Key Insights into How to Set-up Pharma Manufacturing Company in India

Under the flagship programs of Make in India and Self-Reliant India (Aatm Nirbhar Bharat), India aims to extend its footprint in the global supply chain and become a hub for manufacturing activities. To further incentivize indigenous manufacturing, India is offering a host of policy impetus, discounts, subsidies, skill enhancement programs, and much more. 

Out of the various categories, Pharma manufacturing is a sunrise segment, that has the potential to grow vigorously in foreseeable future. India already has a large pharma market sized at USD 46.8 billion in FY 21. Out of this, domestic retail is valued at USD 22.4 billion, while the remaining comprises export activities. The country is a leading player in the global generics market and is aggressively venturing into other categories such as API, biosimilars, diagnostic devices, biotechnology, etc. 

To further support domestic manufacturing, India has also announced a lucrative PLI scheme of over USD 2 billion for the pharma sector, which will be distributed over 8 years (FY 21 to FY 29.). Research suggests that the PLI scheme will result in an incremental export of USD 29 billion. 

The inherent potential in pharma manufacturing makes India a fertile ground for new manufacturers and entrepreneurs. Already there are around ~ 3000 manufacturers in India and the volume is expected to grow manifold. 

To learn more about India’s growing pharma and healthcare sector, one can read couple of our earlier analyses

https://www.theindiawatch.com/service-industry/the-indian-healthcare-industry-is-a-goldmine-for-investors

https://www.theindiawatch.com/retail/from-fy-18-to-fy-21-indian-e-pharma-sector-grew-at-a-cagr-of-8564 

Meanwhile, it is also important for businesses and individuals, who are contemplating starting a pharma manufacturing unit to have complete knowledge of the process to start a pharma manufacturing company in India. 

In this post, we will discuss in detail the various facets of starting a pharma manufacturing company in India. While the post will give stepwise guidance on starting a pharma manufacturing in India 

Firstly, businesses should conduct a preliminary market study to learn more about the sector.  They should have a strong understanding of the sector and gauge its performance in recent years. Comprehensively carrying out the market research will guide them move in the right direction for starting the business.

 

Preliminary Market Study  

• Market Sizing: Gain enough insights on the industry size, the rate at which the industry is growing, estimated future market size in the next 5 years, etc. 
• Customer assessment and market segment analysis: Learn more about the customers and their behavior alongside key market segments. 
• Competitive Intelligence: Businesses should also gain ample competitive intelligence. This will include knowing about major players in the market, monitoring their past performance, and gaining knowledge about their future strategy. 
• Distribution structure analysis: Learn thoroughly about the distribution structure. This will include knowing about the go-to-market strategies, available intermediaries in the market, retail network, online commerce, etc. 
• Policy and Regulatory Insights: Having a thorough knowledge of the industry policies is also greatly needed. In India, policies change continuously and businesses should keep a close eye on the same. 

Initial Step of Setting up a Pharma Manufacturing Plant 

Businesses need to identify a distinct name for the manufacturing company that should be attractive and relevant.

After deciding on a name, individuals need to select the type of manufacturing company they want to open. Types of pharma manufacturing companies include Branded Pharma Manufacturing, Generic Pharma Manufacturing, Pharma Export Company, Derma Medicines & Products Manufacturing Company, Hospital Supply Manufacturing Company, etc. 

Once the category of production is identified, businesses should search, assess, and choose a prominent space for production. The manufacturing premise should not just have sufficient space for the production process but also raw material storage section, quality control section, storage areas for finished goods, etc. Likewise, they should also have space for office and other administrative work along with storage capacity for rejected chemicals and drugs. 

Manufacturing Plant Registration Process

After deciding on the type and nature of a pharma manufacturing company individuals need to start with the legal procedure. Companies need to get registered with the companies registrar under the Companies Act, 1956, or Companies Act, 2013. 

