Start Pharmaceuticals Export Business: Concept and Licenses Required

Start Pharmaceuticals Export Business
Shivani Jain
| Updated: Jan 09, 2021 | Category: Business, IEC

The Indian Pharmaceuticals Sector is the third largest in the world in terms of “Volume” and thirteenth largest in terms of “Value”. Further, this sector has established itself as a “Global Manufacturing and Research Hub”. Also, the Indian Pharmaceutical Sector is mainly dominated by “Generic Drugs” which constitutes nearly 70% of the total market, in contrast, patented drugs and over the counter medicines forms 9% and 21% shares respectively. Therefore, nowadays, every budding entrepreneur seeks to start pharmaceuticals export business of his/her own in India.

In this blog, we will discuss the concept, licenses, and procedure required to start pharmaceuticals export business in India, together with the ongoing growth statistics and trends of the sector.

Concept of Pharmaceutical Product

The term “Pharmaceutical Product” means a mixture or substance manufactures, supplied, or sold for use in the treatment or mitigation of any abnormal physiological or physical state or its associated symptoms.          

Further, the same is used to modify, alter, restore, or correct any organic function in both human being and animals. However, it shall be taken into the record that the same is subject to the control and administration by Pharmaceutical Legislation. Also, it shall be relevant to note for every individual or business entity who want to start pharmaceuticals export business in India that due to public health concerns, all the pharmaceutical product export from or imported in India must confirm “International Safety Standards”.

Factors to Determine Whether a Product is Pharmaceutical or Not

The factors to consider for determining whether a product is pharmaceutical or not are as follows:

Factors to Determine Pharmaceutical or Not

Usage Claims Made With Regard to the Product

This factor deals with the description of what the said product is used for. Further, the description mentioned usually appears at the back of the product or there will be a pamphlet inside the packaging of that product. 

That means if the usage is proposed for medical purposes, then, in that case, it falls into the Pharmaceutical Category.

Composition of the Product

If a product comprises of a drug substance, then, in that case, the same will be termed as a Pharmaceutical Product. Further, the term “Drug Substance” means a substance which is used for the prevention and treatment of a disorder or disease.

What are the Reasons to Start Pharmaceuticals Export Business?

At present, India exports numerous pharmaceuticals and medical products, such as Dosage Formulations (FDFs), Bio Pharmaceuticals, Drug Intermediates, etc., to several parts of the world.

Further, the country ranks at the third position terms of “Volume” and thirteenth largest in terms of “Value”.Seeing at this, the world is now treating India as a profitable location for both the markets and manufacture of pharma products. Therefore, the pharma export market of India has potential to engage customers from all over the world regarding their pharmaceutical formulations, which are available in all types of Dosage Forms.

Furthermore, the reasons to start the pharmaceuticals export business in India are as follows:

Reasons to start pharmaceuticals export business
  1. Largest Manufacturer of Generic Drugs;
  2. India Exports 40% of the Total Pharma Products Manufactured;
  3. In the year 2020, the total export of Pharmaceuticals from India stood at US$ 16.3 billion;
  4. The total pharmaceutical products exported from India comprises of 55% of Formulations and the remaining 45% of Bulk Drugs;
  5. India has the Lowest Manufacturing Cost in the World, which thereby Increases the Demand for Generic Drugs worldwide;
  6. The Pharmaceutical Export Promotion Council (PHARMEXCIL) is working hard to Promote and Encourage the level of Pharma Exports from India;

Growth of Pharmaceuticals Export Business in India

The growth of Pharmaceutical Export Business in recent years can be summarised:

  1. As per a report named “Indian Pharmaceutical Export Value F.Y. 2012 to 2020”, published by STATISTA on 16.10.2020, India ranks at the top position for providing generic drugs all over the world. Moreover, as of the data of November in the financial year 2020, the country has exported pharmaceuticals of worth almost the US $11 billion. Also, in terms of the volume, Indian drugs consist of20% of the “Global Generic Drug Exports”;
  2. Based on a report published by the India Brand Equity Foundation (IBEF) on 30.12.2020, the total pharmaceuticals export from India stood at the US$ 16.3 billion in the Financial Year 2020. Further, the term “Pharmaceutical Export” comprises of Bulk Drugs, Intermediates, Biologicals, Drug Formulations, Ayush and Herbal products, and Surgical Products. Moreover, it is anticipated that the Indian Pharmaceutical Export will reach the worth of the US $13.87 billion in the Financial Year 2021;
  3. Again as per the report published by the India Brand Equity Foundation (IBEF) on 30.12.2020, alone in the month of October 2020, India had Exported Pharmaceuticals of worth the US $ 2.07 billion;
  4. According to an article named “India’s Pharma Export Shoots up Amid Coronavirus Pandemic”, by Financial Express, published on 05.01.2021, the export level of the Indian Pharmaceutical Sector has surged 18% in the Formulations. Also, there is 9% increment in the Bulk Export of Drugsduring H1 F.Y. 21;

Major Players of Pharma Export Sector

The major player of the Pharma Export Sector in India are as follows:

  1. JoinHub Pharma Private Limited;
  2. Sun Pharmaceutical Industries Pvt Ltd;
  3. Cipla Limited[1];
  4. Dr Reddy’s Laboratories;
  5. Aurobindo Private Ltd;
  6. Kings Global Biotech Ltd;

Major Importers of PharmaceuticalsFrom India

As per a report published by the Indian Trade Portal, the major importers of the Indian Pharmaceutical variety in the year 2019 are as follows:

