Zhejiang established the first non-profit drug joint procurement center in China

Published:

2014-10-06


On August 18, more than 50 drugstore chiefs from 11 cities in Zhejiang Province gathered in Hangzhou to officially establish the "Zhejiang Pharmaceutical Retail (Chain) Enterprise Joint Procurement Center", and decided to collectively invite bids from pharmaceutical manufacturers to reduce costs and seek new development space. This is the first non-profit drug joint procurement center in Zhejiang Province and even in China. According to insiders, this indicates that the pharmacy industry has shifted from passive price reduction to "active attack".
Pharmacy development has reached the freezing point
Lin Zhenhua, the general manager of Hangzhou Buyi Pharmacy, one of the initiators of this drug joint procurement center, told the reporter that since 2002, the competition in the drug retail market has become increasingly fierce, and the price war has erupted everywhere. The drug price difference is shrinking, the gross profit is declining, the pharmacy operation is getting worse and worse, and the drug retail enterprises have entered an unprecedented difficult situation.
Take Hangzhou as an example. There are more than 1000 pharmacies in Hangzhou. However, in the first half of this year, more than 160 pharmacies applied to Hangzhou Food and Drug Administration for cancellation, not including those that have actually closed down but have not been reported to the SFDA. "After several years of price reduction, the drug price in Hangzhou has reached the freezing point. In addition, in the early stage, the drug price was reduced mainly because the drugstore was giving way to profits. Now it is time for the drugstore to 'fight back'." Chen Chunqin, one of the members of the Joint Procurement Center and the deputy general manager of East China Pharmacy, said. The most difficult time is when we should unite. Therefore, many drugstore bosses have come up with the idea of cooperation among peers and joint procurement.
It is estimated that 1.5 billion yuan will be purchased jointly each year
In 2005, many large affordable pharmacies developed in depth to small and medium-sized cities, and a new round of price war will inevitably impact small and medium-sized retail enterprises. What should small and medium-sized enterprises that already have low profits do? For small and medium-sized drugstores that do not want to be victims, the only way to save themselves is to unite.
Lin Zhenhua, general manager of Hangzhou Buyi Pharmacy, told the reporter that the purpose of joint procurement is to directly purchase from manufacturers, reduce the purchase price of drugs, and benefit the people. The goal of the Procurement Center is that the annual sales of all members exceed 1.5 billion yuan, and the joint procurement of OTC drugs ranks first in Zhejiang Province.
Lin Zhenhua said that the drugstore, as an inferior enterprise of drug circulation, was exhausted in the trend of price reduction and fierce market competition in recent years. Reducing procurement costs is undoubtedly the most direct and effective way to develop demand. The first group of members of the Joint Procurement Center is more than 50, with a total of more than 1000 stores. The annual sales will exceed 1.5 billion yuan. Such strength is enough to attract most domestic drug manufacturers. The advantages of the joint procurement center are very obvious.
Another important reason for joint procurement is that there is a great disparity between pharmacies and pharmacies. Generally, the annual sales of pharmacies are in the unit of "100 million", while the annual sales of pharmacies reach 10 million yuan. So pharmacy and pharmacy are not on the same platform at all. Only when drugstores unite can they increase their "weight" and negotiate with manufacturers at the same table.
Whether it is effective or not requires market inspection
Among the first 50 members of Zhejiang Pharmaceutical Retail (Chain) Enterprise Joint Procurement Center, only two are pharmacies in Hangzhou. Are other pharmacies waiting or waiting? Liu Lei, general manager of Hangzhou Jiuzhou Pharmacy, told the reporter that the issue of joint procurement has been discussed within the industry for several years. The reason why there has been no action is that many specific operational details have not been resolved, such as the main issue of joint procurement, the use of warehouses, and related laws and regulations. Now we have pioneers. I hope they can succeed and bring new development space to Hangzhou pharmacy.
Mao Hailuo, the director of the Fanghuichuntang Traditional Chinese Medicine Museum in Hangzhou, believes that the establishment of the Joint Procurement Center is a positive thing. He said that this shows that Zhejiang pharmacies are trying to find a breakthrough and seek new development. However, the development of everything should follow the market rules. In particular, medicine is a special commodity, which is different from household appliances such as mobile phones. We should consider whether it is suitable for group buying. On the other hand, from the perspective of pharmaceutical factories, besides pharmacies, manufacturers have to face some large pharmacies other than joint procurement centers, as well as hospitals that account for the largest share of the drug market. If the joint purchasing center is given a low price, how does the manufacturer treat other trading partners? More than 50 members are loose groups without legal constraints. Who leads the negotiation? Do other members trust them? These are all problems that need to be discussed again.  
Although there are still many questions, it is certain that the pharmaceutical industry is currently in the most competitive stage and the most difficult transformation process. It is believed that after this stage, after a series of waves, it will enter a new stage of development.
 

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