the Product Development Plan?

In practice, the PDP is not one strategy, but many. The key to creating a well-integrated program is to ensure that the PDP encompasses all stages and aspects of the drug development program. While the structure and content may vary, most drug development plans include these components:

Executive Summary

A high-level overview of the drug product and target patient, the market position, as well as a summary of the financial figures and projections needed to support investment and stage gate decisions.

Marketing Strategy and Business Case

This section focuses in more detail on the commercial aspects of the program, plotting the strategy for achieving the necessary market penetration and expected return on investment. Intellectual property and trademark strategy – plays a crucial role in maintaining competitive advantage, ensuring protection in major markets, and responding quickly to any changes in the IP landscape.

Target Product Profile (TPP)

Often described as the backbone of the PDP, the TPP details the target product attributes needed to obtain regulatory approval and to satisfy commercial goals; these specifications are crucial in determining what can be claimed on the product label, and they also drive the design and evidence gathering strategies for other critical program elements.

Detailed Roadmaps

Comprising of the ‘meat and bones’ of the PDP, laying out the most effective strategies for non-clinical and clinical development, CMC, manufacturing, regulatory affairs, and quality assurance, project organization, planning and budget considerations.

How to Get it Right First Time

Having a PDP in place as early as possible lays a solid foundation for success, but only if it has the right structure and content. To see what a typical PDP looks like, request our free PDP template, which you can access after completing the form below. In the next and final article of this series, we’ll discuss how to put together the most effective PDP for your drug development program .

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The road from R&D to final production of an adenoviral vector product is well trodden. Here is information to help you on your journey.

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Bringing a new viral vector-based therapy from lab to market? This resource guides you through the complexities of viral vector development, scale-up, and cGMP manufacturing.

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How to Start a Pharma Company in 10 Easy Steps

David Blok | Posted on September 19, 2023 | Updated on March 26, 2024

Introduction

Step 1: market research and pharmaceutical business ideas.

• Step 2: Creating a Business Plan

Step 3: Regulatory Compliance and Legalities

• Step 4: Team Building and Talent Acquisition
• Step 5: Location and Infrastructure

Step 6: Product Development

Step 7: clinical trials and approval process.

• Step 8: Manufacturing and Supply Chain Management

Step 9: Marketing and Sales

• Step 10: Scaling Your Business
• Frequently Asked Questions (FAQs)

Let’s face it: if you are reading this, you are one of two people: the entrepreneurial mind that dreams of building a business in an impactful industry, or you’re passionate about science and research and want to contribute to the better health of humanity.

Whether you envision yourself as a Pharma tycoon or simply long to casually drop ‘I make drugs for a living’ at dinner parties, the time has come for you to admit it – you want to build a Pharma company.

Why is a Pharmaceutical company a good investment?

Starting any company takes time, energy and money, but a Pharma business has even more to consider: it requires a combination of scientific expertise, business acumen, and regulatory knowledge. Whether you’re considering how to start a pharmaceutical business or exploring pharmaceutical business ideas you’re not just selling any products here, you’re impacting the health of people. I know what you are thinking: if it’s so difficult, why do people keep investing in Pharma?

Pharmaceutical manufacturing companies can be extremely profitable:

• These companies show resilience during market downturns, rising in R&D investments to stay competitive & flexible (Grand View Research Report, 2023).
• The industry has experienced significant growth during the past two decades, with Pharma revenues worldwide totaling 1.48 trillion dollars in 2022 (statista, 2024). Still don’t believe it? Check out this blog and discover India’s top Pharma Companies to find out h ow profitable pharma companies are in India.

Being such a lucrative market, it’s a natural good investment, especially if you have a good idea – which I’ll get to in the next chapter.

This brings us to our topic at hand, welcome to your comprehensive guide on how to make your venture a reality. In the upcoming sections, we’ll delve into the why’s and how’s of building a successful Pharma empire. Get ready for insights, anecdotes, and much more.

Let’s dive in!

The first step is always the hardest because there is nothing before it. On the flip side it’s a great opportunity to set the direction of your company. Your business is a blank canvas at this point, and you get to bring your vision to life, so the best way to set the wheel in motion is by understanding everything about the industry gap you are trying to fill, in practical terms, whether your idea is viable or not.

Before you dismiss market research as a formality, ask yourself: “Is there a chance my solution is old news compared to what’s already out there?”.

Unless you have the cure for cancer in your pocket, someone’s advancements in your field are worth taking a look at. At this stage, you should focus on two things:

• Understanding market trends and directions.
• Realizing if your big idea is profitable.

Market research will identify unmet needs within the healthcare system, such as patient preferences. By looking at emerging technologies, you can direct your research and development strategy.

Your company’s direction is in your hands at this point, and isn’t that exciting?

Where to start your research?

Start looking at insightful industry reports, academic journals, and the latest industry news, but remember to use credible and reputable sources.

The most important thing is to stay updated, especially on everything that concerns your big idea; market research will back it up. Staying on top of trends also ensures your product is aligned with market demand, and that you have a competitive edge, also called your unique selling proposition.

Step 2: Business Plan and Funding your Pharmaceutical Company

Once you’ve settled on an idea, it’s time to start shaping it into an actual enterprise. Welcome to a pivotal chapter: creating the blueprint of your operations, aka your business plan. Don’t have the faintest idea of what a business plan consists of? Pharmaoffer has got you covered.

Fundamentals of a bulletproof Business Plan:

• A market analysis – which you already did in Step 1.
• Outline of management and the company organization.
• All your products/services – which you probably already know.
• Customer segmentation.
• Marketing plan.

Pitch Perfect

Why is a detailed business plan crucial, you may ask? This plan isn’t just a formality; it’s your golden ticket. This single document is meant to convince stakeholders and investors that you’re not a risk; you’re a calculated and promising investment, which will increase trust and the chances of getting the funds you need.

So don’t be scared to dive deep into the big questions like who will benefit from your pharmaceutical innovations, and what makes it profitable. Paint the financial portrait of your venture with clarity—how will the funds be utilized, and what’s the return on investment? Venture capitalists, government grant applications, and loans are great routes to explore. Your business plan will prepare you to pitch your idea to the right people.

Okay, this is where it gets tricky, but it’s why pharmaceutical business entrepreneurship isn’t for everybody. You are too far along in this journey to stop now, so it’s better to keep going.

Regulating to triumph

We know that acronyms like FDA, GMP, and CEP may be scary, but like we said from the start of this journey: when it comes to the health of the population, you can’t risk it. Regulations ensure your company is ethical and safe. Dismissing them puts your entire operation at risk of getting a bad reputation, not to mention facing penalties later on. Oh, and besides, no funding without compliance is just not going to happen!

What is your business structure?

Now, let’s talk about how to set up and open a Pharma business. Should you go for an LLC (more partnership-oriented) or a corporation, and why does it matter?

The selection of a business structure is a crucial decision for a company because it impacts various aspects, including:

• Legal responsibilities.
• Liability protection.
• Ability to raise capital – we know this sounds like a broken record on this one, but money it doesn’t grow on trees, right?

Remember, it’s not just about paperwork; your business structure shapes the core of your company. Speaking of structure and shape, it’s time to shape your physical company.

Step 4: Building your A-team

You’re the mastermind behind this venture, but you don’t have to do everything yourself. Like a formula, it takes plenty of ingredients to make one solution. In this section, you’ll select the best people to represent and help grow your business.

The trick to knowing whom to hire is simple: point out the necessary fields for your business to run that you need to hire for, and find people who can excel at them. Think R&D, supply chain management, sales, and, of course, medical professionals. ´

Extra tip: remember that sometimes you don’t want to hire the best technical person, but someone who can complement your team’s attributes, like, for example, someone with a proven track record of adaptability and communication.

Step 5: Location, Location, Location

The perfect location is a no-brainer: it is the one closest to your potential partners. Places like research centers for experiments, hospitals for data, or universities for talent scouting are where you wanna be. Just think of how your idea can improve with these extra resources.

A place to call…office

Ideally, if you picture a creative and productive atmosphere, it won’t be a cramped space, poorly lit with bad chairs, that won’t cut it. Your facilities are the day-to-day of your operation, where some say, the real magic happens, so make sure your spaces are up-to code and optimized for the tasks at hand. Remember, a positive environment boosts morale and increases efficiency.

Admit it, you’ve been thinking of this since the very beginning of this adventure. After all, this is what you came here for. Whether it’s a new drug or medical device, the development phase is the fun, and most important part. Let your R&D work shine to bring your vision to life.

Trials and tribulations

Having a finished product means one thing, and one thing only in the Pharma world: clinical trials. Clinical trials aim to provide a scientific basis for advising and treating patients.

But don’t be discouraged if it doesn’t work out. Even when researchers don’t obtain the outcomes they predicted, the trials results can help point scientists in the correct direction of their research. Trials present their challenges, but as cliché as it is, every challenge is an opportunity in disguise and a testament to your team’s innovation capacities.

Think you heard enough about clinical trials? These are the final stages before your product enters the market, and needless to say, it won’t enter without the green light. How do you make sure it’s approved then?

• Rigorous protocol adherence.
• Collaboration with regulatory bodies.
• Scientifically proven efficacy and safety.
• Real-world testing for validation.

Extra tip: real-world testing is a good option to further validate and solidify product claims that may give you an interesting competitive edge.

Passing this frantic stage is a monumental milestone, and it’s one foot in the door of your Pharmaceutical business success. If you are in this stage, or just looking to dive deeper into the complexities of API’s clinical trials, check out our blog, API Clinical Trials: From Preclinical Trials to Post-Marketing Surveillance.

Step 8: Pharmaceutical Manufacturing and Supply Chain Management

Quality control isn’t just between your lab and office walls most of the time unless you manufacture everything in-house, but is that cost-effective?

We are not going to go into this question but leave it for a promising blog about the pros and cons of API in-house manufacturing or out-sourcing. This time we’re going to talk about the Pharmaceutical company’s supply chain.

As you need to make sure every substance you use is under the same quality control as your business, how can you be positive you are purchasing APIs from a qualified supplier?

We’re not gonna lie, unfortunately this step can be a dead end as many API manufactures aren’t registered in a public contact base.

You really need to know the business and ask around, a total nightmare. This is our mission statement: at Pharmaoffer we want to match the best certified API manufacturers with businesses like yours, so to provide resources for both and enrich Pharmaceutical business supply chain with qualified options.

Your supply ally

When choosing the right suppliers, the biggest worry is compliance standards, so make sure your supplier:

• Meets all compliance standards.
• Is up to speed with industry best practices.
• Has the means to make deliveries on schedule.

