Loan License in Pharma: Meaning, Process, Benefits & Requirements
A loan license in pharma is a legal permit allowing you to manufacture medicines under your own brand’s name, but by using another registered facility without owning the plant itself.
Building a separate plant for medicine manufacturing demands huge capital investments in land, high-tech machinery, and storage. But by using third-party manufacturing, businesses can reduce their costs by a substantial amount and shift their focus towards branding, marketing, and distribution. A loan license in pharma makes it easy for them to conduct manufacturing processes under another approved facility and equipment. But how does this license work, the process of acquiring it, its cost, and possible limitations? Businesses cannot afford not to understand them before starting pharma manufacturing.
What is a Loan License in Pharma?
A loan license in pharma industry is a permit issued by the government, allowing businesses to outsource their manufacturing to another licensed and approved facility. It allows them to use the facility’s equipment, staff, and technology for the medicine manufacturing process.
These licenses are issued by the State Drug Licensing Authority (State FDA) and do not expire, but a retention fee is paid every 5 years.
Benefits of a Loan License in Pharma Manufacturing
Here are the benefits of a loan license in pharma:
- It makes medicine production cost-effective, as there is no need to set up a manufacturing plant.
- It simplifies market entry for businesses.
- It helps ensure compliance with WHO-GMP Schedule M regulations that are required for pharma manufacturing.
- It lets businesses focus on the main work, such as branding, marketing, and distribution.
- Businesses can control their production volume according to the demand in the market.
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How Does a Loan License in Pharma Work?
A loan license in pharma is acquired by the brand owner, who is also referred to as the loanee. The loanee who holds this license has ownership of the medicine formula, trademark, and market responsibility.
On the other hand, the factory, which we also call the host or lender, holds the ownership of the physical plant, machinery, technology, technical staff, and equipment.
In addition, this rule is defined by Rule 69A of the Drugs Rules, 1945, which outlines that the loan license is issued to the applicant who wants to use the facility and infrastructure of the facility owner.
Moreover, this loan license for drug manufacturing is issued by the State Drug Licensing Authority (State FDA).
Businesses can submit their applications using:
- Form 24A: Loan License for non-Schedule C/C1 drugs or
- Form 28A: Loan License for Schedule C/C1 drugs, excluding Schedule X drugs.
Also, before granting the license, the authority checks the facility to verify suitable equipment, trained staff, manufacturing capacity, and testing facilities. The approval might take around 60 to 120 working days after the application is submitted.
Difference Between a Loan License and a Manufacturing License
A loan license pharma and manufacturing license differ across many aspects, such as the definition, ownership of premises, responsibility, and investment. Thus, look at the table given below to understand their differences with respect to these aspects.
The difference between a loan and a pharma manufacturing license:
| Aspect | Loan License | Manufacturing License |
| Meaning | Permission to manufacture products using another licensed manufacturer’s facilities | Permission to manufacture products in your own licensed premises |
| Manufacturing Facility | Uses another manufacturer’s facility | Uses your own facility |
| Ownership of Premises | Not necessarily owned and controlled by the license holder | Controlled by the license holder |
| Responsibility | License holder remains responsible for regulatory compliance and product quality | Manufacturer directly manages production and compliance |
| Investment | Generally lower, as own manufacturing infrastructure may not be required | Generally higher due to infrastructure and equipment requirements |
| Suitable for | Businesses that want to outsource manufacturing | Businesses operating their own manufacturing unit |
The Process of Getting a Loan License in Pharma
Follow the step-by-step given here to acquire your loan license:
1. Decide on a Host Manufacturer
The first and foremost step for you to complete is to finalize who will be the host manufacturer. Consider a manufacturer like Medella Softgel Pvt. Ltd. that is WHO-GMP approved and has relevant ISO certifications to ensure safe and compliant medicine manufacturing.
2. Sign the Agreement
Sign the formal Loan License Agreement with information, including scope, product specifications, trademark transfers, quality control, and other manufacturing responsibilities.
3. Prepare the Documentation
Gather all the necessary documents that will be required in the application process for a loan license pharma manufacturing.
4. Submit the Application
File Form 24A or Form 24A according to your requirements through your respective state FDA (Food and Drug Administration) authority portal.
