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How To Start & Manage Pharmaceuticals Business in India

Starting and managing a pharmaceuticals business in India can be a rewarding venture, given the country's growing healthcare demands and thriving pharmaceutical industry. With its vast market potential, favorable government policies, and increasing focus on healthcare innovation, India offers a promising landscape for entrepreneurs. However, building a successful pharmaceuticals business requires careful planning, adherence to regulatory standards, and effective management strategies. From understanding licensing requirements and sourcing quality products to navigating marketing challenges and ensuring compliance, this guide will walk you through the essential steps to establish and manage a thriving pharmaceuticals business in India.

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Start & Manage your Pharmaceuticals Business like a Breeze with Team Taxaj.

Created by potrace 1.15, written by Peter Selinger 2001-2017

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  1. Name, Contact Number and Email Id of Stakeholder.

  2. Self Attested PAN, Aadhar & Passport size photo of Stakeholder.

  3. Specimen Signatures of Stakeholder.

  4. Latest Electricity Bill/Landline Bill of Registered Office.

  5. NOC from owner of registered office. (If Owned)

  6. Rent Agreement from Landlord. (If Rented/Leased)

  7. Brief description of main business activities of the proposed Company.

  8. Cancelled Cheque in business name (After GST Approval)

Types of Pharmaceuticals Businesses in India

India's pharmaceutical industry offers diverse business opportunities catering to different aspects of the healthcare ecosystem. Below are the main types of pharmaceuticals businesses in India:

1. Pharmaceutical Manufacturing Business

  • Focuses on producing drugs, medicines, and healthcare products.
  • Includes bulk drug manufacturing (Active Pharmaceutical Ingredients) and finished formulations.

2. Pharmaceutical Marketing Business

  • Centers on marketing and distributing pharmaceutical products.
  • Businesses operate as marketing companies, selling products under their own brand name.

3. Retail Pharmacy

  • Involves running a pharmacy store to sell medicines and healthcare products directly to customers.
  • Requires a retail drug license and compliance with local regulations.

4. Wholesale Pharmacy

  • Deals with bulk distribution of pharmaceutical products to retail pharmacies, hospitals, and clinics.
  • Requires a wholesale drug license for operations.

5. Pharma Franchise Business

  • A low-investment model where businesses operate under the franchise model of established pharma companies.
  • Focuses on marketing and distribution of the parent company’s products.

6. Contract Manufacturing Business

  • Provides manufacturing services to other pharmaceutical companies.
  • Ideal for companies looking to outsource production.

7. Pharmaceutical Export Business

  • Involves exporting medicines, raw materials, and healthcare products to international markets.
  • Requires adherence to export regulations and global standards.

8. Ayurvedic and Herbal Medicines Business

  • Focuses on the production and sale of traditional Indian medicine and herbal products.
  • Includes ayurvedic formulations, nutraceuticals, and dietary supplements.

9. Veterinary Pharmaceuticals Business

  • Specializes in medicines and healthcare products for animals.
  • Targets veterinary hospitals, clinics, and pet care facilities.

10. Online Pharmacy

  • Operates as an e-commerce platform selling medicines and healthcare products.
  • Requires adherence to digital and pharmaceutical regulations.

11. Biotechnology and Biopharmaceuticals Business

  • Focuses on biologics, vaccines, and biosimilars using advanced biotechnology.
  • High investment and research-driven model.

12. OTC (Over-the-Counter) Products Business

  • Deals with non-prescription medicines and healthcare products.
  • Includes items like pain relievers, cold remedies, and health supplements.


These business types cater to a wide range of markets and customer needs, providing opportunities for entrepreneurs with varied expertise and investment capacity.

Key Features of Pharmaceuticals Business in India

The pharmaceuticals business in India has distinct features that make it a lucrative and dynamic industry. Here are the key features of the pharmaceuticals business in India:

1. Largest Generic Drug Producer
India is the world’s largest producer of generic drugs, supplying affordable medicines to both domestic and international markets.


2. Strong Domestic Market
The country has a robust and growing domestic market, driven by increasing healthcare awareness, population growth, and lifestyle-related health issues.


