I don't know if you've noticed, but it seems that the streets are full of pharmacies right now.
For example, there is one on the left and one on the right at the entrance of my community, and if the distance is relaxed, there are more than 10 pharmacies within a radius of 500 meters.
Many people may also be curious, saying that the business of physical stores is not good now, but why are more and more pharmacies opened?
Is it really that profitable to open a pharmacy?
It's all about the data.
You may pay more attention to the kind of drink shops, which are all over the streets and alleys, and there are certainly not a few.
Relevant data shows that as of August 2023, the number of all new tea stores in China, including brands such as Heytea, Mixue Bingcheng, and Naixue's tea, is only 515,000.
And what about pharmacies?
According to data from Zhongkang CMH, as of May 2023, the total number of pharmacies holding the "Drug Business License" in the country exceeds 640,000.
In other words, there are more than 100,000 more pharmacies on the street than there are drink shops frequented.
There must be some people who can't figure it out, whether it's milk tea or fruit tea, no matter how you say it, it's a market with strong demand for daily consumption, and it's not uncommon for consumers to buy a cup a day, or even drink a cup in the morning and evening.
But no one can buy medicine every day, right?
However, the fact is that in 2022, the sales scale of the national new tea beverage market will exceed 290 billion yuan, while in the same year, the sales volume of the national retail pharmacy market will be about 542.1 billion yuan, a year-on-year increase of 10.2%, reaching the highest rate in the past five years.
Among them, in December 2022 alone, the retail pharmacy market showed explosive growth in a single month, with monthly sales exceeding 80 billion yuan, a year-on-year increase of 82%.
Sales Breakdown of Retail Pharmacies Nationwide in December 2022 Data source: Zhongkang CMH
Why is the pharmacy business so hot?
It all started with a 2017 document.
First popularize a concept, domestic drug retail terminals are mainly divided into public hospitals, primary medical institutions and retail pharmacies.
Forecast of China's pharmaceutical retail market by channel
Before 2017, more than 60% of patients were in large hospitals or primary medical institutions to see doctors and buy medicines.
However, in that year, the state issued the "Notice on Comprehensively Promoting the Comprehensive Reform of Public Hospitals", which clearly stipulated that from September 30, 2017, drugs sold by public hospital pharmacies must achieve zero price difference and zero markup.
This means that the hospital can only buy and sell the drugs for as much as they want, and the hospital is not allowed to make the difference in price.
In fact, this is a supplement to the "Guiding Opinions on Promoting the Healthy Development of the Pharmaceutical Industry" promulgated by the state in 2016.
In that document, it was clearly stated that hospitals should prescribe drugs to patients according to their generic names, and prohibited restrictions on the outflow of prescription drugs to protect patients' right to choose drugs.
You must know that when patients buy medicine in the hospital, they don't buy vegetables in the vegetable market, they do whatever they want, they buy medicine honestly according to the doctor's prescription.
No matter how expensive it is, anyway, the doctor prescribes it, so you have to buy it.
It's not wrong to buy medicine according to the prescription, after all, what kind of disease to take what medicine.
But as a result, doctors have great power to prescribe medicines, and there are many opportunities for corruption, which have been criticized by countless people.
In the era of "medicine for medicine", hospitals can sell drugs at a 15% mark-up, and doctors also get rebates privately by prescribing.
For the common cold, some doctors prescribe a cold medicine of more than 10 yuan, and the same medicine can cure the disease; but a small number of doctors deliberately prescribe a lot of expensive medicines that they do not need to take, and take a commission from them, thus damaging the image of the "angel in white."
Hospitals only sell "affordable drugs", and the decentralization of prescription power, which is now familiar with the system of separation of medicines, is fundamentally to fully protect the rights and interests of patients and eliminate the corresponding problem of pharmaceutical corruption.
In the early years, pharmacies could only sell OTC (over-the-counter) medicines
At that time, most pharmacies could only sell OTC (over-the-counter) drugs.
Since there is no urgent need for prescription drugs, many pharmacies rely on low-cost medical insurance drugs to attract traffic, sell high-margin OTC, and even rely on selling non-drugs such as "rice, flour, grain and oil" to maintain profits.
The introduction of the pharmaceutical separation system is equivalent to the state cutting a big cake from the pharmaceutical market with a scale of over one trillion yuan and sending it to downstream pharmacies, which is tempting to look at.
Stimulated by the "law of true fragrance", all kinds of capital have gone down, and there are naturally more and more pharmacies, and most of them appear in the form of chain stores, and the effect is also very significant.
According to the "Statistical Communiqué on the Development of National Medical Security Development" released by the National Health Insurance Administration, from 2018 to 2022, the medical expenses mainly spent on drugs purchased in retail pharmacies increased from 164.5 billion yuan to 248.441 billion yuan, and the proportion of total medical expenses also increased from 13.55% to more than 15%.
In 2018, the number of pharmacies in the country was about 500,000, and by 2022, it has soared to about 620,000, an increase of more than 100,000 in four years, mainly chain stores.
Friends who live in the city may notice that there are many chain brand pharmacies on the street.
Medicines are no better than other commodities, and not just any store dares to sell them.
Consumers naturally choose those chain stores with brands, at least with a sense of trust.
At the same time, branded pharmacies also mean a better supply chain and more professional management.
Therefore, the first thing that capital is eyeing is pharmacies that have brands or have some influence in the local area, or investment or mergers and acquisitions, and finally form a scale effect, commonly known as "horse racing".
The listed chain pharmacy companies that everyone is familiar with have more than 10,000 stores in their hands.
There are so many chain stores because the capital behind the pharmacy does not make money by selling drugs, but through continuous mergers and acquisitions, bringing high valuation in the capital market.
