Difference between Third Party Manufacturing And Contract Manufacturing.

This is ———– from Gorakhpur, Uttar Pradesh, I read your pages, Its very helpful for every one who want to start.
Dear Sir actually I also want to start a my own pharma marketing company with four brands. I have contacted to some manufacturer for product. But I am not aware with the required things which is mandatory to start a pharma marketing company.
Their is lots of question in my mind which not only disturbing me also it creating a big confusion in my mind.
1- A big question is that what is main difference between Third Party Manufacturing & Contract Manufacturing.
2- If I have to start a marketing company so to whom should I choose (Third Party Manufacturing Or Contract Manufacturing)
3- Is it necessary to register a company before starting a marketing base company
if yes so what should i do first.
4- If i am starting with four product should i register my brand name (patient copy).
5- Which types of license is required to start a marketing company.

It is extremely request to you Please help me for these question.

1. Difference Between Third Party manufacturer and Contract Manufacture : Practically there is no major difference in both terms. These could be used for in place of each other. There is theoretical difference in both terminology.

Third Party Manufacturing term is used when a company get manufactured product with own brand name at a particular quantity timely from a manufacturing company e.g. 1000 box order as one time requirement.
Contract Manufacturing term is used when a company get manufactured product its own brands and make a contract with manufacturing company for supplying a particular quantity of its brand at regular basis e.g. 10000 boxes per month basis or 100000 boxes in a year or 1000 boxes per week like this.

In third party manufacturing, there is no time compulsion to deliver the goods whereas contract manufacturing has delivery time compulsion.
Mostly small companies work at the basis of third party manufacturing whereas medium size and big companies work at contract manufacturing basis.

Related: Difference between Third Party manufacturing and Loan License manufacturing

2. Third Party Manufacturing will be better option for you. Read in detail about Third Party manufacturing here

3. You need to register your company. Read how to register company by clicking here

4. If you have enough budget then you go for trade mark registration in starting. otherwise you can register your brand name later.

5. For starting Pharma marketing company, you will require:

Hope above information is helpful to you…

For any correction, error, comment, query and suggestion, mail us at pharmafranchiseehelp@gmail.com

what are the documents required to start own drug company through contract manufacturing?


Your article at pharmafranchisehelp.com was immensely helpful. thank you!

My name is Tabish and i’m a resident of Patna,Bihar and currently i am in the lookouts to start my own drug manufacturing. I intend to avail contract manufacturing facility for products that i can sell.
In addition to that helpful article of yours,i would be immensely grateful if you can help me with the below mentioned queries as well.
what are the documents required to start my own drug manufacturing company (manufacturing here refers to getting medicines manufactured through contract manufacturing )?

what are the approvals ,i need to get before initiating the manufacturing of a particular composition?
Already, thankful for your efforts.


You will need whole sale drug license number and sale tax number of your company to start company through contract manufacturing. Read in detail about starting company through contract manufacturing by clicking here

Regarding approvals read our article: How to get approval of pharma products?

Hope above information is helpful to you….

For any query and suggestion, mail us at pharmafranchiseehelp@gmail.com

Contract Manufacturing Facility


We are ——– Pharma involved in Formulating and Marketing of Ayurvedic and Unani system of medicine. Currently Looking for an appropriate reliable CMU (Contract Manufacturing Unit) for the manufacturing of our Products.

With regard to your Organisational task relating to CMU, has subjected us to get into an inquiry with your firm which fit our business requirements. We would like to request your quotation for manufacturing and packing of Ayurvedic semi-solid formulation i.e. like CHYAWANPRASH where we will provide you all the raw material / blend of or for the formulation along with packaging material. The major aspect we are expecting from CMU is manufacturing.

We would appreciate your quotation as per detail below by the end of the day for our business / order consideration:

Interest : CMU
Request : For Quotation
Description : Manufacturing Quotation per Kg (Kilogram)

As we are rushing for a confirm order, we would appreciate a prompt response.
We believe in good quality at a reasonable price. By no means, we shall entertain any compromise in quality of the product. We hope that this may be the start of a long lasting business relationship.


