How to tap the growth pole of overseas market for Chinese Pharmaceutical Enterprises

[market analysis of chinapharma.com] after enjoying a long period of ultra-high annual average compound growth rate, Chinese pharmaceutical enterprises have regarded the overseas market as the growth pole that must be fully explored in the face of slowdown in growth rate In particular, the substantial growth of Hengrui and Huahai's business in the U.S market has set off a boom in the export of Chinese pharmaceutical products More and more Chinese pharmaceutical enterprises begin to take internationalization as their core strategy The export of independent brands and overseas M & A and restructuring have gradually become the trend of the industry The pharmaceutical production workshop (the picture comes from Baidu picture) but getting the "access certificate" of the product in the US market is only the step to go to sea, and only the sales in the US market can produce returns, so how to do the product? Is it the agent distribution or the enterprise's own docking terminal? This is a problem that domestic pharmaceutical enterprises must fully consider It can be imagined that after several years of continuous investment, the enterprise finally has the product to obtain the standard market certification, which is extremely gratifying However, when its products want to participate in the fierce market competition, the terminal purchasers who have not established a sense of trust in advance give unacceptable low prices, and sometimes they have to face such and such legal problems It is inevitable that Chinese pharmaceutical enterprises with insufficient preparation will“ The export of preparations can only stay at the conceptual level and become a "beautiful looking" thing This is not uncommon Recently, the media communicated with Robert, former general manager of international pharmaceutical business of Yiling pharmaceutical, on the issue of "what should be done after the products of domestic pharmaceutical enterprises enter the U.S market" Here, Robert's management experience in the U.S market development is sorted out and written, hoping to provide some help to Chinese pharmaceutical enterprises that are willing to go to sea The main difference between the US pharmaceutical market and China is that cooperation with the US pharmaceutical retail giant is the first choice for pharmaceutical separation 80% - 90% of the US pharmaceutical market is contributed by the pharmaceutical retail terminal In recent years, the market size of the pharmaceutical retail industry in the United States is increasing, but the number of single drugstores is decreasing year by year, and the chain operation mode is dominant With the increasing concentration of drug terminal purchasers in the United States, it is more and more difficult for generic pharmaceutical companies to increase the share of retail terminals At the same time, the drug payment preference in the United States is inclined to generic drugs, and large chain drugstores are more inclined to "price for quantity" sales mode, resulting in lower and lower profit margin of generic drugs CVs, Walgreen and Rite Aid are the three largest chain drugstores in the retail terminal of oral solid drugs in the United States CVS's annual sales revenue reached US $153.3 billion, but a large part of it is insurance business, with only US $52.5 billion in drug sales After CVS purchased target's drugstores for $1.9 billion in 2015, the number of terminal drugstores reached 9569 Walgreens, No 2, has an annual sales revenue of $81 billion, nearly 65% of which is from drugs, and 8173 stores across the country Rite Aid, ranked third, had $18.4 billion in drug sales in 2015, with 4561 stores across the country From October 2015 to now, walegreens is in the process of acquiring Rite Aid If the acquisition is successful, the drug retail market in the United States will change from "three parts of the world" to "two powers" In addition to pharmacies, the drug retail business in the United States also includes the mail business of PBM (pharmacy welfare management organization), mainly including ESI, Caremark under CVs and optumrx under United health In terms of business area, Walgreens? Focuses on community chain drugstores, while CVS derives a large part of its revenue from its PBM business In the "price for volume" sales mode, the wholesalers, in order to reduce the price, have more and more close cooperation with retail chain drugstores and PBM This means that if Chinese pharmaceutical companies want to enter the U.S drug market and stand firm, cooperation with large drug retail chain giants should be a top priority 02 commission sales can simplify the regulatory process in the United States Drugs entering the market of each state need to have wholesale license If it is directly to the terminal, it needs to apply for the license of each state, and the regulatory problems will be very complicated If you want to simplify the regulatory process, it will be more convenient to entrust agents to connect with the terminal market For example, when the manufacturer gets anda, the company uses the national drug validation number (NDC) and logo of the agent in the United States at the same time, and then a dealer is responsible for direct delivery to the drugstore Although the sales process has been simplified, the pressure of price reduction and passive production is not small "In the United States, large sales companies have internal regulations that they refuse to cooperate if the profit of the product does not exceed a certain standard For manufacturers, they don't know how to sell their products The advantage of commissioned agent sales is that it will not be too troublesome in the face of audit, and at the same time, it is not necessary to directly talk with the end customer about business However, he lost the initiative of production according to plan Once an agent comes to place an order, it needs to be produced immediately, and there will be three days of fishing and three days of net drying in one day, "Robert added "All terminals are under the control of agents, good market and good market I used to help domestic enterprises plan for the American market The company's cost rose year by year, but the sales market did not rise Every time the operating cost of the factory increased, it would be very hard " 03 the self-employed company has the initiative to sell generic drugs and specialty drugs in the United States The