What third party pharmaceutical manufacturing actually involves
UNOS Biotech 2 min read
In third party pharmaceutical manufacturing, the marketing company owns the brand, trademark and artwork while a licensed manufacturer produces and packs the goods. The marketing company supplies its drug licence, GST registration, trademark details and approved artwork; costs comprise the per-pack rate, packing material, freight and GST.
Third party manufacturing gets described in brochures as a "win-win partnership", which tells you nothing useful. Here is the mechanical version.
Who owns what
Two companies are involved. The marketing company owns the brand name, the trademark, the artwork and the customer relationship. It decides what to sell, at what MRP, in which territory. The manufacturing company holds the manufacturing licence for the relevant categories and produces the goods to the marketing company's specification, packed in the marketing company's artwork.
The goods leave the factory already branded as the marketing company's product. The manufacturer's name appears on the pack as required by law, but commercially the brand belongs to the marketing company.
What changes hands before anything is made
- Your drug licence — the manufacturer cannot supply a firm that does not hold one.
- Your GST registration.
- Trademark details for each brand name, or at minimum the application number. Manufacturers are cautious here because a brand-name dispute lands on both parties.
- Approved artwork for cartons, foils, labels and inserts.
Where the money actually goes
The quoted rate per pack is not the whole cost. Three other items matter:
- Packing material. Cartons and foils are printed to your artwork in minimum print runs. This is usually the largest one-time cost when launching a new brand, and it is the reason MOQs exist at all — a print run of 500 cartons costs almost the same per unit as a run of 5,000.
- Freight. Most quotes, including ours, are ex-factory or ex-city. Freight to your state is extra, at actuals.
- GST, charged as applicable per product category.
What to ask before you commit
Ask for the MOQ per pack, not per product — a company will happily quote you a low per-tablet rate on a quantity you cannot sell. Ask what the lead time is after packing material is in hand, since that is the number that determines your launch date. Ask which categories the manufacturer's licence actually covers, because a partner who cannot make your second product is only half a partner.
Where this fits for a new marketing company
If you are starting out, third party manufacturing is the difference between launching on working capital and launching on a factory loan. You keep the brand and the margin; you skip the plant. The trade-off is that you are dependent on someone else's production schedule, which is why partner selection matters more than the rate sheet.