Profit margin in Pharmaceutical Sector (Manufacturer to Retailers)

Profit margin in pharmaceutical business: Retailers: 16-22% Distributors: 8-12% Stockist: 6-10% CFA: 4-8% Company: Vary according to marketing type

Query:

I am a 3rd year B. Pharm student and want to know about What are the profit margins of a pharma business? Kindly Explain in a particular cycle i.e. Profit from a manufacturing company to retailer?

Response:

Profit margin in pharmaceutical business vary company to company. We can’t estimate any company’s margin just by analyzing from outside. We have to involve deeply with company business strategy to calculate the margin in pharmaceutical sector. Profit Margin of chemists, pharmacies, stockists  and Carrying and Forwarding agent (CFA) also vary depend upon many factors like branded medicine, generic medicines, brand value of medicines, otc product, company status, ethical/unethical practice etc.

Here we are going to explain a general profit margin cycle from manufacturer to retailers. First you need to know about distribution channel in pharmaceutical sector through which profit share divides. A distribution channel includes mainly following parts:

  • Company (Manufacturing and/or Marketing Company)
  • Carrying and Forwarding Agent
  • Stockist
  • Distributor
  • Retail/Chemist/Pharmacy

Profit margin should be divide between above five firms/individuals. But actually profit margin will be distributed in another individuals also. That we will discuss later in article. First we start from bottom side. The reason from starting bottom side is that their margins are some what fixed if profit margin is taken ethically.

In case of unethical practice, profit margin may be many times greater than actual profit margins. Unethical practice means selling a medicines by much higher than its actual cost after adding own profit e.g. selling generic medicines at MRP (Maximum Retail Price) but in actual its cost is 4-5 times less than MRP.

Company’s margin vary according to its expenses. A company will handle a big sales team, executives, staff members, workers etc. Company has to invest at stock, machinery, plant, advertisement, promotion and other aspects. How much bigger their expenses, they have to set profit margins accordingly. Sale turnover also affect profit margin.

Bigger sale turnover will provide bigger profit so company can compete in market by taking low margins. Competitors also play role in mrp, trade rates fixation hence profit margins. Many factor affects the profit margin of a company.

Nothing is fixed in pharmaceutical sector. Below margin’s explanation is based upon standards margins. These can be vary as we discussed above and according to company marketing type like branded marketing, generic marketing, franchise marketing, pcd marketing etc.

A retailer/Pharmacy margin is approx. 16-22% percent ethically. Along with margins they also get benefits of scheme and offers provided by companies. Retailers/pharmacies also enjoy credit facilities provided by companies and/or stockists.

A Distributor margin is approx. 8-12%. Distributors could also enjoy some benefits scheme and offers. At distributor level credit facility could be enjoyed.

A Stockist margin is approx. 6-10%. At stockist level  less chances of scheme/offers. Majority of cases a stockist has to invest many in distribution channel by providing advance payment to company/CFA and/or credit facility to distributors.

Carrying and Forwarding Agent (CFA) margin is approx. 4-8%. CFA plays middle man role in majority of cases. They receive stock from company in bulk and distributes it to stockists in small quantity.

Company profit margin is difficult to fix and/or calculate. Many factors affect profit margin fixation. At pharmacy, stockist, distributor and cfa level, there is fixed expenses and running cost. Hence fixed margins don’t affect their money circulation.

But at Company hand lot of things to consider. As we discussed above company profit margin depend at many factors. What could be the possible profit margin that we will understand with a simple example according to their marketing types.

  • Branded Marketing Type Company
  • Generic Marketing Type Company
  • Franchise/Pcd Marketing Type Company
  • Over The Counter (OTC) Marketing Type Company

Suppose a Medicine’s cost after adding all manufacturing expenses* is 30 Rs. Now margin in each type of marketing will be different.

In Branded marketing type, profit margin will be calculated after adding all sales and marketing expenses like Sales Team Salary/Tour Expenses, Doctor’s expenses*, transportation, office staff salary and expenses, promotional expenses and related expenses.

Practically all these expenses cost could not been added in any single product but expenses calculation verses profit margin is based upon all products included in company’s product list.

In Generic Marketing Type, company don’t spend at sales team, doctors etc. Company Fixed a particular margin like 5%, 10%, 20%, 30% etc and dispatch to CFA and/or Stockist. Now their turn how they distribute it at how much profit margin.

In Franchise/Pcd Marketing Type, Company do the same as in Generic marketing Type and fix a particular margin and dispatch goods to CFA and/or Stockist. But in Franchise/Pcd marketing , stockis/CFA has to calculate their profit margin based upon factors we discussed in Branded marketing type like sales team salary/tour expenses, doctor’s expenses, transportation etc.

