About the
Pharmaceutical Formulation industry
The pharmaceutical formulation
industry plays a crucial role in the development and production of various
pharmaceutical products such as tablets, capsules, injectable, creams,
ointments, and more. This industry is responsible for transforming active
pharmaceutical ingredients (APIs) into a final dosage form that is safe,
effective, and suitable for administration to patients.
Pharmaceutical formulation transforms
the active pharmaceutical ingredients (APIs) to final dosage form that is safe,
effective, and suitable for administration to patients. It involves the
combination of different excipients (inactive ingredients) with APIs to create
a stable, uniform drug product. Excipients help in preserving the stability,
enhancing the absorption, modifying the release profile, and improving the
overall appearance and acceptability of the final dosage form.
The industry produces a wide range
of products to meet various health care needs. Here are some of the categories
of pharmaceutical formulation products:
Solid Dosage forms: Tablets,
Capsules, Powders, Granules, Pellets
Liquid Dosage forms: Solutions,
Suspensions, Syrups, Drops
Parental Dosage forms:
Injections, Implants
Inhalation dosage forms and
others
This is not an exhaustive list.
Within each type of dosage form, there may be variations in formulations,
strengths and combination of active ingredients. Each product type has its formulation
requirements, manufacturing process and regulatory considerations.
The table below shows the
different stages of manufacturing and distributing a pharma product and description
of major cost components (other than the fixed overheads) incurred at each
stage from Active Pharma Ingredient (API) manufacturing and ends with the
pharma formulation product reaching the end consumer through a pharmacy.
Importance
of cost control in Pharmaceutical Formulation Industry
Costing is crucial in the
pharmaceutical formulation industry as it helps companies determine pricing,
control costs, plan budgets, ensure regulatory compliance, make informed
decisions, and drive continuous improvement. By effectively managing costs,
pharmaceutical companies can maintain competitiveness, maximize profitability,
and deliver high-quality formulations to the market.
Method of
costing
In the pharmaceutical formulation
industry, Batch Process costing is commonly used as the products are
manufactured in distinct batches. In this method, costs are accumulated and
allocated to each specific batch of products. The costs incurred such as raw
materials, labour utilities and manufacturing overheads are tracked and
assigned to respective batch, It allows better cost control, quality monitoring
and traceability for each specific batch. It facilitates compliance with
regulatory requirement.
Common Manufacturing
Processes in Formulation Industry
- Weighing and dispensing of raw materials, APIs and excipients according to formulation recipes.
- Blending
- Granulation, drying and milling
- Compression (tablets) or encapsulation (capsules)
- Coating
·
In case of liquid formulation- mixing of liquid
ingredients and filling into vials or ampoules
- Sterilization- in case of injectable or ophthalmic
products additional steps to ensure sterility
- Packaging and Labelling
Cost centres
In the pharmaceutical formulation
industry, cost centres are specific departments, divisions, or areas within an
organization where costs are incurred. They are used to track and allocate
expenses to better understand the cost structure of the business. Cost centres
help in analysing and managing costs more effectively by providing a breakdown
of expenses and facilitating budgeting and performance evaluations. Here are
some of the indicative cost centres typically found in the pharma formulation
industry
The cost centres can be broadly
categorized into manufacturing, utilities, environmental health and safety
(EHS), quality control and assurance, quality management system, maintenance,
research and development, supply chain and procurement, factory overhead,
administration overhead, sales and distribution overhead, legal and regulatory
affairs, etc. It's important to note that the specific cost centres may vary
depending on the organization's structure, size, and specific operations.
COST SHEET
An indicative cost sheet based on absorption costing is provided in the
table given below:
Cost sheet is to be prepared for each type of formulation, each type of
packing and each size of packing.
Cost
control and Cost Management
Cost control helps the formulation
manufacturing companies to optimize costs and maximize profitability.
Cost control is possible in the
following areas:
- Raw
Material Sourcing
- Manufacturing
Process Optimization
- Scale of
Production
- Supply
Chain Management
- Outsourcing
- Quality
Control
- Regulatory
Compliance
- Pricing
Strategies
- Continuous
improvement and Cost Tracking
- Waste
management
Along with the cost control
measures, the cost management strategies may be implemented without
compromising on product quality, patient safely and regulatory compliance. Some
of the areas where cost management can be applied are energy efficiency,
standardizing formulations, cost benchmarking, IP protection, process
automation and digitization. Value engineering and lean manufacturing are some
of the important cost management strategies which can be applied in formulation
manufacturing industry.
Implementation of cost management
strategies and continuous improvement makes the company more competitive and
also help the pharmaceutical formulation industry to gain competitive advantage
in global markets.
CMA Manjula Gutti
Cost and Management Accountant
Services Offered: Audit and
assurance, Cost Consultant
Email
id: manjula_asso.cma@rediffmail.com
Mobile No: +91 9989065215
(Customised Cost sheets and Cost MIS reports/ Dashboard are provided
during the implementation of the cost management system. Cost sheets will be
designed based on the industry, company and its operations and method of
costing adopted.)