3. Export-Oriented Industry
India is a major exporter of pharmaceuticals, including generic medicines, vaccines, and over-the-counter (OTC) products, to over 200 countries.


4. Low Manufacturing Costs
With cost-efficient production capabilities and skilled labor, India offers competitive manufacturing costs compared to other nations.


5. Government Support and Initiatives
Policies such as the Production Linked Incentive (PLI) scheme and efforts to streamline regulatory approvals have boosted the industry.


6. Research and Development (R&D)
India’s focus on R&D has led to advancements in biopharmaceuticals, vaccines, and innovative drug formulations.


7. Highly Regulated Market
The pharmaceuticals sector is regulated by agencies like the Central Drugs Standard Control Organization (CDSCO) to ensure compliance with quality and safety standards.


8. Diverse Business Opportunities
The industry includes multiple segments like manufacturing, distribution, retail, biotechnology, and herbal products, offering a variety of opportunities for entrepreneurs.


9. Integration with Technology
Digital tools and online platforms are transforming operations, enabling online pharmacies, telemedicine, and e-health solutions.


10. Skilled Workforce
India boasts a large pool of qualified professionals, including pharmacists, researchers, and healthcare specialists.


11. Competitive Pricing
Affordable medicines make India a preferred supplier for global markets, particularly developing countries.


12. Innovation in Traditional Medicine
The industry has seen significant growth in ayurvedic and herbal medicine, blending traditional practices with modern techniques.


13. Cluster-Based Infrastructure
India has pharmaceutical hubs like Hyderabad, Bengaluru, and Gujarat, which house state-of-the-art manufacturing and R&D facilities.


14. Rising Healthcare Investments
Increased spending on healthcare infrastructure and insurance penetration is driving demand for pharmaceutical products.


15. Export Compliance
Indian pharmaceutical companies comply with international standards like the USFDA, WHO-GMP, and EMA, enhancing their credibility globally.


These features make the Indian pharmaceutical sector a vital contributor to global healthcare and a promising domain for entrepreneurs and investors.

How to Start Pharmaceuticals Business in India

Starting a pharmaceuticals business in India requires careful planning, adherence to legal requirements, and strategic execution. Here’s a step-by-step guide to help you navigate the process:

1. Research and Planning

  • Market Research: Identify the demand for specific medicines or healthcare products in your target market.
  • Business Model: Decide on the type of pharmaceutical business you want to start (manufacturing, marketing, wholesale, retail, etc.).
  • Competitor Analysis: Study existing businesses and their strategies to identify gaps and opportunities.

2. Choose the Business Structure

  • Select a suitable legal structure such as a proprietorship, partnership, private limited company, or LLP (Limited Liability Partnership).
  • Register your business under the Ministry of Corporate Affairs (MCA) if applicable.

3. Obtain Necessary Licenses and Permits

  • Drug License: Mandatory for all pharmaceutical businesses, issued by the State Drug Control Department.
    • Retail License: For retail pharmacies.
    • Wholesale License: For wholesalers and distributors.
  • GST Registration: Required for tax compliance.
  • Company Registration: Register your business with the Registrar of Companies (ROC).
  • FSSAI License: If dealing with nutraceuticals or health supplements.

4. Secure Financial Backing

  • Estimate the capital required for setup, operations, and marketing.
  • Explore funding options like bank loans, government grants, or investor funding.

5. Select a Suitable Location

  • Choose a location compliant with drug regulatory requirements, such as proximity to healthcare facilities and storage conditions.
  • Ensure adequate infrastructure for manufacturing, storage, or retail operations.

6. Source Products and Raw Materials

  • Identify reliable suppliers for medicines, raw materials, or finished products.
  • Ensure they comply with quality standards and certifications like WHO-GMP.

7. Comply with Regulatory Standards

  • Follow guidelines set by the Central Drugs Standard Control Organization (CDSCO) and local authorities.
  • Maintain Good Manufacturing Practices (GMP) if manufacturing medicines.

8. Build a Skilled Team

  • Hire qualified professionals such as pharmacists, sales executives, and operations managers.
  • Ensure all personnel meet regulatory qualification requirements.

