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The Complex Factors that Influence Drug Prices

Pharmaceutical companies typically use a variety of factors to determine the price of their drugs, including: Development and production costs: Pharmaceutical companies invest significant amounts of money into the research, development, and production of new drugs. The cost of these activities, including clinical trials and obtaining regulatory approval, is factored into the price of the drug. Marketing and Distribution Cost: Marketing and distribution costs may also be considered by pharmaceutical companies when determining drug prices. These costs include expenses related to advertising, sales representatives, and distribution networks. Drug Uniqueness: If a drug is the first of its kind or represents a significant improvement over existing treatments, the pharmaceutical company may set a higher price for it. If a drug has many competitors or is like existing treatments, the company may have to set a lower price to remain competitive. Market demand: Companies also consider the dem

Minimum investment required to start a pharmaceutical marketing company

Investment required to start a pharmaceutical marketing company is not fixed. That are depend at many factors like:
  • Rent or property rates of premises where you are going to take license or set-up as corporate office
  • Licenses and Documents Cost at your area
  • Product’s Molecule and composition selected by you for launching into market
  • Number of products you want to launch
  • Staff, Office accessories and infrastructure Cost
  • Scale at which you want to work
  • Marketing, travelling and promotional expenses etc.
Terms like Pharmaceutical Marketing Company, trading company, distribution company, marketed by company, third party manufactured by company are used Synonymously. So, don’t be confused between these terms.

Before proceeding further, check out documents and licenses required to start a pharmaceutical marketing company

General Legal Formalities:

  1. Business Registration – Firm Registration or Company Registration
  2. Wholesale Drug License
  3. Goods and Service Tax Identification Number (GST)
  4. FSSAI License (If you have food supplements also)
  5. Trademark Registration (Voluntary)

As we discussed above, investment required to start a pharmaceutical marketing company, depend at above factors. We will try to understand with an example.

Person A: 

A person is going to start a pharma distribution and marketing company. In his area, rent of the premises is 6000/- rupees for 10 square meter premises that is minimum requirement of drug license for marketing and trading company.

He has selected 10 molecules or composition from which 2 has costlier that third party manufacturing or contract manufacturing cost of these products have 500-600 rupees per box. 5 Products have prices in range of 200-250 rupees and remaining 3 products worth 50-75 rupees.

Suppose, minimum third-party order quantity for costlier products is 200 Boxes, medium range products are 300 Boxes and low-priced products are 500 Boxes.

Licenses and documents cost, we may suppose is 20000-25000/-. Required Office accessories cost is 30000/- approx. we consider. He hasn’t done any further investment at any staff or any other things. He is going to do all work by own as he chooses to work at smaller area initially.

He doesn’t have staff so no salary given to any staff, only his own salary and expenses. That we consider as 30000/- per month.

Person B: 

On the other hand, a person starts by establishing a good office with good space that is at rent of 30000/- per month. He wants to launch products at large area by appointing a proper office staff and sales staff. He chooses to launch 50 products and suppose partition of cost of products as similar to mentioned in person A by multiply by 5 like 10 products having cost of 500-600/-. 25 Products having price range of 200-250/-. And 15 products in range of 50-75/-

Documents and licenses cost we suppose similar to above but infrastructure cost will be high as number of staff will be higher and will require more office accessories. That we are supposing will cause investment of approx. 5 lakh rupees. Suppose he has office, sales and other staff of 5 persons. Average salary and daily expenses of a staff member is 20000/-. Promotion and marketing expenses is 15000 per month, we are considering.

Calculation of the investment in both cases:

A business requires to take time to be established. It may be 2 years, 3 years or more. Here we are considering that a business require minimum of 1-year time so it can fully generate enough money for its working capital and 3 years for establishment. Till then at expenses that will require to run a business will also fall under investment.

In case of person A,

Rent: 6000*12 months = 72000/-

Licensed and Documents Cost: 25000/-

Office Accessories and Infrastructure Cost: 30000/-

Products Cost:
2 Products and Minimum of 200 Boxes i.e. total 400 Box*600 = 240000/-
5 products and minimum of 300 Boxes i.e. total 1500 Box*250 =375000/-
3 Products and minimum of 500 Boxes i.e. total 1500 Box*75 = 112500/-

Other expenses and salary: 30000*12 = 360000/-

Promotion and marketing approx. = 5000*12 = 60000/-

Total Investment as per above figures will be 72000 + 25000 + 30000 + 240000+375000 + 112500 + 360000 + 60000 = 1274500/- approx.

In case of Person B,

Rent: 30000*12 = 360000/-

License and Documents Cost: 25000/-

Office accessories and infrastructure cost: 500000/-

Products Cost:
10 Products and Minimum of 200 Boxes i.e. total 2000 Box*600 = 1200000/-
25 products and minimum of 300 Boxes i.e. total 7500 Box*250 =1875000/-
15 Products and minimum of 500 Boxes i.e. total 7500 Box*75 = 562500/-

Other expenses and salary: 5 person*20000 = 100000 * 12 months = 1200000/-

Promotion and marketing approx. = 15000*12 = 180000/-

Total Investment as per above figures will be 360000 + 25000 + 500000 + 1200000 + 1875000 + 562500 + 1200000 + 180000 = 5902500/- approx.

As we discussed above from different figures, investment and cost for establishing a pharmaceutical marketing company is not fix. You can start it from small scale as well as large scale and investment required will be changed as per your way of starting.

If you choose all low-priced product then you can launch a greater number of products in an investment whereas if you choose to launch higher priced product then you can only launch less products.

If we talk about rent or property rate. It’s better to start with rented place in starting as it will require a large sum of money for purchasing a premise which ultimately will increase your investment.

Rent also vary location to location and place to place. You can set-up at area where as less rent because in pharmaceutical marketing company, there is less possibility for people to visit your office but it’s high possibility your customer or client can visit at you, you should have office at good location.

There may be few other factors that may affect investment required to start a pharmaceutical company. You can also include in above expenses to calculate money or fund required to start a pharmaceutical marketing company.

Hope above information is helpful to you…

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