Every business is conducted through a distribution channel, same in case of pharmaceutical Industry. The pharmaceutical distribution channel is composed of several key players, including the pharmaceutical company, CnFs, stockists, wholesalers, distributors, agencies, retailers, and customers (who purchase products against doctor’s prescription). The primary goal of the distribution chain is to ensure timely and consistent product/service delivery to the end-user, or the customer.

This article will provide valuable insights into various aspects of the pharmaceutical distribution business, including the definitions of pharmaceutical distributors, wholesalers, stockists, and agencies. Additionally, it will guide readers on the process of becoming a pharmaceutical distributor in India, including the necessary licenses and procedures required for obtaining drug license. The article will also offer a detailed medicine wholesale business plan, including the amount of investment required to enter the market, potential profit margins, and the scope of the pharmaceutical distributor license. Finally, the article will shed light on the regulations governing the sale of medicines and to whom wholesalers and distributors may sell these products.

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How Pharmaceutical Distribution Channel Works?

In the pharmaceutical industry, the end-users of medicines and drugs are typically patients and/or their caregivers, who purchase these medicines from pharmacies/chemists/retailers against the prescription of a registered medical practitioner. These pharmacies get medicines from their respective distributors, who obtain the products from wholesalers/stockists.

These wholesalers/stockists, purchase the medicines from the CnFs, who acquire them from the pharmaceutical companies themselves. This distribution channel is critical in ensuring that pharmaceutical products reach their intended end-users in a timely and efficient manner.

What are the roles of Pharmaceutical wholesalers, stockiest and Distributors?

Pharmaceutical wholesalers, stockists, and distributors play important roles in the supply chain of pharmaceutical products, ensuring that medicines and other healthcare products are delivered to retailers, hospitals, and other healthcare providers efficiently and effectively.

While these entities may be distinct or overlapping in function, they all require the same licenses and documents for operation.

Although the differences between them are often minor, they may vary depending on their methods of operation. Nonetheless, each of these entities plays a critical role in ensuring that pharmaceutical products reach their intended end-users in a timely and efficient manner.

You can check difference between wholesaler and Distributor here

How can we define Pharmaceutical Distributor, Wholesaler, Stockiest or Agency?

Pharmaceutical wholesalers:

Pharmaceutical wholesalers are businesses that purchase drugs/pharmaceutical products directly from manufacturers in large quantities and then sell them to pharmacies, hospitals, and other healthcare providers. They usually operate on a regional or national level and maintain large warehouses to store the medicines.

Pharmaceutical Stockists:

Stockists are businesses that purchase pharmaceutical products in bulk from wholesalers and distribute them to smaller retailers, such as local pharmacies or clinics. They typically operate at a local or regional level and provide a range of products and services to their customers, including delivery, inventory management, and credit facilities.

Pharmaceutical Distributors:

Pharmaceutical distributors are responsible for delivering drugs and other healthcare products to their final destination, such as a pharmacy, hospital, or clinic. They often work closely with wholesalers and stockists to ensure that products are delivered on time and in good condition. They also provide value-added services such as product information and training to healthcare providers.

In summary,

while wholesalers purchase drugs directly from manufacturers and sell them to healthcare providers, stockists buy in bulk from wholesalers and distribute to smaller retailers. Distributors, on the other hand, deliver the products to their final destinations, working with both wholesalers and stockists to ensure that the medicines are delivered safely and efficiently.

Carrying and Forwarding Agents also requires same licenses and procedure to start business.

How to become pharmaceutical distributor in India?

To become a medical and pharmaceutical distributor, an individual must possess a Wholesale Drug License and a GST number (if their annual turnover exceeds 40 lakhs). The first and most important step to start a medicine wholesale business is to obtain a wholesale drug license number from the district drug licensing authority appointed by the state drug control office.

To become a pharmaceutical distributor in India, you need to follow these steps:

Obtain a drug license: The first step in becoming a pharmaceutical distributor in India is to obtain a drug license.

Choose your distribution model: You can choose to distribute pharmaceutical products either Prescription Drugs Marketing (Branded drugs, Generic Drugs), Over the Counter Drugs, institutional sales etc. Different types of distribution model require different type of skills and requirements apart from licenses.
check difference between You can check difference between generic and branded drugs here

Register your business: You need to register your business as a legal entity, such as a sole proprietorship, partnership, or private limited company.