You have a finished product, your team is working and the place up and running, so it’s time to find some clients. We do this with a marketing and sales strategy.

What do people think of when they hear your company’s name? Do you have a logo? These are some of the questions you need to clear with the proper professionals.

Branding is understandably the last thing on your mind, but don’t make the mistake to overlook it indefinitely. Nowadays, if your business doesn’t look good it won’t be credible. Branding is how you present your company to the world. It’s your mission statement, your corporate culture, and your values. It will help you find your market and secure a strong position in it.

Getting the word out

Marketing is about business survival, there is no denying it. In this increasingly visual world it’s not enough to have a great product, you need to present it well to elevate it. The way you do so is with marketing tools.

Now don’t fall into cheap marketing tactics: in Pharma you can’t make any false claims, exaggerate benefits, or show dubious testimonials. This will kill your entire operation. Marketing in the Pharma sector demands a careful balance of awareness-raising and ethical considerations. Credibility is central, so keep it real, and let your amazing product and integrity attract customers.

Because we understand how complex marketing strategies can be, at Pharmaoffer we wrote you a startup guide to navigate online marketing in the pharmaceutical sector called Online marketing in pharma; where to start?   Feel free to take a look.

Step 10: Scaling Your Pharmaceutical Business

You finally have a Pharma company, congratulations and we take no credit for it. Now that you have a growing business, the question is: How big do you wanna get? We’ve seen how much does it cost to start a pharmaceutical company and remember that scaling and it isn’t just about growth, it’s about smart growth. Scaling is about expanding your operation, and it should be a calculated decision.

To make the right move you need to be on top of market demand, KPIs tracking, and consult your team to know when it’s the right time to do it.Bigger the business, bigger the challenge.

Bigger the business, bigger the challenge

A bigger business is a complex one. From staffing to resource allocation, be prepared to adapt your business strategies as you expand.

Extra tip: keep your staff informed and let them be a part of the change. It will make them more involved in your business success.

You made it to the end yay!

We saw how to start a Pharmaceutical company investment which is no small endeavor, but it’s a rewarding one for sure! You are building something of your own, following your heart and creative dreams and the best of all, you’re saving lives while you do it, how great is that?

Okay, it’s time to get to work, so roll up those sleeves, and get started if you haven’t already. We have no doubts that if you pay attention to these 10 steps, you have what it takes to build your successful Pharmaceutical company.

Needing further assistance to find the right API suppliers for your business? Fill in the form to contact Pharmao ff er and schedule a free meeting to take your business to the next level.

Is it hard to start a pharmaceutical company?

Yes, but it's also rewarding. Be prepared for regulatory hurdles and significant initial investment.

How long does it take to launch pharma company?

On average, it could take 1–3 years, depending on the business model, licensing, and other factors.

Can I start a pharma company without a medical background?

Yes, although you'll need a team of experts in medical and scientific fields. Your role may be more focused on business strategy and growth.

What are the biggest challenges in starting a pharma company?

Regulatory compliance, securing funding, and market competition are some of the biggest hurdles you'll face.

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• Interviews & Case Studies (7)
• Market Analysis & Data (13)
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• Regulations & Standards (18)
• Sales & Marketing (15)

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Pharmacy Business Plan

Things to Consider Before Writing a Pharmacy Store Business Plan

Check your legal requirements.

A pharmacy business requires a fair amount of licenses and permits. It is good to have a checklist of all the required licenses and to see if you have to get any of them.

Research what permits your state requires as well as the ones mandatory for everyone. It helps you stay on the good side of the law.

Pick a good location

A pharmacy setup requires a fixed minimum area. Also, a pharmacy that is easily accessible is more likely to succeed than one which is unreachable during emergencies. Hence, picking a good location is important .

Also, you can pick between starting a physical store or going online. Both business structures would have their pros and cons. You should pick the one that is the best for you.

Have a proper storage facility

Different medicines and formulas have different storage requirements. You’ll keep most of them in cool and dry places though. Bad storage can cost a pharmacy business dearly, even if you do everything else right.

Hence, it is important to have a good and ideal storage facility before you get started.

Check if your staff has the proper technical knowledge

You need technical knowledge and attention to detail to fare well as a pharmacist and so does your staff. As dealing with medicines is quite a critical job and can have consequences if not done right, it is important to find staff who know what they are doing and are well-trained and up to the job.

After you figure out some of the technical requirements, it is essential to figure out the business side of running a pharmacy. Planning, in the beginning, can save you from a lot of trouble later on.

Chalking Out Your Business Plan

A business plan helps you stay prepared for challenges, make better decisions, and formulate better business strategies. A pharmacy business takes a fair amount of legal procedures and competitive strategies, a pharmacy business plan can help you with that.

Reading some sample business plans will give you a good idea of what you’re aiming for. Also, it will show you the different sections that different entrepreneurs include and the language they use to write about themselves and their business plans.

We have created this sample pharmacy business plan for you to get a good idea about how perfect a pharmacy business plan should look and what details you will need to include in your stunning business plan.

Pharmacy Business Plan Outline

This is the standard business plan outline which will cover all important sections that you should include in your business plan.

• Keys to Success
• Business Ownership
• Summary Chart
• Business Model Description
• Mail order customers
• Walk-in customers
• Target Market Analysis
• Target Market Segment Strategy
• Competitive Edge
• Marketing Strategy
• Sales Forecast
• Development Requirements
• Personnel Plan
• Important Assumptions
• Break-even Analysis
• Projected Profit and Loss
• Projected Cash Flow
• Balance Sheet

Let’s understand how you can write each section of the pharmacy business plan.

1. Executive Summary

The executive summary section forms the first page of your business plan. It summarises all that your business stands for.

The executive summary section consists of the following subsegments:

• Objectives : This segment consists of the reason you started your business in the first place. What is your idea behind it and what problem do you plan on solving with it?
• Mission : Your mission statement should reflect how your pharmacy business can help people, apart from providing them with medicines. It reflects how your idea can deal with a problem more optimally.
• Financial Summary : This section would consist of the funding requirements of your business, and how the said funds would be put to use. It serves the main purpose of the executive summary, which is to get your business funded.

As a pharmacy business, your executive summary would consist of the type and size of your pharmacy business, your team, your qualifications and licenses, and a summary of your financial plan.

2. Products and Services

This section consists of a description of all the products and services your pharmacy offers.

For example, apart from your general products, this section can also consist of services your pharmacy offers like home delivery of medicines, subscription packages, online orders, etc.

3. Market Analysis

Market analysis helps you understand what you are getting yourself into. It also helps you make sense of all the research you have done and how you can put it to use for your business.

It consists of the following subsegments:

• Market Segmentation : Through market segmentation, you separate your target audience from the rest of the market based on their age, gender, income, occupation, medical conditions, etc.
• Market Positioning : In this segment, you can add an analysis of where you stand in the current market. And what would be the best marketing strategy for you as per your position?
• Target Market Analysis : In this section, you’ll write down an analysis of your target market, and their tastes and preferences.

As a pharmacy business, you can list down the type of pharmacy you own, your target customer base, the kind of services they like, the location they’ll prefer, and how they buy their medical supplies.

4. Strategy And Implementation

After you carry out market analysis, the next step would be to create a marketing strategy based on the same. This section helps you promote your business to your target audience.

This section consists of the following subsegments:

• Competitive Edge : Include your competitive advantage in this section. Include how your product is better than your competitor’s and how you’ll use that to your advantage.
• Marketing Strategy : Your marketing strategy should speak to your target audience. Your campaign should show your customers how your business solves a pressing problem.
• Sales Strategy : A sales strategy should be formulated after surveying what works best for your specific industry.

As a pharmacy business, you can center your marketing around safe products, better service, and availability. According to various surveys, KAM, clinical sales force, and service rep model are three of the most successful strategies for pharmacies.

5. Web Plan

With everything going online, a website strategy is of utmost importance. With online pharmacies like mail, my prescriptions, and Amazon pharmacy coming up, having an online presence is crucial to being seen by your consumers.

Moreover, an eCommerce website can also serve as a good alternative if you don’t want to go through the hassle of owning a physical store.

Nonetheless, building your online presence can help you in getting noticed. It is also a good method of promoting your brand idea.

6. Financial Plan

This section would consist of everything about your company’s finances. From your financial history to your projected profits, your financial plan would cover it all.

A good financial plan helps your business survive and thrive.

This segment consists of the following subsegments:

• Financial Resources : This segment would consist of the investment you can put in your business, as well as other resources for meeting your funding requirements.
• Funding Requirements : This would consist of the funding requirements to set up your pharmacy and keep it going.
• Projected Cash Flow and Profits : This section would consist of your business’s expected cash flow and profits in the long term.

Download a sample pharmacy business plan

Need help writing your business plan from scratch? Here you go;  download our free pharmacy business plan pdf  to start.

It’s a modern business plan template specifically designed for your pharmacy business. Use the example business plan as a guide for writing your own.

The Quickest Way to turn a Business Idea into a Business Plan

Fill-in-the-blanks and automatic financials make it easy.

Pharmacy Business Plan Summary

In conclusion, though a pharmacy business might take a lot of work, you can make running your business a lot easier and smoother with a business plan.

A business plan helps you stay organized and updated as per market trends and changing environment of the industry.

After getting started with Upmetrics , you can copy this sample pharmacy business plan template into your business plan and modify the required information and download your pharmacy business plan pdf or doc file.

It’s the fastest and easiest way to start writing your business plan.

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• Pharmaceutical Company Business Plan

Pharmaceutical Company

BUSINESS PLAN

PAIN AWAY LTD.

1117 High St. Poughkeepsie, NY 13495

The company described in this plan has moved beyond the initial start-up phase and is now seeking investors to finance its growth. Much of the plan, therefore, is geared toward persuading, explaining, and reassuring potential investors that the company (which produces a therapeutic, topical pain cream), is well-managed and stable. The in-depth analysis of the company's competitors is an outstanding feature of this plan, as is its market research.

EXECUTIVE SUMMARY/OVERVIEW

Competition.

• PROPERTY & FACILITIES
• PATENTS & TRADEMARKS
• RESEARCH & DEVELOPMENT

GOVERNMENT REGULATIONS

Insurance and taxes, corporate structure, risk factors.

• RETURN ON INVESTMENT AND EXIT
• ANALYSIS OF OPERATIONS & PROJECTIONS

FINANCIAL STATEMENTS

Type of business.