Chawanprash is —-/- per kg including packing material.

If you will provide herbs and packing material, then 10/- per kg is conversion charges.

Only herbs we accept, not blended mixture/powder from marketing companies

Hope above information was useful to you…

What is third party/contract manufacturing in Pharmaceutical/Ayurvedic sector? Procedure, Requirements, Inventory !

Pharmaceutical third party/contract manufacturing is easy way to expand your business whether you want to start pharma marketing company or you want to expand your manufacturing business by manufacturing of other companies products along with own products.

Pharmaceutical/Ayurvedic Third Party Manufacturing:
Pharma Third party manufacturing/contract manufacturing is easy way to start pharma marketing company in India. This concept provide easy solution for manufacturing of own brands.

Third party or contract manufacturing is referred to out sourcing of products or to get manufactured one’s brand names from others manufacturing unit out. In current time it is very popular concept among marketing companies. Even companies having their own manufacturing units are gotten manufactured their products from outside. Multinational companies are also gotten manufactured their products at loan license or third party basis.

Third Manufacturing/Contract Manufacturing: When a firm/company (marketing/manufacturing firm/company), called party ‘A’ enters into an agreement with the manufacturing firm/company, called party ‘B’ and Party ’B’ agrees to manufactured generic/patent-proprietary product of party ‘A’ in the manufacturing facility belonging to Party ‘B’ on bases of party ‘A’ wholesale drug license. Majority of Pharma marketing companies are engaged in third party manufacturing.

Third Party/Contract Party Manufacturers:
Elzac Herbal India (Ayurvedic Third Party Manufacturer)
V.P.O. Gheer, Distt. Karnal-132001 (Haryana)
Contact: 8930765982, E-mail: contact@elzac.in
Vatson Remedies
Plot No. 761, Hsiidc, Rai, Sonipat (Haryana)
Contact: 8059478187

Why is this concept so popular?
One of the best reasons of popularity of this concept is simplicity and easy availability. You don’t have to do much work and investment. It gives opportunities to even those persons who don’t have own manufacturing units to start their own Pharma company. Starting and running a manufacturing pharmaceutical company is difficult and tensed work, and require high investment but starting and running Pharma marketing company is easy thanks to third party manufacturing. Before announcing of excise free zone of Himachal Pradesh and Uttarakhand, it was not so popular as it is today, but after implementation of excise free zone in these above states, it became one of the most popular concept in pharmaceutical industry.

Procedure to start own marketing company and get product manufactured at third party basis?

  • Choose Company Name
  • Apply for Company Registration
  • Apply For Wholesale Drug License (Read Requirement and Procedure for Wholesale Drug License Read Here
  • Apply for GSTIN
  • Select Molecules and Combination for manufacturing and chose Brand Name. 
  • Send quotation for minimum batch size and minimum possible rates at third party basis. We recommend you to send query to many third party manufacturers to get best deal. 
  • Choose pharmaceutical manufacturer to which you want to get manufactured your product. 
  • Manufacturer will ask you to send affidavit with respect to brand name or trade mark. This is generally for the purpose to specify that this brand name of product belongs to you and you will be totally responsible for brand name or trade mark conflict and manufacturer will not responsible for any brand name conflict in future. 
  • Manufacturer will also ask for scan copy of your drug license number and GST number. These documents will provide authenticity and proof of your address and firm name. 
  • Send Marketed By address which you want to put at products 
  • Finalize design of packing material. Printing and procurement of packing material depends upon you. You can procure packing material yourself or you can let manufacturer to procure and print packing material for yourself. 
  • Deposit initial advance in manufacturer account and your third party Pharma manufacturing process has been started. Generally, manufacturers take 25% advance and remaining 75% against Performa invoice after completion of manufacturing of your products. 
  • Manufacturer will book you product through transport or other mean (as you prefer) to your premises or location. Now process has been completed. 