We are not going to discuss much on general company registration in India. We have already written a few posts on the topic and one can read them to know a bit more about them. 

https://www.theindiawatch.com/economy-and-policy/how-to-online-register-a-company-in-india-before-foraying-into-business

https://www.theindiawatch.com/economy-and-policy/private-limited-company-registration-in-india

https://www.theindiawatch.com/economy-and-policy/company-registration-in-india

Micro, Small, and Medium Enterprises or MSME registration is optional for factories and manufacturing companies. The MSME certificate provides several benefits as they will easily get loans under priority sector lending and they will also pay less interest on loans, and will also get benefits of exemption under tax laws, and much more. Small, Medium, or Micro entities get environmental clearances and they benefit by registering for MSME certificates. This certificate can either be provisional or permanent. However, individuals starting the pharmaceutical industry are advised to apply for the provisional certificate, especially if they are opening a new manufacturing unit or factory. Under the MSME Act the manufacturing enterprise status are as follow:

• If the investment amount is less than Rs. 25 Lakh then it will be a Micro Manufacturing Industry
• If the investment is more than 25 Lakh and less than Rs, 5 Crore, then Small Scale Industry
• If the investment amount is more than 5 Crore but less than Rs. 10 Crore then it will be a Medium Scale Industry

Approval of the Manufacturing Layout 

Individuals looking to set up a pharma manufacturing factory in India need to abide by a set of terms, rules, and regulations. This has been mandated to ensure safe, quality, and pure formulations of drugs, and the requirements may vary from state to state. To obtain a manufacturing license individuals need to fulfill the following steps:

• For manufacturing premises, individuals have to fulfill requirements according to the Drugs and Cosmetics Act 1940.
• Blueprints of the premises layout plan in 3 copies need to be submitted to the concerned Licensing Authority. Four copies of the premises blueprints are required if blood products or vaccines have to be manufactured.
• Layout inspection is carried out by a panel of officers to check whether the layout is as per the Drugs and Cosmetics Act 1940.
• On the approval of the layout, the individual will receive an approved copy of it.  

Licensing of Pharma Manufacturing Plant

Pharma manufacturing plant needs to obtain Drug and Cosmetic manufacturing license that is provided by the Foods and Drugs Administration. The license should be approved by the Central Licensing Approving Authority i.e. Drug Controller General of India. Individuals seeking licenses need to make necessary payments through a bank challan.

Assets required for starting pharma manufacturing company

Fixed Assets:

• Building
• Land
• Heating Ventilation and Air Conditioning System
• Air Lock System
• Fitting and Furnishing
• Machinery and Lab Equipment
• Water and Electricity Supply
• Compressed Air Supply
• Complete formalities for obtaining licenses

Liquid Assets:

• Skilled and Technical Staff wages
• Un-skilled worker wages
• Rent 
• Bank EMI and other related expenses
• Marketing and Promotional expenses
• Other Expenses

Vital Documents Lists

• Fee receipt or bank challan copy
• Educational qualifications and experience certificates of the competent technical staff that will be responsible for manufacturing and testing of drugs and cosmetics in the newly set up pharma plant 
• Approved layout plan copy
• Rent agreement or documents showing the ownership of the premises
• Equipment and machinery purchase bills
• Manufacturing company incorporation certificate copy along with Partnership Deed, AOA & MOA
• Name and authorized signatory of the authorized person or partners
• State Pollution Control Board permission for setting up a pharma manufacturing plant
• NOC certificate to construct or start a manufacturing plant
• For manufacturing a new drug, an individual will need clearance from the Drug Controller General of India, Delhi.

 

How India Watch can help?

The India watch is an India-based research and consulting house, which helps indigenous and international business to set-up, grow, and evolve in the Indian market. Alongside host of other sectors, we work with pharma and healthcare companies and offer them custom research and consulting solutions. Our services include, 

• Tailor made market research services for pharma companies to learn about the business ecosystem in India, gain competitive insights, and acquire market intelligence.
• Business research and data advisory services for investors and private equity companies looking to invest in the Indian pharma industry. 
• For pharma companies, we can work as their strategic partner and help them acquire relevant licenses and assist in the company registration process. 
• We can create feasibility studies for pharma manufacturing enterprises comprising financial & market feasibility, market assessment, cash flow projection, etc. 
• We can assist in identifying, evaluating, and selecting the right location for manufacturing.
• For any further query, feel free to drop us a mail at info@theindiawatch.com