The cost of pharmaceutical innovation can be a limiting factor in the creation of new drugs and treatments for a variety of illnesses. Research and development can be an expensive undertaking, especially for smaller firms working to synthesize only one or two new drugs for the medical marketplace. An article published in August 2013 in Forbes Magazine explores the real costs of developing a new medication in the pharmaceutical field. Author Matthew Herper discovered that the median cost for bringing a single new drug from conception to marketplace was $351 million. For companies that produce more than one drug at a time, those costs can rise to astronomical proportions.
For established pharmaceutical firms, research and development costs are typically viewed as long-term investments in future resources and commodities for the pharma company. Once a new treatment has been identified, evaluated and passed through the pharmaceutical firm’s internal and external testing processes, a New Drug Application (NDA) is submitted to the U.S. Food and Drug Administration for approval. The FDA will review the data submitted and will consider any clinical testing results to determine whether the drug is ready for public distribution. The entire process of developing, testing and reviewing new medications for safety and effectiveness may take years or decades, depending on the risk factors involved with the medication and the need for an immediate treatment in the medical marketplace.
Pharmaceutical firms generally manufacture more than one drug product for public distribution and consumption. As a result, these firms can often accumulate a number of pending invoices awaiting payment from distribution centers, insurance companies and other elements of the medical industry. For pharma firms that require added cash on hand to manage their ongoing research and development costs, to pay for clinical trials by an independent agency or to market drugs already in production, finding a way to monetize these amounts due can provide a valuable competitive edge over rivals in the pharmaceutical industry.
Accounts receivable loans, purchase order lending and invoice factoring arrangements can provide added financial flexibility for cash-strapped pharmaceutical firms in the modern marketplace. These lending arrangements differ from traditional loans in that they are fully collateralized by the value of the outstanding financial instruments used to secure them. In plain terms, this means that the lending company retains an ownership interest in the invoices and purchase orders used as collateral until they are paid. Once payment has been received, the resulting funds are used to pay off the loan and any applicable fees. The borrower then receives the remainder of the funds and the loan is closed. Lines of credit work in a similar way, but the funding available can be maintained for a much longer period of time and made available for ongoing business needs. In the pharmaceutical field, this added flexibility can help fund clinical trials, promotional activities and other operational expenses. Funding Innovation in the Pharmaceutical Field
The lending experts at Commerce Commercial Credit and other asset-based loan providers can deliver the invoice lending, purchase order funding and factoring services necessary to help pharmaceutical firms perform necessary research and development tasks. These vital investments can provide new treatments and new approaches to common diseases and conditions and can offer real hope for patients suffering from these serious ailments.