Non-prescription drug wholesalers; US SIC Code - 2834 Pharmaceutical Preparations.

Company Summary

Pain Away Ltd. is a going concern, a Delaware corporation formed in January 1995 to manufacture and sell its premier launch product Pain Away, a topical pain remedy using FDA-approved homeopathic ingredients developed for the simple purpose of relieving pain. The company was formed by its parent S-corporation, Peale, Inc. in order to market products nationally and internationally. Peale, Inc. was formed in February 1994 to complete the development of the launch product. The formation of the company was a significant step in a 9-year process of refining and testing a homeopathic formula first used by company founder and CEO Robert Peale to alleviate his pain from carpal tunnel syndrome. The R&D phase of this product began when Mr. Peale purchased the original formula, did a thorough study of homeopathy, and refined the formula to its present marketable state. From the beginning of R&D, Mr. Peale worked within FDA guidelines in order to secure FDA registration. Then, in February 1994, the company was formed to finally manufacture and sell the product. Starting with only a handful of customers, including some professionals, chiropractors, physical therapists, etc., only 19 months of operation have yielded 12,000 individual customers with an 80% reorder rate. The current customer base now includes medical doctors from different specialties, sports trainers, and athletes, both professional and amateur. The company expects to show a profit in 1996 and estimates that it will be very profitable in 3 years.

Mr. Peale is 49 years old and has a 25-year history in sales, sales management, and marketing for a tool distribution company. His deep study of homeopathic medicines started in 1985 and included studies in nutritional supplements. Mr. Peale has been invited to sit on a newly-formed FDA committee addressing the growing national interest in natural medicines.

Curtis Company president, Ms. Alana has 25 years of experience in retail and direct sales. She has been a senior sales director and sales trainer for Beautiful You Cosmetics, has owned and operated a retail sporting goods store, and has managed a 15 person, $1 million department for a major chain retailer. She also has some banking experience.

Vice-president of marketing, Ryan Lemon has 32 years of experience as production manager, buyer, sales manager, and marketing manager. He was director of marketing for Pilgrim Health and was responsible for their first launch into New Jersey which led to their first $18MM in sales (in 3 years). He has a BS degree in textile engineering and has also done independent marketing consulting.

Product and Competition

The R&D mission was to develop a greaseless, odorless, topical cream which was measurably more effective at relieving pain than any other OTC (over the counter) topical product. This mission has been accomplished. The company has collected anecdotal, testimonial, and uncontrolled medical study evidence that Pain Away is more effective than the leading topical analgesics such as Arthritin and others. The product's effectiveness in relieving pain is its most powerful benefit, besides the added benefits of it being greaseless and odorless. What distinguishes Pain Away from any other topical analgesic in this still-growing $402.1MM market is its advanced homeopathic formula - a refined blend of 11 FDA approved pure and natural ingredients. The typical OTC topical analgesic works to either block the sensation of pain or distract perception of deep pain by "counterirritating" another localized area near the pain. Pain Away's formula is different. Pain Away treats pain at its source. It stimulates improved circulation in the micro-capillary system in the ligaments and tendons, where most pain is felt. Pain-relief from Pain Away is the result of the body's own self-healing. It also can be applied several times a day because it is odorless and greaseless. The US pain management market ($15.2 billion by 1997) is a mature market with intense, established competition ("The Market for Pain Management Products in the US - Introduction, Drugs, Devices, Trends, and Market Structure," in FIND-SVP). With future pharmaceutical market growth dependent upon new and innovative product additions, Pain Away is entering the field at the right time. The company will distinguish itself and its market position by dedication to the development of only natural-ingredient products. Since its unique formula of ingredients already has FDA approval, the company aims to penetrate the OTC pharmaceutical market, where new products traditionally find success. Here Pain Away will compete with topical as well as internal analgesics, including aspirin, acetaminophin and ibuprofen. An estimated 4,000 people a year die from aspirin overdose. A condition known as "analgesic neuropathy" can result from extended or inappropriate use of analgesics. Medical studies linking heavy usage to health problems have affected aspirin, acetaminophin, and ibuprofen. Pain Away can be marketed as a substitute for (reducing overdose risk with internal analgesics), or as a supplement to (using Pain Away can reduce needed dosage of internal analgesics) internal analgesics when used for certain pain relief. Furthermore, Pain Away is not contraindicated for use with any other medication. This broad-based appeal is built upon the reliability of Pain Away's effectiveness in relieving pain, inflammation, and spasm associated with arthritis, bursitis, sciatic spasm, neck/back pain, tendonitis, tennis elbow, tension headache, achilles tendonitis, and carpal tunnel syndrome.

A second product, a natural anti-inflammatory nutritional support system formula known as "Pain Away Plus," will soon be marketed as a companion product to Pain Away. This multistaged formula is a combination of trace minerals, herbs, and a natural cartilage-derived substance. The company has long-term plans to develop more health-related products.

Funds Requested

Company principals have invested all available personal assets into the product development and operations to date. The need for capital is in the context of the readiness of the product for mass marketing. Management is seeking a $1,500,000 equity investment in exchange for a suggested 30% ownership of the company. All terms of financing are negotiable in order to meet the financial requirements of the investor.

Use of Proceeds

Advertising & promotion campaign - $1,200,000 (see below); Market research - $300,000. The company anticipates the need for follow-on financing after 24 months of business.

Financial History

Sales were first made in 5/94 under Peale Inc. ($143,881). As sales expanded nationally, Pain Away Ltd was formed in January 1995. All sales since then have been under Pain Away Ltd.

Financial Projections

With capital request accomodated, the company believes that Pain Away will jump in sales starting in 1996.

The company will attempt a public offering based on year 2000 earnings. If there is no public market and no prospect for a public market in the near future, then the company will offer to buy back the stock owned by the venture capitalist. A predetermined price could be set ahead of time, if desired by the venture capitalist.

The product effectiveness, evidenced largely through anecdotal evidence, personal testimonials, and repeat sales, has formed the basis for the future growth of the company. Together with a second, complementary product (nearly ready for market), the launch product will be aggressively mass marketed as a pain management system for the next five to ten years. Past and current sales have been to end-users, health professionals, and to some retail chains. The company and product are now poised for first stage expansion. Over 30 target wholesale markets have been identified. While the company uses its marketing strategy to enter these wholesale markets, simultaneous efforts will be made to develop research protocols. Management is confident that the anecdotal evidence and personal testimonials will be strengthened by controlled studies, designed to test the effectiveness of the product and demonstrate the physiological healing activity stimulated by the formula. With scientific credibility, the product will not only build its position in the $150 million homeopathic product category but will also strengthen its transition into the formidable mainstream topical analgesic category.

Future research is planned, based upon inquiry, in order to adapt the formula for animal use (Pain Away currently being tested on thoroughbred horses).

At the end of five years, the company intends to have at least one additional health product and should be able to go public off its revenues. The long-term goal for the company is to become an entrepreneurial leader in the development of natural products for various segments of the health care market. The company plans to capture enough share of the topical analgesic market to become either a viable joint venture partner or an acquisition candidate.

The product formula and delivery system are proprietary. The formula is uniquely advanced and is nearly immediately effective in relieving pain. Homeopathy and immunization have much in common, namely the principle of similars, which states that whatever a substance causes in a large dose, it can stimulate an immune response to defend against it in a small dose. It works by the principles of stimulation to the body's own self-healing mechanism and by the scientific balancing of its natural active ingredients through a dilution process called micro-dosing. Micro-dosing has given homeopathy its 200-year history of safety with no known side effects or toxicity. This self-healing process is in contrast to the majority of commercially successful topical analgesics, which contain counter-irritants, including the newer capsaicin-based products. These ingredients cause a superficial inflammation on the skin which masks pain by deadening the sensation of pain in the epidermal nerve endings only, or by distracting from the perception of pain by irritating an area near the pain source. The Pain Away formula has been developed with precision and balance and is a product that is effective and safe for use on all skin types. Pain Away's eleven active ingredients stimulate improved circulation in the micro-capillary system to ligaments and tendons, where most pain is felt. Pain relief is the result of the body's self-healing.

The manufacturing is sub-contracted out to a highly respected FDA-licensed manufacturer of homeopathic products.

An important unique feature of Pain Away which distinguishes it from other homeopathic remedies is that Pain Away is a topical treatment and is not a systemic treatment. As such, it requires little knowledge to use and is conducive to cross-merchandising in the mainstream analgesic category. Furthermore, since Pain Away is a formula of ingredients, it provides a broad spectrum of effects as compared to single remedies.

The personal commitment of the founder to relieve his own pain also adds a unique value to the story of this product - a story which can enhance marketability - to anyone who is in pain or anyone who knows someone in pain.

Although Pain Away is an homeopathic product, the company will position itself as a natural ingredients company - not necessarily homeopathic. All the company principals plan to engage both septics and advocates of complementary medicine by applying rigorous scientific standards equally across the board, for both conventional and unconventional treatments. Contacts have already been made with the National Institute of Health regarding future research.

Product Description

The product is a specialty consumer good carrying a suggested retail price of $19.95 for a 3.7 oz. jar (1.9 oz. jar also available at $12.95). The jar is designed with a medical appearance. The jar is easy to ship in multiples, is easy to stack on a shelf, is aesthetically pleasing, and has an easy-to-handle screw cap. The actual cream is greaseless, easy and pleasant to apply, and is odorless. Pain Away has, to date, largely been sold directly to end-users, and wholesale to retailers, distributors, and catalogues. The markets have supported the suggested retail price, which was arrived at by surveying market research supporting the $19.95 price along with the perceived value of the product compared to similar products at about the same price. This price also yielded a gross profit of $3.75 per jar and allowed for 100% markup from wholesale.

The eleven ingredients are readily available through top-quality labs which control for purity and authenticity. The cream is compatible with any medication being taken. The product carries a money-back 30-day guarantee.

Purchasers of the Product

Preliminary studies done by independent treatment professionals (no control group used) have shown that Pain Away has been effective for relieving the pain, inflammation, and spasm associated with arthritis, bursitis, sciatic spasm, neck and back pain, tendonitis, tennis elbow, tension headache, achilles tendonitis, and carpal tunnel syndrome. Anyone suffering these ailments, treating these ailments, or caring about anyone suffering these ailments is a potential purchaser of the product. A New Jersey hockey team uses Pain Away prior to workouts, competition, and for pain relief. The head trainer for the team says, "There's no product better for contusion of the quadriceps." He has reported shorter recovery times as a result of using Pain Away. Reports from athletes are that using Pain Away before and after workouts yields less cramping, fatigue, and soreness.

