Everything You Need To Know Before You Start a Pharmaceutical Company?
A pharmaceutical company is one of the best choices for starting a company. A pharmaceutical business can be involved in one or more forms of applications such as research, production, trading, distribution and marketing, etc.
Every country controls the pharmaceutical industry. The Drug and Cosmetic Act & Regulations control the import, production, distribution and sale of medicines and cosmetics in India. We would need a licence from a pharmacy office known as a drug licence to perform some form of business in the pharmaceutical field.
We would also include a drug licence for a pharmaceutical business. We would need a Drug Manufacturing License from the state drug control authority in order to start a pharmaceutical manufacturing business. We need a wholesale drug licence number for marketing, exchange, distribution. We would need a Retail Drug License Number for retail shop and pharmacy.
In this article you will learn how to start a pharmaceutical company in India. From the beginning to the end of the process, we will address all aspects such as previous experience, how to register, required licences, qualification, investment required, how to develop etc.
Before starting up a pharmaceutical business, be it manufacturing or marketing, we would suggest that you have a previous background in the pharmaceutical sector or at least basic pharmaceutical knowledge.
What level of experience will determine which type of pharmaceutical business to start with. If you have expertise in the pharmaceutical industry, then the best option is to set up a production facility, but if you are experienced in pharmaceutical sales and marketing, we would advise you to start with a marketing business. If you have experience in research and drug production, you can start a pharmaceutical company relevant to your profession.
We will address in this article how to begin a selling, trading and distributing pharmaceutical business.
Each Indian State has nearly the same formalities. Only a small requirement can vary from state to state. You can first contact the Drug Inspector district office to confirm the company’s start up.
Experience: Either you or one of your partners should have experience in the pharmaceutical field, especially in sales and marketing along with fundamental knowledge of business foundations, etc.
Project: Project report contains summaries, facts, objectives versus actual achievements, analyses, measures to be taken, risks and issuances, money, budget, timetables etc. Project report
Business plan: where to begin, which specialty to cover, goods to launch, required investment, available investment, other funds, required sales staff, licences and NOCs, territories to be covered, etc.
Territory Knowledge: You should have strong territory knowledge in which you want to start business. Number of physicians present, the main clients, dealers, manufacturers, hospitals, pharmacies etc.
Financial resources: Constructing a company requires time and effort. You should obtain sufficient funding to launch, operate and run this until it begins to make sufficient profit to cover your own and expenses. Financial resources may include credit, own investments, mortgages, part-time income, etc.
Important Step (Procedure and Sequence):
- Take Experience in pharmaceutical sales and marketing and/or recruit experienced staff
- Prepare a project report or take advice of pharma experts
- Make a Business Plan
- Choose Location for Business set-up. Search for shop/building/premises for office, licenses and stock. It may be rented or owned but there should be adequate space as per government norm.
- Finance Source (Own Saving, Bank Loan, Investment etc.)
- Research and Prepare list of all molecule and combinations depend at specialization (General, Paediatric, cardiac, oncology etc.) in which you want to enter.
- Finalize Company Name and Brand Names of all products. Be sure these don’t resemble to any other company or brand already working in Market. Due to presence of thousand of brands and companies, it becomes difficult to choose unique name but you should try your best. Already registered or in process Trade Name and Company Name you can search at http://ipindiaonline.gov.in/tmrpublicsearch/frmmain.aspx . Trade name in class 5 and Company name at class 35.
- Register as a company (as a private limited, one person private limited or Limited Liability Partnership etc) under Company act or work as a firm (proprietorship, partnership)
- Recruitment of registered competent person or registered pharmacist as per norms. (In case if you or any of partners are not EP or Pharmacist). A Competent person or pharmacist is required as authorised person for taking drug license. Qualification of competent person we will discuss below in article.
- Apply for Drug License Number. You have to prepare a file with attaching all required documents and have to submit at district drug control office (manually or online depend at your applying state policy). You should apply for drug license with same name as you have company registration or firm registration. If you have registered your company as a ABC Pvt Ltd then take license with same name.
- After receiving drug license number. Apply for GST Number.
- Search for Third Party manufacturer or Contract Manufacturer. If you want to show manufacturing by address also of your marketing company then you can contact pharmaceutical manufacturer and apply for loan license.
- Place Order to Manufacturer
- Make an agreement/contract
- Finalize Packaging and Packing, Design Material
- Complete payment and other formalities (Generally 25% Advance and 75% against Performa invoice)
- Then all work will be done by Manufacturer
- When products will be ready, manufacturer will inform you and will send Performa invoice (Time taken for new products is approximately 30 to 45 days)
- After remaining payment manufacturer will dispatch the product to your billing address
- Start marketing, promoting and distribution your pharmaceutical products
Along with applying for above registrations, you can move upward with following steps. Following work, you should finished before issuing registration certificates, so you can save your time and you can meet with your deadlines.