5. Pay the Fees
Pay the standard government charges, including the inspection fees, on the portal using your preferred payment option.
6. Site Inspection
After that, a drug inspector will visit the manufacturing site to confirm whether the facility adheres to the Good Manufacturing Practices (GMP) regulations, along with the technical skills and credentials of the staff working there.
7. Resolve the Queries
Clear the queries that are raised by the drug inspectors. They can be about:
- Document Discrepancies
- Product Dossier Issues
- Host Facility Suitability
- Technical Staff Approvals
- Testing and Raw Material Sources
8. Receiving the Loan License
After you get the approval from the respective state FDA authority, your final loan license certificate, whether Form 25A or Form 27A, will be digitally sent in their portal account.
Eligibility Requirements for the Pharma Loan License
Here are the eligibility criteria that should be fulfilled if you want to get the loan license for drug manufacturing in India:
- Your business should be a Private Limited Company, LLP, Partnership Firm, or Proprietorship entity.
- You are also required to have a written consent agreement with the manufacturing unit with a valid manufacturing license.
- The facility must maintain compliance with the Good Manufacturing Practices (GMP) regulations.
Documents Required for a Loan License Pharma Manufacturing
Here are the documents required from the side of the applicant or loanee:
- Aadhaar and PAN IDs of the directors, partners, or proprietors.
- Business Incorporation Certificate and Partnership Deed
- Certificate of GST Registration and Office Address
- Signed Loan License Agreement
- Proposed Drug Formulations, Packing Details, and Specimen Labels
- Declarations of Tech Staff and Qualification Certificates
Documents needed for the host manufacturer or parent unit:
- A Valid Manufacturing License
- Consent Letter
- Site Master File (SMF) and Layout Plan
- Certificate of GMP Compliance or Schedule M
The Cost of a Loan License in Pharma Manufacturing
Here is a table containing the approximate costs of a loan license in pharma manufacturing:
| Cost | Amount | Details |
| Loan Licence Fee | ₹6,000 | Up to 10 items |
| Inspection Fee | ₹1,500 | Per inspection |
| Additional Item | ₹300 | Each item above 10 |
| Retention Fee | ₹6,000 | Every 5 years |
| Late Retention Fee | 2% per month | Up to 6 months |
| Duplicate Licence | ₹1,000 | Lost or damaged licence |
Conclusion
A loan license in pharma lets businesses use the infrastructure and equipment of a licensed third party pharma manufacturing companies to produce medicines. It is a cost-saving solution for them because it eliminates the need for setting up a new manufacturing facility. Businesses can apply for this license by visiting their respective state FDA portals with the right documents.
If you are looking for trusted third party manufacturing support for pharma, you can connect with Medella Softgel. We are a third-party pharma manufacturing company in India that offers pharma manufacturing to businesses all over the country. With WHO-GMP and ISO certifications, we have a qualified team of professionals to maintain compliance and meet quality standards. Thus, you can trust us and reach out to us to get pharma manufacturing solutions today.
Read Blog: How to Choose a Third-Party Pharma Manufacturer in Bangalore
Frequently Asked Questions
A loan license in pharma is a permit issued by the government that lets brands use another licensed manufacturer’s facility and equipment for production.
A loan license is when you produce medicines using another facility, but third-party manufacturing means when the other company produces medicines and sells them under your brand name.
The requirements for a pharma loan license include:
- Registered Business Entity
- Host Manufacturer Agreement
- GMP Compliance
- Quality Control
The documents that are required for a loan license in pharma include identification cards, address proof, license, facility compliance certificates, and others.
State Drug Licensing Authority is responsible for issuing the loan licenses for drug manufacturing.
Here is a brief process of obtaining the loan license for drug manufacturing in India:
- Finalize the Host Manufacturer
- Sign the Agreement
- Prepare the Documents
- Submit the Application
- Pay the Fees
- Clear the Site Inspection
- Receive the Loan License
The renewal of a pharma loan license is subject to the applicable conditions under the Drugs Rules, 1945.
The exact cost of a loan license in India depends on the drug category and application form.
No, a loan license cannot be used for all types of pharmaceutical products.
Here are the limitations of a loan license pharma:
- Limited Scope of Products
- Operational Dependency
- Compliance Liability
- Process Visibility
- Complex Administration