Top purchasers of TPR to date:

The total market for OTC internal and topical analgesics is estimated at $3.6 billion for 1995 and is projected to be $4 billion by 1997. With over 400 brands saturating this mature market, growth is still occurring through new products and product innovations. Driving this growth are:

• increasing use of pain management products for the over-50 population segment, whose numbers are increasing
• increasing awareness that pain does not have to be tolerated and can be treated
• price increases

Body/Muscle Pain Market

The market is dominated by internal analgesics:

Pain Away is a new product to this sizable OTC pain-relief market. It will enter this large arena riding on its effectiveness and coming from the new and growing alternative health care market segment. As a new OTC product, Pain Away has such a broad-based appeal that it will be sold to a large portion of the total OTC pain-relief market (both internal & topical), estimated to be 84% of all US adults and growing as the baby boom population ages and concerns regarding age-related ailments, such as arthritis, increase. Of this 84%, about 25% alone use pain-relief products for body/muscle pain for which Pain Away is especially suited. Just this one type of ailment offers a substantial market potential:

If only 40.3 million Americans (25% of 84% of adults) use an OTC pain-relief product three times a week for body/muscle pain alone, then the market potential is 6.3 billion uses of a pain-relieving product per year. Past use of Pain Away has indicated that a minimum of 3 applications per week would use about one 3.7 oz. jar per month. A conservative yearly estimate would be 10 jars per year, with consistent use. In order to reach a five-year sales goal of $50 million (6.7 MM jars), 667 MM consistent purchasers (10 jars/yr.) are needed. Product history has indicated a consistent 80% reorder rate, so at this rate, 833,000 original purchasers are required. This figure is 2.07% of just this one market segment. The company is very confident that it can capture 2.07% of this market segment within five years, especially considering that the roughly 40 million Americans who exercise on a regular basis, and who are aging, are included in this segment. Anecdotal reports from athletes who use Pain Away are that it can prevent injuries by "warming up" vulnerable muscles and joints prior to a workout. The product has wide applicability within this segment. The table below shows the percentage of the body/muscle pain market segment required to meet the next 5 years of sales projections.

These numbers are based upon a wholesale price of $7.50 per jar and a usage rate of 10 jars/year with a segment population of 40.3 million potential purchasers.

The prescription pain relief market is a distinct market which Pain Away will not attempt to penetrate. Pain Away can, however, compete directly with nearly all pain-relief products because of its unique identity of being both a substitute and a supplement to ail competing products. This uniqueness fits a projected market shift from internal to topical analgesic use as the population ages, and derives from 2 factors: 1) Use of Pain Away can reduce the needed dosage of any pain-relieving medication and 2) Pain Away is already part of a rapidly growing segment (25%-30%/year) of consumers who use alternative health care because of a disenchantment with OTC drugs and a concern about side effects with adverse reactions. Use of Pain Away can reduce needed dosage of other pain-relieving medications. As stated earlier, Pain Away's effectiveness is based upon the homeopathic principle of microdosing. While it promotes self-healing by stimulating blood flow to micro-capillaries, it remains safe for all skin types and with use of any other medication. Anecdotal evidence (from hospitals, some doctors, and occupational rehab center) has indicated that use of Pain Away alone has yielded positive results and use of Pain Away, along with other treatments, has seemed to accelerate recovery. As always, this kind of evidence will be scientifically studied. The salient point is that Pain Away can be a substitute and/or a supplement in pain management, and thereby reduce needed dosages of other medications.

Alternative Health Care Segment

Homeopathy, being an established (officially recognized by UK National Health Service) and significant alternative mode of treatment, is gaining increasing acceptance in mainstream American health care. The National Institute of Health has even awarded grant money for research in alternative treatments, including homeopathy. Drug retailers report that homeopathy may be the fastest-growing category in the trade class of drug chains. Since homeopathy is gaining acceptance as an alternative treatment, the market segments which are already embracing these alternatives will continue to be targeted in the company's initial expansion. These segments include people ages 25-elderly, who seek improved quality in life, and whose lifestyle values involve "newness." This segment includes most of the "baby-boomer" population, estimated at over 75 million. The market of alternative health care seekers is characterized by patients who can and will pay for their own care. As much as 70% of alternative medical treatments are still paid for by patients themselves rather than insurers. This kind of purchasing indicates a willingness to try an alternative product and continue purchasing based upon perceived value of the product's effectiveness. Company management has been encouraged by the consistent 80% reorder rate and knows sales will be sustained once initial purchases are made. The alternative health care market is of respectable proportion. According to the New England Journal of Medicine (1/28/93), 34% of Americans spend $13 billion/year on alternative treatments such as chiropractic, acupuncture, massage, and homeopathy. Pain Away is already marketed to all of these treatment specialties so it will reach the spectrum of alternative treatment. This 34% of Americans are familiar with the term "homeopathic," so there's a consumer predisposition to being further educated about homeopathy as a value-added natural ingredient alternative.

The company will build an early market position on the alternative health-care market and will join the growth of the homeopathic segment as it moves from the fringes to the mainstream of the OTC pharmaceutical market.

Alternative Market Potential:

If only about one third of Americans use an an alternative pain-reliever just twice per month, then the market potential is 2 trillion uses of an alternative pain-relieving product per year. Market indicators are that both the number of users and the frequency of use will increase as the population ages. The use rate of 2 times per month converts to 2 jars of Pain Away per year with consistent use. Again, in order to reach the 6.7 million jar sales goal ($50 MM), at the re-order rate of 80%, Pain Away would have to make 4.2 million initial sales in order to sustain 3.3 million consistent purchasers. This size customer base comprises 4.71% of the growing alternative health care market. The company believes that this sales goal is attainable within the next five years. The table below shows the percentage of the alternative health care market segment required to meet projected sales.

These numbers are based upon a wholesale price of $7.50 per jar and a usage rate of 2 jars/year with a segment population of 89.1 million potential purchasers.

Narrowing the Market Focus 2X

The market potential for pain relief products is huge. By narrowing the focus to product category sales, the potential becomes more exact. Pain Away's product category is within the topical analgesic market, estimated at $402.1 MM annually with a projected $522.7 MM market in 1996 (30% growth) and $692.6 in 1997 (32.5% growth). Starting with $522.7 as the base market volume, and with 30% growth per year for the next 5 years, Pain Away would have to capture 3.33% of the year 2000 market volume to make its sales goal of $50MM. Management believes that these goals are attainable.

The table below shows what percentage of the topical analgesic market will meet Pain Away's sales projections.

The focus can be narrowed further to the homeopathic product category, which is growing at a rapid rate at this time. The dollar volume of this segment is estimated at present to be between $150 million and $215 million and expected to grow at a rate of 25% to 30% a year. Some market-trackers say that retail sales haven't grown enough to support the existing number of homeopathic manufacturers and that a shakeout will consolidate sales in the hands of fewer manufacturers. The forseeable trend, however, is progressive growth from the fringes to mainstream markets, and at a rapid rate. The table below again shows percentages of this dollar volume required to meet sales projections.

These numbers are based upon a 1996 volume mid-point between the projected volume range of $150 MM and $215 MM. Growth rate is 25% a year. At first glance these percentages may seem daunting. However, the manufacturers supplying this niche are relatively few in number and therefore hold significant market shares A new player can get a reasonable market share with the right product and marketing plan. The mainstream merchandising of homeopathic products started in the early '90's and has been tested as a lucrative direction. Company management is very confident that Pain Away will gain enough share points to capitalize on the rapid growth of this product category. Pain Away will not remain in the homeopathic niche. Its effectiveness will make it competitive with mainstream topical angalgesics.

International Markets

The company will also develop an international market. A 10,000-unit order has already been received from a distribution company in Hungary and is awaiting final approval from the Hungarian State Department of Pharmacy. A small order was also sent to well-known sports figure in Spain. Discussions are underway for this individual to start large-scale distribution. The homeopathy market in the UK is estimated at 18M pounds and in Germany at 120M pounds, so European marketing could be strengthened by the homeopathic identity alone. In Germany, an independent division of the German Federal Health Agency publishes monographs on the safety and efficacy of herbal medicines. The company believes that Pain Away would fare excellently under such review and will carefully research and plan when and how to reach such markets.

There are many companies competing for shares of the 3.6 billion dollar OTC analgesic market. The major players are the internal analgesic manufacturers:

The balance of the OTC internal analgesic market is held by private label companies and "others." The major strengths of this level of competition are obvious in comparison to Pain Away's present market position. The major players have:

• a manufacturing cost advantage,
• sophisticated market knowledge and access,
• established sales capability,
• strong R&D capacity,
• and of course, brand name loyalty.

An important competitive strength of Pain Away is that it is topical - pain relief is accomplished without risk of overdose and consequent risk of serious side effects. This competitive strength derives from a previously noted shift in the market from internal to topical analgesic use. This shift in consumer preference, along with Pain Away's effectiveness, can position the product as a substitute/supplement among these large competitors. Management is ever mindful that mainstream pharmaceutical companies are watchful of the homeopathic market and will act accordingly should market share be lost to homeopathic remedies. Becoming a viable acquisition candidate to any one of its major competitors is a realistic goal. Pain Away management is committed to quality product development and is also open to strategic alliances which would enhance its market capability.

The competition in the topical analgesic market is head-to-head. The top competitors are:

The basis for the competitive analysis is Pain Away's most competitive feature:

• It doesn't have any of the aforementioned advantages held by the major, well-known players in this market - yet.
• It doesn't have widespread brand name recognition - yet.
• It doesn't have appreciable market share in topical analgesics, alternative health, or homeopathy - yet.
• It does have a unique formula of safe and effective ingredients which none of the above products have.

All topical analgesics contain counter-irritants, including camphor, menthol, methyl salicylate, eucalyptus, wintergreen, and even the popular capsaicin. These ingredients, even when blended, act primarily to cause a superficial inflammation on the skin. This inflammation serves to hide the pain by deadening pain receptors in the skin.

What distinguishes Pain Away from all of the above products is that the eleven active homeopathic ingredients stimulate the blood flow in the body's micro-capillaries and act synergistically with the body tissue. This stimulates the body's own self-healing. Pain is treated at its source. Company management believes that the unique effectiveness of Pain Away will give it competitive clout. The issue then becomes how to compete.

