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How e-pharmacies would able to give 18-20% discount to customers?

Query: First of all, a big thanks for your work. Pharmaceutical industry looks like complex web for a common people but due to your blog it is easy for us to understand this whole industry. Now coming to my question, I want to know if total margin for retailers in this industry is 18-20% then how netmeds, pharmeasy and other online players are giving 25% discount? And what steps we have to take if we want to open pharmacy shop and want to give 15-20% discount. Can a retailer buy medicines directly from company or c&f and cutting margin of distributor/Wholesaler? Response: Online players give discounts upto 18-20% or something like that. Not at all products they give exact margins. In the pharmaceutical industry , Only few brands give less margin, most brands give good margin plus schemes etc, even to offline retailers. If we talk about generic and other products there are huge discounts like product cost is 30 rs and mrp is 100 rs. So, an 25% discount in the pharma market is not

Third Party Manufacturing

Third party manufacturing in pharmaceutical sector is a process for manufacturing own brand named products from manufacturing unit having valid manufacturing license number. Third party manufacturing concept is famous among small and macro sized pharmaceutical marketing companies.

Pharmaceutical manufacturing unit is a time consuming and costly project. Investment required to start a pharmaceutical manufacturing company is huge. It is not possible for small and macro sized existing pharmaceutical companies and new start-ups having limited fund for starting a pharmaceutical business.

 
अगर आप फार्मा थर्ड पार्टी मैन्युफैक्चरिंग के बारे में हिंदी में जानना चाहते है तो आप यह वीडियो देख सकते है।

Pharmaceutical marketing company is an easy, less time consuming and less expensive way for starting a pharmaceutical company. Third party manufacturing is basis of starting a marketing company in pharmaceutical industry. Some time pharmaceutical manufacturers also get manufactured their own brands from other pharmaceutical manufacturers at third party basis due to not having approval of that product.

In this article we will cover how you can start pharmaceutical marketing company with third party manufacturing. First have look at third party manufacturing pharma meaning.

Meaning of pharmaceutical third party manufacturing:

Pharmaceutical third party manufacturing is referred as outsourcing of pharmaceutical products or to get manufactured under own brand name from pharmaceutical manufacturer having valid pharmaceutical manufacturing license.

How to start a pharmaceutical marketing company with third party manufacturing?

For a pharmaceutical company, you need to have pharmaceutical products that you can sell and market. These products can’t be manufactured by yourself as you don’t have pharmaceutical manufacturing license. You need a pharmaceutical manufacturing company for manufacturing own brand named products under marketed by name and address of your pharmaceutical marketing company. Pharmaceutical third party manufacturer provides products to marketing companies under their name. Thus third party manufacturing is one of the crucial step while starting own pharmaceutical marketing company.

Steps to start a pharmaceutical marketing company:

  1. We recommend taking experience in pharmaceutical industry (especially in sales and marketing) first or hire experience staff having pharmaceutical sales and marketing experience.
  2. Write a business plan. Which may include territory/s you want to launch, number of sales person, budget, fund available, number of product to be launched, product range, potential doctors, chemists in territory/s and other important details? Try to keep business plan short and update it as you find it necessary to modify as business plan is a live document.
  3. Register your pharmaceutical company under company act or just make a firm
  4. Apply for wholesale drug license
  5. Apply for Goods and Service Tax number
  6. Find a pharmaceutical third party manufacturer
  7. Manufacture your product at third party manufacturing basis
  8. Start marketing and promotion of your own pharmaceutical company products.


Requirement for Pharmaceutical Third Party Manufacturing:
  • Wholesale Drug License Number
  • GST number
  • Company registration if any
  • Logo, company detail and brand name details
  • Brand name affidavit

Packaging material Responsibility:

There are two way to procure packaging material. Either you can provide packaging material by own or you can leave to pharmaceutical manufacturer to arrange for packaging material and designing part of packing etc. If you have established firm/company then you can go for own arrangement of packaging material but if you don’t know much about packaging manufacturers and process, let it be done by pharmaceutical manufacturer.

Term and Condition for third party manufacturing:
Common term and conditions are as follow
  • Payment terms: 25-30% advance and remaining against Performa invoice
  • Packaging material security: If batch size is less as compare to minimum packaging material will be manufactured
  • Delivery of products: Fresh order – 30-45 days, Repeat – 25-30 days
  • Minimum Order Quantity/minimum batch size: As mutual agreed
  • Transportation: To pay
  • Rates: Rates as mutual discussed. All rates are ex-factory rates
  • Tax: As applicable (most of pharmaceutical products fall under 5% and 12% gst slab)

Is pharmaceutical contract manufacturing and pharmaceutical third party manufacturing is same?

There are some technical differences between both. In general, both can be used as synonyms for each other but technically they are differentiated with each other.

In pharmaceutical third party manufacturing, marketing company only place order to manufacturer and now its pharmaceutical manufacturers responsibility to arrange raw material, packaging material, using die and packaging as available with them etc. where as in pharmaceutical contract manufacturing, pharmaceutical manufacturer provided costume arrangement to marketing company as per pharmaceutical manufacturing need e.g. special die, raw material/packaging material from marketing company choice. Or marketing company will provide all necessary material for manufacturing finished goods i.e. raw material, packaging material, die, bottle etc and pharmaceutical manufacturer only need to convert it into a finished good.

In some cases mixture of third party manufacturing and contract manufacturing is used. Few materials are arranged by marketing company and few are arranged by manufacturing company.

Is third party manufacturing is also available in other sectors?

Ayurvedic products third party manufacturing is similar to pharmaceutical third party manufacturing. All above mentioned procedures, term and conditions, steps are applicable to third party manufacturing of ayurvedic products and medicines also. Fast moving consumer goods (FMCG), food products, dietary supplements, cosmetics and other sectors are also get benefits from third party manufacturing but it is important in regulated sectors as in regulated sectors, name of both manufacturing company and marketing company is essential. In non regulated sectors, where showing manufacturer name is not compulsory, third party manufacturing is hidden concept.

Is there compulsory to show manufacturer name and address?

It’s compulsory at label of pharmaceutical products, ayurvedic medicines, cosmetics, food supplements, nutraceuticals etc to show detail like manufacturer’s name, complete address, manufacturing license number etc. Batch number shown at label is also issued by manufacturer.

Who is responsible for MRP print at label?

Maximum retail price is fixed and suggested by pharmaceutical marketing company if product doesn't fall under DPCO. If it falls under dpco then MRP will be fixed maximum of allowable under dpco or less than it.

Hope above information is helpful to you...

Related: More pharmaceutical Start-up Ideas

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