In Over The Counter Marketing (OTC) Type, company fixed its margin based upon factors like advertisement expenses, sales team salary/tour expenses, transportation, promotion expenses and other related expenses etc.

Above we have discussed about marketing type. That will be applicable for both pharmaceutical marketing company and pharmaceutical manufacturing company when they will sell and/or market their products. Now we will try to find out profit margin of a Pharmaceutical Manufacturing unit/company at manufacturing end.

Pharmaceutical Manufacturing unit get profits by two ways: By Own Marketing and/or By Third Party/Contract Manufacturing/Loan Licensing. By Own Marketing profit margin will be calculated as we discussed above in Marketing type.

Manufacturing companies who reliable at third party/contract manufacturing calculate their margin depend upon batch size, cost of raw material, plant capacity etc. Generally 25-40% margin is added by manufacturing unit at their cost sheet of third party/contract manufacturing rates.

Loan License manufacturing profit margin is different from above mentioned details. In loan license, a manufacturing unit is hired/rented by loan licensee. Loan licensee can manufacture own product at manufacturing unit by own self. Generally rent and manufacturing process expenses is given by loan licensee to manufacturing unit.

Same Profit margin is applicable for Ayurvedic, Food and Dietary Supplements and Cosmetic Industry

Hope this article will be helpful for you to know about profit margin in Pharmaceutical Sector.

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

WHO Good manufacturing practices for pharmaceutical products

GMP is that part of quality management which ensures that products are consistently produced and controlled according to the quality standards appropriate to their intended use and as required by the marketing authorization, clinical trial authorization or product specification. GMP is concerned with both production and QC. GMP is aimed primarily at managing and minimizing the risks inherent in pharmaceutical manufacture to ensure the quality, safety and efficacy of products.

Under WHO-GMP: 

1. All manufacturing processes are clearly defined, systematically reviewed for associated risks in the light of scientific knowledge and experience, and shown to be capable of consistently manufacturing pharmaceutical products of the required quality that comply with their specifications; 
2. Qualification and validation are performed; 
3. All necessary resources are provided, including: 
  • sufficient and appropriately qualified and trained personnel, 
  • adequate premises and space, 
  • suitable equipment and services, 
  • appropriate materials, containers and labels, 
  • approved procedures and instructions, 
  • suitable storage and transport, 
  • adequate personnel, laboratories and equipment for in-process controls; 
4. Instructions and procedures are written in clear and unambiguous language, specifically applicable to the facilities provided; 
5. Procedures are carried out correctly and personnel are trained to do so; 
6. Records are made (manually and/or by recording instruments) during manufacture to show that all the steps required by the defined procedures and instructions have in fact been taken and that the quantity and quality of the product are as expected. Any significant deviations are fully recorded and investigated with the objective of determining the root cause and appropriate corrective and preventive action is implemented; 
7. Records covering manufacture and distribution, which enable the complete history of a batch to be traced, are retained in a comprehensible and accessible form; 
8. The proper storage and distribution of the products minimizes any risk to their quality and takes account of good distribution practices (GDP); 
9. A system is available to recall any batch of product from sale or supply; 
10. Complaints about marketed products are examined, the causes of quality defects investigated and appropriate measures taken in respect of the defective products to prevent recurrence
Related Articles:

How to Start Ayurvedic Business?

Complete detail about starting Ayurvedic Business. Click at article about Ayurvedic business you want to read
If your query is not present in above linked articles, then mail your query at pharmafranchiseehelp@gmail.com

How to Start Pharmaceutical Manufacturing Unit in India?

How to recognize a Loan License Manufacturer and Third Party Manufacturer?

Query:
How to recognise whether it is manufacturer or loan license manufacturer or third party manufacturer?

Response:


Manufacturer is a manufacturer. It’s not like a manufacturer or loan license manufacturer or third party manufacturer. Loan licensing and third party manufacturing are the services that are provided by any manufacturer. All have same things and manufacturing facilities. A manufacturer only, manufacturer for its and has own marketing also where as third party or loan license manufacturer don’t have own marketing or has little marketing of own products so they indulge in manufacturing of other companies products.

It is difficult to recognize at first look whether it is a manufacturer or loan license manufacturer or third party manufacturer. To recognize manufacturer, check its advertisement or go to manufacturer website and check about its services. Or/and contact at number given in manufacturers advertisement or website and ask about his services. Otherwise it couldn’t be recognize by seeing a manufacturers name and plant.

Read What is the difference between pharmaceutical loan licensing, third party manufacturing by clicking here

Which is best – Third Party Or Loan License

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

How To Choose Name For Ayurvedic Company?

Query:

Sir good noon, this is to inform you that I want to start a new ayurvedic pharma company than what is the right name for this.
* Name should related to India

Response:

You can choose name by considering factors discusses in Article: How to choose name for Start-Ups?