Requirements for Pharma/Ayurvedic third party manufacturing?

For getting third party manufacturing, you don’t need to have much requirement. You should have

  • Company Profile 
  • Address Proof 
  • Drug license number (Not applicable at Ayurvedic Products) 
  • GST Identification number 
  • Brand Name non resemblance affidavit 
  • Agreement for manufacturing 
  • Packing material printer (in case you will procure printing material) 

Eligible to get pharma product manufactured at own brand name?Firm or person having its own wholesale drug license number is eligible to get product manufactured at his own brand name.

Minimum batch size for pharma/Ayurvedic third party manufacturing?Batch size depends upon manufacturer and molecule you want to get manufactured. Big giants don’t take small batches whereas small manufacturers can even manufacture small quantity for you. Batch size also depends upon cost of product you want to get manufactured. Costly products can be manufactured in small batches whereas cheap products usually require good number of quantity. Some manufacturers can even manufacture small batch size as 100 boxes for tablet/cap and 500 pc for liquid/syrup, 1000 pc for injections.

Days it takes in manufacturing process:Time depends at availability of materials like packing material, raw material, excipients etc. Usually manufacturing process will take 30-45 days for new product and 15-25 days in case of repetition. Most important, process duration also vary manufacturer to manufacturer. Few manufacturers take less time and few takes more time to manufacture product. But above mentioned duration considered to be standard. Process includes:
Product Approval – 5-7 days
Packing Material – 10-20 days
Manufacturing Process: 12-15 days
Transport: 2-8 days

Costing for third party manufacturing is calculated as per following mentioned product/process’s cost and price.

  • Raw material cost: Involves Active ingredient/s cost and Excipients cost 
  • Packing Material Cost i.e. Box, foil, label, lami tube etc. 
  • Secondary Packing material like tape, shipper, PVC etc. 
  • Manufacturing Process cost 
  • Quality assurance and Quality control cost 
  • Transportation 
  • Labour Charges 
  • Tax 
  • Profit Margin 

Inventory require to get manufactured product at third party basis?
Total inventory require to get manufactured is generally depend upon cost of product. Inventory may vary product to product or dosage form of product. Here, we are discussing briefly about it. Packing material costs major portion of inventory in starting. For cheap products it may be more than the total cost of batch. But it is one time inventory. For example, if you are going with ofloxacin salt manufacturing in Tablet/capsule form, Liquid form, Injection Form and Ointment form. This is for example purpose not exact calculation. Prices or inventory may vary.Read complete inventory estimate here

Procedure for packing material Procurement?Packing material procurement is as important as raw material procurement. Either you can directly involve in procurement of packing material or you let it to manufacturer to procure it for your brand.

Payment Term and Conditions:Payment term also vary party to party. For older parties payment term as per mutual agreed term i.e. generally 45 days. For Newer Parties manufacturing is usually done at 25-30% advance and remaining payment against performa invoice at time of dispatch of finished product.

Goods and Service Tax: Most of Pharmaceutical And Ayurvedic Products has 12% Tax. Some essential medicines come under 5% tax slab.

Transportation and Insurance:Transportation charges mostly bear by marketing company or as per mutual agreement. All transported material should be secured under insurance which is generally 0.5% of total bill value.

Read Related Article:I want to Starting pharma marketing company with loan license/Third Party manufactuirng. Procedure

Check List For New Parties:

  • Approval Letter For Product Approval From The Party On Party’s Letter Head. 
  • Third Party Agreement. 
  • Affadavit Performa For Address Proof. 
  • Contact Information Details Of The Party 
  • Account Numbers Of Pharma Franchise Help For Depositing Product Approval Charges. 
  • Dl No. / GST No. Of The Party 
  • Packing Investment Details To Be Given To Party

