Pharma Third Party Manufacturing Process

Pharma Third Party Manufacturing Process – Many pharma companies do not have own production facilities. They rely on third-party Pharma manufacturers to provide them with the required quantities of agents or products needed for medicinal product development. An effective and good working relationship between the developing company (the client) and its third party manufacturer is essential in this case. Here my next blog will explain Pharma Third Party Manufacturing Process. This includes every detail from costing to taxation which is the main part of this process.

Starting and running a manufacturing pharmaceutical company is difficult and tense work, and requires high investment but starting and running a Pharma marketing company is easy thanks to third party manufacturing. 

Pharmaceutical Third Party Manufacturing Process

The first step is making up your mind to manufacture your products from the best Pharma manufacturing companies and to choose the Best Third-party manufacturer for your process. After than do the proper conversation about all the required needs you want the selected third party manufacturer to manufacture in your Pharma product. Ask about the costing and taxation rates. After the finalization of all your queries, there are some of the Phases of starting the Pharma Third Party Manufacturing Process.

Days it takes in the manufacturing process:
  • Firstly the Formulation approval is necessary from the DRUG department. It will take a maximum of 7 to 10 days.
  • After then the Procurement of Printed Packing material like foils, cartons, labels, etc. which will take 10-20 days
  • Then 10 to 15 days you have to wait for the Actual Production of your Pharma product
  • Lastly Transportation. It depends on the delivery process. Takes 2-7 days.

Important Documents Required for Pharma third party manufacturing?

There is a basic requirement the third party manufactures ask for. you don’t need to have much requirement. The main documents include:

  • Company Profile: They ask for the copy of Pan Card of the registered company and a Copy of Memorandum
  • Articles of Association in case of Pvt. Ltd or limited Company.
  • Partnership deed/ Affidavit for proprietary in case of Partnership firm or Proprietorship firm.
  • Address Proof: The proper Address proof of all the directors of the company
  • Attested copy of Drugs Licenses to be provided with the Drug License number
  • A copy of sales Tax / TIN Registration Certificates with GST Identification number
  • Brand Name non-resemblance affidavit
  • Agreement for manufacturing
  • Packing material printer (in case you will procure printing material)

Remember: Firm or person having its own wholesale drug license number is eligible to get the product manufactured at his own brand name.

Minimum batch size for pharma third party manufacturing?

  • The Batch size differs from company to company and it also depends upon Pharma products you want to get manufactured.
  • Big Pharma manufacturing companies don’t take small batches whereas small manufacturers can even manufacture small quantities for you.
  • Batch size also depends upon the cost of the product you want to get manufactured. Costly products can be manufactured in small batches whereas cheap products usually require a good number of quantities.
  • Some manufacturers can even manufacture small batch size as 100 boxes for tablet/cap and 500 pc for liquid/syrup, 1000 pc for injections.
  • Mainly, For Non-Beta-lactam tablet and capsules items- minimum Batch size is 50,000 tablets
  • For Liquids, Ointments, Liquid injections, Dry injections minimum batch size is 5000 units
  • For costly Beta-lactam tablets and injections, smaller batch sizes are entertaine as per product.

Basic Costing required in Pharma Third Party Manufacturing Process

Costing for the process of third party manufacturing is calculated as per the following mentioned product/process’s cost and price. General Policy of working out cost of the product is given below:

  • Raw material cost: Involves Active ingredient/s cost and Excipients cost
  • Cost of Packaging Material can be term as Primary (Foil, Cartons, Labels, etc.) and Secondary ( PVC, Shippers, tape, packing slips, strips etc)
  • Manufacturing Process cost
  • Quality assurance and Quality control cost
  • Batch Charges- which covers cost of consumables, Quality control Costs & Local transportation.
  • Process loss for RM & PM.
  • Transportation cost
  • Labour Charges
  • Taxations and other charges
  • Profit Margin

Remember: Total inventory require to get manufacture the pharma product is generally depends upon cost of the product. Inventory may vary product to product or dosage form of the product.

Taxation and Outward Transport

There are some taxes which should be given at the time of payments. These includes:

  • CST @ 2.0% is charge as per latest central Govt Exemption Notification.
  • Outward Transport is payable by the Party, the rates depend on the third-party manufacturers are Ex-factory.
  • Transportation charges mostly bear by a marketing company or as per mutual agreement. All transported material should be secured under insurance which is generally 0.5% of total bill value.
  • Most of Pharmaceutical Products has a 12% Tax. Some essential medicines come under a 5% tax slab.

Procedure for packing material Procurement?

Packing of the pharma products procurement is as important as raw material procurement. Either you can directly involve in procurement of packing material or you let it to the manufacturer to procure it for your brand.

  • Finalize packing material vendor.
  • Get prepare the best design for your packing material
  • Select paper, tin, aluminum
  • Send design and matter for approval and correction to manufacturer
  • Send it to printing.

Payment Term and Conditions:

Payment terms also vary from Pharma manufacturer to Manufacturer. For older parties payment term as per mutual agreed term i.e. generally 45 days. For Newer Parties manufacturing they usually take 25-30% advance and remaining payment against proforma invoice at the time of dispatch of the finished product.

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