First Talk about Last names. It could be Herbal, Ayurveda, Herbocare, Herbs, Ayurvedic Pharmacy, cure etc.

First Name, you can fix based upon name of common spiritual names(Mainly Sanskrit words or daily used names. You can also use some technical name also.
Few suggestions are:
—- Ayurveda
—- Herbals
—– Cure
etc.

Please check for company name availability at ipindia.nic.in at public search at class 35.

Hope this information will be helpful to you…

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

What is the process and procedure for Ayurvedic Manufacturing Unit?

Query:

Support to get manufacturing Ayurvedic product. dear sir i want to make a Ayurvedic manufaturing unit want to make
1.ayurvedic dental lotion
2.trifola dust.
3.pain blum and others more
what is the process and procedure please guide me

Response:

You will need to complete all documents and licenses manufacture all Ayurvedic preparations: Read all requirements about ayurvedic manufacturing

Hope this information will be helpful to you…

How can I get quotation from multiple manufacturing companies?

Query:
How can I get quotation from multiple manufacturing companies for manufacturing of my selected pharma product & what are the requirements. 

Response:

You don’t need to go in long process. You only need to collect contact numbers and e-mail id’s of companies you want to get manufactured your products. Mail them your requirement and contact them for reply your mail. You will get quotation from them.
List third party manufacturer find here

for more companies find List of pharma manufacturing companies here..

Hope above information was useful to you…

List of Packaging Material Supplier in India

Packaging material procurement is one of important work for any manufacturing company. Packaging material is used to prevent dosage form damages, moisture, heat or transportation etc. Three types of packaging are used in pharmaceutical and ayurvedic sector to prevent dosage form and accurate delivery to patient.
  • Primary Packaging ( Alu-Alu, Blister, Pet Bottles, Strips etc)
  • Secondary Packaging (Cartoons, labels, Boxes, plastic sheet etc.)
  • Tertiary Packaging ( Containers, Barrels etc.)

Read in detail about packaging at our article: Different types of Packaging used in Pharmaceutical/Ayurvedic Sector
List of Packaging Material Suppliers:
Aakar Design ‘O’ Print
A-45, Naraina Industrial Area
Phase-II, New Delhi-110028
Contact Number: 011-41418523-25
A Key Packing Private Limited
T-5, Street no. 10, Anand Parbat Industrial Area
New Delhi-110005
Contact Number: 011-28762695
Ajanta Packaging Company
8939/1, Multani Dhanda
Paharganj, New Delhi-110055
Contact Number: 011-43507975/23514419/23531589
E-mail: sales@ajantabottle.com
Website: www.ajantabottle.com
Design “O” Xperts
C-197, 2nd floor, Jhimil colony
Vivek Vihar
Delhi-110095
Contact Number: 9811622647
E-mail: designoxperts@yahoo.in
Fenoplast Limited
D.K. Cold Storage compound,
Sunhera Road, Kashipuri Pragna & Tahsil
Roorkee-247667
G.K. Pharma
15A/38, 3rd floor, W.E.A. Karol Bagh,
New Delhi-110005
Contact Number: 011-25719371, 25751444
Fax: 011-25786166
Glowpet Products Private Limited
1st floor, Imperial Cinema Building
14/125 Mall road, Kanpur-208001
Contact Number: 01332-231231/327111
E-mail: glowpet@gmail.com
J.P. Print ‘N’ Pack
B-39/8, Site-IV, Industrial Area,
Sahilbabad-201010
Ghaziabad (U.P.)
Contact Number: 0120-4110442, 9810534070
E-mail: info@jpprint.co.in/amit.adpro@gmail.com
Website: www.jpprint.co.in
Kiran Graphics India
B-9/128, Sector-3,
Rohini, Delhi-110085
Contact Number: 011-27521087, 9212143342
Mahesh Caps
817, Tilak Bazar, Delhi-110006
Contact Number: 23930047
Manage Chemicals & Distributors
7-Sai Lok Colony (Near Engineer Enclave)
G.M.S. Road, Dehradun
Contact Number: 0135-2100887/9412004935
Fax: 0135-2620889
E-mail: managechemicals@gmail.com
Modern Packers
B-4, Sadat pur Colony
Karawal Nagar, Delhi-110094
Contact Number: 011-22856014/32956014
Normed Packaging
18/1, Mathura Road,
Ajrondi Faridabad (Haryana)
Contact Number: 3236556
E-mail: normedpackaging@yahoo.com
Pearl Packaging
RZF-1/192, Mahavir Enclave,
Street Number 2, New Delhi-110045
Contact Number: 9990989732
E-mail: pearlpack@gmail.com
Raj Foil Printing
Plot no. 22-A, 16/2 Mathura Road,
Old Faridabad-121002 (Haryana)
Contact Number: 0129-4049387
E-mail: rajfoilprinting@yahoo.co.in
R.K. Industries
36, Sector-5, I.I.E., Sidcul
Ranipur, Haridwar-249403 (U.K.)
Contact Number: 0124-4001506, 9313333407
Revati Print ‘O’ Pack
Plot No. 37, Sector-II, IIE,
Sidcul, Ranipur,
Haridwar-249403 (UK)
Saraogi Print & Print
E-190, Industrial Area,
Dilshad Garden, Delhi-95
Contact Number: 09810507238
E-mail: subratsaraogi@yahoo.com
Shivalik Enterprises
Ram Dham Colony, Street wine shop
Shivalik Nagar, Haridwar (U.K.)
Contact Number: 01334-324949, 9319006717
E-mail: shivalikenterprises@rediffmail.com
Shriji Polymers (India) Limited
15-D, Industrial Area, Maksi Road,
Ujjain-456010
Contact Number: 0734-2526236/251044
Fax: 0734-2526645
E-mail: info@packingpeople.com
Shriniwas Containers and Closures Private Limited
No. 8-9, Industrial area,
Maksi road, Ujjain-456010 (MP)
Contact Number: 0734-2524071-73
Fax: 0734-2526645
E-mail: info@packingpeople.com
Siflon Polymers
Plot no. 76 & 77, Phase-I
Mlythrinagar, Madinaguda
Hyderabad-500050
E-mail: siflonpolymers@gmail.com
Website: www.siflon.com
Srivari Industries
Plot no. 49, Industrial Estate
Tirupati-517506
Contact: 0877-2275510/2275843/2284774
E-mail: saptgiri@vsnl.com
Swastik Print
1/5, Kirtinagar Industrial Area
New Delhi-15
Contact: 9015687307
Super Print ‘O’ Pack
Opposite Radha Swami Satsang Bhawan
4.5 km, Roorkee Road
Muzzaffarnagar-251001