9. Develop a Marketing and Sales Strategy

  • Create a robust marketing plan to promote your products or services.
  • Use digital marketing, partnerships with healthcare providers, and networking with distributors to expand your reach.

10. Ensure Quality Control and Compliance

  • Regularly test products for safety and efficacy.
  • Keep detailed records of transactions and maintain compliance with legal and ethical standards.

11. Launch Your Business

  • Plan a strategic launch to introduce your business to the market.
  • Network with healthcare providers, hospitals, and clinics to establish your presence.

12. Monitor and Grow

  • Continuously monitor market trends and adapt to changes.
  • Invest in R&D, technology, and new product lines to expand your business.


By following these steps, you can establish a successful pharmaceuticals business in India and contribute to the growing healthcare needs of the nation.

Compliances for Pharmaceuticals Business in India

Compliances for the pharmaceuticals business in India are crucial to ensure the safety, efficacy, and quality of drugs and healthcare products. The following are the major compliance requirements for establishing and running a pharmaceuticals business in India:

1. Licensing and Registration

  • Drug License:
    • Retail Drug License: For operating a pharmacy or retail store.
    • Wholesale Drug License: For bulk distribution of medicines.
    • Manufacturing License: For producing pharmaceutical products.
    • Import/Export License: For international trade of medicines and raw materials.
  • Company Registration:
    • Register the business with the Registrar of Companies (ROC) as a proprietorship, partnership, LLP, or private limited company.

2. Regulatory Approvals

  • Central Drugs Standard Control Organization (CDSCO):
    • For approvals related to the manufacturing, import, or marketing of drugs.
    • Obtain New Drug Approval (NDA) if introducing a new formulation.
  • State Drug Control Department:
    • Licensing authority for retail, wholesale, and local manufacturing businesses.

3. Tax Compliance

  • GST Registration:
    • Mandatory for taxation purposes for businesses with an annual turnover above the threshold limit.
    • Comply with regular GST filings and payments.

4. Quality Control Compliance

  • Good Manufacturing Practices (GMP):
    • Follow WHO-GMP guidelines for manufacturing practices.
    • Ensure product safety, efficacy, and quality throughout the production process.
  • Good Laboratory Practices (GLP):
    • Maintain proper lab conditions for testing and analysis.
  • Pharmacovigilance:
    • Monitor and report adverse drug reactions and safety issues.

5. Product Labeling and Packaging

  • Adhere to the Drugs and Cosmetics Act for proper labeling, including:
    • Generic name and composition.
    • Manufacturing and expiry dates.
    • Batch number and license details.
    • Price and storage instructions.

6. Environmental and Safety Compliance

  • Pollution Control Board Clearance:
    • Obtain consent for manufacturing units to comply with environmental norms.
  • Hazardous Waste Management:
    • Proper disposal of pharmaceutical waste as per local regulations.

7. Clinical Trials and Research Compliance

  • Clinical Trial Registry:
    • Register clinical trials with the Clinical Trials Registry of India (CTRI).
  • Ethical Clearance:
    • Obtain approvals from Institutional Ethics Committees for clinical research.

8. Import and Export Regulations

  • Import License:
    • Comply with regulations under the Drugs and Cosmetics Act for importing drugs.
  • Export Compliance:
    • Follow procedures and standards under the Directorate General of Foreign Trade (DGFT).
    • Ensure adherence to international guidelines like USFDA, WHO, and EMA for exported products.

9. Patent and Intellectual Property (IP)

  • Protect product formulations and processes by registering patents under the Indian Patent Act.
  • Avoid infringement of existing patents by conducting thorough IP checks.

10. Pharmacist Compliance

  • Employ a registered pharmacist as mandated for retail or wholesale pharmacies.
  • Maintain proper records of all drug transactions.

11. Advertising Regulations

  • Follow the Drugs and Magic Remedies (Objectionable Advertisements) Act.
  • Avoid false claims or misleading advertisements about drugs and health products.

12. Audit and Record Maintenance

  • Maintain detailed records of manufacturing, distribution, and sales for audit purposes.
  • Conduct periodic internal audits to ensure regulatory compliance.

13. Additional Certifications

  • ISO Certification: To improve operational efficiency and establish credibility.
  • Ayush Certification: Required for manufacturing Ayurvedic and herbal medicines.