Although Pepperub (Pepper) and Vapol (Athens) enjoy the largest market share, they are vulnerable to new product introductions. Menthol Plus (Lucia) held the top position in this category last year until Pepperub was re-packaged and relaunched with line extensions. That relaunch along with a relaunch of Zanprin boosted sales of both brands and put Pepperub back on top. Pepperub, Vapol, and Mentholplus are all menthol-based products. Zanprin is a capsaicin-based product and has boosted usage of its relatively new ingredient. Other relatively new capsaicin products are Capcreme (Bioderm) and Capthol (Men-Thol Co.).

Company management believes that Pain Away is generally more effective than Pepperub and Vapol. However, these venerated brand names, large advertising budgets, and consumer loyalty are formidable competitive advantages. Pain Away will focus on other competitors in order to gain a market position.

The key competitors are Menthol Plus, made by Lucia and Zanprin, made by Skin Care Corp.. Menthol Plus is a menthol-based product which Pain Away has encountered head to head in the sports market. Menthol Plus has a retail price advantage in the mass market, selling for $4 for a 2 oz. tube. This price difference is of little concern because Pain Away will promote itself as a high value product. The topical analgesic, alternative health, and homeopathic markets all support pricing based on perceived product value. Menthol Plus' manufacturer has reduced the advertising budget for this product (about $2 million) recognizing from a 21% decrease in 1994 sales that the product has matured. The company plans to acquire other brands (no topical analgesics) and extend its other lines in order to generate sales growth. The company sells another topical analgesic which is doing well in sales but has not reached the same position as Menthol Plus. Pain Away will monitor the life cycle of Menthol Plus and move to gain any market share it might lose.

Zanprin, made by Skin Care Corp., is gaining market share because Zanprin (.025%) and Zanprin- X (.075%) are capsaicin-based products. Capsaicin, derived from cayenne peppers, has created a new segment in the market and is very popular. Other companies are making capsaic in products but Skin Care Corp. attracted market attention by relaunching Zanprin as an OTC consumer product. It had been marketed for seven years to physicians and kept behind the counter, carrying the credibility of a prescription product. In early 1995, the product was re-packaged for shelf space and supported by TV ads. Despite commanding premium prices ($19.95/2oz of Zanprin-X), the product has done dramatically well.

Skin Care Corp. claims that Zanprin is the "only brand with physician endorsement and specific clinical support." This is a credible claim, cultivated for seven years, and obviously contributing to sales of the product.

Skin Care claims to be the first in the industry to develop their highly purified version of capsaicin for a pharmaceutical base. Zanprin distinguishes itself by promoting controlled clinical studies which have supported its effectiveness. Skin Care claims that such clinical trials don't apply to other, less pure, capsaicin formulas. This scientific feature enhances product credibility among physicians and pharmacists.

The management of Pain Away Ltd. recognizes the effective marketing strategy used by Skin Care because it is similar to their own strategy. Advertising and promotion expense is critical. With proper capitalization, Pain Away can compete because the Pain Away homeopathic formula is unique and effective. Many capsaicin users, including Zanprin users, have complained about the burning sensation caused by capsaicin. Pain Away will stand up to any topical analgesic on the market and do very well with comfort, safety, and effectiveness. The company needs to get this message out. The seven-year product life of Zanprin, supported by unique and heavy TV advertising, gives Zanprin quite an edge. Zanprin is now a "new" growth product and Pain Away can grow behind it, by comparing ingredients and effectiveness at every turn. Pain Away is also in the same price range as Zanprin, doing slightly better with $19.95 for a 3.7 oz. jar or $12.95 for a 1.9 oz. jar.

Zanprin is not the "only brand with physician endorsement and specific clinical support." Pain Away has been cultivating health professional support since the R&D phase. The product is heavily endorsed, and more medical support is developing. Many of Pain Away's sales to date have been to health professionals. Regarding clinical support, Skin Care's success with this strategy underscores the strategic importance of Pain Away's plans for controlled clinical studies.

Speaking of "highly purified" formulas, Pain Away can compete strongly with any formula on the market, especially capsaicin-based. The company wants to discuss purity of ingredients and formula and will do so in all promotional efforts.

The remainder of the products listed in the top competitor list have of course the same advantages that any established company with significant market share has. Beyond these immediate competitive advantages, Pain Away can compete, again, on the ingredient effectiveness basis.

Aspratin, an odorless rub which contains Salycin, sold well when it was introduced in 1992. It held third place among topical analgesics at the end of 1993. It has since been surpassed by capsaicin-based Zanprin. Bioderm developed Capcreme and lowered its price when Zanprin was relaunched.

Capthol was recently developed by the long-established Men-Thol Co. and is a capsaicin-menthol blend designed to compensate for the sometimes delayed pain relief when using capsaicin alone.

Salicreme is a methylsalicylate product which has shown flat growth and has lost market share.

Lyptum was a rapid-growth product in 1990-1991 but has since lost market share. Besides the well-established brands like Pepperub, the products which are gaining in this market are the capsaicin-based. This product category is known to be affected by product innovation and development. With proper support, Pain Away will take a respectable market share.

Homeopathic Competition

The competition takes place in the drug chain arena. Homeopathy may well be the fastest-growing category in the trade class of drug chains (20% of all homeopathic product sales). Among the growing number of drug chains which are giving shelf space to homeopathic products are: Walgreens, Medicine Shoppes International, Thrifty Payless, Eckerd Corp., Edgehill Drugs, Genovese and FEDCO, a California supermarket chain. Research published in the Journal of Clinical Pharmacy and Therapeutics states that 27% of US pharmacists consider homeopathic medicines helpful while only 18% consider them useless. The crossover of homeopathy from health food stores, where sales are still strong, to mass markets is gaining momentum.

As mentioned earlier, there are relatively few companies supplying homeopathic products to the mass market. There are five major producers/distributors of homeopathic products.

Health System, Homeopathic Co., and Life-Right pioneered the distribution of homeopathic products to chain drug stores in the early 1990's and are now market leaders, although more companies are entering this lucrative market. Health System Products now has about 40% market share. Homeopathic Co. and Del Sol are aggressively developing the crossover into mass marketing with line development and heavy TV advertising.

All the topical analgesics listed above are arnica-based, with few other ingredients. Arnica Montana is the premier homeopathic medicine for the treatment of shock and trauma to the muscle. These formulas come the closest to Pain Away's because they contain some of the essential homeopathic pain-reducing ingredients. Pain Away's formula, however, blends more ingredients than any other homeopathic topical analgesic on the market. This more inclusive formula gives the product wider applicability. Price-wise, Pain Away is more expensive than most of the competing homeopathic products, where prices are in the $5-$10 range for 2oz.-4oz. sizes. But, this is a value-priced market, so price is not a critical variable. Since Pain Away is very competitive on an ingredient/effectiveness basis, the critical factor is having the resources to promote the product.

Future Competition

As has been noted, the topical analgesic category, including natural ingredient, is rapidly influenced by new clinical studies and product innovations. There are three main sources of new competition:

• New ingredients and/or new innovations of existing ingredients. Examples are new products which employ the medicinal benefits of ammonium compounds. These products are designed to provide pain relief without the objectionable training room smells, burning sensations and stinging of abraded skin that are often caused by the majority of topical analgesics that contain menthol, methyl salicylate or capsaicin as active ingredients. Pain Away's formula has solved this sensation problem and is a less "high-tech" product, for which consumers are showing a preference.
• Companies currently in this market who could increase market share and become major players. Pain Away Ltd. is in this category.
• Chain drug companies may produce their own private label homeopathic products and corral a significant share of this growing market - much as they did in the non-homeopathic analgesic market. This scenario is more likely to happen as homeopathic companies expand the sales volume in this market and there are share points to be taken away by private labeling.

Pain Away Ltd. can be very competitive with the right promotional support.

Marketing Strategies

Increase market share by reducing market share of competitors. This strategy will capitalize on the market development to date and capture a share of markets held by existing pain-relieving topical applications. The key benefit is that conventional pain-relievers mask pain while Pain Away stimulates the body's own healing ability to directly battle an ailment. Another benefit is that homeopathic remedies have no known side effects while many pain-relievers, especially those ingested, have side effects. Neither will Pain Away interfere with any medication. This strategy requires extensive advertising in mainstream media, including infomercial, QVC (Pain Away already under review), 60 second commercial, cable TV, interactive TV, direct mail, independent sales reps, POP displays, and educational inserts/newsletters. One objective of planned controlled studies on the effectiveness of Pain Away is to use scientific evidence to help bridge the narrowing gap between natural and conventional medicine. Product studies will support this marketing strategy. In this context, the company will pursue preliminary inquiries from a favored vendor to use Pain Away in the workplace to study any reduction of lost work time and/or medical costs precipitated by repetitive stress injuries.

Expand a growing new market for alternative health care by positioning to lead this growing market. This strategy involves specialty catalogues (placed in 5 currently), placement on retail shelves of health food stores, educational product inserts/newsletters, media appearances discussing product, and independent sales reps. This strategy addresses the 89.1 million users of alternative health care.

The company has already been approached by two large Multi-Level Marketing companies. This strategy would involve creating private labels for a large customer. Of utmost consideration with this strategy is product identity and how this channel of distribution would affect it. This channel of distribution usually requires more price mark-up than the product would tolerate.

The company will create its own "competition" by developing private labels and/or separate companies to market to different niches.

Keep capital outlay to a minimum by licensing/franchising Pain Away to a brand-name company. This strategy would add value to the product in the form of brand name loyalty, manufacturing strength, and a strong sales/service force already in place. The company envisions its role in this type of strategic alliance as conducting scientific studies to increase the credibility of TPR and in developing new products. This strategy remains an option which could preclude other strategies under mutually acceptable terms.

Building on an initial order from a health product distribution company in Hungary, Pain Away Ltd. will penetrate the European market by targeting England and Germany, where homeopathy is an accepted form of treatment. This strategy would be developed only after a US market position was established.

Marketing Plan

The company is moving from start-up stage into its first growth stage. Market strategy to date can be succinctly described as selling "one jar at a time." Direct personal selling has been the mainstay in sales growth. This strategy has targeted any end-user willing to try the product. These early customers were reached through health care professionals and direct selling through state/county fairs, shopping mall space, health food store chains, and most recently lifestyle catalogues. As the company moves away from direct selling, a strategy which proved to be an excellent market test, into mass-marketing, identified market segments are being matched with appropriate distribution channels. The plan now is to expand and concentrate more on helping the consumer develop product preference by heavy advertising of the brand name, the benefits of the product, the ease of use, and the guarantee. Company expectations are that all advertising will be enhanced by results of controlled studies of product effectiveness.

