Drug circulation 2000 billion market competition, TOP20 divided half of the country, 4 leading crazy 600 billion

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On June 21, the Ministry of Commerce released the statistical analysis report on the operation of the drug circulation industry in 2017. The report shows that the scale of drug circulation in China reached 2001.6 billion billion yuan in 2017, an increase of 8.4 percent over the same period last year after deducting incomparable factors, and the growth rate has slowed down. The TOP20 pharmaceutical batch enterprises account for nearly half of the country, with four leading enterprises in the country taking in 643.357 billion yuan, of which three have a main income of over 100 billion yuan.

OrThe overall scale has expanded year by year, and the growth rate of enterprise benefits has stabilized.

Figure 1: Sales of seven categories of pharmaceutical commodities nationwide, 2014-2017 (in billions of yuan)

According to the data of the Statistical Analysis Report on the Operation of the Pharmaceutical Circulation Industry in 2017, the total sales of seven major categories of pharmaceutical commodities (western medicines, Chinese patent medicines, Chinese medicinal materials, medical equipment, chemical reagents, glass instruments, and other categories) in 2017 It was 2001.6 billion yuan, an increase of 8.4 year-on-year after deducting non-comparable factors, and the growth rate decreased by 2.0 percentage points from the previous year.

Data show that in recent years, the overall scale of China's drug circulation industry has been expanding, and the growth rate has dropped slightly. Although the growth rate in 2017 slowed down compared with last year, the overall scale exceeded 2000 billion yuan for the first time.

Figure 2: Growth of net profit of direct reporting enterprises in national drug distribution, 2014-2017 (in billions of yuan)

In 2017, the main business income of the national drug circulation direct reporting enterprises was 1462 billion yuan, with a year-on-year increase of 9.0 percent after deducting non-comparable factors, and the growth rate decreased by 2.6 percentage points; the total profit was 36.3 billion billion yuan, with a year-on-year increase of 10.9 percent after deducting non-comparable factors, and the growth rate was the same as that of the previous year.

From 2014 to 2017, the total profit of the national drug circulation direct reporting enterprises increased year by year. Since 2015, the growth momentum has stabilized and maintained a growth rate of about 10%; the average gross profit margin and average profit margin have stabilized for 4 consecutive years, and the average Gross profit margin remained at about 7%, and the average profit margin remained at about 1.5.

OrThe proportion of the top 100 drug batches decreased slightly, TOP20.Hidden changes in ranking

Figure 3: The scale of the top 100 pharmaceutical wholesale enterprises in the total scale, 2014-2017

By the end of 2017, there were 13146 pharmaceutical wholesale enterprises nationwide, up 171 from last year. In terms of market share, the main business income of the top 100 pharmaceutical wholesale enterprises in 2017 accounted for 70.7 of the total size of the national pharmaceutical market in the same period, down 0.2 percentage points from the same period last year, of which 4 national leading enterprises accounted for 37.6 percent, up 0.2 percentage points from the previous year, and 30 regional leading enterprises accounted for 24.5 percent, down 0.1 percentage points from the previous year. It can be seen that the number of pharmaceutical wholesale enterprises increased in 2017 and sales growth slowed down, concentration decreased slightly.

In view of the reasons for the slowdown in sales growth of drug batch enterprises, the report pointed out that the implementation of the "two-vote system" policy forced terminal distribution enterprises to purchase directly from drug production enterprises in a short period of time, resulting in a decline in sales of large distribution enterprises to small and medium-sized distribution enterprises. The implementation of policies such as medical insurance control fees and drug proportion restrictions has pushed the bidding price and dosage of drugs to continue to decline, resulting in sales of distribution enterprises to medical terminals; in addition, the integration of sales channels and the restructuring of large enterprises have not yet been completed, resulting in a slowdown in sales growth.

Table 1: TOP20 of Pharmaceutical Wholesale Enterprises in 2017

Judging from the ranking of pharmaceutical wholesale enterprises, the TOP5 ranking of enterprises' main business income has not changed in 2017, of which four national leading enterprises have been ranked in the top four for many years in a row. The income of TOP20 enterprises all exceeded 10 billion yuan, and the number of members of the "10 billion legion" increased by one compared with last year. Hebei zhongcheng pharmaceutical co., ltd., the newly entered Shiyao group, had a main business income of 9.645 billion yuan in 2016 and exceeded 10 billion yuan in 2017, rising to 19th from 21st in 2016. Tianjin Tianshili Pharmaceutical Marketing Group Co., Ltd., which ranked 16th in 2016, ranked 21st with an operating income of 9.827 billion yuan in 2017.

OrTwo-vote system to accelerate industry consolidation, the four leading layout

In recent years, with the implementation of policies such as the separation of medicines, the zero addition of medicines, the control of the proportion of medicines, and the two-invoice system, the development of the pharmaceutical circulation industry has gradually become standardized, and some small and medium-sized pharmaceutical circulation companies are gradually being merged or withdrawn from the market. The entire industry is facing a general trend of reshuffle and integration, which is very beneficial to the development and growth of leading enterprises.