sales mode of oral preparations in the U.S generic drug market does not need to employ large sales personnel to promote to doctors Only one or two senior sales personnel are employed to sign supply contracts with about three terminal chain drugstores and three wholesalers, because these six customers almost monopolize 80% of the oral preparations Market Chinese pharmaceutical companies choose to cooperate with famous pharmaceutical sales companies in the United States Although there is no need to worry about sales channels, they will be constrained in drug pricing, sales strategy, production schedule and market control Before joining elim pharmaceutical, Robert worked for a generic pharmaceutical company in Southern California He worked as a CFO from the head of accounting and human resources to the CEO of the company Later, he adjusted the drug sales strategy of American companies from agent sales mode to self sales mode, and directly sold the company's products to mainstream chain drugstores, large chain hospitals and wholesalers Since then, the company's sales volume has tripled, its output has tripled and its profit has tripled The reason why Robert changed the sales model of American companies also came from a phone call Before he became CEO, the sales company he worked with called him and said that the order for CVS had been cancelled? This allowed him to handle the fact that 4 tons of original medicines, which had been stored in advance to ensure supply, were put in storage "We are very passive in controlling the market when we entrust sales to agents Since then, I've made up my mind to transform, "Robert said 04 self operation must pay attention to the details based on the experience of working in American oral generic pharmaceutical enterprises When making the international market expansion strategy of Yiling pharmaceutical industry, Robert chose the way of self operation sales He directly negotiated with chain drugstores (including Walgreens, CVs, Rite Aid, etc.) or wholesalers (including McKesson, ABC, red oak) In April 2013, Yiling Pharmaceutical Co., Ltd established a U.S subsidiary, and Robert signed a third-party agreement on warehousing and logistics, and handled wholesale licenses in 50 states to prepare for sales in 2016 "We found a warehouse logistics company, rxtpl, and rented the storage space to other pharmaceutical companies as warehouses If the enterprise has an order, it can put the medicine into the warehouse Rxtpl charges for the delivery according to the number of shelves and the order items In terms of transportation, it is more convenient to consider using the transportation companies of logistics companies " Through leasing, pharmaceutical companies can effectively reduce costs when opening the market in the early stage At the same time, rxtpl has wholesaler licenses in many states of the country, but 29 states require customers of warehouses to apply for wholesaler licenses themselves, and other states can use warehouses As a result, Robert had to reapply for wholesaler licenses in 29 states As mentioned in Yiling pharmaceutical's 2016 half report, the company's U.S subsidiary has completed the registration of wholesaler licenses in 13 U.S states, and it is expected that by the end of 2016, it will be able to complete the registration of wholesaler licenses in the remaining 16 states, as well as the wholesaler licenses of rxtpl that can be used directly in 21 other U.S states, so Wanzhou International Pharmaceutical will be able to realize the sales network covering the U.S at that time In addition to the details of the license, inventory assurance is also a top priority "When we start to cooperate with CVs, we must ensure that there are two to four months of inventory in the warehouse As a Chinese pharmaceutical enterprise, if we want to ensure that the U.S warehouse has 3 months of inventory, we need 1-2 months of transportation time in the middle, plus 2 weeks to 1 month of FDA issuance time, at least 6 months in advance In this way, Chinese pharmaceutical enterprises basically ship every month " "Self sales, retail chain terminal directly orders to the production enterprise, we just need to according to the plan, see whether the capacity can meet the coverage of key customers, and then directly inform the warehouse to deliver goods." Due to the high concentration of retail terminals in the United States, as long as one of the chain drugstore giants is taken, the U.S market can basically be covered, and the factory can also produce according to the plan, so the Chinese pharmaceutical enterprises can truly "live" outside the country According to Robert, many Chinese pharmaceutical companies don't know how to plan and layout the American market It is also a science to choose which products to register In the United States, if the capacity of pharmaceutical enterprises (including the supply of raw materials) can not reach 40% of the market demand, it is difficult to cooperate with national terminals (large retail / distribution platforms), followed by difficulties in the operation of the factory If the supply is not smooth, then the pharmaceutical factory needs to make compensation The amount of compensation is the difference between the open market price (generally the retail price) and the negotiated supply price "In product selection and development, raw material capacity and preparation capacity should be matched, and whether there is a way to reach 40% - 50% of the market in the United States should be considered If there is no cooperation with large retail / distribution platforms, it will not be easy to have a foothold in the US generic market, "Robert stressed Since joining Yiling pharmaceutical in November 2012, Robert has been making a business plan to enter the U.S market According to the market situation, the availability of raw materials and the situation of competitors, we began to select anda products to support the business plan, and organized the team to carry out research and development The business plan was successfully raised and financed in private for about 1.3 billion yuan, and was approved by the Beijing Securities Regulatory Commission in October 2016 The announcement issued by Yiling pharmaceutical in December 2016 also mentioned that the non-public offering fund is to be invested in the international industrialization project of chemical preparations, the international registration project of Lianhua Qingwen capsule and as supplementary working capital.