Contact Number: 0131-2440217, 9997976664

What is Stock Register? How to Prepare Stock Register in Excel for A Company?

Stock Register
Stock Register:Definition of Stock Register:

Stock Register may be define as document/file/software record which is used for maintaining company’s stock. It is based upon live updated of addition of incoming stock (Purchase) and subtraction of issuing stock (Sale). It is an important aspect for any business for Inventory management, preventing shortage problem and maintaining regular supply of products.

Stock Management:

Managing Stock could be an integral part of managing a company. For small companies or in new start-ups, its a big challenge due to shortage of staff specially in pharma field where huge number of products present. Stock management involves receiving, stocking and dispatching etc. There are many types of stock management but few methods are commonly used. Commonly used methods are:

  • Manually Stock Register Book
  • Software
  • Stock Management in Excel
Automatic Software is best possible way to maintain stock in pharmaceutical or any other sector which has large number of products. Manual hand written stock book is also managed by many small and macro sized pharmaceutical companies. It is time consuming process and one person is required to maintain only stock which may be costly for start-ups. Stock management in excel is tricky work but up to a certain level of products, you can manage it easily and freely.
We are committed to provide free tools for your company management system, so we are providing you a quick and easy way to maintain your stock in Microsoft excel. Basic parts are same in all form for maintaining stock. These parts are as follow or you can fix it as per your need.

  • Date
  • Product Name/Particulars
  • Bill/Invoice Number
  • Supplier/Receiver Name
  • Issue
  • Receipt
  • Remark
Manual Stock Register

Here we are embed excel sheet for your reference. We have mentioned Products as Product 1, Product 2, Product 3 to Product 10 and Link it to worksheet that contains detail of that product. You can create your own Stock Management Register in Excel by Following Formula’s and ways. First Check our Example here:




Step by Step Demo:

  • Open Microsoft Excel Sheet
  • Create Work sheet of Each Product as we have mentioned like Product 1, Product 2, Product 3 etc. Create according to number of products available to you as indicated in Snap shoot below:
  • Make a Index in above cells of your Sheet. Make it in first work sheet and prevent time by copy/pasting to all worksheets. Check Snap shot below:
  • Make a title bar containing all details like Date, product name, bill number, issue, receive etc column wise as shown in snap shoot below:
  • Create hyperlink to each product name with its work sheet of that product. Click at column of that Product Name. Press Ctrl + K. Choose Place in this Document and Select work sheet of name as shown in snap shot below:

 

Hope above information is useful to you. If you have better and simple idea for stock management, you can share it with us. You can comment or mail at below mail id.
Importance of Stock Register:
 
Stock register means a record or database of  goods purchased, stored and sold out. Which is helpful in most of aspects of business. Few importance of stock register is as follow:
  • Inventory Management
  • Maintenance of regular supply
  • Evaluation of total stock in Hand
  • Calculation of reordered quantity, reordered time, minimum and maximum stock availability etc

 

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