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Pharmaceutical Third Party / Contract Manufacturing Process

This page describes the process to be followed for pharmaceutical contract manufacturing or 3rd party manufacturing. If you have not seen those pages, then please do so first. Once you have decided on outsourcing the manufacturing work to us, then we require approved brand names and formulas from you in writing along with other documents as listed in list of documents for pharmaceutical third party manufacturing. After finalization of the agreement, there are four phases of starting a "marketed by" set up:

  1. Formulation approval from DRUG department which takes about 5-7 days
  2. Procurement of Printed Packing material like foils, cartons, labels which takes 10-20 days
  3. Actual Production. 10-15 days
  4. Transportation. 2-7 days.

Total time taken for whole process is 40-50 days approximately. For repeat orders 30-40 days shall be required.


General Policy of working out cost of the product is given below:

  1. Cost of Raw-Materials- Active and excipients.
  2. Cost of Packaging Material-
    1. PRIMARY (Printed Packaging Material- Foil, Cartons, Labels), &
    2. SECONDARY (PVC, Shippers, tape, packing slips, strips etc)
  3. Batch Charges- which covers cost of consumables, Quality control Costs & Local transportation.
  4. In Process loss for RM & PM.
  5. Manufacturing Charges.

Taxation and Outward Transport

  1. CST @ 2.0% is charged as per latest central Govt Exemption Notification.
  2. CENTRAL EXCISE: 0% is charged as per central Govt Exemption Notifications.
  3. OUTWARD TRANSPORTATION: Outward Transport is payable by the Party, the rates quoted by us are Ex-factory. We have companies vehicles to transport the manufactured goods either to Baddi or Chandigarh which are well developed Transport hubs supplying all over India. By use of our own transport vehicles we cut down heavy cost of local transports thereby making a direct saving for our customers. We can also supply from Ambala Cantt Railway Junction which is very important Railway hub.
  4. TRANSIT INSURANCE: All our supplies are covered under Transit Insurance from Oriental Insurance Company and nominal transit insurance is changed against this in the Bill/Invoice.

Batch Sizes

For Non-Beta-lactum tablet and capsules items- minimum Batch size is 50,000 tablets, for Liquids, Ointments, Liquid injections, Dry injections minimum batch size is 5000 units, for costly Beta-lactum tablets and injections smaller batch sizes are entertained as per product.

Minimum Business Volume

The marketing company shall give a minimum business assurance of minimum Rs. 25 lacs per annum ON NETT RATES.

Order and Supplies

Written order preferable in format given below is accepted by us, orders through authenticated e-mails are also acceptable, 1st time supply is executed in 45 days and repeat supplies are executed within 30-40 days, occasional URGENT orders are despatched within 10 days.


We need an advance payment of 50% along with order as a confirmation of order and balance at time of despatch or on raising the performa invoice. Payment terms for old parties may vary as per their dealing and performance, we raise credit limits for old parties as per their transactions against security instruments for smoother commercial transactions.

Printed Packaging Material

The inventory of the Printed packaging materials viz Foils, Cartons, labels etc is principally borne by you, we offer our customers a simple solution for this typical issue of taking care of procurement of packaging materials on your behalf, thereby providing you big savings on TIME and MONEY, we charge one time PM inventory deposit, details about this are given below in our write up for PM Inventory Charges.

A Write up for Packing Material Inventory Charges:

Ques No.1: Why do we charge PM Inventory Chages?

The answer is that the minimum procurement quantities of various packing materials is often higher than the Minimum Order Quantity (MOQ) therefore in manufacturing orders of small quantities there is a leftover printed packing material. These are as under:

  1. Foil
  2. Carton
  3. Labels (liquids)

These materials are printed and have name of the “Marketed by” company and have no other use , hence the cost of residual inventory of these printed packaging materials has to be borne by the “Marketed by” company.


