September 30, 2022

The pharmaceutical industry, in all possible means, is one big complicated web of operations. Each single and every aspect of this industry has got manifold variations, which are very much negligible to apparent overviews or observations from outside the system.

This becomes all the more evident when it comes to differentiating the different manufacturing processes or systems that are followed by different pharmaceutical manufacturers in India. For example it is very difficult to explain to a layman, how contract pharma manufacturing is different from that of third party manufacturing. Similarly it is all the more difficult to explain the points of differentiation between third paty manufacturing and pharma P2P manufacturing. Hence, let us try to break and understand the different aspects related to these two systems in order to differentiate them from each other.

What is third-party pharma manufacturing?

When a company orders a certain quantity of products to be made by a third-party manufacturing company, with the former’s brand name; the manufacturing company delivers the manufacturing with the resources available at its own manufacturing unit, concerning raw materials, packaging, and so on.

This kind of manufacturing is called ‘third-party pharma manufacturing’ where all the materials and end products are being taken care of by the manufacturing company, while the end product is sold at the name of the company giving out the order or consignment; which is commonly referred as the marketing company.

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Suppose one wants to start an own marketing company and wants to get own product manufactured or if one is a manufacturer, yet do not have approval for particular product to manufacturer, then it will require to offer a contract with a pharma manufacturer to manufacture products with own brand name and marketed by address.

What is P2P Pharma Manufacturing?

P2P or product to product, is considered to be another variant of loan licensing system; which is like to start own manufacturing without setting up manufacturing unit.

P2P pharma manufacturing under loan licensing system, happens when a pharmaceutical marketing company wants to manufacture its own medicines, but doesn’t want to set-up pharma manufacturing unit. So it ties-up with an already licensed pharmaceutical manufacturing company and uses the latter’s infrastructure for its manufacturing activities. The former applies for a loan license to the drug authority for the permission of manufacturing their medicines in the already licensed manufacturing unit, and using their facilities and staff. It is just like hiring or renting others’ manufacturing premises for manufacturing one’s own products.

Drug authority issues a separate license to pharmaceutical marketing company to manufacture medicines and avail all benefits of manufacturing unit. This process is known as Loan Licensing and license issued to marketing company is known as loan license.

As per market experts, under this system, a P2P manufacturer providing services to other manufacturer in different brand names should be encouraged; as it is every brand name goes to different companies and this results in better market reach of the concerned pharmaceutical drugs.

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Difference Between P2P or Loan Licensing System and Third Party Pharma Manufacturing System

Let us understand the structures of these two pharma manufacturing systems separately, in order to understand the differences between them.

Struture of P2P Pharma Manufacture System

  • In this case, one (say company ‘X’) will rent a particular space in an already existing licensed manufacturing unit (say company ‘Y’) for manufacturing its own brand name products. In that case, the marketed by and manufactured by names are that of the co. X, with manufacturing address details that of hired manufacturing unit i,e co. Y.
  • While co. X manufactures, markets and supplies its products, the technical persons and workers will be of co. Y. The manufacturing operation is handled by X.

Structure of Third Party Manufacturing System

  • In this case, one will only give order to a manufacturing company for manufacturing product with one’s own brand name and company name. Manufacturer will manufacture the product and will supply products in ready to sell form, that the order giving company may forward to the its Cnf and distributors. This is simple process and very less documentation and formalities.
  • In third party manufacturing, manufacturer name and address must be mentioned. It requires marketing company and pharmaceutical manufacturer.
  • In third party manufacturing one can’t use own marketing company name at place of manufacturing company name, but one can mention own company as marketed by company. Ownership of brands will be property of marketing company. Quality will be responsibility of manufacturing company.

Difference in Handling of Raw Materials

In case of p2p pharma manufacturing, raw material procurement is the responsibility of the Loan Licensee as it is working as a manufacturer in another manufacturer’s unit. But in case of third party manufacturing system, the raw material procurement becomes the responsibility of the pharmaceutical manufacturing company, and not of the pharma marketing company.

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