Step 1: Understanding the Concept:
The Drugs and Cosmetics Act provides for different types of manufacturing licenses. A "Loan License" is designed for individuals or companies who have the technical knowledge and raw materials to make a drug but do not own their own factory.
Step 2: Detailed Explanation:
1. Arrangement: The applicant (the "loan licensee") applies to the state licensing authority to use the manufacturing facilities of another existing licensed manufacturer.
2. Responsibility: Even though the physical factory belongs to someone else, the loan licensee is responsible for the quality and testing of the drug under their own name.
3. Requirement: The primary licensee (owner of the factory) must have spare capacity and valid GMP certifications to accommodate the loan licensee.
Step 3: Final Answer:
A loan license refers to the legal provision where one person manufactures drugs using the infrastructure of another person who already holds a valid manufacturing license.