A sample procurement cost involved for Nimupara type of tablet is given below
Onetime for Cylinder (One colour) 1000.00
One time for Box, Dies, Plates, Designing etc 1000.00
Cost of 7 kg foil @ 450.00 3150.00
Cost of 1200 boxes @ 2.55 3050.00
Total 8200.00
Consumption in a lot of 50000 tab/caps batch  
Foil @ 3.5 kg per lac @ 450.00 1575.00
Box 500 @ 2.55 1275.00
Total  2850
Residual Inventory 5350.00

Ques no 2: Does the nett rate cost of product covers the cost of packing material?

The answer is yes it covers the cost of packing material which is consumed in production, but does not cover the residual packing material inventory, that is why one time packing material inventory charges are taken.

Ques No. 3: In case quantities of order are higher, will PM inventory charges be still there?

The answer to this is no, in case of orders more than 2 lacs tablets/capsules, only one time cylinder charges will be applicable, no inventory charges.

Ques No.4: Why are we charging Rs 5200.00 for all type of packing sizes of tablet and capsules?

The answer is to this is for sake of convenience we have calculated an average cost of all sizes which is as under. This cost has two components:

  1. One time charge @ 2000.00 per product
  2. Deposit towards residual inventory @ 3200.00 per product.

Ques No.5: Are there inventory charges for all other items like liquids, ointments, injections etc?

For liquids where only labels are involved, an amount of Rs 500.00 is charged as inventory charges towards one-time cost, and where outer box is also involved we charge an amount of Rs 3000.00 as inventory charges in which 1000.00 is towards one time and 2000 towards inventory deposit, but in case of orders of liquids where order quantity is 10000 bottles, we charge only Rs 1000.00 for one time inventory charge for liquids with outer carton because there is no residual inventory left.

In nutshell our inventory charges are:

  Inventory Deposit (Rs.) One time Processing (Rs.) Total Charges (Rs.)
1. Tab/Capsules one colour foil 3200 2000 5200
2. Tab/Capsules two colour foil 3200 3000 6200
3. Liquids with only labels Nil Nil Nil
4. Liquids with outer carton 2000 1000 3000
5. Dry Inj with outer carton 2,000 1000 3000
6. Dry Inj w.o.c. (qty>5000) Nil Nil Nil
7. Ointments ( 5,000 tubes) 10,000 4000 14000
8. Ointments ( 15,000 tubes) Nil 4000 4,000
9. Liquid injections (Blister) 3200 2000 5200
10. Liquid inj ( tray pack) 2000 1000 3000
11. Dry Syrups with outer carton 2000 1000 3000




An agreement for pharmaceutical third party manufacturing  is entered with the marketing company for a period of three years, the Performa of which is made available at the time of finalization, the performa of agreement is given below:

This agreement for pharmaceutical third party manufacturing is made on ___________201_ between M/s Radico Remedies at 123 Mandhala, Barotiwala, Distt Solan, H.P., through its authorized representative Mr. Vikramjit Singh Sawhney s/o Dr. K.S.Sawhney r/o D-142, Bathla Aptts, I.P.Extn, Delhi-110092 hereinafter called as Manufacturer or the party of 1st part.



Hereinafter called as the party of 2nd part.

Whereas party of the first part is manufacturer of pharmaceutical/food products, the party of the 2nd part is engaged in marketing and distribution of the pharmaceutical products.

Now this agreement witneseth as under:

  1. That it is agreed that the products listed below shall be marketed by the party of 2nd part and manufactured by the party of 1st part.( As per list attached)
  2. That It is agreed that the above trade-marks are property of the party of 2nd part and do not resemble any existing product / trade name of any other company, and that the 2nd party shall be solely responsible for the non-resemblance of trade name & its designs from the marks & designs of any running brand of any other company. Also the 2nd party indemnifies the 1st party for any dispute /claim if arisen out of any resemblance of its trade name with any other trade name/design and shall be solely responsible for claims/liabilities if any. Further 1st party and the 2nd party shall not adopt, whether during the term of this agreement, or any time after its expiry/ termination, thereof any symbol which is similar to the registered Trade mark/ Applied for that which could draw any reference to the said trade mark as to be likely to cause confusion or deception or detract from or adversely affect the rights of proprietor of the said trade-marks.
  3. It is agreed that the 1st party shall manufacture the above products and supply to the 2nd party at Ex-Factory Nett rates mutually worked out.
  4. That the 2nd party shall send 50% advance along with each order and shall make the balance payments at the time of dispatch, or as per any other schedule of payments mutually accepted by both parties. The forwarding charges, transit insurance and outward freight of the finished goods shall be borne by 2nd party. It is further agreed that in case the ordered goods are not lifted by the 2nd party within 30 days of production, the same shall be liquidated in open market by the 1st party without any claims from the 2nd party. In such event it is agreed that 2nd party indemnifies the 1st party against all claims, objections what so ever from any source.
  5. The 1st party shall use the materials for the 2nd party which are in regular use with the 1st party in case any new or typical material is required it shall be supplied by the 2nd party or shall bear the inventory cost of that material. Also the 2nd party shall bear the cost of inventory of all printed packaging materials i.e. Foils, Boxes, labels etc.
  6. It is further agreed that the goods shall be billed at the prevailing Excise and Central Sales Tax rules which offer exemptions .It is further agreed that any liabilities/ Arrears/Claims of any Statutory Government Bodies viz Central Excise Deptt / Sales Tax Depts./ D.P.C.O. or any other Government Department arising out of the transaction between the parties shall be sole responsibility of the 2nd party during or after the expiry of this agreement, since the 1st party is charging only job charges and is not making any profit out of the sale of the products and all the profit is being taken by the 2nd party and the 2nd party indemnifies the 1st party in regard of the above.
  7. It is further agreed that the quality of the product shall be sole responsibility of the 1st party. The 2nd party shall provide the master formulas and the SOP for all its products duly received by the 1st party. The 1st party shall strictly adhere to the master formulas provided by the 2nd party in observation to the Drugs & Cosmetics Act and rules there under. The 1st party shall supply test-reports for the batches manufactured to the 2nd party on demand.
  8. This agreement is initially for three years and can be terminated by either of the parties by giving two month’s notice in writing. However without any dispute it is deemed to be renewed even after the end of the third year. During the currency of this agreement the 2nd party shall not get the products manufactured with the 1st party from any other manufacturer.
  9. Disputes if any shall be adjudicated under jurisdiction of Solan Courts only.
  10. The Force Majure Clause is applicable to this agreement.
    Party of 1st part

    Party of 2nd part
    Witness Witness

Documents Required for 3rd Party Manufacturing

1. Profile:

(Brief Profile with Copy of PAN Card of the company and a Copy of Memorandum & Articles of Association in case of Pvt. Ltd or limited Company. Partnership deed/ Affidavit for proprietary in case of Partnership firm or Proprietorship firm.)

2. Name, Address & Telephones with copy of Aadhar Card and Pan Cards.

( Of all Directors, Partners or Proprietor both official and residential.)

3. Copy of Resolution for Authorised Signatory to Deal:

(For limited , private limited and partnership companies)

4. Drug Licences :

(Attested copy of Drugs Licenses to be provided)

5. Sales Tax / TIN Registration Certificates.

(Attested copy of Sales tax Registration Certificate to be provided)

6. Agreement for Manufacturing. (specimen attached below)

7. Certificate for Non-Resemblance: ( Specimen attached below)


On Letterhead of Marketing Company


We certify that the following trade marks have been originally coined by us and do not resemble to any existing trade mark of other company, also the designs on the product packing do not resemble any design, colour combination of any existing product of any company and that the we shall be solely responsible for the non-resemblence of trade name & its designs.

We shall be solely responsible for any dispute/claims/liabilities, if any, arising out of the use of our trademarks and we further indemnify M/s Radico Remedies, 123, Mandhala, Brotivala, Distt Solan for any dispute/claim if arisen out of any resemblance of its trade name with any other trade name/design and also undertake that we shall withdraw the product from the market and also withdraw the trade name if instructed by the State Drugs Controller Himachal Pradesh in this regard.




The facts mentioned above are true to the best of my knowledge and belief and nothing has been concealed thereof.



To contact us for outsourcing your production, please use our Enquiry form for contract or 3rd party manufacturing.

Disclaimer: The prices were correct at the time of creating this page. Kindly verify the current prices from the sales department.

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