Is pharmaceutical contract manufacturing right for you?

As outlined in my previous post, contract manufacturing today, pharmaceutical contract manufacturing is carried out all over the world. While quite a few large companies use the contract manufacturing route to test the waters, there are many small and medium sector companies that also go through the contract manufacturing route to increase their product portfolio.


Contract Manufacturing in India
If you are a small or medium sector pharmaceutical company and are facing capacity and/or cost constraints you have two choices:
1. Expand your unit by adding more machinery and manpower, or
2. Use a contract manufacturing specialist to make the product and market it yourself.
There are advantages and disadvantages of both.
Advantages: The advantage of the first approach are that you own the plant and the machinery giving greater leverage in negotiation with financial institutions for loans or other fundraising activities.
Disadvantages: The disadvantage mainly comes from the increased employee count. Larger number of employees means hiring more accountants to process the salary and perhaps buying more computers for the same reason. Spending more money on facilities management, e.g., increase in employee number means dirtier toilets and therefore increase in expense of keeping them clean. These are not core competencies for a manufacturing organisation.

Using Contract Manufacturing
Advantages:

• Cost advantage: If you are not located in an excise free area, then using contract manufacturing facilities from a company located in excise free zone such as Baddi (in Himachal Pradesh), would give you a definite cost advantage. With the cut-throat competition in the Pharmaceutical Market, it only makes sense to decrease your cost and increase your profits.

• Contract manufacturer will take care of printing of labels, ordering packaging, such as vials, bottles or tubes.
• You also save on the hassles of PF and ESI for employees hired by your company.
• You save on the facilities management.
• You could also save on the expense of hiring new premises.

Disadvantages:

• Unless the manufacturer has well established processes and procedures, you could end up compromising on the quality control.
• Sometimes, for reasons beyond your control or the control of the contract manufacturer, there could be delays in delivery. These could be caused by local weather conditions, political agitations or regional disturbances.

While valid, both the above disadvantages can be addressed by careful selection of the contract manufacturer. Looking for a pharmaceutical contract manufacturer such as Radico Remedies which complies with ISO 9001, GMP and WHO standards, can address the quality concerns. The political agitations and regional disturbances are a fact of life in India and can happen at your workplace also.