Quasi-Drug OEM Development Guide | PMD Act, Approval Process, Timeline & Costs

Quasi-drugs (medicated cosmetics) are a product category defined under Japan's Pharmaceutical and Medical Device Act (PMD Act) that sits between pharmaceuticals and cosmetics. They have a mild effect on the human body and may display specific efficacy claims by incorporating active ingredients designated in advance by Japan's Minister of Health, Labour and Welfare.

The biggest difference between cosmetics and quasi-drugs lies in the scope of permitted efficacy claims. Cosmetics in Japan are limited to 56 abstract claims such as "conditions the skin" or "provides moisture to the skin," while quasi-drugs may display the specific efficacy claims for which they have received approval.

Key efficacy claims permitted for quasi-drugs

• Skin brightening: "Inhibits melanin production and prevents spots and freckles"
• Hair growth / hair nourishment: "Promotes hair growth, prevents hair loss"
• Acne prevention: "Prevents acne" / "Prevents rough and irritated skin"
• Deodorant: "Prevents body odor (axillary osmidrosis)" / "Prevents perspiration odor"
• Wrinkle improvement: "Improves wrinkles" (a relatively new claim added in 2017)
• Dandruff and itch prevention: "Prevents dandruff and itching"
• Sunscreen: "Prevents spots and freckles caused by sunburn"

The ability to make these efficacy claims significantly increases consumer appeal and makes it easier to set higher retail prices. Generally, quasi-drugs can be priced at 1.5 to 3 times the price of an equivalent cosmetic product. An increasing number of D2C brands and salon-exclusive lines are choosing quasi-drug status as a differentiation strategy.

Quasi-drug OEM manufacturing requires multiple licenses under Japan's PMD Act. The license categories differ from those for cosmetics, so it is essential to understand them accurately.

Manufacturing License (held by the OEM manufacturer)

• Quasi-Drug Manufacturing License (General Category): Permits integrated operations from bulk (formulation) manufacturing through filling and packaging. Facility requirements include a dedicated manufacturing room, quality testing laboratory, and raw material storage area.
• Quasi-Drug Manufacturing License (Packaging, Labeling & Storage Category): Permits only packaging, labeling, and storage of pre-filled products. Bulk manufacturing is not allowed under this license.

A manufacturer that holds only a Cosmetics Manufacturing License cannot manufacture quasi-drugs. When selecting an OEM partner, always confirm that they hold a "Quasi-Drug Manufacturing License (General Category)." License numbers are publicly available through each prefecture's pharmaceutical affairs division.

Marketing Authorization (held by the brand owner or distributor)

• Quasi-Drug Marketing Authorization: Obtained by establishing systems for market release decisions, quality management (GQP), and safety management (GVP). A qualified person such as a pharmacist must be appointed as the General Marketing Supervision Manager.

Many D2C brands do not hold their own Marketing Authorization, so they typically use the OEM manufacturer's Marketing Authorization to bring products to market. In this arrangement, the OEM manufacturer bears the legal responsibility for the product, and this is reflected in additional fees. If you plan to scale your own brand long-term, it is worth considering obtaining your own Marketing Authorization. This typically requires a preparation period of 3 to 6 months and the hiring of a regulatory affairs specialist.

To manufacture and sell quasi-drugs in Japan, approval from the Minister of Health, Labour and Welfare must be obtained for each individual product (applications are submitted through prefectural governors). The approval process differs significantly depending on whether the active ingredient has prior approval precedent.

With prior approval precedent (using a previously approved active ingredient)

• When there is a track record of approval for the same active ingredient and the same efficacy claim, approval can be obtained through a relatively simplified process.
• Required documents: Marketing authorization application, specifications and test methods, stability test data, and manufacturing method documentation
• Estimated review period: 6 to 10 months
• If the OEM manufacturer has previously obtained approval for the same formulation, their approval track record can be leveraged for an even faster process.

Novel approval (new active ingredient or novel combination)

• When applying with a new active ingredient or a novel efficacy claim, extensive safety and efficacy data is required.
• Additional required materials: Toxicity test data (single dose, repeated dose, skin sensitization, phototoxicity, etc.), pharmacological test data, and clinical trial data
• Estimated review period: 1 to 2+ years
• Pre-submission consultation with PMDA (Pharmaceuticals and Medical Devices Agency) is recommended. Consultation fees are approximately ¥100,000–300,000 (approx. $670–2,000) per session.

List of key documents required for application

• Quasi-drug marketing authorization application (Form No. 12)
• Documentation on origin, discovery history, and use in foreign countries
• Physical and chemical properties, specifications, and test methods
• Stability data
• Safety data
• Efficacy data (for novel applications)

For those new to quasi-drug OEM development, the most reliable approach is to select an active ingredient with prior approval precedent and work with an OEM manufacturer that has extensive approval application experience.

One of the most important decisions in quasi-drug development is active ingredient selection. Choosing an active ingredient with prior approval precedent significantly reduces the difficulty and timeline of the application process. Below are representative active ingredients organized by efficacy category.

