Measures regarding the Administration of Food and Drug Operation and Supervision over the Internet, Alibaba, yhd.com, Jingdong, S.F. Express, Sinopharm, Shanghai Pharma, Jointown
The "market anti-driving mechanism" has become a hot word in recent years; there are 28 million results found through Baidu search. And the issuance of the Measures regarding the Administration of Food and Drug Operation and Supervision over the Internet (Draft for Comments) issued by China Food and Drug Administration (CFDA) in May 2014 even broken the nearly 2-decade iron triangle monopoly of medical representative, hospital and retail pharmacy for the e-commerce. As revealed by a staff member of Shanghai Municipal Food and Drug Administration, CFDA will announce that over 200 varieties of prescription drug can be tried network sales by the end of 2015 at the soonest, and a one-trillion-level prescription drug market is being opened.
The "strangulation" participated in by the Internet capitals as of 2015 will shock the entire interests chain of the pharmaceutical products. And I would like to specifically describe the layout of each interest camp below.
I. Online third party pharmaceutical product operating platform Representative: Alibaba system (B2B)
Function: Providing a platform and strategic layout guidance for third party network pharmaceutical product sales enterprises
Alibaba obtained the third party network pharmaceutical product trading platform certificate, commonly known as "Certificate A" from the acquisition of CITIC 21CN, to meet the requirement of Article 23, Chapter IV of the Measures regarding the Administration of Food and Drug Operation and Supervision over the Internet (Draft for Comments). Its Ali Health prescription drug e-platform and Tmall Medicine Museum have gone live in recent years, wherein, the later achieved a sales volume of 1 billion in 2014 by depending only on health care products, OTCs and contraception products.
The traditional advantages of Ali in network platform operation enable its Tmall Medicine Museum to gather a large number of small companies possessing online pharmaceutical product sales qualification, just like the sellers in Tmall, of which the main sales businesses are not implemented in first-tier cities, but in second-tier and third-tier cities. And Ali Health (code HK0241) listed by Ali in Hong Kong even puts the work focus on the street hospitals of second-tier and third-tier cities, and the hospital pharmacy channel cooperation linking up of second-class hospitals.
An insider of Ali Health pointed out: Do not count on directors of 3A-grade hospitals to easily give up their "traditional interests" in hospital pharmacy. Hospitals of second-tier and third-tier cities must be preferentially conducted layout; implement the e-prescription and project of pharmaceutical product distributed to home, through using the characteristic that the street second-class hospitals are small in capacity and are more willing to cooperate with capitals, so as to affect 3A-grade hospitals to "surrender part of the profits" in hospital pharmacy. And the Medicine Museum is a pioneer to open the market.
Objective: To break the traditional hospital pharmacy pattern, and let Ali enter the core interest chain of pharmaceutical product retail.
II. Online pharmaceutical product retail platform Representative: yhd.com, and Jingdong (B2C)
Function: The companies directly participating in online retail and distribution of network pharmaceutical products
Yhd.com and Jingdong also entered the "battlefield" of pharmaceutical product sales over the Internet while Ali was conducting layout. The 2 companies preferentially obtained the online retail pharmaceutical product qualification, commonly known as "Certificate C", with CFDA through utilizing the stipulation in Article 7, Chapter II of the Measures regarding the Administration of Food and Drug Operation and Supervision over the Internet (Draft for Comments): except the operating entities not required to transact the relevant certificates as stipulated by laws and regulations. Regarding this, the staff member from Shanghai Municipal Food and Drug Administration had to exclaim over the powerful capital strength.
Yhd.com and Jingdong, unlike Ali, have been operating in the e-commerce mode of online sales to customer, i.e., B2C mode. Their safety and reliability in pharmaceutical product sales and distribution in the future will make them more easily accepted and trusted by drug buyers due to their strong warehousing and logistics management systems and adherence to self-run sales.
From the control on the stock replenishment channels and bargaining power on suppliers shown by Jingdong in the competition with Suning, we can see that the online retail platforms will break the traditional medical interest chain: representative →retail pharmacy.