Create a business plan: Develop a comprehensive business plan that outlines your target market, products you will distribute, marketing strategy, financial projections, and operational details.

Secure funding: You will need to secure funding to purchase inventory, rent or purchase a warehouse, hire employees, and cover other operational expenses.

Obtain necessary permits: Obtain necessary permits and certificates, such as Goods and Services Tax (GST) registration, Shop and Establishment registration, and Import-Export code (IEC) if applicable.

Find suppliers: Identify reputable pharmaceutical manufacturers and suppliers to purchase products from pharmaceutical company like Cipla, mankind, sun pharma, Elzac herbals and other pharmaceutical companies.

Establish a distribution network: Build relationships with hospitals, clinics, pharmacies, and other healthcare facilities to distribute your products.

Ensure compliance: Ensure compliance with all regulations and laws related to pharmaceutical distribution, including packaging and labelling requirements.

By following these steps, you can become a pharmaceutical distributor in India. However, the process can be complex and time-consuming, so it’s recommended to seek the guidance of a legal professional or industry expert to ensure that you are on the right track.

How to contact Pharmaceutical Companies for getting Distribution?

The appointment of distributors in the pharmaceutical industry is typically handled by the sales and marketing teams of pharmaceutical companies. These teams are responsible for identifying potential distributors who meet the company’s criteria and negotiating contracts with them. The selection process may involve a thorough evaluation of the distributor’s capabilities, such as their experience, distribution network, and storage facilities. Ultimately, the decision to appoint a distributor lies with the pharmaceutical company’s management, who ensure that the distributor meets the company’s standards and requirements.

The responsibility of appointing distributors in the pharmaceutical industry rests with the sales team of the respective pharmaceutical company. The sales team comprises of medical representatives, area sales managers, zonal sales managers, among others. To obtain distribution rights for a pharmaceutical, you can get in touch with the sales team of the company.

Alternatively, you may visit the company’s website and fill out a distribution form or contact them via the contact number provided in their advertisement or website. It is important to note that the appointment of a stockist is subject to the policies and guidelines set by the pharmaceutical company.

Check out in detail How to take distribution ship of a pharmaceutical company?

Licenses Required and Procedure:

• Wholesale Drug License
• Goods and Service Tax Identification Number if applicable
• FSSAI Registration (If doing food and dietary supplement distribution also)
• Shop and Establishment Act Registration if applicable

Wholesale Drug License:

Requirements for wholesale Drug License:

• Premises and Shop (Owned or Rented)
• Area Required: Minimum of 10 square meters
• Walls and Floor: Cemented
• Roof: Concrete
• Technical Person: Pharmacist or Experienced Person
• Fridge and/or Air Conditioned
• Other particulars as asked by licensing authority

Licensing Authority for Wholesale Drug Licence Number:

Licensing authority for wholesale drug license is Senior Drug Inspector / Drug Inspector and/or any person appointed by state government for purpose of granting wholesale drug licence. Licensing Authority office is present mostly at district headquarter and/or may be combined for more than one district. You have to submit your application at licensing authority for wholesale drug license

How to Apply

After completion of all documents (discussed below) and requirement as above, you need to visit licensing authority office for file submission. File submission is online in most of state but in few states you still have to submit your file manually only. After online submission, you also need to submit your uploaded documents physically at licensing authority office. Once file submission process is completed, licensing authority will intimate you about premises inspection date and time through mail, phone number, letter and/or manually as applicable.

Inspection:

Inspection is carried out by Senior Drug Inspector and/or Drug inspector or person appointed by state government for granting of wholesale drug license. If all facilities, documents, technical person detail and other particulars find to be satisfactory, your application will be processed for issuing of wholesale drug license. Otherwise drug department reserve the rights to cancel, objection and/or return file for amendment and resubmission.

