How To Start Third Party Manufacturing Company In India

The Process to Start Third Party Manufacturing Company in India

The following strategy will provide you with an easy solution for the production of Pharma Products & Medicines for your brand.

1. Choose Company’s Name

Choosing a name for your company is always a difficult but important task to execute. We are aware that people trust a product by the company’s name – a brand connected with that product. Whenever we see a Logo, a brand name comes to our mind. But before choosing a name for your company, think of a few facts:

Your company’s name should satisfy your Business Identity Need such as pharma, healthcare, lab, bio, cure, life sciences, laboratories, etc.
In addition to this, you should also remember that your company’s name should be unique & simple.
Letters in your company’s name should be short & simple to make them attractive & easy to remember.
Moreover, you should also never put any silent alphabet in your company’s name. The silent alphabet may create incorrect pronunciation and may mislead the brand image.
Your company’s name should also be a technical one and it should carry a prefix or suffix related to Pharma Sector.
Lastly, it should also be unique in the availability & pronunciation. Also, no other company should have a similar or resembling name. Uniqueness will create your brand for people to recognize more easily.

2. Apply for Your Company’s Registration

You can register your Pharma Company in multiple ways. In this section, we are going to discuss a few documents & procedures that are crucial to registering your Pharma Company.

The Drug License Number
Goods & Services Tax Number
Trade Mark Registration

You may Register your Pharma Company as any one of the following:

One Person Company
Private Limited Company
Limited Liability Company
Public Company

Requirements to Register your Pharma Company

Digital Signature Certificate (DSC)
Director Identification Number (DIN)
PAN Card (Permanent Account Number)
Tax Deduction & Collection Number (TAN)
ID Proof (Electronic ID / Passport / Aadhar Card / Driving License)
Passport Size Photograph
DSC Form (Download Format)
Address Proof (Mobile Bill/Bank Statement/Telephone Bill)

Procedure to Register your Pharma Company

ID Proof & Address Proof is compulsory for all the director(s) of the company
Create Digital Signature Certificate
All the directors of the company should have a Directors’ Identification Number
No Objection Certificate is necessary for the premises’ landlord to be put forward as an office
You’ll have to select your company’s name (you may select from 5 – 6 names from which you may choose)
If your preferred name isn’t available, you may go to the successive one. You may apply for the available name online using Form 1A, available at the Ministry of Corporate Affairs.
After the approval of your company’s name, you’ll have to apply for your company’s incorporation. Prepare an Association Memorandum which will carry all the details of your company’s operations.
Registration Fees – The fee for Pvt. Ltd. Company is approx. Rs. 9500/- for 2 partners (fees may vary)

3. Apply for WDL (Wholesale Drug License)

License Authority for Wholesale Drug License is Drug Inspector / Senior Drug Inspector to grant the Whole Drug License. Licensing Authority Office is mostly present at District HQ and/or combined of multiple districts. You’ll have to apply to the licensing authority to obtain a Wholesale Drug License. Here are the documents that you’ll need to avail Wholesale Drug License:

The necessary area of the company’s infrastructure should be of minimum – 10 square meters and the minimum height should be – 8’ 2”.
Certificate of Pharmacist Registration & Experience Person Certificate or the appointment letter from a competent person
Fees of INR 3000/- for Biological & Non-Biological Companies
Attested Copy of Director(s) Address Proof
Rent Agreement or Ownership Proof (if the premises is rented)
Copy of Refrigerator Purchase Bill with Complete Address
Copy of Academic Qualification Certificate (Pharmacist)
Photocopy of Date of Birth Certificate
Affidavit of Pharmacist/EP
Partnership Deed (In case of Partnership Firm)
Copy of Registration Firm Receipt for Private Registration Firm
List of Directors along with their Address Proof & Memorandum of Article of Association
Affidavit of partners/directors/proprietor
Three copies of Layout Plan/Blueprint of our company’s infrastructure with director(s) signature on all 3 copies
Adequate Facilities for Product Storage including cupboards, racks, refrigerators, etc.