Objective: To break the interests chain of traditional medical representative →retail pharmacy, and obtain the rights to replenish stock and bargain on Chinese and imported pharmaceutical products.
III. Traditional pharmaceutical product retail giants Representative: Shanghai Pharmaceuticals Holding, Sinopharm Group, Tongrentang, and Tong Jun Ge
Function: Operation of chain retail pharmacies
Those enterprises, possessing years of traditional chain operation experience and controlling retail channel interests chain in the market, originally enjoyed the fixed cash flow of chain by relying on the accurate grasp of policies of CFDA, but have gradually become "slow and heavy" in the medical reform. After the Internet capitals "declared war", those enterprises were rattled to start to enter the combat status like soldiers with unloaded guns. Sinopharm, Shanghai Pharma and Tongrentang, etc. competed to declare that they would begin online retail operation and online and offline joint operation. But can such companies without Internet gene endure the impact of the Internet capitals that have been accustomed to the concept of "only the quick responder survive"? In the future, how many procurement channel chains will be chopped off? How many retail stores will be closed down? How many points will both the profits and assets be reduced?
The endless topic in the traditional pharmaceutical product retail industry in the following years will be "to surrender or die". Does it seem that they have really no other measures except being nibbled market by the Internet capitals helplessly? My proposal is that: they shall focus on developing the layout advantages of the chain pharmacies and the drug buying demands of the old, rather than competing for the procurement channels and young consumers with the Internet capitals. After all, China is entering the aged society, and it is a good opportunity for the traditional industry to deepen resource transformation by relying on pharmacies entering communities and people-oriented service for the old people who are unable to shop online.
Objective: (my proposal) To give play to the advantages of section layout, and deeply dip the service for the old to buy and use drugs.
IV. Distribution industry Representative: Jointown, and S.F. Express
Function: Distribution of drug medical equipment
For S.F. Express, the leader of the express industry, its widest distribution areas and best distribution services have been its core competence. S.F. Express is eager to obtain the distribution dominant right and cost pricing power for the online pharmaceutical product operation and sales initiated by Ali and Jingdong, so as to continue to support its freights that are higher than the peers and develop the new market. The newly-founded S.F. pharmaceutical product distribution department will further consolidate S.F. Express's position in Chinese express industry.
While Jointown, more like a complex, founded in Hubei, has now conducted layout in 21 provinces in China in wholesale, transport and retail. But as the leading enterprise in traditional pharmaceutical product circulation, a problem that Jointown's management has to face in the following years is how to face the challenge and competition of the new distribution companies represented by S.F. Express.
Objective: To obtain the distribution share and cost pricing power of online pharmaceutical products
V. CFDA and other relevant practitioners
CFDA
CFDA, in response to "market reverse forced mechanism", has proceeded with the unprecedented stride this time: from modifying the original market system, to trying to establish a new market system, to solve the current pharmaceutical channel monopoly and partial contradiction between doctors and patients. Such "Demolish & Establish" posture can be called one boldest decision throughout history.
The 2015 licensed pharmacist examination has been reformed in order to cooperate with the new policy; such most difficult examination throughout history is about to begin, and even the training teachers are now re-recognizing the new examination points. The new examination questions will be emphasized on the guidance knowledge of clinical medication, and more agree with the Measures regarding the Administration of Food and Drug Operation and Supervision over the Internet (Draft for Comments): the talent equipping requirement: the designated online pharmaceutical product operating enterprises must establish the licensed pharmacist online service system.
Reform of CFDA still needs to improve plenty of work, such as on account of the particularity of Internet, how to regulate pharmaceutical product quality and distribution as well as medication safety in China to enable citizens to obtain cheap, convenient and secure good drugs.
Various medical representatives and traditional channel vendors
Whether they shall follow the traditional pharmaceutical product retail industry, or hasten to the arms of the Internet capitals? The work-by-themselves and subordination pattern will become a history. Practitioners have already had to choose the road.
Licensed pharmacists and relevant practitioners
There are 0.28 million of licensed pharmacists and a total of 1 million of relevant practitioners. Most of those persons will have to find a new life direction if the decline of the traditional retail enterprises finally becomes certain.