Because of this, the capital behind other chain pharmacies is not to be outdone, and they have joined the ranks of opening stores while merging and merging, so that there are so many pharmacies today.
There was a period of time when various chain pharmacies were competing to open, and sometimes two pharmacies not far apart would open on the same day.
In 2020, 22,000 new pharmacies were opened in China, and in 2021, 33,100 new pharmacies were opened.
In order to limit the opening of pharmacies too densely, many cities also stipulate the distance between pharmacies.
For example, the distance between pharmacies in Sanya is 100 meters, in Shanghai is 300 meters, and so on.
Fundamentally speaking, what attracts capital to frenzied mergers and acquisitions and store openings is the major changes that are taking place in pharmaceutical policies.
In 2019, as the basic sales of centrally purchased drugs are shrinking at a rate of 50% per year, the pharmaceutical retail industry actually undertakes more than 55% of the prescription drug distribution market.
More importantly, a series of reform measures, such as the national medical insurance negotiation, the "dual channel" of innovative drugs (that is, innovative drugs that can be purchased in qualified pharmacies), and the inclusion of pharmacies in medical insurance reimbursement by "outpatient co-ordination" have been implemented one after another.
New policies continue to be superimposed, which continues to benefit pharmacies
Within the hospital, on the one hand, the proportion of inpatient medication has dropped from about 80% in the past to 46%, and it is still decreasing; on the other hand, the amount of outpatient medication has surged, and with the blessing of medical insurance payment, the long-standing drug structure of the hospital has changed.
At the same time, large pharmaceutical companies affected by centralized procurement have shifted their drug marketing focus from hospitals to chain pharmacies as early as after the introduction of the drug separation policy.
And all these policy changes will become the incremental income of social pharmacies, and it is also a direct driving factor for more and more pharmacies today.
But for chain pharmacies, this piece of "fat" is not easy to swallow.
Although the policies are favorable, there are many pharmacies, which also makes the competition between them more and more fierce.
Many people may think that to open a pharmacy, the owner must be a doctor, and it also requires a lot of related procedures, which may be very troublesome.
But this is not the case, and the threshold for opening a pharmacy is not as high as imagined.
Opening a pharmacy may not be as difficult as you think
A pharmacy can be opened as long as the owner holds a graduation certificate and relevant documents from a first-class health school, the decoration meets the industry standards of the pharmacy, and passes the approval of the relevant departments, which is not much more troublesome than opening a bubble tea shop.
In order to increase turnover, "open a store to send eggs", "full promotion", "0 yuan exchange" ...... Pharmacies offer a wide range of tools to provide free blood pressure, blood sugar tests and other services to keep customers coming back.
For pharmacies, there are also multiple ways to make profits.
In addition to recommending prescription drugs and OTC drugs with higher profits, general pharmacies also sell products such as daily necessities, health products, and health care equipment.
From a marketing point of view, pharmacies selling conventional drugs can only be regarded as drainage, and they want to make money by relying on high value-added goods.
But the real problem is that more and more pharmacies are opened, but the money may not be easy to make, or it is still impossible to "grab" the hospital.
The most important way to make money from selling drugs is to rely on prescription drugs, especially drugs for chronic diseases: first, this is the rigid need of patients, and secondly, because such drugs must be taken frequently, and the repurchase rate is high.
Although the hospital has decentralised the right to prescribe, since patients can buy "affordable drugs" directly in the hospital after seeing the doctor, why should they come to pharmacies that may have to increase the price to buy medicines?
The reality is often that patients get their prescriptions and go straight to the hospital pharmacy after waiting in a long line at the hospital to see a doctor, rather than going to the pharmacy at their doorstep to buy their medicine.
For most patients, the first choice for medical treatment is the pharmacy of the hospital
In particular, many of the people who buy medicine are middle-aged and elderly people, who have long been Xi to seeing a doctor in the hospital and buying medicine, and the pharmacy is only the choice after some minor problems occur.
At the same time, hospital prescriptions that are detached from the hospital environment, even if they are designated pharmacies that are included in the outpatient co-ordination, may have a variety of medical insurance violations, which makes the regulatory authorities very uneasy.
Not only that, due to the high management and personnel costs of chain pharmacies, the net profit margin of chain pharmacies in the past few years has only averaged about 5%, which means that the net profit of 1 million yuan is only 50,000 yuan.
It's good to be profitable, but many chain pharmacies have been losing money.
According to the survey of China Pharmacy Value List, in 2021, more than 40% of the sales of large chain pharmacies will grow by less than 5%, of which 18.18% will be negative.
National retail pharmacy sales trends from 2020 to 2022
This situation is also normal, because the capital store is based on the advantages of the capital market through economies of scale, and does not consider the problems caused by the excessive number of stores.
Anyway, the capital market is making money, so it's a big deal to close the unprofitable store and try the next one.
Not only pharmacies, but also many consumer chain stores in China are opening and closing quickly, almost all of which are due to this reason.
Internationally, the ratio of general pharmacies to population is 6,000:1, and in China it is already 3,000:1
At present, there has been a serious surplus of pharmacies in China, and according to international practice, there is generally an average of one pharmacy for every 6,000 people, while China currently has an average of one pharmacy for every 3,000 people, and Chengdu and other cities have reached an average of one pharmacy for every 1,800 to 2,000 people.
So much so that some foreigners are very puzzled after coming to China: Do Chinese love to be sick so much?
Of course not!
The increasing number of pharmacies in China is largely due to the objective reality that the capital behind it has been fueling the flames after the implementation of the pharmaceutical separation system.
The increase in pharmacies has indeed brought certain convenience to people seeking medical advice, and the opening of pharmacies is not comparable to other transactions, and it has been a serious business that benefits people's livelihood since ancient times.
If you want to make huge profits from this, not only the market, but also from the conscience, you shouldn't.