Compliance with these requirements ensures that the pharmaceuticals business operates within legal and ethical boundaries while maintaining product quality and safety for consumers

Taxation of Pharmaecuticals Business in India

Taxation in the pharmaceuticals business in India involves multiple layers of taxes, duties, and compliance requirements. Below is a detailed overview of the applicable taxes and tax-related aspects for a pharmaceuticals business:

1. Goods and Services Tax (GST)

The Goods and Services Tax (GST) is the primary indirect tax applicable to the pharmaceutical sector.

Key GST Components

  • Tax Rates:

    • Essential drugs: 5% GST (e.g., life-saving medicines).
    • Regular pharmaceutical products: 12% GST.
    • Medical devices: 5% or 12% GST, depending on the product category.

  • Input Tax Credit (ITC):

    • Pharma businesses can claim ITC on GST paid for raw materials, manufacturing inputs, and business services.

GST Compliance

  • Obtain GST registration for your business.
  • File regular GST returns (GSTR-1, GSTR-3B, GSTR-9).
  • Maintain proper invoicing and records for tax credits and filings.

2. Corporate Tax

Pharmaceutical businesses must pay corporate tax based on their structure and income:

  • Tax Rates:

    • Domestic companies: 25% (if turnover is less than ₹400 crore) or 30% (for higher turnover).
    • Startups under specific schemes: Lower tax rates may apply.
    • LLPs: Taxed at 30% on profits.

  • Surcharge and Cess:

    • A surcharge of 7% or 12% applies based on income levels.
    • Health and education cess of 4% applies on total tax payable.

3. Income Tax Deductions and Benefits

Pharma businesses can avail of specific income tax benefits:

  • R&D Deductions:
    • 100% to 150% deduction under Section 35 for expenditure on research and development.
  • Depreciation:
    • Claim depreciation on plant, machinery, and equipment under Section 32.
  • Startup Incentives:
    • Tax exemptions under the Startup India initiative for eligible businesses.

4. Customs Duty

Applicable on the import and export of pharmaceutical raw materials, finished products, and machinery:

  • Import Duty: Varies based on the product type (lower rates for life-saving drugs).
  • Export Duty: Generally exempt for pharmaceutical products, encouraging exports.

5. Minimum Alternate Tax (MAT)

  • Pharma companies benefiting from deductions or exemptions may be subject to MAT under Section 115JB.
  • MAT is levied at 15% of book profits (plus applicable surcharge and cess).

6. Excise Duty (for Non-GST Items)

For products not covered under GST, excise duty may apply, such as alcohol-based pharmaceutical products.

7. Taxation on Pharma Franchise Models

Pharmaceutical franchise businesses must account for GST on franchise fees and product sales.

  • Input tax credits are available for GST paid on supplies and services.

8. Transfer Pricing

Pharma companies involved in international transactions with related entities must comply with transfer pricing regulations under the Income Tax Act.

9. Tax on Online Pharma Business

E-commerce platforms selling pharmaceuticals must comply with GST and income tax regulations, including:

  • GST on online sales.
  • Tax collected at source (TCS) under GST for marketplaces.

10. Tax Records and Audits

  • Maintain detailed records of sales, purchases, inventory, and expenses.
  • Conduct regular audits to ensure compliance with tax laws.

11. Export Benefits and Tax Exemptions

Pharmaceutical exporters may benefit from:

  • GST refunds on exported goods.
  • Duty drawbacks for customs duties paid on inputs.
  • Exemptions under foreign trade policies like MEIS/SEIS.


Proper tax planning and compliance are essential for a pharmaceuticals business to minimize liabilities and optimize profitability while adhering to legal obligations. Consulting a tax professional is recommended for accurate filings and leveraging available benefits

Challenges Faced By Pharmaceuticals Business

The pharmaceuticals business, while lucrative, faces a variety of challenges that can affect operations, growth, and profitability. Here are some of the key challenges faced by the pharmaceuticals business:

1. Regulatory Compliance

  • Strict and complex regulations from authorities like CDSCO, USFDA, and EMA require extensive documentation and adherence to quality standards.
  • Delays in obtaining licenses and approvals can hinder product launches and market entry.