The company intends to expand regionally, based on existing markets and consumer profiles (e.g., households from the South are likely heavy users of analgesics). The national market will only be tested by placement in catalogues with a distribution of 200 million. As regional sales grow and as the product gains recognition, then a national marketing strategy will take shape. Company management have begun discussions with a major marketing communications agency (Fortune 500 client list) who themselves approached Pain Away. The marketing and sales outline is as follows.

Marketing Function

• A complete review and analysis of the topical analgesic market.
• Utilization of Triad Groups conducted with the professional community and general consumers. Purpose is to identify professional and consumer preferences.
• Based on research, create a product identity.
• From product identity, establish professional and consumer strategic directions, which would affect product design, packaging, advertising, consumer promotion, and product publicity.
• Test both professional and consumer strategic direction via two more Triad Groups.
• Develop launch marketing plan with all elements and budget for both professional and consumer.
• Actual implementation of the plan to include product design changes, packaging, advertising, consumer promotion, display, and product publicity.

Sales Function

Utilize a sales organization enabling direct-call coverage on the top 25 customers, which generally account for 80% of retail sales, and broker-managed coverage for the remainder. Launch plan would include a national sales meeting and all necessary materials.

Professional

Concentrate on the pharmacist community via co-op direct mail. Pharmacist recommendation at the purchase counter does affect sales.

The production process takes place in a standard homeopathic laboratory where raw materials are blended. There are no significant health or safety risks involved. Production orders are processed by purchase order for finished product. Some raw materials are usually on hand but more are ordered against purchase order requirements. Jars are ordered from a separate manufacturer and sent to the homeopathic laboratory to be filled, packaged, and shipped to Pain Away Ltd., where fulfillment is done.

The homeopathic laboratory has the capacity to fill all projected orders. As orders increase, Pain Away management will consider using a fulfillment service and more drop-shipping to wholesale customers. Cost of goods is estimated at 18% of gross sales. This figure has been consistent throughout production to date and is based on the complete production cycle.

There is no backlog.

Production Characteristics

The production process does not require any specialized or proprietary machinery. The critical factors in the production process are the highest quality of raw materials and the incubation process, which assures a stable finished product. Water is added to a base of vegetable/plant emollients. The eleven active ingredients are then mixed into the emulsion, which incubates for about 48 hours in large vats, while monitored for any fungal invasion. The finished product is then lab-tested for potency, which is done by lot number (the company gets lot samples). Filling is currently done by gravity-feed. The manufacturer might advance to computerized filling. One batch is 500 gallons. Lead time from order to packaged product is 4 weeks. Only a skilled and experienced manufacturer can produce the formula. Even other homeopathic manufacturers not familiar with a cream-based product would have difficulty with the production process. General topical analgesic manufacturers would need to become familiar with the raw materials and the production process in order to blend Pain Away's eleven active and ten inert ingredients. The company currently has one back-up manufacturer, which has never been used.

Labor Force and Employees

The company administrative staff consists of 5 people (recently reduced by 3) including the 3 officers. The two employees are paid an hourly wage. The staff are not unionized and there is no expectation of such. The labor supply in the region is more than sufficient to meet all future staffing needs. The sales force is comprised of independent agents who are paid on commission.

Currently, the laboratory procures all production materials. There are no shortages of key components, and multiple sources are available.

Subcontractors

All production is sub contracted out. Only fulfillment and shipping are done in-house. The company has formed a strong working relationship with Herbal Laboratories, which is the key subcontractor. Although management has selected a back-up manufacturer, the existing relationship with Herbal Labs has been more than satisfactory, so no change is foreseen. Other subcontractors supplying jars, labels, and boxes are used based upon price and service and can be replaced.

Standard office equipment is used for administrative functions. All production equipment at Herbal Laboratories is new and there is nothing that would cause production to be stopped for any appreciable time.

PROPERTY AND FACILITIES

The company facility is a single-story 1,950 square foot, cement block structure on about a two-acre cleared lot that is leased in one-year increments. The facility is located in northern Dutchess County, NY. All necessary commercial and industrial infrastructure is in place. The facility is easily accessible from major thoroughfares. The general area has been and is recovering from the closing of 2 large industrial facilities, so there's been anoticeable decline in property values. There is, however, a regional effort to re-direct the area to rely more upon small and entrepreneurial business. Management plans to purchase the building in order to add an appreciable fixed asset and to reduce expenses. The structure is easily expandable, so the company will not have to move during its critical growth stage.

PATENTS AND TRADEMARKS

Active homeopathics are not patentable. Management is exploring establishing a trademark and a formula patent.

RESEARCH AND DEVELOPMENT

The three principals have invested collectively $100,000, which has been capitalized. Plans for the immediate future include forming a research alliance with a university, hospital, or research group in order to develop a protocol for applying the "rigorous scientific standards" against which the effectiveness of Pain Away can be proven. Management has projected R&D expenses at $ 30,000 for the next 12-month period. These expenditures are intended for controlled studies proving effectiveness, and for continuation of developing applications for animals. Management is sales-marketing oriented and does not want to develop only a research lab. Any R&D will be designed to enhance sales and profits. Company management is currently investigating an SBIR grant.

There are no particular federal, state or local laws/regulations that affect the conduct of business. The manufacturer meets OSHA requirements, as does the Pain Away administrative facility. The FDA regulates homeopathy as an OTC non-prescription medicine. Pain Away's ingredients are in total compliance with FDA standards. Mr. Peale cultivated a working relationship with FDA representatives during the initial research and wisely intends to sustain such.

Product liability insurance is underwritten. A buy-sell agreement among officers exists but is not yet backed by insurance. Key employee insurance is also yet to be written.

All taxes are current. The company pays standard payroll, Social Security, and corporate taxes. The product is sales tax exempt in many states.

Company principals first formed an S-corporation under the name Peale Inc. The realization of the likelihood of international sales prompted management to form Pain Away Ltd. as the operational company. Peale Inc. serves a limited partnership which was formed to attract investors. Both companies are run by the same management team. All R&D is done through Peale Inc. There is comingling of funds. This proposal seeks financing for Pain Away Ltd. Return on the investment will derive from the sale of the product Pain Away itself and any other products which the company sells.

Pain Away Ltd. is a member of the Homeopathic Manufacturers Association. The officers were invited to participate in an annual meeting of the newly formed FDA committee on natural medicines. This committee works on the bases for regulations, compliance, and claims for the natural ingredient industry, covering vitamins, herbs, and homeopathy.

Management subscribes to the following publications:

• Homeopathy Today
• Natural Foods Merchandiser
• American Health
• Prevention Magazine
• Let's Live
• New England Journal of Medicine letter

Directors and Officers

A board of directors will be developed in the near future. There is interest from the medical, nutritional, and professional sports communities, as well as from a local bank. Officers are:

Robert Peale - CEO Alana Curtis - President Ryan Lemon - Vice-President, Marketing

Profit and loss responsibilities are shared by the officers.

The officers are primary key employees (backgrounds in executive summary). Other key employees include:

Key Employees

Leslie Ottaviani - bookkeeper and office manager - known by management for 5 years and described as "a dedicated innovator with a true grasp for details." She has experience supervising 20 employees in the accounting department of Worldwide Airlines and has worked as an independent bookkeeper for several companies in Hudson Valley, NY.

Julia Allen - administrative assistant - known by management for 6 years and described as "having people and problem-solving skills and works incredibly well under pressure." Her background includes sales in a successful business which included business consulting.

Remuneration

Accountant and Banker

All other fees paid on an ad hoc basis. Different attorneys have been used on an ad hoc basis (finance closing fees will be paid by the company).

Principal Shareholders

Proposed Financing

Management is willing to negotiate any structure which suits the investor. The company is seeking an equity investor. Management will provide a seat on the company's board of directors. Ongoing reports of key ratios, profit-loss statements, balance sheets, and annual audits would be provided to the investor. It is management's intent that the investor will enjoy returns on investment in excess of that of alternative investments, as a privately held company, while providing investor liquidity of his investment by taking the company public at its earliest opportunity.

Capital Structure

The existing capital structure includes a $50,000 unsecured line of credit with Poughkeepsie National Savings Bank. This line of credit was just brought to maturity in 1/96 for a 30-day period, at which time the line was renewed. If the current financing proposal is accomodated, then the line of credit can be increased.

Additional financing to date has derived from the sale of limited partnerships offering $.01 per 3.7 oz. jar royalty for every $1,000 invested. Each limited partner has been given the right to convert his/her capital investment into common stock when the company goes public, or, to receive back his/her original capital investment when the company goes public. Total amount of financing raised through the limited partnership is $100,000.

As mentioned earlier, officers have collectively invested about $100,000 in the company, mostly through the R&D phase. Officers' "sweat equity" is immeasurable.

As stated in the executive summary: Advertising & promotion campaign - $1,200,000 (see below); Market research - $300,000. The company anticipates the need for follow-on financing after 24 months of business.

Management intends to preserve cash flow by factoring much of the receivables. With the current lead time of 4 weeks, however, some capital may be used to increase merchandising inventory in order to fulfill initial large orders. It is hoped that any follow-on financing can and will be debt financing, serviced by cash flow.

The following table sets forth the capitalization of Pain Away Ltd. as of 12/31/95 and as adjusted to reflect the proposed sale of common stock.

Dilution: The net tangible book value of the company as of 12/31/95 was minus $1,673 per share. Without taking into account any other changes in such net tangible book value after 12/31/96, other than to give effect to the sale of 60 shares (proposed 30% equity share) hereby, the pro forma net tangible book value of the company on 12/31/95 will be $5,827 per share, representing an immediate dilution of $13,597 per share to new investors.

Management recognizes that this proposed financing implies a large premium value on the existing equity and so will negotiate any other conditions which would induce the investor to make the investment.

At the time of the company's IPO, limited partners who opt for common stock will receive their shares from the officers' share of owned stock. The negotiated ownership held by the investor will not be further diluted.

Investor Involvement

Management seeks a close working relationship with the investor. The investor will be given one seat on the board of directors. Management would solicit consultations (for a fee) on financial matters, or any other area of investor expertise (e.g., planning, management development), but voting power is not an option. Fees will also be paid for any future financing and/or profitable business connections arranged by the investor.

Limited Operating History

Even though management feels that the company is at first-stage expansion, it is definitely still an early-stage company. Two obvious risks inherent in early-stage companies are undercapitalization and poor liquidity. Management has capitalized the business operations to date well enough to have developed the product and identified penetrable market segments. The current proposed financing will provide enough capital to handle the anticipated growth.