Documents required for Wholesale Drug License File Submission:

• Application is to submit to district drug inspector/drug selling authority office in prescribed form 19 with other information forms.
• Required area of premises should be minimum of 10 sq. meter (15 sq. meter for wholesale plus Pharmacy/Retail license), minimum 8’2″ height. Premises should be brick built, plastered floor cemented.
• Application has to submit in Form no.19 with addition information form
• Experience person certificate or pharmacist registration certificate or appointment letter of competent person
• Fees of Rs. 3000/- (For biological & Non Biological )
• Address proof copy
• Ownership proof or Rent agreement in case of rented premises
• Refrigerator purchase bill photocopy with complete address
• Academic qualification certificate photocopy of EP/Pharmacist
• Date of birth certificate photocopy
• Affidavit of EP/Pharmacist
• Partnership deed for partnership firm
• Registration firm receipt copy for private registration firm and list of directors with address proof, Memorandum of article of association etc.
• Affidavit of proprietor/partners/directors
• Blueprint/layout plan of premises with signature in 3 copies
• Adequate storage facilities required including cupboards with glass doors, racks, pallets, refrigerator etc.

Qualification and Requirement for Technical Person:

• Either Registered pharmacist under state pharmacy council or
• Competent Person/ Experienced Person having minimum of one year experience at registered wholesale drug licensed firm after graduation (With bank salary statement, appointment letter, experienced letter and resignation letter)

Goods and Service Tax Identification Registration:

Goods and Service Tax (GST) Identification Number is compulsory for all business having above 40 lakh annual turnover or inter-state sale or online business. Other wise you can also conduct business without wholesale drug license. You can approach to Chartered account or sales tax advocates for applying goods and service tax. If you want to applying by your own then you can read complete procedure at our article: What is GSTIN and How to apply for it?

Food Safety and Standards Authority of India (FSSAI) Registration:

If you are Distributing food and dietary supplements (vitamins, calcium, iron preparations and many more products that fall under food category) along with medicines and drug then you will need to apply for FSSAI registration. You can read complete procedure for applying for FSSAI registration at our article: How to apply for FSSAI registration?

Shop and Establishment Act Registration:

Different areas have different laws and regulations for shop and establishment act registration. This process varies according to locality. Some regions may not require to register a shop and some regions may have compulsion to register a shop before starting any business. First you need to confirm at your local authorities i.e. municipality committee, panchyat etc.

Pharmaceutical wholesale business plan

A pharmaceutical business plan should include the following key components:

• Market research and analysis to identify potential customers and competitors in the area
• The development of a comprehensive product portfolio to meet the needs of target customers
• Implementation of efficient logistics and inventory management systems to ensure timely delivery of orders
• Recruitment of a team of experienced sales representatives to build and maintain strong relationships with customers
• A marketing strategy that includes a website, social media, and advertising campaigns to increase brand awareness and drive sales
• Financial projections that indicate a profitable and sustainable business model.

Steps to start Medicine Wholesale Business:

• Write a Business Plan
• Finalize a premises/shop (Rented/Owned).
• Make a rent agreement (In case of Rented premises)
• Contact pharmaceutical companies or CnF for Stockiest ship, wholesale and/or Distribution ship
• Finalize all deals with Pharmaceutical Company or CnF.
• Apply for wholesale drug license to district drug control office andGoods and Service Tax Registration. (Previously Tin/Vat/CST)
• Purchase office accessories like Furniture, computer, Freeze etc.
• Drug Inspector or Concern person will personally inspect premises. If he finds premises conditions satisfactory then he will approve your application for issuing license.
• After some time you will receive your drug licence copy and number
• Start purchasing, stocking and invoicing drug and medicines to retailers and pharmacies

Investment/Money/Fund/Amount needed for pharma distribution business:

• Fixed Capital Investment
• Operation Capital Requirement

Fixed Assets:

• Documentation and License: approximately twenty five to thirty thousand.
• Furniture: Approximately twenty thousand
• Refrigerator: 5 to 10 thousand

Liquid Assets:

• Rent of premises : Vary according to area
• Medicine and Drugs: Depend at your purchase

For starting pharma distribution business with big names approx. 3 to 5 lakh investment is required and for small pharmaceutical companies approx. 1 to 2 lakh investment is required.

Read more about Investment read our article: How much investment require for starting pharmaceutical company? , Refer investment required for stock and product availability under factors Section to calculate medicines and drugs purchase investment.

