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E-Folder - Profit and Loss Account Basics
What is a profit and loss account?
The profit and loss account (p&l) is usually presented as a statement and it shows the trading activity and associated expenditure of an organisa
The profit and loss account (p&l) is usually presented as a statement and it shows the trading activity and associated expenditure of an organisa
According to USFDA, a combination product is one composed of any combination of a drug and device; biological product and device; drug and biological product
tion over a defined period of time.
A typical p&l will contain the following:
Sales
This is the turnover of the business, the main source of income from sales of produ
A typical p&l will contain the following:
Sales
This is the turnover of the business, the main source of income from sales of produ
; or drug, device, and biological product and fixed dose combination would include two or more combinations of drug.
Examples of combination products may in
Examples of combination products may in
ts or services. This figure is always net of taxes as these are payable to the government and do not form part of the income of the business.
Purchases (stock/inventory)
Purchases are t
Purchases (stock/inventory)
Purchases are t
lude drug-coated devices, drugs packaged with delivery devices in medical kits, and drugs and devices packaged separately but intended to be used together.
e items of stock you buy in order to sell on to customers. A basic accounting principle is that income is exactly matched against the cost of generating that income. In this regard the s
here is enormous increase in the number of combination products entering the market in the recent years. Combination products have proven advantages but fixe
ock or inventory on hand at the end of the accounting period is always deducted from the total purchases cost. These stock items will be used to generate future sales and will be matched
d dose combinations are still in the process of convincing regulatory authority on their advantages over the single ingredient formulations.
Combination pro
Combination pro
against those sales in the next period.
Sales related expenditure
These costs are those that are directly incurred in the process of making a sale to a customer. They include items such
Sales related expenditure
These costs are those that are directly incurred in the process of making a sale to a customer. They include items such
ucts have become life saving products for the pharmaceutical companies who doesn’t have many innovative molecules in their product pipeline and have been inc
as sales commission, promotional costs and courier charges.
Overheads
Lastly there are the overheads of the business. These are the costs incurred on the rest of the business that is no
Overheads
Lastly there are the overheads of the business. These are the costs incurred on the rest of the business that is no
easingly used in the product life cycle management. Even the companies having product patents are trying to extend their product life cycle through the combi
directly involved with the selling process. Examples of overhead costs are: admin staff salaries, lighting and heating, office stationery, computer maintenance and legal and accountancy
nation products and maximize the revenues. But the companies involved in this practice are overlooking that they are burdening the patients both economically
ees.
Two versions of the profit and loss account
In published accounts the p&l account has a standard format, this is to aid understanding and interpretation of the informat
Two versions of the profit and loss account
In published accounts the p&l account has a standard format, this is to aid understanding and interpretation of the informat
and physically. They need to rightly judge the benefits of the combination products and they have to even look at the risks involved when combining the produ
ion. The accounts are typically known as Financial (or Statutory) accounts and are subject to accounting and legal governing principles.
However, to really understand how your business i
However, to really understand how your business i
ts. Some of the combination products were well accepted by physicians while others suffered. Companies involved in development of combination products are fi
performing you need to prepare a fully detailed p&l account, this is an expanded version of the published accounts and usually has extra information such as ratio analysis and key perform
ding difficulty in defining their combination products and facing various challenges from selecting a combination to marketing it.
Following aspects would a
Following aspects would a
nce indicators.
This version is typically referred to as the ‘management accounts’ simply because they are figures intended for management and not external publication. Therefore, there
This version is typically referred to as the ‘management accounts’ simply because they are figures intended for management and not external publication. Therefore, there
dd to the challenges in developing combination products:
Which markets to tap where the combination products can do fairly well?
Which combination prod
Which markets to tap where the combination products can do fairly well?
Which combination prod
re no regulatory guidelines on their composition to worry about.
Management accounts are the tool you need to have in order to see if your business is profitable and are normally prepared
Management accounts are the tool you need to have in order to see if your business is profitable and are normally prepared
cts are meaningful and rational?
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin
on a regular basis, usually monthly, for each of your product lines. The p&l is a central part of the management accounts package.
Regular review is necessary because you need to be awa
Regular review is necessary because you need to be awa
tions increase the patient compliance?
What would be the developing cost?
How to tackle the risks encountered during combination product developmen
What would be the developing cost?
How to tackle the risks encountered during combination product developmen
e of areas not meeting targets as soon as possible; so that you give yourself time to take corrective action before the end of your financial year. For instance, if a regular client has s
t?
As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel
As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel
arted placing orders erratically it may be that on investigation, you find they are testing out one of your competitors. This gives you an opportunity to carry out some special promotions
ping new procedures for reviewing their safety, efficacy and quality.
Professional from academic institutions, pharmaceutical industries, health care indust
Professional from academic institutions, pharmaceutical industries, health care indust
or re-negotiate the deal with your client to win their business back from your competitor.
In addition, you will find budgeting is a valuable tool for your business. A budget is a financ
In addition, you will find budgeting is a valuable tool for your business. A budget is a financ
y and representatives from various regulatory agencies are working out to design the regulatory requirements for manufacture and sale of combination products
ial plan for the year ahead. Creation of a budget allows you to review all areas of your business both to ensure their existence is justified and that you are making the most of your asse
.
As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de
As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de
s or resources.
During the year you compare your actual results to your budget and investigate where results have not turned out according to plan. Examples of problems could be cost ove
During the year you compare your actual results to your budget and investigate where results have not turned out according to plan. Examples of problems could be cost ove
elopment. They need to be wiser in analyzing the market trends and the regulatory requirements.
Companies that provide selfless information through particip
Companies that provide selfless information through particip
runs due to inefficient ordering or use of more expensive components unnecessarily. Again, this review process gives you time to make changes before problem areas run out of control.
tion in industry events and feedback to regulatory authorities would be able to face the challenges and will be successful in developing combination products
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