Loan License and Third Party Manufacturing Ban In Pharmaceutical Industry

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Loan License and Third Party Manufacturing Ban In Pharmaceutical Industry

Loan License and Third Party Manufacturing Ban In Pharmaceutical Industry – Our prime minister, Narendra Modi hinted about the generic and branded prescriptions earlier in April 2017. The Health Ministry and Finance Ministry started to work on amending the Drugs and Cosmetics Act. The costly affair and discrimination of branded and generic drugs lead to the introduction of revised draft pharmaceuticals policy. There are speculations stating loan license and third party manufacturing ban in the pharmaceuticals industry.

The generic drugs share 80 percent (20% is accounted by branded and patented drugs). The share is expected to touch 90 percent in next three years. The expensive share of branded drugs and doctors influence on a prescription has affected the common man. The government of India plans to shift its focus to patient–centric ways.

The draft pharmaceutical policy covers the aspect of drug related to quality, issues related to patent, the time taken for drug approval etc. It also renews laws regarding loan license and third party manufacturing.  There are rumors of loan license and third party manufacturing ban in the pharmaceuticals industry. Read more about it!

About | Government’s New Draft Pharma Policy and Pharma Manufacturing

The Department of Pharmaceuticals (DOP) recently released the new draft pharmaceutical policy. It has been making the news.  The draft focuses on the role and functions of the National Pharmaceutical Pricing Authority (NPPA). The draft clearly showed the signs of drawbacks of NPPA when it followed given government guidelines. Take a look at the features of draft pharma policy 2017:

  1. The main feature is the banishment of branded names or differently-priced brands by pharma manufacturers. They are allowed to sell medicines under generic names.
  2. It focuses on the better balance of price control of various medicines and drugs.
  3. The draft has made the authorities of Union government powerful when deciding the price of medicines and medical devices.
  4. NPPA has authority to regulate medicines mentioned in government specified National List of Essential Medicines.
  5. Reduction in price caps imposed on patent medicines.
  6. WHO manufacturing is compulsory for all.
  7. It will cap trade margins that were unreasonably offered by different hospitals and stockists.
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What Are The Major Draw Backs Of Draft Pharma Policy?

The draft pharmaceuticals policies have undergone various criticisms like any other policies. Many people have shown displease with the policies of the draft. The government of India has been shocking the Industry with newer policies and changes. First, they introduced demonetization and then change in taxation system aka GST. They introduced the draft policy. This has made the industry wary.

People have shown negative views about it. The change in policies has created hindrance in the growth of the industry. Here are the major cons of the draft pharma policy:

  • The draft pharma policies have lacks mechanisms to increase production standards.
  • There are more chances of loop holes in regards of chemists. The policy fails to regulate the sale of fake drugs by pharmacy retailers in the market.
  • The drug control powers have been transferred from appellate authority to bureaucrats.
  • The Government takes the in charge of fixing the drug price. It will affect the drug quality and innovation. This can lead to negative impact on patients and companies. It can lead to lobbying and rent-seeking. This leads to increased corruption.
  • The policies are more vulnerable to competitions and mishappenings.

What Is Loan License and Third Party Manufacturing In The Pharma Industry?

A Loan License and 3rd Party Pharma Manufacturing are similar in many ways. The difference lies in the agreement/ contract nature. You will need a loan license contract in a loan license pharma manufacturing. Under this, the marketing company prints its name and address under “market by” and “manufactured by”. The manufacturing company will print its name and address under “manufactured by” column. It is a process of renting or hiring premises for the manufacturing process.

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Third party pharma manufacturing follows a similar process. Under this, the cases can be either you don’t own a manufacturing unit or do not have the approval from the high authority to manufacture certain products or medicines. The marketing company cannot use the name and address under “manufactured by” heading.

Reason Behind Banning Loan Licensing and Third Party Pharma Manufacturing In India 

The government plans to make drugs, medicines and pharma products reasonable and reachable. The main objective behind National Pharma Policy draft is to promote the industry growth. There are serious speculations about the banishment of loan licensing and third party pharma manufacturing.  The main motive behind the draft was to cut down unfair practices, cap trade margins and boost domestic pharma manufacturing.

The manufacturing companies took the approval of government for manufacturing generic drugs. The manufacturing companies could manufacture endless using a single generic approval for the authorities. The drug authorities had less to no control over branded drugs. There are two situations which have resulted in this banishment:

  1. Company A uses Brand Name Cef for Cefixime and Company B used Brand Name Cef for Cefpodoxime. This created confusion of brand resemblance of two different formulations.
  2. Company A and Company B use same Brand name PAR for paracetamol. This leads to misbranding.

Loan Licensing and Third Party/Contract Manufacturing Ban in India

The Branded drugs registration are an intellectual property. The intellectual property does not require providing detail technical details, composition or any active ingredients. The branded drug registration became the focal point here. The government wanted to introduce policies to regulate loan licensing and third party pharma manufacturing in India.

  • The companies are allowed to put branded names on fixed-dose combinations only.
  • The Companies for other drugs are allowed to print generic names. This meant one company–one drug–one brand name–one price. The medicine or product will differ on the basis on the company logo.
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The loan licensing contributes to one-third of the industry. Our country has one of the largest markets of pharma manufacturing in the world. Our domestic pharma sector raises 40 to 50 percent of local drugs small scale unit loan licensing and 3rd party pharma manufacturing. Banishment of both can lead to heavy losses to the industry and widespread unemployment.


The government should focus more on price monitoring of 200+ essential drugs. The banning of third party pharma manufacturing and loan licensing is a great step. The pharma sector is expected better policies in regard of pharma manufacturing. The policies should be friendly to big as well as small players of pharma lines. Strict price control can restrict the growth of small pharma businesses. It is a good step to promote import of domestically produced drugs. There is a dire need to introduce policies against overcharging of prices by pharma market segment.

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