4. Apply for GST IN Registration (Goods & Service Tax Identification Number)

GST is an Indirect Tax that has replaced all the earlier indirect taxes followed by the Central & State Governments. It was a much-awaited tax reform that will further help in the vision – One India, One Tax. Here is the list of documents necessary to apply for GSTIN:

Class – II Digital Signature Certificate
Copy of Sales Tax Identification Number
Address Proof of Company’s Entity and Company’s Partners/Directors/Proprietors
Copy of Aadhar Card, PAN Card, Ownership Proof, and/or Rent Agreement
Partnership Deed or Memorandum of Association
Bank Statement & Bank Details

How to Apply

Access the URL – https://www.gst.gov.in/and GST Home Page will be displayed
Click on the options Services > Registration > New Registration

The applicable form is further divided into 2 different parts – Part – A & Part – B

Part – A

In the list of ‘I Am A’, select the option – ‘Taxpayer’
In the list of UT/State & District, select the State/UT & District for which registration is necessary
Furthermore, in the field of Legal Name of Business, enter your company’s legal name as per PAN Database
In the field of PAN Number, enter your Company’s PAN
Now fill the columns of mobile number, email address, & captcha, and then, proceed
An OTP will be sent to your mobile number & email address separately
You will have to verify both the OTPs by entering in the form
Now, you’ll receive a TRN Acknowledgement Information on your Mobile Number as well as your Email Address

Part – B

In the field of Temporary Reference Number, enter the TRN generated and enter the captcha as available.
Click on the button – Proceedand the ‘Verify OTP’ page will display. Then you’ll receive 2 different OTPs on your Mobile Number as well as your Email Address.
Now verify both the OTPs to go to the next step (Valid for 10 minutes).
Click on the button – Proceed Then the ‘My Saved Application’ page will be displayed. Under the ‘Action’ column, click on the ‘Edit’ icon.

5. Prepare a List of Pharma Medicines and Request for Prices

Prepare a list of potential Pharma Manufacturers and gather their details via online research. Call them or email them and request their quotation including their products’ cost, securities, & minimum delivery order. Send this quotation for Minimum Bach Size & Minimum Possible Rates on Third Party Basis. We recommend you send this quotation to as many people as possible to find the best deal. Here are the points that will help you to pick the best products & medicines that will further help you to yield maximum profit.

Firstly, Make Your Budget List: You need to decide your financials before proceeding further. If you’ll make multiple products, then your budget should be more accurate. Also, you’ll have to decide the maximum limit along with some margin for any mishappening.
Select a Viable Product: The business Viability of any product depends on how you distinguish them. Will you manufacture a fast-moving product with lower profitability? Or will you produce the products with lower demand by higher profitability?
Perform Market Research before Initiating Pharma Third Party Manufacturing: The Pharmaceutical Market is very lucrative and is equally competitive. If you’ll take steps without market analysis, it can prove to be disastrous. For the market analysis, you may hire a Market Research Organization if you are not comfortable with it.
Gather Knowledge Regarding Pharma Products & Market: Get an overall understanding of your market competitors who manufacture & supply similar products as you do. To overcome this competition, your products should be uniquely theirs.

6. Minimum Order Quantity for Pharma Third Party Manufacturing in India

Finalize the quantity of your order and then, write down your required product composition. Here are the things you should always keep in mind:

Minimum Order Quantity (MOQ) can be 500 boxes
MOQ for Injections can be 2000 units
MOQs for Syrup can be 2500 bottles

The average MOQ for tablets & capsules is One Lakh and if the products are costlier, then the quantity may increase up to 30,000 to 50,000 products per batch. For liquid ranges, the majority of companies offer the MOQ of about 2000 pieces to 5000 pieces.

7. Choose the Pharma Companies to Which You Want to Manufacture the Pharma Products

Here are some considerations you should remember while choosing a Pharma Manufacturer you’ll work with:

Geographical Location: Provided there are a few CMOS in your location, start locally. The closer they’ll be, the lesser burdensome travel becomes.
Capability: It’s a crucial point for you to remember. You need to remember if the manufacturing company has enough capability & expertise to produce the products in the required amount within time.
Quality & Compliance: Check if the company has a good track with FDA & other regulatory bodies. If they had any recalls extractable to them – it’s an important factor.
Responsiveness: Check how quickly CMO responds as it’s an indicator for future dealings. If they are slow in responding to your business, then there isn’t any reason for you to connect with them.
Communication: A clear & open communication channel is the key to the successful development & transfer of your products. Get to know if the team members can give you an insight into how the company works to clear out the communication part.