Skin Brightening (Melanin Production Inhibition)

• Tranexamic Acid: Inhibits plasmin activity and suppresses melanocyte activation. Has extensive prior approval precedent and is one of the easiest brightening ingredients to adopt. Typical formulation concentration is 1.0–2.0%.
• Niacinamide (Nicotinamide): Inhibits melanosome transport. Has prior approval precedent for both brightening and "wrinkle improvement" efficacy, enabling dual claims.
• Arbutin (α-Arbutin): Inhibits tyrosinase activity. Typical formulation concentration is 3.0–7.0%.
• Ascorbyl Glucoside (AA2G): A stabilized vitamin C derivative with high stability in aqueous solutions.
• Potassium 4-Methoxysalicylate (4MSK): A unique approach that promotes melanin excretion.

Skin Roughness Prevention / Acne Prevention

• Dipotassium Glycyrrhizinate: An anti-inflammatory ingredient derived from licorice root. Can be incorporated into a wide range of formulations from toners to creams. Maximum allowable concentration is 0.5%.
• Allantoin: Promotes cell proliferation and has anti-inflammatory properties. Ideal for sensitive skin formulations.
• Isopropyl Methylphenol (IPMP): An antibacterial agent effective against P. acnes, the bacterium that causes acne.
• Salicylic Acid: Has keratolytic action. Used in acne prevention products for its peeling effect.

Hair Growth / Hair Growth Promotion

• Swertia Japonica Extract: Promotes blood circulation. A classic ingredient in hair growth products.
• Ginseng Extract: Activates hair matrix cells.
• D-Pantothenyl Alcohol: Promotes hair growth.

Active ingredient selection should be based on a comprehensive assessment of the target efficacy, formulation stability, raw material cost, and ease of approval application. Work closely with the OEM manufacturer's formulation development team to choose the optimal ingredient.

Quasi-drug approval applications require both stability testing to demonstrate product quality and safety testing to confirm safety for human use. These test data are critical evaluation criteria in the approval review process.

Stability Testing

• Accelerated testing: Products are stored at 40°C ± 2°C and 75% ± 5% relative humidity for 6 months. Appearance (color, odor), pH, viscosity, and active ingredient content are measured periodically. Data is typically collected at the start, 1 month, 3 months, and 6 months.
• Long-term storage testing: Products are stored at 25°C ± 2°C and 60% ± 5% relative humidity for 3 years (this provides the basis for setting the product's shelf life). A minimum of 6 months' data is required at the time of application, but testing continues after submission for the remaining period.
• Temperature cycling test: Repeated cycles between -5°C and 40°C to check emulsion stability and whether creams separate. This is especially important for emulsion formulations (lotions, creams).
• Photostability testing: Products are exposed to total illumination of at least 1.2 million lux·hr and total near-ultraviolet radiation of at least 200 W·hr/m² to evaluate active ingredient degradation or discoloration.

Safety Testing

• Patch test (human patch test): The product is applied to the inner upper arm or back of test subjects under occlusion for 24–48 hours to evaluate skin irritation. Typically conducted with 20–50 subjects. Cost: approximately ¥300,000–600,000 (approx. $2,000–4,000).
• RIPT (Repeated Insult Patch Test): Evaluates sensitization (allergic potential) through repeated application. Nine applications over a 3-week induction period, followed by a 2-week rest period, then re-application to check for reactions. Requires 50+ subjects; cost is approximately ¥500,000–1,000,000 (approx. $3,300–6,700).
• Stinging test: Evaluates sensory irritation such as tingling and itching in subjects with sensitive skin. Recommended for products marketed to sensitive skin users.
• Eye irritation test: Required for products used around the eyes (such as eye creams).

These tests are typically outsourced to contract testing laboratories. OEM manufacturers can often introduce you to their partner testing labs for a smoother process. The total cost for all tests is approximately ¥300,000–800,000 (approx. $2,000–5,300), though costs increase as more test items are added.

Quasi-drug OEM manufacturing requires 12 to 18 months from planning to launch, longer than standard cosmetics due to the addition of the approval application process. Below is the standard schedule for each phase.

Phase 1: Planning & Formulation Design (1–2 months)

• Product concept development and target market definition
• Efficacy claim selection and active ingredient determination
• OEM manufacturer selection and contracting

Phase 2: Formulation Development & Prototyping (2–3 months)

• Base formulation selection or new formulation development
• Prototype creation and sensory evaluation (texture, feel, fragrance)
• Typically 3–5 rounds of formulation revisions

Phase 3: Stability & Safety Testing (6–8 months)

• Accelerated testing (6 months): Begins immediately after formulation finalization
• Patch tests and RIPT tests conducted in parallel (2–3 months)
• Specification and test method establishment and validation
• This is the longest phase and represents the bottleneck for the overall schedule

Phase 4: Approval Application & Review (6–10 months)

• Preparation and submission of approval application documents
• Review by the prefectural pharmaceutical affairs division
• Response to inquiries (additional questions from reviewers)
• With a prior-approved ingredient and few inquiries, this can take about 6 months; with many inquiries, 10+ months is possible

Phase 5: Production Preparation & Manufacturing (1–2 months)

• After approval is obtained: procurement of containers and packaging materials
• Finalization and printing of package design
• Bulk manufacturing → filling → packaging → quality inspection

A key point is that Phase 3 and Phase 4 can partially overlap. The approval application can be submitted once the 6-month accelerated test data is available, while long-term storage testing continues after submission. This parallel approach can shorten the overall schedule by 2 to 3 months. Coordinate with the OEM manufacturer in advance to identify which phases can run concurrently.

