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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

What is the Difference between Third Party Manufacturing, Contract Manufacturing and Loan License Manufacturing?

Third party manufacturing, contract manufacturing and loan licensing, all are the terms for manufacturing own pharmaceutical brands without owing a pharmaceutical manufacturing unit. With help of these three, one can easily set-up own pharmaceutical company without investing at manufacturing facility. In this article, we will checkout difference between these three.

First two are similar in many aspects and used as synonyms many times for each other in general talking but have technical difference. Loan licensing is totally different from these terms.

First we will understand difference between third party manufacturing and contract manufacturing.


Third party manufacturing and contract manufacturing, both are the ways to get manufacturing own brand name products from manufacturing company with or without involvement of manufacturing process. Responsibility of manufacturing process is of manufacturer but marketing company may involve in procurement of material required during manufacturing process. This Involvement creates difference between third party manufacturing and contract manufacturing.

In both processes require a marketing company and a manufacturing company.

When a marketing company orders a product to manufacturing company for manufacturing at marketing company’s brand name and manufacturing company provides the goods as per specifications and sources available at its manufacturing facility i.e. die, tablet shape, bottles, packaging material etc, this process is known as third party manufacturing.

Whereas when marketing company get manufactured its own brand name products at customized terms & specification, and provides or asked for procurement of everything used for manufacturing of that product i.e. raw material, excipients, packaging material, die etc. as per marketing company specifications. Manufacturing company only need to process it to convert into the finished goods with marketing company’s brand name, and in other term, assembling it as per marketing company specifications. This process is known as contract manufacturing.

Marketing company may pay for procurement of special accessories used or may provide these by own to manufacturer for customization of products as per their standard. In some cases, marketing company provides every desire material i.e. raw material, excipients, packaging material, dies etc and in some cases provides some material and remaining is procured by the manufacturer.

Now come to Loan Licensing. Loan licensing is totally different from above two processes. In loan license, manufacturing process is also responsibility of marketing company. First have look at Loan license definition.

According to Drug and Cosmetic Act & Rules, “A Loan license is defined as “For the purpose of this rule a loan license means a license which a licensing authority may issue to an applicant who does not have his own arrangements for manufacture but who intends to avail himself of the manufacturing facilities owned by a licensee in form 25 or in form 28 as the case may be.”

In loan licensing, marketing company approaches to manufacturing company having manufacturing license and ask him to use his manufacturing facility for manufacturing own products. Then manufacturing company apply for permission to drug department to allow marketing company for manufacturing products at its manufacturing premises already having manufacturing license and compile with drug manufacturing license requirements. Drug department issue a license to marketing company on the basis of manufacturing premises, technical staff, capacity, specifications of manufacturing company to manufacture products. This license is known as loan license.

In loan licensing, marketing company can handle complete manufacturing work or some time appoint an authorized person at manufacturing premises which look after manufacturing processes handled by parent manufacturing company during marketing company’s products manufacturing or on basis of mutually agreed term and conditions. Compensation, rent, profit or commission whichever is agreed is paid to manufacturing company by marketing company for availing its manufacturing facility.

There is labelling requirement will also be vary in third party manufacturing, contract manufacturing and loan licensing.

In third party manufacturing and contract manufacturing, marketing company will be shown as Marketed by or manufactured for or with any other similar term. Manufactured name and address and license number will also be shown at label.

In Loan licensing, marketing company works as manufacturer and marketing company name will be shown as manufactured by and loan license number will be shown as manufacturing license number.

Hope above information is helpful to you...

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