A Loan License is a regulatory provision under the Drugs and Cosmetics Act, 1940 (D&C Act) and the Medical Device Rules, 2017 (MDR 2017) that allows a stakeholder to manufacture medical devices or drugs at a facility owned by another licensed manufacturer. This concept is particularly beneficial for businesses that do not own a manufacturing unit but wish to produce and market medical devices in compliance with regulatory requirements.
Definition of Loan License
As per the D&C Act and Medical Device Rules, a Loan License refers to a license granted to an applicant who intends to manufacture medical devices at a premise that is already licensed to another entity. The applicant does not own the facility but utilizes it under a formal agreement with the existing licensed manufacturer.
Meaning and Purpose of Loan License
A Loan License allows an entity to legally manufacture medical devices without establishing its own production facility. It is an ideal solution for:
- Startups and small businesses looking to enter the market without heavy infrastructure investment.
- Companies with limited resources that prefer outsourcing manufacturing.
- Foreign manufacturers aiming to produce medical devices in India without setting up a local plant.
- Existing manufacturers looking to expand their product portfolio without additional capital expenditure.
When Should a Stakeholder Opt for a Loan License?
A stakeholder may choose to obtain a Loan License in the following scenarios:- No Own Manufacturing Facility: When a company does not have its own infrastructure but wants to manufacture medical devices.
- Cost-Effective Strategy: To avoid high capital costs associated with establishing a new manufacturing unit.
- Regulatory Compliance Ease: When utilizing an already compliant and approved facility helps in faster product approvals.
- Market Entry Strategy: When a foreign company wants to enter the Indian market without setting up its own plant.
- Expansion of Product Line: When a company wants to diversify its product offerings without modifying or expanding its existing facility.
Conditions for Obtaining a Loan License
To obtain a Loan License under Medical Device Rules, 2017, the following conditions must be met:- Valid Agreement with a Licensed Manufacturer: The applicant must have a formal agreement with an existing licensed manufacturer who owns the production facility.
- Application to the Licensing Authority: The applicant must submit an application in the prescribed format (as per MDR 2017) to the appropriate licensing authority.
- Compliance with QMS and Quality Standards: The facility must comply with the Good Manufacturing Practices outlined in the Quality Management System under ISO 13485.
- Approval of Product and Labeling Requirements: The products to be manufactured must comply with the labeling and regulatory approval norms.
- Regular Inspections and Audits: The licensed facility must be open to periodic inspections to ensure compliance with regulatory norms.
Objectives Behind the Loan License Concept
The primary objectives behind the Loan License system include:- Encouraging Small and Medium Enterprises (SMEs): Allowing businesses to operate without the burden of high capital investments.
- Fostering Contract Manufacturing: Promoting a business model where experienced manufacturers can produce devices on behalf of other stakeholders.
- Regulatory Control: Ensuring that all medical devices manufactured under a Loan License comply with safety and quality regulations.
- Facilitating Market Growth: Providing an entry pathway for startups and foreign manufacturers into the Indian market.
- Ensuring Product Availability: Meeting market demand by allowing more players to produce devices without setting up new facilities.
The Loan License provision under the D&C Act and Medical Device Rules serves as a crucial regulatory tool that enables companies to manufacture medical devices at approved facilities without having to invest in infrastructure. It is a strategic option for businesses looking to enter or expand within the Indian medical device industry while ensuring regulatory compliance and cost-effectiveness. Stakeholders must carefully assess their requirements, ensure compliance with applicable regulations, and establish a clear agreement with the licensed manufacturer before applying for a Loan License.
Loan License vs Manufacturing License
Loan License
A Loan License allows an entity to manufacture at another company's facility.
Manufacturing License
A Manufacturing License requires ownership of a facility for manufacturing the product.
A Loan License is for entities that do not have manufacturing facilities, while a Manufacturing License is required for facilities owned by the license holder.
Loan License
The Licensee is accountable for post-market surveillance, recalls, and regulatory reporting.
Manufacturing License
The Manufacturer is responsible for the same aspects, including regulatory compliance and post-market surveillance.
Both licenses require compliance with vigilance, but the responsibility lies with the Licensee or Manufacturer, depending on the type.
Loan License
Startups, SMEs, and foreign manufacturers entering the market without investing in facilities.
Manufacturing License
Companies with long-term production goals and infrastructure for manufacturing their products.
Loan Licenses are ideal for smaller entities or those new to the market, while Manufacturing Licenses suit established companies with infrastructure.
Loan License
The Licensee relies on the facility's approved status for regulatory compliance.
Manufacturing License
The Manufacturer is directly responsible for regulatory compliance and quality management.
The regulatory responsibility is shared but is more direct for the Manufacturing License holder.
Loan License
Manufactured by (equivalent to Legal Manufacturer) and Manufactured At (Actual manufacturing site). Both must include License Number and Address. If for Sterilization, the label must state 'Sterilized At' with license details.
Manufacturing License
Label must include Manufacturer Name, Address, and License Number.
Loan License holders must clearly identify the actual manufacturing site, while full manufacturers display only their own details.
Points to Remember
- Loan License enables quick market entry without owning a manufacturing setup.
- Product vigilance and regulatory compliance are solely the responsibility of the Loan Licensee.
- Manufacturing Licenses provide greater control but require investment in infrastructure.
- Both licenses must comply with regulatory frameworks as defined in Medical Device Rules 2017 or notified by central government time to time.
- Choosing between a Loan and Manufacturing License depends on business goals and resources.
- Loan License labeling must include both the legal manufacturer and the actual production site.