Country Name

Total Value

United States of America

US $119. 18 Million

Russia

US $10. 33 Million

United Kingdom

US $9. 83 Million

South Africa

US$3. 63 Million

Nigeria

US$1. 71 Million

Factors To Consider To Start Pharmaceuticals Export Business In India

The factors to consider to start pharmaceuticals export business in India are as follows:

  1. Register a Private Limited Company/Partnership Firm or LLP that will manufacture and market the pharmaceutical products;
  2. Obtain the IEC Registration and IEC Number;
  3. Acquire other required Licenses to Start Pharmaceuticals Export Business;
  4. Choose a Target Country;
  5. Engage Distributors or Agents in the Target Country, or register an office in that Country;
  6. Get the Particulars, Documents, and Terms and Conditions signed off by the hired distributor or agent;
  7. Register the Pharmaceutical Product in the Target Country;
  8. Get the Export Approval from DCGI (Drugs Controller General of India);
  9. Decide the Mode of Shipping, Payment, and Delivery in the target Country;
  10. Receive Purchase Order;
  11. Send Pro-forma Invoice, together with details, such as follows:
  12. Type of Packing;
  13. Rate;
  14. Freight Details, etc.;
  15. Prepare Commercial Invoice against LOC (Letter of Credit) or Purchase Order;
  16. Sign Contract with the FFA (Freight Forwarding Agency) to ship the product to the respective target country;
  17. Send Products for Custom Clearance;
  18. After receiving clearance, the material will be shipped further;
  19. In the importing or the target country, customs clearance is again required;

Documents Required To Start Pharmaceutical Export Business in India

The documents required to start pharmaceutical export business in India are as follows:

  1. COR (Certificate of Registration);
  2. PAN (Permanent Account Number) Card of the Applicant Company;
  3. Identity Proof of the partners or directors, in the form of DL (Driving License), Aadhar Card, Voter Identity Card, etc.;
  4. Address Proof for the Registered Office of the Applicant Company, in the form of Rent Agreement or Sale Deed, together with Utility Bills;
  5. A copy of Memorandum of Association (MOA);
  6. A copy of Articles of Association (AOA);
  7. In the case of an LLP Registration, a copy of the Limited Liability Partnership or LLP Agreement;
  8. In the case of a Partnership Firm, a copy of the Registered Partnership Deed;
  9. Certificate of Goods or Service Tax or GST Registration;
  10. Import Export Code (IEC);

Licenses Required To Start Pharmaceutical Export Business in India

The licenses required to start pharmaceutical export business in India are as follows:

Licenses Required To Start Pharmaceutical Export Business

Company Registration

To start a pharmaceutical export business in India, the foremost condition is to register a company/Limited Liability Partnership/ or Partnership Firm in India.

Further, for acquiring a Private Limited Company Registration, the applicant needs to file an application under the provisions and stipulations of the Companies Act 2013.

In the same manner, for obtaining Partnership Firm Registration or LLP Registration, the applicant requires to apply under the provisions of the Indian Partnership Act 1932 or Limited Liability Partnership Act 2008 respectively.

However, the most suitable business format to start pharmaceutical export business in India is a Limited Liability Partnership, as it provides benefits and treats of both a Partnership Firm and Private Ltd Company.

Import Export Code

Another most vital license to start pharmaceutical export business in India is IEC or Import Export Code. Further, to obtain IEC Registration in India, the applicant requires to furnish an online application on the official website of the Director General of Foreign Trade (DGFT).

Also, it shall be significant to take into the record that without a valid Import Export Code or IEC code, an individual or a business entity cannot start pharmaceutical export business in India.

GST Registration

According to the provisions and stipulations of the Goods or Service Tax or GST Act, it is compulsory for every Import Export Code holder to apply for GST Registration in India. Also, in the case of Import and Export the aggregate annual turnover is considered.

That means for every IEC code holder it is mandatory to get GST Registration done in India.

Custom Clearance

Customs Clearance is another crucial document that needs to be mandatorily obtained when the applicant wants to start pharmaceutical export business in India. Also, the same can be done either by the applicant on its own or by it can hire a Clearing Agent for the same.

Conclusion

In a nutshell, the attempts and the efforts made by the government (both the Central Government and State Government), together with the Pharmaceutical Export Promotion Council (PHARMEXCIL) to promote, encourage, support, and stimulate foreign trade and export of pharmaceuticals by way of various schemes, grants, subsidies, and aids are paying off now. That clearly means that the Indian Pharmaceutical Export Sector can now easily move ahead to discover the unmapped and untraced new markets worldwide. As the same holds huge scope, possibility, and opportunity both in terms of customer base and income generation.

But, it shall again be relevant to record that opening a pharmaceutical export business in India is subject to many legal, intricate, and complicated regulations and compliances, for which it is always advised that the applicant must reach out for professional assistance.

At Swarit Advisors, our skilled, dedicated, and proficient experts of various domains and fields are ready to cater to your needs. Also, they will not only provide you the top-notch advice and suggestions but will assist and guide you in the procedure of acquiring licenses, registrations, and permits as well.

Also, Read: Know the Complete Difference Between IEC Certification and Import License

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Shivani Jain

Shivani has completed her B com LLB (Hons) and has the experience of writing various research papers during her college time. Earlier she was working as an Associate in a Delhi based Law Firm, but her interest in writing made her pursue Legal Content Writing as a career. Her core area of interest is in writing about various legal enactments, tax, and finance.

 

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