Quick Link to download:
Click to Downloads Quotation Format
Click to Downloads third party agreement format
Click to Download Packing material availability format
Click to Download Purchase Order Format
Click to download Product approval letter format
Click to download Brand Name and MRP declaration format
Affidavit Format for Contact information, Third Person Authorization

Third Party Agreement sample Format:
(Stamp Paper)

An Agreement depicting the terms and conditions settled between M/s Pharma Franchise Help, Karnal(HR) called first party and M/s——————- called second party.
We M/s Pharma Franchise Help, Karnal(HR) through our director Sh. Ajay Kamboj and M/s through its proprietor do hereby solemnly affirm and declare that we have mutually settled the following terms and conditions applicable to both the parties.

  • That M/s Pharma Franchise Help, Karnal(HR) would manufacture the following products to be marketed by M/s. ——– 
  • That the above brand names are for the exclusive use of M/s—————and that these brand names would not be henceforth given to any other marketing or manufacturing organization and neither would they be used by M/s Pharma Franchise Help, Karnal(HR) 
  • That M/s—————are at Liberty to get the above mentioned brand names registered with the appropriate authorities for their exclusive use. 
  • That the above brand names shall be considered as adopted by M/s.————-themselves. If any other manufacturer is already manufacturing or marketing any product by any of the above brand names, M/s.———————will hold whole responsibility for adopting the name. Any loss on account of any reason i.e. withdrawal of the product, paying compensation to the other party or any legal expenses incurred etc. shall be of M/s ————- 
  • That M/s Pharma Franchise Help shall provide all packing material on payment by the second party. M/s——————————shall get all the printed matter details from M/s Pharma Franchise Help and get their labels, cartons printed in confirmation of Drugs and Cosmetics Act and under guidelines of the first party. M/s Pharma Franchise Help holds the right to reject such material which is in contravention of Drugs Act and also which M/s got printed without their approval. 
  • That company will charge 0.1% of the amount of bill for insurance against transit loss. Open delivery will be taken by the second party from the transporter at the time of taking delivery where in any breakage or shortage is suspected during transit. The shortage or breakage certificate obtained as above may be sent to the First party which will in turn claim damages from the transporter but reimburse the amount to the second party within a month from the date of receipt of shortage certificate. 
  • That the wastage in process to the extent of 2% to 5% depending upon the product produced by the first party shall be borne by the second party. 
  • That in case due to any technical flaw or amendment of any Act the Authorities impose extra excise duty at later date on the products of second party, the second party will bear such duties and pay to the first party the difference in amounts that the Authorities impose on the first party. 
  • Delivery: Products shall be delivered by 1st Party within 30-45 days from the dated receipt of purchase order along with advance from 2nd party or the availability of packing material whichever is later. 
  • Payment terms: 50 % of Purchase order value shall be released along with purchase order as an advance. Further 50% of Invoice amount shall be released before dispatch of goods. 
  • That the first party will use their own dies presently available with them for the products to be manufactured by them for the second party but if the second party desires any special size dies which are not available with first party or dies with any trade or marketing markings on the product, the second party shall provide such dies at their cost to the first party. 
  • That the first party shall deliver all products manufactured by it for the second party at its factory premises. The second party shall at their own expenses collect and transport the material from the factory. Any damage or shortage during transit shall be borne by the second party. Similarly, the expiry of the products shall entirely be the responsibility of the second party. 
  • That utmost care shall be taken by the first party to manufacture the products to the entire satisfaction of the second party. However, if any product is received back from the market due to any manufacturing defect, it will be reprocessed by the first party at its own cost. However, the cost of printed matter wasted in this process and expenses incurred in returning and again collecting the products from the first party shall be borne by the second party. 
  • That for the termination of this agreement four months notice would be required to be served by any party intending to terminate the agreement. 

We M/s Pharma franchise Help and M/s ———-do hereby once again solemnly affirm and declare that the above terms and conditions have been mutually agreed upon by both the parties.

For Pharma Franchise Help                                                         For————-

Director Prop./director                                                                 Director Prop./director


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