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Pharmaceutical companies frequently ask us this question: how much does it cost to make a pharmaceutical product, such as a tablet, capsule, cream, lotion, gel, ointment or oral liquid? The real answer is: for any of these types of products, it depends.
We’re not trying to avoid answering the question; supplying the right answer requires us to clearly understand the detailed specifics of the product to be manufactured. Let’s walk through a series of questions we’d ask in order to establish that clear understanding, which would then allow us to address cost in an intelligent and realistic manner.
Evaluation Of Your Ingredients And Formulation Is Essential
Let’s stop and review this for a moment. As an example, some of today’s creams have many exotic ingredients; some containing as many as 15-20 in very small quantities. The greater the number of ingredients present, the longer it takes to dispense them and to manufacture the product. Suppliers of these materials have minimum order quantities and many have short expiry periods – all of these factors add to the costs.
Higher Product Volumes Has Its Cost Benefits
Our next question would be: what’s the marketing forecast? If it’s a small niche product, costs are bound to be higher. Large volume products can be made cheaper by virtue of volume purchasing and higher efficiencies in manufacturing campaigns. To clarify that – if you’re running a campaign of several lots one after another, you can save on the amount of labor used throughout the manufacturing campaign, since there would only be one set up and one cleanup operation of the equipment train, for the entire, multiple lot campaign. If you are only manufacturing one lot at a time, you would have to perform a set up and cleanup operation every time you produce that one lot. That adds labor cost to each lot. If you are producing a few lots at one time, this set up and cleanup operation would only occur once.
Consider How Detailed Your Packaging Requirements Are
Next question: Is the packaging unique? Unique packaging might make the product look more attractive, especially if it is an OTC product, but you’re also going to pay more for the packaging components – especially if they are absolutely unique for that product.
For example, does your product require specialized packaging components, i.e. uniquely shaped bottle that would need its own mold, or a special sized product label with multiple panels and colors? All of these things drive the prices up. Chances are you are also going to need specialized packaging change parts to accommodate these special requirements, so, that’s also going to drive your price up. Simple things like how many colors are on your label or your carton, can add to the price of your final product that would appear on a drug store shelf.
Remember: You’re Not Just Paying For A Product, You’re Paying For Quality And Compliance
Another element to keep in mind is you’re not only purchasing a finished product, you’re also purchasing the quality systems in place at your contract manufacturer. Do you know, going in, what to expect from a quality and compliance standpoint from your contract manufacturer? How responsive are your partners? Can you build a relationship with them? Will they supply you on time? Will they bump your production in favor of a larger volume product or a bigger client? These are all vital things to be determined.
In A Nutshell, Here Are The 3 Key Factors That Define Your Pharmaceutical Product Costs
Prospective clients call us all the time and ask us “How much is it to make my product? I have 3 products and I need them made and what is your price?” As we’ve just outlined above, there are many things that go into the cost of a pharmaceutical product. To recap, the 3 biggest factors are:
- What regulatory status do you want your product to be – is it going to be an OTC, is going to be a natural health product, is it going to be a prescription pharmaceutical? That’s going to have a big impact on the amount of money you’re going to have to spend to get your product started and to get it manufactured according to the regulations stipulated by Health Canada, the US Food and Drug Administration, or the European Medicines Agency.
- What volumes do you anticipate? The higher the volumes, the more efficient you can make the product on an on-going basis, from buying the raw materials and packaging components, to the labor that is utilized in making your pharmaceutical product.
- Minimizing the amount of set-up and clean that you have to do between each production run. For campaigning lots, how many lots are you going to do at one time so that you can minimize setup and clean? In a pharmaceutical product, that is the biggest portion of cost, next to materials, is how much fixed cost has to go into your product to make it according to regulatory standards.
So, generally, we can’t give a price list. It’s not like we have a fixed price for every tablet that we make. The other day, we got an email from a client that wanted to know how much it would cost to make a product, and their volume was worth between 300,000 and 1,000,000 capsules. That’s great, but there’s a lot of other information that needs to go into it. For example, what’s the formulation composition? How heavy is your tablet? What’s the tablet weight? With this information, we have to extrapolate the number of tablets by the tablet weight, to come up with a batch size that we can then calculate all our costs on. Those are the main considerations that go into a product cost, and why having detailed information is essential for pinning it down.