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Business Development – the contracts
In the last blog, I talked about nature of contracts. We continue this discussion in the current blog.
The Contracts – legal and regulatory aspects
Please note that International contracts are generally more elaborate and at times may be very complex. These will require strong negotiation skills and expert understanding. For this reason, the teams comprising of legal, technical and business development professionals handle international contracts. Domestic contracts may be simpler and easier to handle.
Nature of Contracts. Contracts may be of several types.
- Contract Marketing Contracts. In the original form, these contracts are between a manufacturing company and a marketing company. The manufacturing company does not have the marketing muscle, or they choose not to develop marketing function. The marketing company’s core competence is marketing activity. The two join hands to make a symbiotic, mutually beneficial combination. Internationally, these have become established and approved norm. The manufacturers are excelling in manufacturing competence and marketers are developing the market. In Pakistan however, DRAP does not officially even recognize it, not to talk about approval. The activity is going on openly all the same. DRAP looks the other way but so far does not appear to intend to regularize it so that it can come under the ambit of some regulations. It would bring security for both manufacturers and marketers and will be better for consumers, if it is legalized. In this case, the registration or marketing authorization is given to manufacturer only.
- Contract/ Toll Manufacturing Contracts. DRAP does allow contract manufacturing by one manufacturing company for another manufacturing company. It is not allowed between manufacturers and non-manufacturers.
Some conditions are to be met. Toll manufacturing is allowed for dedicated sections such as cephalosporins, penicillins, hormones etc. These are not life time kind. The understanding is that the contract giving company shall establish their own dedicated section in about three years’ time. Toll manufacturing would cover that period. This may change over time and toll manufacturing contacts may last longer or forever. Several MNCs are getting their products toll-manufactured from local manufacturers and it is indefinite arrangement.
In this scenario, the MA holder is the manufacturer who gives contract for toll; not the one who receives toll contract.
- Promotion Contracts. As the name implies, these contracts are for promotion of products only; not for marketing. Several MNCs have experimented with this model.
The MNC enters into contract with someone who has or can gather a limited number of medical reps. The marketing activities are controlled by the parent company. The Promotion company makes a sales team and assigns them to some or all territories in Pakistan. Their job is to promote the products and achieve sales targets. The promotion company gets a fixed %age of business as their service charges. Sanofi did it in late 1990s with three different promotion companies for selected range of products. Pfizer had engaged a promotion company for some products in the entire country. The jury is still out on the legality of this arrangement.
- Regulatory Contracts. Regulatory contracts are done to provide regulatory services. These are officially recognized in many countries. The consultants, individual and groups offer regulatory assistance for company and product registration. This involves dossier preparation, other documents preparation, submission to regulatory authorities and following up till the registration is granted. Lately, some individuals offer DRAP liaison services to several companies simultaneously. DRAP sees it but has not stopped it as yet. In this case also, it will be better to regularize this service and bring it under regulations.
Contracts are critically important and must be done very carefully. The BD is involved in most of these, but they are well-advised to move along with a team so that all aspects are covered, and the company interests do not get hurt just because some clause was ignored.
To be Continued……