- Designing of Logo
- Company Website and social media accounts
- Preparation of Visual Aids
- Preparation of Product cards and other promotion materials
Now you have products with your own brand names and your company name. Have a quick look at documents required for particular registration and licenses:
Qualification and Eligibility for EP or competent person:
A Competent person to be authorised to conduct all operation of pharmaceutical marketing company should possess either one from following:
- Registered pharmacist under state pharmacy council or
- Minimum one year experience at wholesale drug licensed firm after graduation with proof acceptable by drug licensing authority.
Following registrations and licenses, you will require to set-up your own pharmaceutical company at marketing, trading and distribution basis.
Most important licenses and registrations are
- Wholesale Drug Licence number (D.L. No.)
- Goods and Service Tax ( GST ) Registration
Voluntary but necessary licenses and registrations are:
- Company or Firm Registration
- Trade Mark registration
- FSSAI Registration
Wholesale Drug License:
Wholesale Drug License is the licence to sell stock or exhibit or offer for sale, or distribute by wholesale means. It also covers distribution, trading also. Marketing and promotion can be done with any restriction but when it come to receive medicines from pharmaceutical manufacturing company, stocking it, supply to stockist, distributor, retail pharmacies etc, you will require to have a wholesale drug license to raise invoice to them.
Some companies receive stock and invoice at any other pharmaceutical wholesale firm. This could be one another way to skip wholesale drug license but authenticity of doing business by this mean in not confirmed (whether legal or not) but being conducted by many pharmaceutical companies.
You will require taking different licenses for wholesale depend at Schedule under Drug and Cosmetic Act & rules in which a drug is covered marketed by your pharmaceutical company. List of these licenses are as follow:
- Licence on Form 20-B for wholesale of drugs other than those specified in Schedule C, C(1) and X and application is to be submitted on Form-19.
- Licence on Form 21-B for wholesale of drugs specified in Schedule C & C(1) and application is to be submitted on Form-19.
- Licence on Form 20-G for wholesale of drugs Specified in Schedule ‘X’ and application is to be submitted on Form-19-C.
Documents and Requirements for Drug License:
District Drug Control office would provide you full details of requirement for a whole sale drug license. Few we are describing here. Procedure and details for applying for D.L. number may be changed with respect to any governmental policy change.
- Application will be submitted in form no. 19 with other detailed information forms.
- You or your partner (if any) should be a registered pharmacist or Experienced Person (Duly registered under local authorities) or competent person. If you don’t have any of above qualification than you can appoint or hire a registered pharmacist or EP (Experienced Person) and make him authorized to handle all work on your behalf ( Appointment letter will be submitted with application)
- Premises size should have minimum of 10 square meter area (requirement of area may vary) and should have single premises.
- Fees ( mode of fee and prescribed fee may vary)
- Blue print or layout of Premises
- Freeze purchase bill copy with complete address
- Air Conditioner if applicable
- Ownership or Rent agreement deed of premises.
- Electricity bill of premises.
- Affidavit of proprietor, partner, pharmacist, EP etc.
- Firm registration receipt in case private limited firm. List of directors, address proof, article of association etc is also to submit with application form
- Partnership deed if any
- Any other documents as asked by local drug controller etc.
After submission of documents, inspection will be carried out by local drug authority for accuracy and correctness of detail submitted with the application form. Drug authority reserves the right to approve or reject your application if not satisfy with application.
If Drug officer is satisfied with your application, he/she will precede further it for issuing of drug license. After issuing of drug license number for sale of drugs for which you have applied will be granted. After that you are permitted to sale, purchase, distribute, supply of drugs at wholesale basis.
Goods and Service Tax Identification number
Goods and Service Tax Identification number, in short ‘GST number’ is mandatory for turnover above 40 lakhs or inter-state supply of goods. In both cases, either you have above 40 lakhs turnover or have stockist or distributors in other states to whom you have to supply then you have to apply for Goods and Service Tax number. If you don’t fall under these terms then you can skip to take GST number
Licensing authority for wholesale drug license is District Drug Control Officer or any other officer appointed by state drug control authority. GST number can be applied by visiting GST portal provided by state government or centre government.
Documents and Requirements for Goods and Service Tax Registration (GST) for Pharma Company:
For applying for GST Registration, you need to visit GST portal and apply for it. But if you want to reduce burden for applying GST number by yourself you can apply through any sale tax accountant or chartered accountant. They will charge a minimal fee and will apply GST number for your firm/company.
General procedure for applying GST number is as follow:
- Go to https://www.gst.gov.in/
- There will be the two options: New User and Existing User
- Click at New User
- Enter your detail for apply GST
- Enter you mobile number and Email Address of the authorized signatory of the business entity. This number and e-mail will be used for all future communication from the GST portal
- You will receive a OTP at mobile number and e-mail id you entered in previous step
- Enter this OTP.
