Difference Between PCD Pharma & Third Party Manufacturing
Business organizations have various options in Pharma industry. Third party manufacturing and PCD Pharma Franchise are two common options. Despite their significant contributions to the industry, both operate in different ways. Recognizing such distinctions enables businesses to adopt suitable strategies.
In this blog, we discuss the differences between PCD Pharma and Third Party Manufacturing with respect to their benefits and shortcomings.
What is PCD Pharma Franchise?
As the name suggests, Propaganda-Cum-Distribution Pharma Franchise refers to an entity where a pharmaceutical company gives partial rights to a franchise partner to sell its products without losing the branding. The partner is allowed to sell the company’s products within a specified region and company continues to own the brand name.
Key Features of PCD Pharma Franchise:
The franchise holder focuses only on marketing and distribution; there is no manufacturing of products.
1. This model allows for setting up a business with lower investments as no R&D is required and production facilities do not need to be set up.
2. It is possible to obtain exclusive distribution of certain products in a defined region for a predetermined period of time; this would help reduce competition.
3. To aid the franchise holder with sales undertakings, the parent company offers brochures, visual aids, product samples and free gifts targeted to doctors.
4. Best suited for individuals, startups or small businesses who wish to penetrate the pharmaceutical industry without incurring significant operational costs.
5. The franchise holder makes profit depending on the sales volume as well as how well the franchise holder develops a distribution network.
6. The business is only as successful as the marketing skills of the franchise partner and how much they can sell to doctors and retailers.
What is Third Party Manufacturing?
It is also known as contract manufacturing, is a pharmaceutical type business model in which a company subcontracts their medicine production to a third-part manufacturer. The contract giving company determines the composition, branding and packaging of the medicine, while the manufacturer is responsible for the entire production.
Key Features of Third Party Manufacturing:
The contracting company does not have to purchase expensive production units, hence lowering the expense of broadening an already existing product line.
1. The manufacturer has the sole responsibility and authority over the production process as well as quality control and regulation of the medicines to ensure it meets the industry standards.
2. This model is useful for client firms since 'per unit' production costs decrease with higher volume purchases, resulting in maximized profits.
3. This model best serves marketing heavy organizations that want to focus their resources in branding, marketing and selling, while giving out the technical and manufacturing work to other parties.
4. They enable pharmaceutical firms to meet the growing needs without having to scale the manufacturing facilities, which require a lot of capital investment.
5. Raw material sourcing, formulation development, packaging and even logistics are part of the extensive support offered by third-party suppliers who take full responsibility.
6. This is appropriate for already established pharmaceutical brands, new startups and businesses aiming to penetrate the Indian pharmaceutical industry without the need to establish in-house production facilities.
Major Distinctions between the PCD Pharma Franchise and a Third-Party Manufacturer
Characterstics | PCD Pharma Franchise | Third Party Manufacturing |
| Business Model | Franchisee is given rights for distribution and marketing by the parent company. | Brand sells a product under their own name, but outsources the manufacturing of goods. |
| Investment Required | This model is low cost, needing only a spending on marketing and sales. | More expensive due to bulk production, but lower cost due to no manufacturing establishment needed. |
| Product Ownership | Franchise holders venture into business using the name of the parent company and hence are referred to as franchise holders. | The brand hands over their medicine to be manufactured with their full permission by the other party. |
| Manufacturing Responsibility | Not engaged in manufacturing; only handles sales, distribution and promotional activities. | Responsibility for production, quality assurance and compliance with applicable guidelines falls solely on the third-party contractor. |
| Profit Margins | The profit margin depends on the level of sales, payment to the distributor and demand in the market. | Profits will increase as a result of mass production and reduction in production costs. |
| Best Suited For | Suitable for individual practitioners, new entrepreneurs and small businessmen who wish to enter into the pharmaceutical industry with minimum risk. | More appropriate for already established pharmaceutical companies or start-ups that wish to release products without having to spend money on a production plant. |
Which Model Fits You?
Opt for PCD Pharma Franchise if you are making your first steps in the pharmaceutical industry, particularly, in the marketing and sales side and you prefer not to get stuck with the associated manufacturing complexities. This model is ideal for entrepreneurs seeking a less capital investment demanding business with a high potential for growth.
Opt for Third Party Manufacturing if you already operate a pharmaceutical brand that you want to grow and wish to include more products without going through hassle of setting up a production unit. Offering this model gives you the ability to enhance your business while directing your efforts toward creating brand awareness and penetrating the market.
Conclusion
Whatever model fits right for you, Aesthetic Softcaps is a highly professional and trusted manufacturer and exporter of nutraceuticals, health supplements and wellness products. We are accredited with USFDA, WHO-GMP, GHP, HACCP, HALAL and ISO 9001:2015 and ISO 22000:2018 certifications demonstrating our commitment to upholding high-quality standards.