8. Quotation for Required Products & Medicines

After the selection of all the desired products & medicines for third party manufacturing, the company shall send you a quotation includes all the information regarding the product(s) counting their costs. The quotation will also include the miscellaneous charges (if any) that you’ll have to pay for Pharma Third Party Manufacturing Processes. There are 2 types of approaches – Open Book Pricing & Closed Book Pricing.

9. Products’ Design & Packaging Materials

You’ll have to remember the following points while finalizing the products’ design & packaging materials:

Finalize the design of the packing material for your products.
Packing & designing of the products create the first impression.
Printing & Procurement of the packaging materials depends on you.
You may procure the packaging materials yourself or let the manufacturer do that.
If you’ll procure the packaging material yourself, you may select paper, tin, or aluminum.
Once you’ll approve the design, it will further go to the printing section for final packaging.
They’ll print sufficient material for all your materials to sustain inventory levels.
We recommend you procure the packaging material yourself but if do not have enough time; the staff will look after it.

10. Minimum Batch Size for Third Party Pharma Manufacturing in India

Here, we’ll explain the minimum batch size for Pharma Third Party Manufacturing in India:

Batch size mainly depends on the Pharma Manufacturer and the molecule you are willing to get manufactured.
Big Giants don’t go for small batches whereas; small manufacturers can manufacture the molecules in small batches as well.
Batch size depends on the products’ manufacturing cost of the products you want to avail.
Expensive products can be produced in smaller batches whereas cheap products can be produced in smaller products.
Some manufacturers can also produce as small batches as 100 boxes for tablets & capsules as well as 500 pieces for syrup.

11. Costing of Pharma Third Party Manufacturing Processes in India

Costs of Third Party Pharma Manufacturing is generally calculated as the following products & processes’ costs:

Raw Material Cost: Cost of Active Ingredients & Excipients
Packaging Material Cost: Includes box, label, foil, & lami tube; Primary (Packing Material) – Foil & Cartons, and Secondary – PVC, tape, strips, shippers, packing slips, etc.
Manufacturing Processes’ Cost
Quality Assurance & Quality Control Cost
Local Transportation Cost
Process Loss for PM & RM
Labour Charges
Tax Charges
Profit Margin

12. Placing of Orders for Pharma Third Party Manufacturing in India

Here are the processes for placing the orders for Pharma Third Party Manufacturing in India:

After the product composition & order quantities, you should give the purchase order to the Pharma Third Party Manufacturer
Also, you should always ask the manufacturer to confirm all the products
After confirming the products, the partial amount of payment needs to be made well in advance.

While finalizing your order, you should check the following list of checkpoints:

Your brand’s name on foil & carton
Manufacturing details, composition, & packing details
Marketed by Company’s Name, Address, & Logo on foil & Logo
As well as Design & Color Combination

13. Taxation & Outward Transportation

Here are the updates regarding Taxation & Outward Transportation:

CST: As per the latest Government Exemption Notification, CST is charged at 2 percent.
Central Exercise: 0 percent charges are made as per the latest Government Exemption Notification.
Outward Transportation: It is payable by the client and the rates quoted by our firm are Ex-Factory.
Transit Assurance: Most of the time, Transportation Charges are borne by the marketing firm or as per agreement.
Goods & Services Tax: The majority of Pharma & Ayurveda Medicines have 12% GST and some of the essential medicines have 5% GST.

14. Terms & Conditions for Payment

Here are the general terms & conditions you need to follow at the time of payment:

Firstly, deposit the partial payment in advance in the manufacturer’s account and your Third Party Pharma Manufacturing Process will start.
Generally, manufacturers ask for a 25% advance you may deposit the remaining 75% after the delivery of all the products.
Payment terms may also change from party to party.
Moreover, payment terms are as per mutually agreed terms for older parties.
For newer parties, Contract Manufacturing is generally done at 25% to 30% advance.

15. Product Delivery

Here are the points you need to remember that you need to remember at the time of Product Delivery:

After the manufacturing of your order, you’ll receive a quotation from the manufacturing firm listing all the details of the product(s).
Then the manufacturer will transport the products as per your preferences to your location. After this, the remaining amount needs to be made.
Also, the manufacturer will dispatch your order through you’re recommended transporter.

Conclusion

Through this article, we have provided the best information regarding How to Start Third Party Manufacturing Company in India. Now after reading the above article, if you want to start your own Pharma Third Party Manufacturing Company in India, contact us now to get more details. You can reach out to us by filling up the Contact Form available on our website.