Figure 4: Main operating income of TOP4, a pharmaceutical wholesale company, 2014-2017 (in billions of yuan)

At present, the four leading enterprises in the field of pharmaceutical circulation in China are China Pharmaceutical, China Resources Pharmaceutical, Shanghai Pharmaceutical and Kyushu Tong. These four enterprises have been ranked in the top four for many years in a row. In 2017, the business income of China Pharmaceutical, China Resources Pharmaceutical and Shanghai Pharmaceutical all exceeded 100 billion yuan. Among them, China Pharmaceutical is far ahead of the other three enterprises by absolute advantage, and its main business income is as high as 321.439 billion yuan, china Pharmaceuticals has Sinopharm Holdings, Sinopharm shares, Sinopharm is consistent, of which Sinopharm Holdings is dominant.

Distribution revenue is the four leading growth points.

Figure 5: Distribution revenue of the four leading enterprises, 2015-2017 (in billions of yuan)

In recent years, the distribution income of the four wholesale enterprises has been increasing year by year. In terms of distribution revenue, Sinopar Holdings was far ahead of the other three companies in terms of distribution revenue of 264.352 billion yuan in 2017. From the perspective of the growth of distribution revenue, except for the growth rate of China Resources Pharmaceuticals, which increased year-on-year, the growth rate of the other three companies has slowed down.

Distribution network, logistics center are the layout of the focus

Table 2: Distribution networks and logistics centers of the four leading companies in 2017

As of the end of 2017, Sinopharm's distribution network has covered 31 provinces, municipalities and autonomous regions in China; Shanghai Pharmaceuticals directly covers 24 provinces, municipalities and autonomous regions across the country through the distribution network of its holding subsidiaries; China Resources Pharmaceuticals covers 27 provinces, municipalities and autonomous regions in China; Kyushu Tong covers most of China's administrative regions and constitutes a national network.

From the perspective of logistics networks, Sinopharm holds a total of 308 national pharmaceutical distribution logistics networks, including 4 hub logistics centers, 42 provincial logistics centers, 236 municipal logistics networks and 26 retail logistics networks. China Resources Pharmaceutical has 153 logistics centers in its national pharmaceutical distribution business. Jiuzhoutong has completed the layout of 31 provincial logistics centers and 81 municipal logistics centers nationwide.

From the perspective of distribution customers, downstream customers (including pharmacies, medical institutions at all levels, etc.) are the focus of the layout of the four enterprises. Among them, Sinopharm Holding's direct customers include 15032 graded hospitals (including 2301 tertiary hospitals), 128326 small-scale end customers (including primary medical institutions, etc.), and 87246 retail pharmacies. CR Pharmaceutical's customers include 5475 tertiary hospitals and 37941 primary medical institutions in 2, 30270 retail pharmacies; Shanghai pharmaceutical distribution covers more than 20000 medical institutions of various types; Jiuzhoutong currently mainly deals in 291 and 293 varieties of drugs and medical devices.

Expedited mergers and acquisitions to enhance their competitiveness

Although the income of the four enterprises increased in 2017 compared with the same period last year, the growth rate has slowed down, and with the advent of the national version of the two-vote system, the trend of slowing down the performance growth of pharmaceutical circulation enterprises will be more significant, which requires giants to adjust their strategies and shift from the allocation mode to the direct sales mode to cover the terminals as soon as possible, and extension coverage is undoubtedly the fastest way.

China Resources Pharmaceutical has taken Jiangzhong Pharmaceutical into its pocket this year after completing the subscription of 40% of the expanded equity of China Resources Leasing Co., Ltd. in 2017. Shanghai Pharmaceutical's merger and acquisition is also a big one. In 2017, it bought a 100 equity of Conrad Malaysia for US $0.576 billion and invested 0.297 billion yuan to acquire a 51% equity of Sichuan Shenyu Pharmaceutical Co., Ltd. (now renamed as "Shangyao Holding Sichuan Co., Ltd."), invested 0.579 billion yuan to acquire 99% equity of Xuzhou Pharmaceutical Co., Ltd., and completed the acquisition of 100 equity of Condler China with US $0.557 billion this year. Jiuzhoutong also launched a number of acquisitions last year, including Henan Jiuzhoutong Guohua Pharmaceutical Logistics Co., Ltd. for 0.106 billion yuan......


In 2018, the sales growth rate of my country's pharmaceutical circulation market may decline, but the sales scale may still maintain steady growth. With the successive release and implementation of various national policies, the competition in the pharmaceutical circulation industry will become more intense. The external growth of the reorganization and the endogenous growth of the active development of the terminal market have continuously enhanced their own business capabilities, and the big waves have seen gold.