2. High Research and Development (R&D) Costs

  • Developing new drugs requires significant investment in R&D, clinical trials, and testing, with no guarantee of success.
  • Balancing R&D expenditure while maintaining competitive pricing is challenging.

3. Pricing Pressures

  • Governments and regulatory bodies often impose price controls on essential medicines, reducing profit margins.
  • Intense competition in generic drugs leads to price wars.

4. Supply Chain Management

  • Managing a vast supply chain, including raw material procurement, storage, and distribution, is complex.
  • Dependence on imports for Active Pharmaceutical Ingredients (APIs) makes the industry vulnerable to global disruptions.

5. Counterfeit Medicines

  • The proliferation of fake or substandard drugs in the market damages brand reputation and poses health risks to consumers.

6. Market Competition

  • The Indian pharmaceutical industry is highly competitive, with numerous players in the generic drug segment.
  • Global competition, especially from countries like China, adds pressure on pricing and market share.

7. Talent Shortage

  • A lack of skilled professionals in research, manufacturing, and regulatory affairs can limit growth.
  • Retaining top talent in a competitive market is another challenge.

8. Intellectual Property (IP) Challenges

  • Patent infringement disputes and the expiration of patents on blockbuster drugs reduce revenue potential.
  • Developing unique formulations while avoiding existing patents requires significant expertise.

9. Evolving Consumer Expectations

  • Increasing demand for personalized medicine and advanced therapies requires significant investment in technology and research.

10. Environmental and Waste Management Issues

  • Pharmaceutical manufacturing generates chemical waste that must be disposed of as per environmental regulations.
  • Non-compliance can lead to penalties and damage to the company’s reputation.

11. Global Trade Challenges

  • Exporting pharmaceuticals requires compliance with international standards and certifications, which can be resource-intensive.
  • Trade restrictions, tariffs, and geopolitical tensions impact export operations.

12. Digital Transformation

  • Integrating digital solutions like telemedicine, e-pharmacies, and automated processes requires investment and expertise.
  • Cybersecurity concerns with sensitive patient and company data are also rising.

13. Rising Costs of Raw Materials

  • Increasing API prices, often due to dependency on imports, directly impact production costs.
  • Global supply chain disruptions, like the COVID-19 pandemic, exacerbate this issue.

14. Delayed Payments

  • Delayed payments from hospitals, distributors, and government agencies strain cash flow and working capital.

15. Public Perception and Ethical Concerns

  • Negative publicity about high drug prices, unethical clinical trials, or quality issues can erode consumer trust.
  • Addressing these concerns while maintaining profitability is a delicate balance.

16. Short Product Lifecycles

  • Generic drugs have a limited window of high profitability before market saturation occurs.
  • Constant innovation is required to sustain competitive advantage.

17. Fragmented Distribution Network

  • Inadequate infrastructure and logistical inefficiencies in rural and semi-urban areas hinder market penetration.

18. Compliance with Global Standards

  • Meeting stringent international standards for exports, such as USFDA and WHO-GMP, involves additional costs and operational complexity.

19. Changing Regulatory Landscape

  • Frequent changes in policies and regulations require continuous adaptation, increasing administrative burdens.

20. Pandemic and Health Crises

  • Sudden demand surges or production halts during pandemics or health emergencies disrupt normal business operations.


Addressing these challenges requires strategic planning, technological adoption, skilled talent, and a strong focus on quality and compliance.

Emerging Trends in Pharmaceuticals Business

The pharmaceuticals business is evolving rapidly due to advancements in technology, changing consumer preferences, and a growing focus on personalized healthcare. Here are some of the emerging trends in the pharmaceuticals business:

1. Personalized Medicine

  • Focus on tailoring treatments to individual genetic profiles for more effective outcomes.
  • Growth of precision medicine driven by advancements in genomics and data analytics.

2. Biopharmaceuticals

  • Increasing demand for biologics, including monoclonal antibodies, vaccines, and biosimilars.
  • Growth of cell and gene therapies to treat chronic and rare diseases.

3. Digital Transformation

  • Adoption of Artificial Intelligence (AI) and Machine Learning (ML) for drug discovery, clinical trials, and predictive analytics.
  • Use of blockchain for transparent and secure supply chain management.

