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Top Articles - Financing the Cost of Medical Equipment
What Are the Range of Options for Equipment Acquisition?
Cash Payments
This option assumes that there is enough cash available.
Advantages:
• It’s simple and quick.
• Everybody accepts cash
• Cash purchases minimize paperwork and middlemen and may help reduce purchase price.
Disadvantages
• It’s generally no
Cash Payments
This option assumes that there is enough cash available.
Advantages:
• It’s simple and quick.
• Everybody accepts cash
• Cash purchases minimize paperwork and middlemen and may help reduce purchase price.
Disadvantages
• It’s generally no
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
t a good use of funds.
In today’s investment market, you can often obtain a yield on your money in excess of the interest charged for financing the equipment purchase. The only rationale for paying cash for the purchase is if your funds are in a low-paying account (e.g., a passbook savings account yielding 3%) whose yield is less than
In today’s investment market, you can often obtain a yield on your money in excess of the interest charged for financing the equipment purchase. The only rationale for paying cash for the purchase is if your funds are in a low-paying account (e.g., a passbook savings account yielding 3%) whose yield is less than
; 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
the interest on a loan or lease. In that case, taking the funds from a low-yield account and losing the 3% interest in order to avoid paying 9% or 10% is a sound financial decision. Of course, having significant funds in a 3% account is not wise cash management.
Financed Purchase In this method of purchase, a lender provides funds for t
Financed Purchase In this method of purchase, a lender provides funds for 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.
he purchase and generally obtains some form of lien or other encumbrance on the equipment until the funds have been repaid.
Advantages
• It does not deplete cash flow. (Usually a 10% to 20% down payment of the total purchase price is required. (In many cases, the income generated by the equipment can exceed the payments.)
• Fund
Advantages
• It does not deplete cash flow. (Usually a 10% to 20% down payment of the total purchase price is required. (In many cases, the income generated by the equipment can exceed the payments.)
• Fund
here is enormous increase in the number of combination products entering the market in the recent years. Combination products have proven advantages but fixe
s not expended for a cash purchase can possibly earn a higher-income yield than the interest rate of the loan. Disadvantages
• Interest rates may be high.
• The down payment may be high.
• The equipment is encumbered by a third party (unless the funds are borrowed from a source other than a financial institution‹for instance
• Interest rates may be high.
• The down payment may be high.
• The equipment is encumbered by a third party (unless the funds are borrowed from a source other than a financial institution‹for instance
d dose combinations are still in the process of convincing regulatory authority on their advantages over the single ingredient formulations.
Combination pro
Combination pro
, from your pension fund).
Lease A lease offers an alternative to traditional financing. With a lease, the equipment is owned by the leasing company. The practice makes payments to the leasing company in exchange for being able to use the equipment (i.e., essentially rental payments). Leases can be closed-ended, in which case the lea
Lease A lease offers an alternative to traditional financing. With a lease, the equipment is owned by the leasing company. The practice makes payments to the leasing company in exchange for being able to use the equipment (i.e., essentially rental payments). Leases can be closed-ended, in which case the lea
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
sing entity retains the equipment at the end of the lease term. There are also open-ended leases, where at the end of the lease term a predetermined amount is paid to the leasing entity, and the practice attains ownership of the equipment.
As a general rule, the higher the residual value (balance owed) at the end of the lease, the lower t
As a general rule, the higher the residual value (balance owed) at the end of the lease, the lower t
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
he monthly payments.
Advantages
• Generally little or no down payment is required.
• Leases are often supported by the equipment manufacturer, which can lower the interest rate or the residual payment (the amount required to attain ownership of the equipment at the end of the lease term).
• Leasing can give you the ability
Advantages
• Generally little or no down payment is required.
• Leases are often supported by the equipment manufacturer, which can lower the interest rate or the residual payment (the amount required to attain ownership of the equipment at the end of the lease term).
• Leasing can give you the ability
nation products and maximize the revenues. But the companies involved in this practice are overlooking that they are burdening the patients both economically
to obtain more purchasing power from a given amount of available cash.
• Sometimes equipment becomes obsolete in a relatively brief period of time. A closed-ended lease may allow you to use the equipment during its useful life and return it to the leasing entity at the end of the lease term with a lower total expenditure than an outri
• Sometimes equipment becomes obsolete in a relatively brief period of time. A closed-ended lease may allow you to use the equipment during its useful life and return it to the leasing entity at the end of the lease term with a lower total expenditure than an outri
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
ght purchase would have required.
Disadvantage
• More interest is paid than in any other form of acquisition.