Limited Resources

Management believes that it has the resources to continue at the present pace of business. An anticipated increase in sales through advertising media such as QVC , regional/national catalogues, retail outlets, and some European distribution can be financed by factoring. These "bootstrapping" approaches have sustained the company to date and will accommodate slow growth. Management believes, however, that more rapid expansion is desirable in order to penetrate its identified market segments. More rapid expansion requires more resources.

Limited Management Experience

All officers have successful backgrounds in marketing. Additional experience in manufacturing/distribution has been gained in the past nine years of product development. Management has consistently shown a willingness to leverage themselves with accomplished professional consulting relationships. The company culture is one which reinforces sharing of expertise with mutual benefit to all concerned.

Market Uncertainties

Any consumer product business is subject to the changing preferences of the marketplace. As presented in the marketing section of this proposal, the target markets are showing substantial growth, which limits uncertainty. There is currently a growing consumer preference for homeopathic topical remedies. More uncertainty is evident when considering competition, but can be made tolerable by on-going research and analysis.

Production Uncertainties

The only uncertainty at present is whether or not the lead time (4 weeks) from purchase order to finished product can consistently be reduced. This uncertainty is of material concern as sales increase. Herbal Laboratories is a sound company with a promising long-term future and has always been customer-friendly, so no more serious uncertainties exist at present. Management believes that vertical integration of manufacturing is feasible in the long-term but is not practical in the near-term.

Liquidation

In the event that liquidation becomes necessary, management believes that the most value could be realized from the sale of the product formula itself. The formula is not patented, so valuation remains uncertain. However, the sales history, along with the testimonials attesting to the effectiveness of this "ready-made" product, should determine value. Office equipment would yield limited value, and unless the company building was purchased prior to liquidation, no value would be realized. Management believes that the company can and will generate increasing value in the near future, evidenced by increasing sales.

Dependence on Key Management

At present, CEO Robert Peale is considered the primary key manager/officer. His knowledge of the product ingredients, his history of public appearances promoting the product, his increasing recognition by the health community as an expert in natural medicine, and his charisma as a business professional highlight his key role. Managerially, the other officers are thoroughly competent and could manage the company and market its products without Mr. Peale. At this critical early stage, however, the product needs an identity and a market position before the loss of any key managers could be overcome. Once the premier product is securely launched and the product line is expanded, the loss of any officer could be absorbed by continued proper management of the company. Management believes that such a development is not far off, once the company is properly capitalized. Until such time, key person life insurance will be purchased.

What Could Go Wrong?

Upgraded advertising campaigns could not lead to any substantial increase in sales. This problem can be avoided by using experienced advertising/marketing consultants who have familiarity with the targeted markets. Furthermore, properly designed test runs on any advertising campaign would provide objective indicators of expected returns. Capital investment in advertising should be gradual and progressively based upon certain expected levels of return.

Stronger competition could capitalize on and stall Pain Away's early success by replicating the product and its marketing strategy. This problem can be solved in two ways: First, with proper capitalization, Pain Away can make an entry into targeted markets rapidly and with enough strength to grab market share. Keeping market share can be easier than getting it. This market requires extensive advertising. Increasing market share could mean an increasing advertising budget. An increasing advertising budget can easily reduce profit margin, so strategic planning is required. The second way to solve the competition problem is in the formula itself. Management will seek to patent the formula. The nature of the homeopathic ingredients is likely to inhibit any mainstream non-homeopathic company from replicating the product. Acquisition of a homeopathic company would make more sense. Narrowing the competition, then, to other homeopathic companies gives Pain Away more of a fighting chance, since its formula is more sophisticated and user-friendly than any homeopathic topical analgesic on the market.

Governmental controls could conceivably impede sales. This problem is unlikely because the ingredients are already FDA-approved. Furthermore, management's participation in the FDA committee to develop regulatory standards for the natural medicine field would provide early warnings of any such prohibitory controls.

The company could be controlled by non-investor stockholders. This problem is not likely to develop because the management team would hold a majority. Management is dedicated to the principles of increasing value and profits and is confident that its efforts will be in concert with those of the investor.

RETURN ON INVESTMENT ANDEXIT

Public offering.

Management plans for an IPO in 5-7 years. The investor's shares would be sold to provide the targeted return on investment. Should there be no public market, then a buy back would occur.

Management will negotiate a buy back formula with the investor and will target milestones in planning for this possibility. Management aims for returning 6 times the original investment in five years.

ANALYSIS OF OPERATIONS AND PROJECTIONS

The business has not shown a profit since sales activity began in May 1994. This lack of profit is not unusual for an early-stage company. Losses were incurred in the start-up phase, where the objective was to get consumers to try the product. Gross profit margins have remained stable, however. Management focus was targeted on getting professionals and consumers to try the product in order to collect anecdotal evidence and testimonials of its effectiveness. Not enough focus was on asset management, as evidenced by a low return on assets ratio (p.32). Now that the product has gotten some recognition, especially in professional circles, the focus will shift toward mass marketing. Management intends to improve inventory management by using factoring of receivables in conjunction with JIT inventory control. As sales volume increases, drop-shipping from plant to wholesale customer, will also be arranged.

Balance Sheet

Monthly Income Statements 1995

Income Statement - 12/31/95

Key Ratio Analysis

THIS PORTION OF PAGE INTENTIONALLY LEFT BLANK SEE NEXT PAGE FOR PROJECTED CASH FLOW TABLE

Projected Cash Flow

Projected Annual Financial Statements

Assumptions

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• Facilitating Generic Drug Product Development through Product-Specific Guidances - 04/25/2024

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Event Title Facilitating Generic Drug Product Development through Product-Specific Guidances April 25, 2024

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ABOUT THIS EVENT

FDA’s Office of Generic Drugs (OGD) publishes product-specific guidances (PSGs), which describe the agency’s current thinking and expectations on how to develop generic drug products that are therapeutically equivalent to reference listed drugs.

The purpose of this webinar is to provide current and prospective generic drug applicants insight on how PSGs are developed, revised, and published, and how PSGs may be used to improve the efficiency of generic drug development. FDA publishes PSGs to give applicants seeking to develop generic drugs a better opportunity to efficiently allocate resources and clarity of FDA's expectations on the evidence needed to support an abbreviated new drug application (ANDA) approval, and ultimately promote generic drug product availability.

The event will include a panel discussion on topics pertinent to PSGs and a live Q&A session with FDA .

INTENDED AUDIENCE

• Members of the generic drug industry, including current and prospective applicants who are interested in submitting an ANDA
• Regulatory reviewers for generic drug assessments
• Consultants focused on bioequivalence
• Clinical research coordinators

TOPICS COVERED

• General Principles of PSGs
• PSG Lifecycle Overview
• Utility of PSGs
• Updates on PSG Program

FDA RESOURCES

• FDA Product-Specific Guidances
• Upcoming Product-Specific Guidances for Generic Drug Product Development
• Product-Specific Guidance Snapshot
• Bioequivalence Recommendations for Specific Products Final Guidance (June 2010)
• Product-Specific Guidance Meetings Between FDA and ANDA Applicants Under GDUFA Draft Guidance (February 2023)

CONTINUING EDUCATION

Real-time attendance is required for the certificate of attendance which can be used in support of CEs for the following professional organizations. Certificates are only available during the two weeks post-event.

This course has been pre-approved by:

• RAPS as eligible for a maximum of 12 credits for a two-day event (appropriate to real-time attendance) towards a participant’s RAC recertification upon full completion.
• SOCRA who accepts documentation of candidate participation in continuing education programs for re-certification if the program is applicable to clinical research regulations, operations or management, or to the candidate's clinical research therapeutic area.
• SQA as eligible for 1 non-GCP or non-GLP unit for every 1 hour of instructional time towards a participant’s RQAP re-registration.
• ACRP for continuing education in clinical research. ACRP will provide 1 ACRP contact hour for every 45-60 minutes of qualified material.

TECHNICAL INFORMATION

• To optimize your webinar experience, use Chrome when viewing Adobe Connect in a browser.
• Please contact [email protected] for all technical questions.
• If you encounter any technical issues before or during the event, please visit the Technical Issues Support
• Test your PC for use with Adobe Connect prior to the day of the event. Adobe, the Adobe logo, Acrobat and Acrobat Connect are either registered trademarks or trademarks of Adobe Systems Incorporated in the United States and/or other countries.

Medicare Wegovy Coverage Spurs Employer Action on Drug Plans (1)

By Sara Hansard

Medicare coverage of Novo Nordisk A/S’s blockbuster weight-loss drug Wegovy for heart disease is putting even more pressure on employers to cover the pricey drug that some are finding unaffordable.

The Centers for Medicare & Medicaid Services announced March 22 that Wegovy is now approved for coverage in Part D plans for patients who have cardiovascular disease, likely expanding access to the drug by commercial plans, said Dr. Angela Fitch, president of the Obesity Medicine Association and chief medical officer of knownwell.

The expansion for treatment comes as employers have been weighing potential long-term savings from reduced cardiovascular and other diseases related to obesity against the high up-front cost of the drugs.

Commercial health plans often follow Medicare’s lead in coverage decisions, but some large employers that have already made that leap are cutting off Wegovy coverage for weight loss because of the drug’s expensive price tag.

On April 1, the North Carolina State Health Plan will no longer cover Wegovy for weight loss, state Treasurer Dale Folwell said.

“It was putting our plan under financial siege,” Folwell said, noting it would cost the state more than $150 million a year to continue Wegovy coverage for weight loss, which has been used by 22,000 plan participants.

According to Folwell, Novo Nordisk should sell the the drug for the same price it charges in the company’s home country of Denmark. The drug costs the North Carolina plan $838 for a one month supply per patient, compared to about $250 a month in Denmark, he said.

“We do not support insurers or bureaucrats inserting their judgement in these medically driven decisions,” a spokesperson for Novo Nordisk said in an email. Coverage for anti-obesity medications “can ultimately save the healthcare system and the economy billions of dollars and address an epidemic that has been plaguing our country for decades,” the company said.

“Denying patients insurance coverage for important and effective FDA approved treatments for obesity is irresponsible,” a spokesperson for Novo Nordisk said in an email. “The clinical benefit of treating and reducing obesity has been demonstrated most recently through clinical data showing a 20% reduction in major adverse cardiac events (cardiovascular death, non-fatal heart attack or non-fatal stroke).”