The cost of quasi-drug OEM manufacturing is higher than for standard cosmetics. Below are the major cost items and their typical ranges.

Approval Application Costs

• Application preparation service fee: ¥500,000–1,500,000 (approx. $3,300–10,000). Includes document preparation, liaison with authorities, and responding to review inquiries. Costs vary depending on whether the OEM manufacturer handles this in-house or outsources to a regulatory consultant.
• Application fee (prefectural): Approximately ¥30,000–50,000 (approx. $200–330), varies by municipality
• PMDA pre-submission consultation fee: ¥100,000–300,000 (approx. $670–2,000) per session (required for novel ingredients)

Testing Costs

• Stability testing (accelerated + long-term storage): ¥100,000–300,000 (approx. $670–2,000)
• Patch test: ¥300,000–600,000 (approx. $2,000–4,000), varies by number of subjects
• RIPT test: ¥500,000–1,000,000 (approx. $3,300–6,700)
• Specification testing and analytical fees: ¥50,000–150,000 (approx. $330–1,000)
• Estimated total testing costs: ¥300,000–800,000 (approx. $2,000–5,300)

Formulation Development & Prototyping Costs

• Formulation development fee: ¥100,000–300,000 (approx. $670–2,000). Lower when based on the OEM manufacturer's existing formulations; higher for fully custom development.
• Prototyping fee: ¥30,000–80,000 (approx. $200–530) per round (typically 3–5 rounds)

Manufacturing Costs (Production Run)

• Minimum order quantity (MOQ): 1,000–3,000 units is typical
• Per-unit manufacturing cost: ¥200–500 (approx. $1.30–3.30) for 30–50 mL products
• For a 3,000-unit lot, total manufacturing cost: ¥600,000–1,500,000 (approx. $4,000–10,000)
• Container and packaging material cost: ¥50–200 (approx. $0.33–1.30) per unit

Total Cost for a First Project

• Initial costs (application + testing + development): ¥1,500,000–3,500,000 (approx. $10,000–23,000)
• Production costs (3,000 units): ¥750,000–2,100,000 (approx. $5,000–14,000)
• Estimated total: ¥2,500,000–5,500,000 (approx. $17,000–37,000)

While a standard cosmetics OEM project can be started for approximately ¥1,000,000–2,000,000 (approx. $6,700–13,000), quasi-drugs cost 2–3 times more. However, the ability to set higher retail prices means that medium- to long-term ROI is well within reach.

In quasi-drug OEM development, manufacturer selection is even more critical to success than in standard cosmetics. Evaluate potential partners on the following criteria.

Approval Application Support Capabilities

• Does the manufacturer have a dedicated in-house regulatory affairs department? Manufacturers with in-house regulatory staff tend to be faster and more accurate than those that outsource entirely to external regulatory consultants.
• Check their track record of approvals. Manufacturers with 10 or more approvals per year have accumulated significant know-how in dealing with regulatory authorities.
• Manufacturers experienced in responding to review inquiries (additional questions during the review process) can navigate the approval process more smoothly.

Number and Variety of Existing Approved Products

• The number of products an OEM manufacturer has already obtained approval for is an important indicator. If the formulation is similar to an already approved product, a faster application leveraging prior approval precedent is possible.
• Specifically confirm whether they have approval track records in the efficacy categories you are targeting, such as skin brightening, acne prevention, or hair growth.

R&D Capabilities and Equipment

• Manufacturers with their own R&D laboratories that can handle everything from formulation development to stability testing in-house tend to have shorter lead times and lower costs than those that rely heavily on outsourcing.
• Check whether they own analytical instruments (HPLC, UV spectrophotometer, viscometer, etc.). Outsourcing specification testing adds both cost and time.

Availability of Marketing Authorization

• If your company does not hold its own Quasi-Drug Marketing Authorization, confirm whether you can use the OEM manufacturer's authorization. In this case, the manufacturer bears market responsibility for the product, which results in additional fees.

Communication and Transparency

• Do they provide regular progress reports on the approval application? For a long-term project, having a monthly progress-sharing process provides peace of mind.
• Do they clearly present cost breakdowns and consult in advance when additional costs arise? Since quasi-drug projects are prone to unexpected additional testing, choosing a transparent manufacturer is critical.

For your first quasi-drug development, it is strongly recommended to consult with multiple OEM manufacturers and compare the scope and cost of their approval application support. It is not uncommon for the manufacturer's capability to make a difference of several months in the review timeline.