Today, pharmaceutical manufacturing is a prospering industry, which is strictly controlled and highly regulated by governmental authorities. Pills manufacturing is an extremely complex process that includes several sections: mixing, granulation, drying, tablet punching, coating, capsule filling, packaging section, and so on (Manufacturing of Solid Dosage Form i.e. Tablet Manufacturing and Capsule Filling par. 5). In this case study, we are going to cover the average prices for the medicine manufacturing equipment, salaries for the employees, the raw materials price, and operation costs as if based on the perspective of a small medicine factory with a budget of one million dollars.
Types of equipment and prices
Medicine manufacturing equipment can include a wide range of different machines. For example, Shechter mentions eighteen types of processing equipment and nearly eight types of packaging equipment (par. 2-3). For our study, we will focus only on the machinery meant for the production of pills, which are often referred to as “solid dosage” and agreed to be the most popular dosage form in the pharmaceutical industry (Manufacturing of Solid Dosage Form i.e. Tablet Manufacturing and Capsule Filling, par. 2).
For tablet and capsule sections, it is usually required to have the following machinery: rapid mixer granulator, double cone blender/mechanical shifter, spray coating machine, rotary tablet press, tablet counting machine, tablet polishing machine, automatic tablet printing machine, strip packing machine, manual 300 holes capsule filling machine, automatic capsule printing machine, automatic 300 holes capsule loading machine, capsule inspection cum polishing machine, blister packaging machine, capsule counting and packing machine (Pharmaceutical Machinery par. 5-6). To calculate the costs for these equipment units, we have consulted with the price list of Vanguard Pharmaceutical Machinery, Inc., which positions itself as a “leader in providing and servicing a complete pharmaceutical processing, packaging and laboratory equipment worldwide” (Vanguard Pharmaceutical Machinery par. 1). The following numbers are average because Vanguard Pharmaceutical Machinery, Inc. offers a wide range of machines for each type of the required equipment: blending equipment – $62,970, blister-packing machine – $153,000, a capper – $45,800, capsule filler – $63,450, capsule/tablet polisher – $10,260, cone mill – $18,680, tablet/capsule counter – $45,250, film coating system – $89,343, fluid-bed dryer – $122,650, 50L granulator – $47,500, 8-station tablet presser – $41,900, double-deck shifting machine – $12,342. Thus, we will have to spend about $713,145 on the equipment (single-piece).
Salary Budget
To monitor the manufacturing process, it is required to hire the following specialists: Manufacturing Chemist, Analytical Chemist, Quality Assurance Manager, Production Supervisors, Machine Operators (Manufacturing of Solid Dosage Form i.e. Tablet Manufacturing and Capsule Filling par. 3). Here are the annual average salaries of these specialists according to Glassdoor: Manufacturing Chemist – $53,000, Analytical Manager – $58,000, Quality Assurance Managers – $90,000, Production Supervisor – $60,000, Machine Operator – $29,000, Assistant – $30,000 (Glassdoor). Thus, we will have to spend about $320,000 on the employees’ salaries the first year. Nevertheless, we are not expected to pay the entire annual salary at once, so we will spend about $26,665 to pay these specialists for the first month of work. The remaining sum is to be paid using the factory revenues.
Raw Materials
The pharmaceutical industry is different from other industries because it deals with people’s health and requires ultimate responsibility and precision in producing medicines. Raw materials (RM) used in the industry are usually divided into three categories: RM of Active Pharmaceutical Ingredients (API), RM of Excipients, and RM of Packaging (What are the Types of Pharmaceutical Raw Materials par. 2). The price of materials differs if we compare different suppliers. To calculate how much we have to spend on them, one should know exactly what product he or she is going to manufacture. Wellspring Pharma Services state that many factors are affecting the cost of the product: uniqueness of its presentation or action, the number of ingredients in the formula, the types of ingredients, materials expiry periods, and so on (par. 3-4). For example, Malhotra proposes the calculation of a Modanifil factory cost, which is $8.34 per 453,6g (par. 12). Assuming that the box of Modanifil contains 200g, one can calculate its factory cost, which is about $3.67. If the daily production of Modanifil at our factory is 1000 boxes, we can calculate the factory cost for this amount which equals $3,670. Modanifil is a product of a mid-price segment and allows us to take it as an average price medicine. Thus, the cost for the production of 1000 boxes of this product fully fits into our budget.
Speaking of the materials suppliers, most materials are usually ordered in China and India. These are the most known ones: Indiamart (India), Warsila Biotech (India), Sangeeta Pharma (India), Indus Pharma (India), Asian Winner Group Universal Ltd. (China), Hunan Hong Ying Xiang Biochemistry Industry Co. Ltd. (China). Another famous supplier is BASF Societas Europaea, which is also the largest chemical producer in the world. Tamro (Finland) is a company mostly working on packaging materials. BEE International is a leading supplier of high-pressure homogenizers not only for pharmaceutical, but for food, cosmetic, and chemical industries as well. Thus, we have covered the main companies that can provide the necessary raw materials for the project.
Operation cost
Operation costs are the expenses that are generally associated with the operation of any business and relate to the cost of sources necessary for maintaining the business. Operation cost for our project can be divided into three groups associated with the expenses for materials, labor, and manufacturing process. We have already covered the first and second groups and now refer to the third one. This group is usually “comprised of all the costs incurred that are needed to run a factory” (Bragg par.4). It can include equipment maintenance, expenses for electricity, factory utilities, delivery of supplies, and so on. To calculate exact numbers seems to be impossible at this stage of the project due to the lack of information that is available only in real-life conditions. Nevertheless, we will list them since it is essential to be aware of all the issues that a real-life entrepreneur can face. These issues may include but are not limited to electricity rates, factory size, location (to calculate the expenses for supplies delivery), maintenance rate, repair size, and so on. With this, we have studied what operation costs we may face in the course of the project.
Thus, in this medicine-factory-case study, we have managed to study certain aspects that are indispensable when establishing and running a factory. We have covered the average prices for the medicine manufacturing equipment, average salaries of the employees, and calculated the raw materials costs for the 1000-boxes-per-day production. We also analyzed what factors usually affect the volume of operation costs.
Works Cited
Bragg, Steven. “Factory Cost.” AccountingTools. Web.
Glassdoor: Find the Job That Fits Your Life. Glassdoor, 2017. Web.
Malhotra, Girish. “Pharmaceutical Costs, Technology Innovation, Opportunities & Reality.” Pharmaceutical Processing. Web.
“Manufacturing of Solid Dosage Form i.e. Tablet Manufacturing and Capsule Filling.” Pharmafranchisehelp, 2016. Web.
Pharmaceutical Machinery. “Industrial Overview.” Pharmaceutical Machinery. Web.
Shechter, Tal. “Types of Pharmaceutical Manufacturing Equipment.” Beei. Web.
Vanguard Pharmaceutical Machinery. “Price List.” Pharmaceutical-equipment. Web.
Vanguard Pharmaceutical Machinery. “Welcome to Vanguard Pharmaceutical Machinery.” Pharmaceutical-equipment. Web.
Wellspring Pharma Services. “How Much Does It Cost to Make a Pharmaceutical Product?” Wellspring Manufacturing Solutions, 2014. Web.
“What Are the Types of Pharmaceutical Raw Materials?” SlideShare, 2016. Web.