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It has been said that one of the best qualities of US corporation law, is its federalist organization. A firm may choose its state of incorporation, a domicile that is indepe

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

ndent of its actual physical presence, and one that can be changed at any time with shareholder approval. The corporation codes in each state contain the standard provisions

; or drug, device, and biological product and fixed dose combination would include two or more combinations of drug.

Examples of combination products may in

or corporate governance and function as default provisions in corporate charters. The firm therefore can tailor their corporate charters to fit their needs more precisely und

lude drug-coated devices, drugs packaged with delivery devices in medical kits, and drugs and devices packaged separately but intended to be used together.

er the state code. Just as important to them, firms may also look for a state whose corporation law best matches their needs.

The provisions in various corporation laws run

here is enormous increase in the number of combination products entering the market in the recent years. Combination products have proven advantages but fixe

he gamut from trivial housekeeping to the more fundamental need for fashioning the relationship between shareholders and managers. Corporation laws may provide for things as

d dose combinations are still in the process of convincing regulatory authority on their advantages over the single ingredient formulations.

Combination pro

undane as specifying that a corporation’s name be placed in its charter, to as esoteric a thing as specifying the fiduciary duties of managers and voting rights of shareholde

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

rs, when these can be waived and procedures for corporate combinations, including when managers’ – as opposed to shareholders’ – decisions are controlling. States have provid

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

d a different set of governance defaults for small privately held firms, which are called ‘close corporation codes’. The varieties of corporation laws have an enabling approa

nation products and maximize the revenues. But the companies involved in this practice are overlooking that they are burdening the patients both economically

h thereby accommodating the diversity in organization, capital structure, and lines of business found in different business firms.

Most corporation laws have to wrestle with

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

the problem of separation of ownership from control in the modern public corporation. The big, publicly held firms typically have numerous shareholders with small holdings,

ts. Some of the combination products were well accepted by physicians while others suffered. Companies involved in development of combination products are fi

ho cannot actively exercise control over the firm or monitor management. The holdings of the managers running such firms are usually infinitesimal. This creates what is calle

ding difficulty in defining their combination products and facing various challenges from selecting a combination to marketing it.

Following aspects would a

an ‘agency’ problem, in which the managers’ operation of a firm may deviate from the shareholders’ wishes to maximize the value of the firm.

It is not inconceivable, for ex

dd to the challenges in developing combination products:

Which markets to tap where the combination products can do fairly well?
Which combination prod

ample, to find managers implementing a policy that makes their jobs more secure, such as engaging in defensive tactics to thwart a corporate takeover, even though this policy

cts are meaningful and rational?
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin

may reduce the company’s value. Or, because the managers’ wealth is indexed to both present and prospective compensation in the firm, they may follow a corporate strategy to

tions increase the patient compliance?
What would be the developing cost?
How to tackle the risks encountered during combination product developmen

educe firm-specific risk. A typical example is the diversification of corporate acquisitions, in spite of the knowledge that the shareholders will not benefit because they ar

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

e holding diversified stock portfolios which are subject to market, not firm-specific, risks.

The primary role of corporation laws in this regard is to establish corporate g

ping new procedures for reviewing their safety, efficacy and quality.

Professional from academic institutions, pharmaceutical industries, health care indust

vernance policies that mitigate this agency problem by aligning managerial incentives with shareholder interests. Corporation laws have governance devices such as promoting s

y and representatives from various regulatory agencies are working out to design the regulatory requirements for manufacture and sale of combination products

areholder-elected boards of directors to monitor managers, strengthening shareholder voting rights for fundamental corporate changes, and defining fiduciary duties that impos

.

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

e liability on managers and directors who act negligently or with divided loyalty (i.e. favor their own financial interest over that of shareholders). Perhaps, managers shoul

elopment. They need to be wiser in analyzing the market trends and the regulatory requirements.

Companies that provide selfless information through particip

be reminded that corporation law presumes that firms should be managed for shareholders’ interests, not those of managers, in situations when those interests are in conflict

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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