“Unfortunately, the stigma and bias associated with this chronic disease has taken a new form by requiring patients to demonstrate broad cost-savings to the entire healthcare system before they can access medically proven treatment options,” the spokesperson said.

“While Novo Nordisk strongly opposes creating new hurdles for patient access to care, we have and will continue to engage with NCSHP officials to address any potential cost concerns,” the company added.

Medicare didn’t previously cover weight loss drugs because the 2003 Medicare Modernization Act prohibits Part D plans from covering the drugs for weight loss, and commercial plans often follow Medicare’s lead.

Obesity affects nearly 40% of US adults and 20% of adolescents, driving up costs for related conditions such as diabetes and heart disease.

The Food and Drug Administration has approved Wegovy to treat obesity, but many commercial plans offered by employers and health insurers restrict coverage of the drug to people who have other health complications associated with obesity, such as cardiovascular disease and diabetes.

The FDA also has approved Wegovy to treat heart disease.

Coverage Complicated

Drug coverage based on some patients’ medical problems but not others is complicated, Fitch said.

“I’m hopeful that this whole thing will just expand access overall,” she said. “Let’s stop this nonsense of having it be a carve-out,” meaning it can only be covered for particular uses, she said. “It needs to just be a standard benefit like any other disease.”

The retail price for Wegovy is between $15,000 and $16,000 a year, but after rebates and discounts health plans spend $8,000-$9,000 a year on the drug, according to Jeff Levin-Scherz, population health leader for consulting firm WTW.

The cost of the drug currently adds $11 per member per month, or about 9.6% of pharmacy costs, he added.

Wegovy has a US list price of $1,349.02 for a 28-day supply dosed once-weekly, Novo Nordisk said. Approximately 80% of US Wegovy patients with commercial coverage for Wegovy are paying $25/month or less for the drug, according to the company.

Commercially insured patients who don’t have insurance coverage for Wegovy, or those who pay cash for their prescriptions, may use savings offers to shave up to $500 off the full retail price, it said.

When making decisions on how they cover drugs in their formularies, employer-sponsored plans are going to look at many factors, Levin-Scherz said. “Discovering that this drug can prevent, for instance, second heart attacks in somebody that’s had a heart attack, that will potentially compel some employers to cover,” he said.

Levin-Scherz noted that about 38% of employers surveyed by WTW now cover weight-loss drugs, and they are seeing costs rising substantially.

“Some employers might choose to cover with prior authorization specifically for this indication,” Levin-Scherz said. They may not cover the drug for weight-loss use alone, but if someone is obese and had a cardiovascular event in the past, they may cover it to try to prevent another event, assuming pharmacy benefit managers are willing to administer plans that way, he said.

Medicare Coverage ‘Huge’

Medicare’s increased coverage of weight-loss drugs “is huge, because people do tend to follow what CMS does, and it sort of forces coverage by employer plans, said Lydia Alexander, president-elect of the Obesity Medicine Association.

It also means Medicaid coverage of the drugs will increase, she said, noting that only about one in five state Medicaid plans have been covering the medications.

Employers may choose to wait until the next plan year to adopt coverage because of the increased cost, and they may require that users of the drug engage in lifestyle changes to help lose weight, Alexander added. Covering the drug for secondary prevention of cardiovascular events means a smaller subset of people will qualify for it, but “tens of millions of people will certainly qualify,” she said.

Margaret Faso, senior director of public policy for the HR Policy Association, which represents large employers, predicted that Medicare’s action “will probably spur additional conversation or discussions on whether to cover or to what extent to cover GLP-1" weight loss drugs. “They’re hearing from employees a lot about GLP-1s,” and they’re trying to examine long-term impacts, she said. “How do you weigh the large upfront costs against maybe long-term savings?”

Medicare’s coverage is “another reason in favor of covering GLP-1s” by employers, said Tom Hubbard, senior vice president of the Network for Excellence in Health Innovation.

But it isn’t clear how rapidly Medicare drug plans will cover the drug for cardiovascular disease, and how many restrictions will be put on it, he said.

To contact the reporter on this story: Sara Hansard in Washington at [email protected]

To contact the editors responsible for this story: Genevieve Douglas at [email protected] ; Laura D. Francis at [email protected]

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China’s Plan to Spur Growth: A New Slogan for Building Factories

As China’s leaders promote their strategy, other countries worry about manufacturing overcapacity and plans for more exports.

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By Keith Bradsher

Reporting from Beijing

From the top of the government, China is heavily promoting a plan to fix the country’s stagnant economy and offset the harm from a decades-long housing bubble.

The program has a fresh slogan, presented foremost by Xi Jinping, the country’s top leader, as “new, quality productive forces.”

But it has features that are familiar from China’s economic playbook: The idea is to spur innovation and growth through massive investments in manufacturing, particularly in high-tech and clean energy, as well as robust spending on research and development. And there have been few concrete provisions for how the government hopes to persuade Chinese households to reverse a prolonged slowdown in spending.

Premier Li Qiang, the country’s No. 2 official, laid out the plan on Sunday in a speech to chief executives from around the globe, who had gathered in Beijing for the country’s annual China Development Forum. “We will accelerate the development of new, quality productive forces,” he said at the forum’s opening ceremony.

Started in 2000, the China Development Forum is designed to explain to corporate leaders the economic plan laid out each year by the premier on March 5.

In previous years, the forum featured a lengthy, closed-door discussion with chief executives where the premier entertained many questions. But the premier’s conversation, usually on the event’s final day, was canceled this year without explanation, prompting some chief executives to skip Monday and schedule their private jets to fly out on Sunday evening.

The China Development Forum also used to include a fairly open discussion of economic policies by Chinese corporate leaders and ministers a day before the opening ceremony, but that, too, did not take place this year.

China has moved toward fewer and more scripted public events involving its top leaders. The annual news conference by the premier at the closing of the legislature in mid-March was also canceled .

Evan Greenberg, chairman and chief executive of the Chubb Group, a large American insurer, co-hosted the opening of the conference on Sunday. The list of attendees included Tim Cook, the chief executive of Apple, who has been in China the past week trying to reinvigorate iPhone sales, as well as Mike Henry, the chief executive of BHP, the Australian mining giant.

In his speech, Mr. Li called for enhanced manufacturing and increased services and consumption. He repeated calls for Chinese households to replace old cars and household appliances, but did not say whether the government would provide money to help them do so.

Consumer spending in China has been lackluster as apartment prices have fallen by a fifth in the past two years, according to semiofficial data. The number of housing transactions has also plummeted. Homeowners complain that they must cut prices by up to half if they want to find buyers.

Real estate represents 60 to 80 percent of household assets, a much larger share than in most countries. So the near collapse of the housing market has left many families feeling less affluent and struggling to meet mortgage payments.

Mr. Li mentioned real estate and a related problem, local government debt, only briefly, during a discussion of risks. Over the past four decades, he said, “risks and challenges have not defeated us.”

Mr. Li said the government would look to provide legal residency for the more than 250 million people from farm families who have moved permanently to cities but have not qualified for residency there. Cities provide far higher medical, retirement and educational benefits than rural areas.

But Mr. Li did not explain how city governments that are already running out of money could afford to provide these costly benefits.

The mantra of “new, quality productive forces” is aimed partly at allaying worries in China and abroad that American-led restrictions on high-tech exports to China might stunt its growth. In briefings before the forum, officials emphasized that manufacturing represents a large part of the country’s economy — more than double the share in the United States.

“In China, you can see it is consistently on the rise and far higher than in other countries,” Shi Dan, a director general of economics at the Chinese Academy of Social Sciences, a government ministry, said at a briefing.

China’s trade partners are worried that more manufacturing will likely lead to more Chinese exports. The European Union is preparing to impose tariffs on electric cars from China. The European Union Chamber of Commerce issued a report last Wednesday warning that the policy could lead to deindustrialization in Europe, as European companies may not be able to compete with government-backed Chinese businesses.

Companies that have depended on selling commodities to China for housing and infrastructure construction have been watching closely the redoubled emphasis on high-tech manufacturing.

Andrew Forrest, the executive chairman of Fortescue, an Australian iron ore mining giant, said that China will inevitably continue spending a lot on infrastructure, including roads, rail lines and ports.

“The situation on infrastructure won’t actually be a switch away from it, it’ll be just an emphasis on manufacturing,” he said in an interview.

Chinese officials have made numerous promises to stabilize the housing market, but have offered few details on how.

Li Xuesong, another director general of economics at the Chinese Academy of Social Sciences, said at a briefing that local governments could provide more apartments for public sector workers. But he did not address how local governments, many of which are laboring under heavy debts, would pay for these apartments.

After a recent collapse in sales of public land to real estate developers, many local governments have had to cut pay for municipal workers and have needed assistance from Beijing to make interest payments. The Chinese finance ministry has begun a program to help some cities with their debts, provided they curtail costly but popular programs to build infrastructure.

Helping consumers to afford more spending is crucial, said Wang Dan , the chief China economist in the Shanghai office at Hang Seng Bank, at an online conference hosted by the International Finance Forum, an affiliate of China’s central bank. “A direct cash transfer would still be the most effective way,” she said.

For now, the emphasis in China is on strengthening the supply and quality of goods, and not on worrying about demand.

“The growth momentum of investment in new driving forces is good,” said Liu Sushe, deputy head of the National Development and Reform Commission.

Keith Bradsher is the Beijing bureau chief for The Times. He previously served as bureau chief in Shanghai, Hong Kong and Detroit and as a Washington correspondent. He has lived and reported in mainland China through the pandemic. More about Keith Bradsher

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Investor boost for Moscow Metro brings new line and less gridlock

For the first time Moscow Metro management is looking to attract private investors to build a new subway line in the east of the city. Several Russian and foreign companies are already lining up to take part in a project.

The Chief Executive of the Moscow Metro Igor Besedin says negotiations are underway with a Spanish investor.  The companies are interested in developing both underground and above ground with retail and other services offered to passengers. The first private line with 9 stations stretching 19 km would be the longest subway line built in recent years.  Its cost could be about $3.2 billion, according to the Russian consulting firm FBK. The new line leading from Aviamotornaya station to Lyubertsy fields should be completed by 2015.  Moscow has a serious traffic problem, and authorities think a new subway line will help reduce the gridlock. Currently the city has 300km of underground railway split across 12 lines with 182 stations. About 7 million people use the Moscow Metro every day. Moscow Metro system has no privately owned lines yet, but the Mykinino station in the west of Moscow was built by a private investor. Private subway lines are common in big cities all over the world. Private lines operate in Tokyo and in London.

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