Abstract: In recent years, the number of pharmacies in mainland China has continued to increase. In 2022, the total number of pharmacies in the country has exceeded 623,000. The chaining rate of pharmacies in mainland China has also increased year by year, increasing to 56.68% in 2022. In terms of the regional distribution of pharmacies, the number of pharmacies in Guangdong Province tops the list, with 62,197 pharmacies in 2022.
1. Definitions and Classification
Pharmacies usually refer to retail drug stores or stores, which are operated by enterprises that have obtained the "Drug Business License" in accordance with the law. The main function of a pharmacy is to provide patients with the medicines and other medical services they need, such as pharmacy consultations, etc. The pharmacy industry can be classified according to the business scope, sales channels and types of goods, and can be roughly divided into eight categories: comprehensive pharmacies, specialized pharmacies, Internet pharmacies, chain pharmacies, community pharmacies, hospital pharmacies, import pharmacies, and education and training pharmacies.
Second, the business model
1. Chain store model
The chain business model is mainly divided into two ways: direct chain and franchise chain. Direct-operated chain means that the stores of the chain company are wholly owned or controlled by the company's headquarters and are operated under the direct leadership of the headquarters. The headquarters implements unified management of personnel, finance, materials, and information for each store. Franchising refers to the franchisor's own trademarks, trade names, products, patents and know-how, business models, etc. in the form of a franchise contract to the franchisee to use, the franchisee in accordance with the provisions of the contract, in the franchisor's unified business model to engage in business activities, and pay the franchisor the corresponding fees.
2. Pharmacy trusteeship model
With the advancement of the reform of the medical system and the reform of the drug circulation system, it is an inevitable trend to gradually establish a perfect community health service system and realize the separation of medicine, which has given birth to the pharmacy trusteeship model. Pharmacy trusteeship refers to the fact that medical institutions hand over the pharmacy to a pharmaceutical circulation enterprise with strong operation and management ability and can bear the corresponding risks for paid operation and management in the form of a contract, under the condition that the ownership of the pharmacy does not change. In the custody contract signed between a pharmaceutical commercial enterprise and a hospital, the medical institution will pay a certain percentage of the drug income to the entrusted party, and the rest will be owned by the medical institution.
3. Online pharmacy mode
The online pharmacy model is an e-commerce model that conducts online drug transactions through the Internet, which is a product of the development of modern pharmaceutical e-commerce. Online pharmacies use the Internet as the carrier and offline stores as the basis to open up online and offline channels to enrich consumers' ways to purchase medicines. With the rise of e-commerce platforms, more and more retail pharmacies have begun to explore the "O2O" sales model, where consumers place orders online and offline stores deliver according to the order, maximizing the needs of consumers and improving the consumer experience.
3. Industry policy
1. Competent authorities and regulatory system
Pharmacies belong to the pharmaceutical retail industry, and the competent authorities of the industry include the National Health Commission, the State Administration for Market Regulation, the Ministry of Commerce, and the Ministry of Human Resources and Social Security of the National Development and Reform Commission. The National Health Commission is mainly responsible for promoting the reform of the medical and health system, establishing a national essential drug system and organizing its implementation. The State Administration for Market Regulation is mainly responsible for formulating drug safety supervision and management policies, supervising the research, production, circulation and use of drugs, supervising drug quality and safety, formulating and supervising the implementation of drug business quality management standards. The Ministry of Commerce is mainly responsible for formulating development plans, policies and standards for the drug circulation industry, promoting the structural adjustment of the drug circulation industry, guiding the reform of drug circulation enterprises, and promoting the development of modern drug circulation methods. The National Development and Reform Commission is mainly responsible for the development planning, project filing and approval of the pharmaceutical industry, the macro management and guidance of the economic operation of pharmaceutical enterprises, and the supervision and management of drug prices. The Ministry of Human Resources and Social Security is mainly responsible for the management of medical insurance services in pharmacies, and the admission and review of medical insurance stores.
The industry self-discipline organization is the China Association of Pharmaceutical Commerce, which is mainly responsible for promoting the self-discipline of the pharmaceutical circulation industry, standardizing and improving the rules and regulations of the industry, promoting the standardized operation of the industry, honest service, maintaining and improving the market order, and safeguarding the legitimate rights and interests of the industry, enterprises and members.
2. Industry-related policies
Pharmacies are an important scenario for residents' health consumption, and optimizing pharmacy management is an important way to meet residents' high-quality health consumption. In March 2023, the National People's Congress issued the "Report on the Implementation of the National Economic and Social Development Plan for 2022 and the Draft National Economic and Social Development Plan for 2023", which pointed out that it is necessary to strengthen the production and reserve supply of medical supplies, give full play to the role of large chain pharmacies and Internet platforms, and improve the efficiency of drug production, operation and distribution. Under the guidance of the policy, chain operation and the development of the online market will become the future development trend of the mainland pharmacy industry. In addition, pharmacies are also an important part of the mainland's medical insurance system. In February 2023, the National Healthcare Security Administration issued the "Notice on Further Improving the Inclusion of Designated Retail Pharmacies in the Coordinated Management of Outpatient Clinics", proposing to support designated retail pharmacies to carry out outpatient co-ordination services. This will further activate the consumer demand in the retail pharmacy market and bring a broader development space for retail pharmacies.
Fourth, industry barriers
1. Barriers to business qualifications
Since pharmaceutical products are closely related to the health and safety of consumers, the establishment of pharmaceutical retail enterprises requires obtaining relevant business qualifications such as "Drug Business License" and "Medical Device Business License". When applying for the relevant business qualifications of pharmaceutical retail, enterprises need to have the necessary business premises, equipment, sanitary environment and professional and technical personnel. Due to the many conditions that need to be met to apply for business qualifications, obtaining relevant business qualifications has become one of the important barriers to entering the pharmaceutical retail industry.
2. Barriers to operation and management
In order to ensure the quality and safety of drug circulation, the operation and management of pharmaceutical retail enterprises are faced with a full range of regulatory requirements. The system management, personnel management, operation process, hardware facilities, monitoring methods and other aspects of the industry correspond to comprehensive and specific requirements. In order to realize the relevant functions, it is necessary to invest a lot of resources such as money, equipment, and manpower. At the same time, the large number of stores of pharmaceutical retail chain enterprises requires a high level of informatization and supply chain management capabilities, which puts forward higher requirements for the operation of pharmaceutical retail chain enterprises.
3. Scale and financial barriers
Large pharmaceutical retail enterprises in the pharmaceutical retail industry have relatively strong bargaining power over suppliers, which is conducive to reducing procurement costs and improving profitability. The large-scale operation requires the enterprise to have a strong financial strength as a support, and the unified management mode of chain pharmacies has strict unified standards for store decoration and layout, which requires more costs than general single pharmacies; In the process of operation, there are many types of goods in stores, and commodity reserves need to occupy funds for a long time, and in addition, the logistics platform and information platform also need to be upgraded accordingly. Therefore, capital investment has become one of the important barriers to entering the pharmaceutical retail industry.
Fifth, the industrial chain
1. Analysis of the industry chain
The pharmaceutical industry chain in mainland China mainly includes three links: pharmaceutical manufacturing, pharmaceutical circulation and pharmaceutical consumption. Pharmacies belong to the pharmaceutical circulation link, the upstream is dominated by pharmaceutical manufacturing and health food, and the downstream is patients, general consumers and other consumer groups. The industrial chain of the pharmacy industry is shown in the following figure:
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