Medicine wholesale business profit margin in India:

Profit of a wholesale and distributor vary company to company, and marketing/sale types.

Branded Drug companies provide a fixed profit margin as drugs are sold by company’s own sales team. Medical agency work is to distribute orders collected by pharmacy company’s representatives and collection of payment. In branded drugs, a pharmaceutical distributor generally has 8 to 12% of margin.

Generic Drug and Institutional sales market is rate based market. As much as low rate you will provide, you will get the orders. In generic drug  and institutional sale market, there are not fixed margin of distributors/agencies as price base market. Still pharmaceutical wholesaler manages to reach at profit margin of branded drugs, even more from them.

In pharma franchise, pharmaceutical franchise company has provide maximum profit to their distributors as marketing and promotion is also done by pharma franchise distributor along with distribution and collection of payment. Generally a pharmaceutical company provides goods at net rate which is approximately 1/4, 1/3 of Maximum retail price but pharma franchise distributor has to manage expenses of sales team, promotion etc. At last a pharma franchise distributor manages to retail 20 to 30 percent of profit margin.

OTC drugs are sold by name as advertisement done by pharmaceutical company so pharmaceutical company provides a fixed profit margin as in case of branded drugs marketing.

Scope of Pharmaceutical Distributor license:

You can start following business with pharmaceutical distributor licence. A pharmaceutical wholesale distributor/agency can conduct business related to:

• Prescription Drugs (Generic Drugs  and Branded Drugs) distribution
• Over the Counter (OTC) Medicine distribution
• Pharma Franchise Distribution and PCD business
• Institutional sale and Supply included Hospital, pharmacy chains, online pharmacies etc
• Surgical Dressings Business
• Medical devices Supply
• Active Pharmaceutical Ingredients (API/Bulk Drugs) Trading
• Food and Dietary Supplements Supply (FSSAI registration also required)
• Ayurvedic and Herbal Medicine Supply
• Pharma Marketing Company

To whom a wholesaler/distributor can sell medicines?

A wholesale drug licensed firm can’t sell drugs unless such drug is purchased under a cash or credit memo from a duly licensed dealer or a duly licensed manufacturer.

A wholesale drug licensed firm can sell drugs only to a person having requisite licence to sell stock or exhibit for sale, or distribute the drug. No sale of any drug shall be made to a person not holding the requisite licence to sell stock or exhibit for sale, or distribute the drug.

A wholesale drug licensed firm can’t sell directly to patients/their caretaker against prescription of registered medical practitioners.

Other than requisite licence firms, a wholesale drug licensed firm can sell to followings even if they don’t have drug related license:

• An officer or authority purchasing on behalf of Government, or
• A hospital, medical, educational or research institution or a registered medical practitioner for the purpose of supply to his patients, or
• A manufacturer of beverages, confectionery biscuits and other non-medicinal products, where such drugs are required for processing these products

Questions and Answers:

Question: Is medicine wholesale a good business?

Answer: A medicine wholesale business can be a good business if you have a solid business plan, a comprehensive understanding of the industry and regulations, and a commitment to providing high-quality products and excellent customer service.
The healthcare industry is growing rapidly due to an aging population, increased healthcare spending, and advancements in medical technology. This provides a large and growing market for pharmaceutical products and medical supplies. Secondly, as a wholesale business, you can benefit from economies of scale by purchasing large quantities of products at lower prices and selling them to retailers and hospitals at a markup. This can result in higher profit margins than a retail pharmacy or hospital.
However, it’s important to note that the pharmaceutical industry is heavily regulated, and you will need to comply with various laws and regulations, such as licensing requirements and safety standards. You will also need to compete with other wholesale businesses in the area, which can be challenging.

Conclusion:

Pharmaceutical Wholesale and Distribution ship is important part of pharmaceutical distribution channel. You can start it by taking wholesale drug license and GST number.

Few other Business opportunities in Pharmaceutical Industry:

• Pharmaceutical Manufacturing Company
• Pharmaceutical Marketing Company
• Pharmaceutical Retail Business

Hope above information is helpful to you…
For any query and suggestion, mail us at pharmafranchiseehelp@gmail.com