How to start a pharmaceutical company

Starting your own business takes time, energy, and money—and if you're building a pharmaceutical startup, there’s even more to consider.

In the pharmaceutical industry, you must contend with FDA regulations associated with every single stage of the process—from development to approval and beyond. You also must budget for the long waiting period before your products can go to market (assuming product approval). Moreover, to get from point A to Point B, you will  need capital to cover equipment, research, and clinical trials.

Before starting your pharmaceutical company, thoroughly plan and map out your strategy, expenses and business model. Additionally, file your articles of incorporation and take care of other administrative activities more so that you can start on the right foot as you navigate this industry. These steps will help make sure the foundation of your pharmaceutical startup is a success. 

Assess upfront expenses

It is no secret that you’ll need funding to help you get this project off the ground—your company won’t generate revenue until your drug is approved and on the market. Typically, a drug takes at least a decade to travel the journey from development to the market.

To know the required funding for this process, you first need to analyze the upfront expenses. These costs can vary widely. A 2020 study found that from 2009 to 2018, average costs to bring a medicine to market ranged from $314 million to a staggering $2.8 billion, so it’s essential to do a granular analysis of your projected budget. That includes several different types of costs, such as:

  • Facility: If you use your own facility, you’ll have operating costs for the building, as well as for wet and dry labs, office space, manufacturing equipment, and other resources. TO reduce costs, you could use an incubator facility that provides these resources in exchange for monthly rent. Also, consider pharmaceutical manufacturing companies, like Patheon, that could make and package the drug for you—this can also cut down on facility costs.
  • Worker salaries: The good news is that due to mergers and acquisitions, staff is leaving the larger pharma companies to move to smaller ones—but you will still need to offer competitive pay to entice them to leave and come work for your company. Make sure to factor this expense into your funding needs to give yourself some extra padding in case you need it.
  • Research and development: Since it takes an average of 10 years for a drug to reach the market, and typically six to seven of those years are in clinical trials, plan for approximately three years of research and development. Remember, 10 years is just the average—it could take longer. Make sure to plan around that.
  • Software costs: To develop your pharmaceutical products, you need specialized software to help keep track of processes and procedures since those records are vital to achieving FDA approval. Options include quality management software, document management software, and supplier management software.

Find sources of funding

Once you know how much funding your company will need to start product development and proving it works, you can then seek sources to provide that funding to you. Those sources may include angel investors, venture capitalists, academia, or even other pharmaceutical companies. Moving from your funding stages can take a while, especially if you’re a new pharma company without a product on the market yet. Different funding sources are likely to come in at different stages of your funding. You may start with a grant from a university, and once you’ve done enough research, you could seek out a larger round of funding from venture capitalists.

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Academic partners

If you’re just starting out, you could look for universities that offer funding opportunities or partnerships. For example, the University of North Carolina at Chapel Hill works with several biotech and pharma startups started by faculty and staff through its school of pharmacy and innovation services hub. And at the University of Michigan, Innovation Partnerships help to launch a new startup every three weeks.

Angel investors

During your initial seed funding stage, consider reaching out to angel investors who typically want a share of equity in the company in exchange for investing with you. Angel investors use their net worth to invest and often provide funding to startups in the beginning stages.

Venture capitalists

Once you move into the Series A funding stage, you will have more opportunities to meet with venture capitalists. They usually work for a venture capital firm and want to see a robust business model and how your company will provide a return on investment. As you recruit additional funding, you’ll move into Series B and then Series C, where it will likely be easier to recruit investors.

Pharmaceutical companies

Other pharmaceutical companies also work with smaller life sciences companies to provide funding. Leaps by Bayer invests in smaller companies in both healthcare and agriculture that are working toward goals that include curing genetic diseases, providing sustainable organ and tissue replacement, curing cancer, and reversing autoimmune diseases.

Work with a pharmaceutical consultant

Creating a new drug involves many different professionals, including scientists, executives, and manufacturers. When you are working on launching a new pharma company, you may want to hire a pharmaceutical consultant who is well-versed in the industry and can advise you on the development process. These experts use their knowledge of the pharmaceutical industry to help companies research, develop, and sell their products.

A pharmaceutical consultant can help with many aspects of the business, including:

  • Advising on software choices
  • Helping with financial decisions
  • Looking through data and identifying issues
  • Finding clients and making commercial relationships
  • Working with insurance companies

Prioritize FDA compliance from day one

The biggest challenge in getting your product to market in this industry is compliance. The FDA has many regulations in place for every single phase of drug development—and with good reason. These rules protect the consumer. Failing to comply could result in failing to get approval for your drug, which is bad news for you and your investors.

A pharma consultant can help you with compliance. It is a requirement for pharma companies to record and store everything within a quality management system so that FDA auditors can review your records and ensure that you follow standard operating procedures (SOPs), from development to distribution. Some firms also offer FDA audit experts who can assess your procedures and policies to help you prepare for an official FDA inspection or third-party audit. 

Most synthetic drugs are approved by the FDA’s Center for Drug Evaluation and Research (CDER). To get approval, you have to fill out a new drug application that will ask for information about clinical trials, product labels, your manufacturing process, quality assurance, and more.

Find reliable suppliers for labels, raw materials and containers

To create and store your drug safely, whether you are making therapeutics or supplements, you will need to source raw materials and containers from suppliers. The pharmaceutical supply chain also follows FDA regulations and current good manufacturing practices (cGMP).

According to ISO 9001:2015 (the global standard for quality management), you will need to determine criteria for each phase of working with a supplier, including evaluating each one, selecting them, measuring their performance, and re-evaluating them as needed through a supplier audit. If your supplier has a quality issue that affects your pharma products, then you as the brand owner are still liable. Evaluate each one carefully, do a risk management assessment, and ensure they have a good reputation and are using a quality management system.

Create a marketing plan

According to a study by Bain & Company, nearly 50% of new drug launches have underperformed expectations in the past eight years. However, Bain found that the ones that do succeed have three elements in common:

  • They effectively use messaging to differentiate their drug.
  • They offer a great overall customer experience.
  • They ensure that there is a way to get “continuous frontline feedback.”

With a new drug, you will see a competitive market emerge within four years. You’ll need something other than a catchy brand name and clinical trial data to get doctors and other healthcare providers to choose your product over the competition.

Make sure to constantly communicate with the network of providers and give them any new data, including post-launch data, to show how your product is outperforming name brand or generic alternatives. Find any differentiators and focus on those in your messaging. For example, is your drug a once-a-day pill vs. twice-a-day? Focus on that element, and present it to providers, so they know your drug is more manageable for patients to take and could increase patient compliance.

You will also need a process for providers to offer new product feedback so that you will stay informed on how it’s performing for their patients. Consider creating a portal they can log into and share information, or make it easy for them to contact your company. Not only does this help your company with its continuous improvement, but it also shows that you care and value their input.

Get the right eQMS

The pharma industry is tough to navigate, and it is easy to become overwhelmed with all the regulations that you must follow, especially while you’re still getting off the ground. That’s why we created a quality management system specifically for life sciences startups that will scale as your grow. And our Qualio Plus team is available to help guide you ever step of the way. Get a demo of Qualio today.