- After that follow all steps and enter information and scanned images as mentioned in Provisional registration form
Documents required for applying for GSTIN:
- Digital Signature Certificate (Class II)
- Address Proof of Business Entity
- Proprietor/Partners/Directors Address Proof
- Aadhaar Card, PAN and Image etc
- Ownership Proof or Rent agreement
- Partnership deed or memorandum of association/certificate of incorporation
- Back Statement and Bank Detail
Company Registration or Firm Registration
Company Registration or Firm Registration is not as important as above mentioned requirements. You can skip these both easily if you have a proprietorship business. You can just take wholesale drug license and gst number, and start you pharmaceutical marketing business.
But if you are two or more partners then it become more important to register your company as private limited company or Limited Liability Partnership Company or register your firm under state government act & rules. This helps and prevents any future dispute and claim if occur.
Documents and Requirements to register a Pharmaceutical Company under Company Act:
For registering a pharma company under Company Act, applying through a chartered accountant is good way. Follow documents will be require for company registration:
- DSC (Digital Signature Certificate)
- DIN (Director Identification Number)
- PAN (Permanent Account Number) Card
- TAN (Tax Deduction and Collection Number)
- Identity Proof (Electronic ID / Aadhar Card / Passport / Driving License)
- Passport Photo
- Address Proof (Bank Statement / Mobile Bill / Telephone)
- Rent Agreement (Notarised: For rented property) or Ownership proof
- Latest Electricity Bill
- MOA(Memorandum Of Association) or/andAOA (Article Of Association)
- NOC if required
Trademark Registration is not compulsory but an essential aspect to prevent use of your intellectual property i.e. company name, brand name by any other individual or company. You should apply for trademark registration for at least your company name and major brand names.
Documents and Requirements for Trademark Registration:
- TM-48 Form
- Assignment Form
- Name and/or Logo with description
- Owner Detail (Individual/Firm/Company)
- Nature of Product/Service
- Class in which want to apply
FSSAI registration or license
FSSAI registration or license will be required to obtain if you are also dealing in food and dietary supplement products along with pharmaceutical products. Some of commonly used food supplements by pharmaceutical company are lycopene products, omega 3 fatty acid, calcium supplements, vitamin preparation, enzymatic products etc. You should apply for FSSAI registration if you deal in any one of food supplement product.
Documents and Requirements for FSSAI Registration/License:
Documents to be enclosed for New Application for License to State Licensing Authority:
- Form-B Duly completed and signed
- List of Directors/Partners/Proprietor
- Photo I.D and address proof issued by Government authority of Proprietor/Partner/Director(s)/Authorised Signatory
- List of food category desired
- Authority letter with name and address of responsible person nominated
- Proof of possession of premises. (Sale deed/ Rent agreement/ Electricity bill, etc.) (op_onal)
- Partnership Deed/Affidavit of Proprietorship/Memorandum & Articles of Association
- Food Safety Management System plan or certificate (if any)
Investment Required for Starting Pharmaceutical Company:
Three types of investment is generally required for pharmaceutical marketing company:
- Fixed Investment
- Capital Investment
- Inventory Investment
Fixed Investment for pharma marketing company includes Premises/shop/office, Furniture and accessories, Computer and electronic equipments, Fitting and Furnishing, Amount paid for licenses and registration, any other requirements cost etc.
Capital investment includes rent and bills, staff salary and daily expenses, bank loan instalments, promotional and marketing expenditure and others.
Inventory investment includes much investment at Stock of goods.
How to establish a pharmaceutical Company?
There are many marketing and promotional ways you can establish your pharmaceutical company. But you need to decide which type of marketing you want to do and establish your marketing strategy effectively.
You can choose either one or two or more from ethical/branded medicine marketing, generic medicine marketing, franchise distribution, supply to institutions, over the counter marketing, supply to pharmacy chains, online pharmacies or export etc. Below in scope section we have provided links to know more about each marketing type and get more knowledge about these.
Third Party Manufacturing, Contract Manufacturing and Loan License Manufacturing:
Getting Manufactured own brand name products from pharmaceutical manufacturer is an integral part of pharmaceutical marketing company. For manufacturing of own brands from manufacturer, we can choose from either of third party manufacturing, contract manufacturing or loan licensing. Third party manufacturing and contract manufacturing is easiest and simple way, and similar in many aspect where as loan licensing is somewhat difficult and requires lot of formalities.
Scope of Pharma marketing company:
- Branded Medicine Selling
- Generic Medicine Selling
- Pharma Franchise
- Institutional Sales i.e. supply to hospitals, colleges, departments etc
- Over the Counter (OTC) Drugs Sale
- Supply to Pharmacy Chains
- Supply to Online Pharmacy
- Pharmaceutical Product’s Export
- Pharmaceutical Product’s Import
- Active Pharmaceutical Ingredients and other raw material trading business
- Medical Devices and Surgical Dressing business
Other Business Opportunities
Along with pharmaceutical company, there are other business opportunities also available in healthcare and pharmaceutical sector.