Other Leasing Considerations
1. Trade up‹An equipment manufacturer may have a lease or purchase program that will allow significant credit for the equipment you’ve acquired from them when you move up to a more curre
Disadvantage
• More interest is paid than in any other form of acquisition.
Other Leasing Considerations
1. Trade up‹An equipment manufacturer may have a lease or purchase program that will allow significant credit for the equipment you’ve acquired from them when you move up to a more curre
ts. Some of the combination products were well accepted by physicians while others suffered. Companies involved in development of combination products are fi
t model or to newer technology. This can alter the calculation of the best option for acquisition.
2. Supported Leases or Financing‹An equipment manufacturer may support the interest rate of a lease or financing plan and may lower lease payments by increasing the residual value of a closed-ended lease. Again, these special offers may sign
2. Supported Leases or Financing‹An equipment manufacturer may support the interest rate of a lease or financing plan and may lower lease payments by increasing the residual value of a closed-ended lease. Again, these special offers may sign
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
ificantly alter the assessment of the best acquisition option.
3. Purchase Price‹No matter what financing option you choose, do not ignore the purchase price. Negotiate your best price before you evaluate financing. Do not fall into the trap that automobile dealers have used for years: “You can have the latest and best visual fields machi
3. Purchase Price‹No matter what financing option you choose, do not ignore the purchase price. Negotiate your best price before you evaluate financing. Do not fall into the trap that automobile dealers have used for years: “You can have the latest and best visual fields machi
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
ne for only $49.95 a month!” You should always start with the purchase price and then move to the terms (whether lease or purchase).
4. Beware of the Lease That’s Not a Lease‹The Internal Revenue Service may consider an open-ended lease with a purchase option to be a purchase contract rather than a lease. The impact of this is that the le
4. Beware of the Lease That’s Not a Lease‹The Internal Revenue Service may consider an open-ended lease with a purchase option to be a purchase contract rather than a lease. The impact of this is that the le
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
ase payments may not be deducted as expenses, and instead the equipment will be capitalized and depreciated. Have your professional financial advisors evaluate the financing contract to assess your level of risk.
5. Each Transaction Is Unique‹Each piece of equipment you are considering for acquisition must be evaluated in the context of t
5. Each Transaction Is Unique‹Each piece of equipment you are considering for acquisition must be evaluated in the context of t
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
he following:
a. Purchase price
b. Projected useful life of the item
c Your current cash position and monthly cash flow
d. Your current and projected future tax position
e. Financing incentives offered by the vendor
f. Careful evaluation of the lease or financing contract to ensure that it meets the requiremen
a. Purchase price
b. Projected useful life of the item
c Your current cash position and monthly cash flow
d. Your current and projected future tax position
e. Financing incentives offered by the vendor
f. Careful evaluation of the lease or financing contract to ensure that it meets the requiremen
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
ts for the method you plan to use to report the equipment in your tax filings
g. Any other considerations required by your expert financial and tax advisors
In today’s financial and tax environment, many of the factors that favored one type of financing over another have disappeared. What remain are the purchase price and financi
g. Any other considerations required by your expert financial and tax advisors
In today’s financial and tax environment, many of the factors that favored one type of financing over another have disappeared. What remain are the purchase price and financi
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
ng terms, whether the transaction is called a lease or a purchase. Keep in mind that today’s market is not as good as it was last year. In the final analysis you may find that purchasing is cheaper than the interest cost on a lease.
For equipment that you anticipate retaining at the end of the lease or financing term, the purchase price,
For equipment that you anticipate retaining at the end of the lease or financing term, the purchase price,
y and representatives from various regulatory agencies are working out to design the regulatory requirements for manufacture and sale of combination products
down payment, monthly payments, and total payments (principal and interest) are key. These factors can be impacted by incentives from the vendor, but ultimately the same evaluation needs to be done (purchase price, down payment, monthly payments, and total payments).
Secondary issues may include tax advantages and other concurrent acquisi
.
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
tions.
If you think that eventually you may be recycling the equipment or‹trading up to more current or more capable models‹the evaluation changes; and a lease, especially one that is artificially supported by the vendor, may be a better way to go.
Finally, if you are just starting out in a new practice or have just acquired an existing
If you think that eventually you may be recycling the equipment or‹trading up to more current or more capable models‹the evaluation changes; and a lease, especially one that is artificially supported by the vendor, may be a better way to go.
Finally, if you are just starting out in a new practice or have just acquired an existing
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
practice and need to upgrade equipment, current cash availability and projected cash flow may dictate that you finance the acquisition with the lowest possible cash outlay, even if the ultimate total of funds required is significantly higher. Remember to get advice from a professional to help you sort out the details of the equipment lease
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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