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Zhejiang established the nation's first non-profit joint drug procurement center

Published:

2014-10-06

　　On August 18, more than 50 pharmacy owners from 11 cities in Zhejiang Province gathered in Hangzhou to officially establish the "Zhejiang Province Pharmaceutical Retail (Chain) Enterprise Joint Procurement Center," deciding to collectively tender to pharmaceutical manufacturers to reduce costs and seek new development opportunities. This is the first non-profit joint pharmaceutical procurement center in Zhejiang Province and even nationwide. Industry insiders say this marks a shift in the pharmacy industry from passive price reductions to "active offense."

Pharmacy development has reached a freezing point

　　Lin Zhenhua, general manager of Hangzhou Buyi Pharmacy and one of the initiators of the joint pharmaceutical procurement center, told reporters that since 2002, competition in the pharmaceutical retail market has intensified, with price wars breaking out across regions. The price differences of medicines are narrowing, gross profits are declining, pharmacy operations are worsening, and pharmaceutical retail enterprises have entered an unprecedented difficult situation.

　　Taking Hangzhou as an example. There are more than 1,000 pharmacies in Hangzhou, but in the first half of this year, more than 160 pharmacies applied to cancel their licenses at the Hangzhou Food and Drug Administration, not including those that have actually closed but have not reported to the municipal drug supervision bureau. "After several years of price cuts, drug prices in Hangzhou have reached a freezing point, and the earlier price reductions were mainly pharmacies making concessions. Now it is time for pharmacies to 'fight back from the brink,'" said Chen Chunqin, deputy general manager of East China Pharmacy and a member of the joint procurement center. The most difficult times are when unity is needed. Therefore, many pharmacy owners coincidentally thought of cooperating with peers for joint procurement.

Expected joint procurement of 1.5 billion yuan per year

　　In 2005, many large discount pharmacies expanded into small and medium-sized cities, and a new round of price wars will inevitably impact small and medium-sized retail enterprises. What should small and medium-sized enterprises with already thin profits do? For small and medium-sized pharmacies that do not want to become victims, the only way to save themselves is to unite.

　　Lin Zhenhua, general manager of Hangzhou Buyi Pharmacy, told reporters that the purpose of joint procurement is to purchase directly from manufacturers, reduce the purchase price of medicines, and benefit the public. The goal of the procurement center is for all members to achieve annual sales exceeding 1.5 billion yuan, making it the top OTC drug joint procurement in Zhejiang Province.

　　Lin Zhenhua said that pharmacies, as downstream enterprises in drug distribution, have been exhausted by the recent price-cutting trend and fierce market competition. Reducing procurement costs is undoubtedly the most direct and effective way to meet development needs. The first batch of more than 50 members of the joint procurement center, with over 1,000 stores and annual sales exceeding 1.5 billion yuan, has enough strength to attract most domestic pharmaceutical manufacturers, making the advantages of union very obvious.

　　Another important reason for joint procurement is the imbalance of power between pharmacies and drug manufacturers. Generally, drug manufacturers have annual sales in the billions, while pharmacies reaching tens of millions in annual sales is already remarkable. Therefore, pharmacies and manufacturers are not on the same platform. Only by uniting can pharmacies increase their "weight" and negotiate at the same table with manufacturers.

Whether it is effective still needs market verification

　　Among the first batch of more than 50 members of the Zhejiang Province Pharmaceutical Retail (Chain) Enterprise Joint Procurement Center, only two are pharmacies from Hangzhou. Are other pharmacies watching or waiting? Liu Lei, general manager of Hangzhou Jiuzhou Pharmacy, told reporters that the issue of joint procurement has been discussed within the industry for several years. The main reason for the lack of action has been many unresolved operational details, such as the main body of joint procurement, warehouse usage, and related laws and regulations. Now that there are pioneers, they hope they will succeed and bring new development opportunities to Hangzhou pharmacies.

　　Mao Haiwu, director of Hangzhou Fanghuichuntang Traditional Chinese Medicine Hall, believes that the establishment of the joint procurement center is commendable. He said this shows that pharmacies in Zhejiang are striving to find breakthroughs and seek new development. However, any development must follow market rules. Especially since medicines are special products, different from household appliances like mobile phones, it is necessary to consider whether group buying is suitable. On the other hand, from the manufacturers' perspective, besides pharmacies, they also face some large pharmacies outside the joint procurement center and hospitals that hold the largest market share of medicines. If the joint procurement center is given low prices, how will manufacturers treat other trade partners? The more than 50 members are a loose group without legal constraints. Who leads the negotiations, and do other members trust them? These are issues that need further discussion.

　　Although there are still many questions, it is certain that the pharmaceutical industry is currently in the most intense competition phase and the most difficult transformation process. It is believed that after this stage, after a thorough selection, it will enter a brand-new development phase.

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