4. Telemedicine and Online Pharmacies

  • Surge in teleconsultations and e-prescriptions due to convenience and accessibility.
  • Growth of online pharmacies providing doorstep delivery of medicines and healthcare products.

5. Advanced Drug Delivery Systems

  • Development of innovative delivery methods such as nanotechnology, 3D printing, and implantable devices.
  • Targeted drug delivery for improved efficacy and reduced side effects.

6. Focus on Preventive Healthcare

  • Increasing consumer interest in nutraceuticals, dietary supplements, and wellness products.
  • Shift towards promoting health maintenance rather than just treating illnesses.

7. Artificial Intelligence in Drug Discovery

  • AI algorithms accelerating drug discovery processes, reducing development time and costs.
  • Use of AI to identify potential drug candidates and optimize clinical trial designs.

8. Sustainable Manufacturing

  • Emphasis on green chemistry and eco-friendly production processes to reduce environmental impact.
  • Adoption of energy-efficient technologies and proper waste management practices.

9. Rise of Biosimilars

  • Increasing development and acceptance of biosimilars as patents for original biologics expire.
  • Cost-effective alternatives driving growth in the global and Indian markets.

10. Integration of Big Data and Analytics

  • Use of big data to analyze patient records, market trends, and drug performance.
  • Predictive analytics to improve supply chain management and patient outcomes.

11. Growth of Contract Research and Manufacturing Services (CRAMS)

  • Outsourcing of research and manufacturing processes to specialized third-party organizations.
  • Cost-effective and scalable solutions for pharmaceutical companies.

12. Wearable Technology and Digital Health

  • Devices like smartwatches and fitness trackers providing real-time health data.
  • Integration of wearables with healthcare systems for remote monitoring and drug adherence.

13. Expansion into Emerging Markets

  • Growing focus on expanding pharmaceutical operations in developing countries with rising healthcare needs.
  • Increased affordability of drugs in price-sensitive markets.

14. Regulatory Evolution

  • Streamlining of regulatory approvals with faster pathways for essential and innovative drugs.
  • Increased focus on quality standards for export-oriented businesses.

15. Focus on Rare and Orphan Diseases

  • Development of niche drugs targeting rare diseases with small patient populations.
  • Government incentives for orphan drug development driving growth in this segment.

16. Pandemic Preparedness

  • Investment in vaccine research and manufacturing capabilities to address global health crises.
  • Expansion of antiviral drugs and rapid diagnostic kits.

17. Enhanced Clinical Trials

  • Virtual and decentralized clinical trials using digital platforms to recruit participants and collect data remotely.
  • Increased use of wearable devices to monitor patients during trials.

18. Automation and Robotics

  • Automation in manufacturing processes to improve efficiency and reduce human error.
  • Use of robotics in laboratories and packaging operations.

19. Artificial Intelligence in Regulatory Compliance

  • AI-powered tools for monitoring compliance with global and local regulations.
  • Automated updates and audits to streamline regulatory processes.

20. Increasing Importance of Mental Health Solutions

  • Growth in pharmaceuticals addressing mental health issues such as depression, anxiety, and neurological disorders.
  • Development of drugs and therapies tailored for cognitive enhancement and brain health.


By embracing these trends, pharmaceutical businesses can enhance their operational efficiency, improve patient outcomes, and remain competitive in the rapidly evolving healthcare landscape.

Summary

The pharmaceuticals business in India offers immense opportunities, driven by growing healthcare demands, advancements in technology, and government support. However, it also comes with challenges such as stringent regulations, pricing pressures, and market competition. By staying updated with emerging trends like personalized medicine, digital transformation, and sustainable manufacturing, businesses can adapt to the changing landscape and thrive. With proper planning, compliance, and innovation, the pharmaceutical industry remains a promising avenue for entrepreneurs and established companies alike, contributing significantly to global healthcare and well-being.


If you need professional guidance for setting up, managing, or ensuring compliance for your organisation, reach out to Team TAXAJ. Contact us at +91 8802912345 via WhatsApp or Call, or email us at . Our experts are here to assist you every step of the way.

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