The development trend and response of the retail industry under the negative growth situation of drug all-end sales

The retail pharmacy industry, as an important part of the medical and health sector, has also been hit hard this year.
particular manifestations include: the outbreak led to a decline in passenger traffic, centralized procurement weakened the price advantage of the retail industry, retail gross margins continued to decline, small and medium-sized chain market challenges intensified.
opportunities and challenges coexist, and new industry opportunities are becoming apparent, such as the rapid growth of online channels in the outbreak and the rapid expansion of mergers and acquisitions by head companies.
there is no doubt that the pharmaceutical retail industry has reached a crossroads of development, where to go has become a difficult problem for many retail enterprises.
01 epidemic and medical reform as the main cause, the size of the drug terminal market is expected to grow negative in 2020 In recent years, China's health costs have maintained an annual growth rate of more than 10%, in 2019 the total national health expenditure has reached 651.959 billion yuan, up 12.41% YoY.
, China Health Information, the health care market will continue to maintain a steady growth trend in the next decade.
From the point of view of supply and demand, on the one hand, with the further aging of the population, the steady increase in per capita disposable income, health needs are fully released, on the other hand, the development of pharmaceutical technology, biotechnology, intelligence and other technologies, to promote the health industry supply side products and services to improve significantly, so that more health needs can be met.
long-term stable growth trend in the healthcare industry is the main tone of the industry.
Chart 1: China's health care costs are growing steadily Data sources: National Statistical Bulletin, Zhongkang Information Industry Capital Research Center In order to better meet people's health needs and curb the rapid growth of health care spending in recent years, the state has continuously issued a series of health care reform policies.
2019, the state has landed the Health Care Catalog Adjustment Program and carried out three batches of four rounds of centralized procurement of national drugs, all of which have had a great impact on the industry as a whole.
2: Some of the health care reform policies released by the state so far in 2019 Data sources: public data collation, China-Kangkang Information Industry Capital Research Center Medical reform has a great impact on the drug terminal market.
china-kang information CMH database shows that the all-end drug market has been growing year by year, but the growth rate has slowed significantly, from 18.04 percent in 2011 to only 8.91 percent in 2019.
note that the outbreak is expected to see the market decline in size for the first time in nearly a decade by 2020.
Chart 3: China's drug market size growth rate decline Data sources: Zhongkang CMH, Zhongkang Information Industry Capital Research Center From the channel point of view, the proportion of grade hospitals has remained stable in recent years, at about 70%, is the main way of drug sales.
primary health care and retail pharmacies both declined slightly, with market share of 10.4% and 18.8% respectively in 2019 and expected to fall to 10% and 18% respectively in 2020.
addition, in recent years, there have been other drug sales channels such as e-commerce, the Internet, these emerging drug sales terminals, although small, but very fast development, 1.9% in 2019, is expected to reach 2.9% in 2020.
figure 4: Primary health care and retail drug sales decreased Data sources: Zhongkang CMH, Zhongkang Information Industry Capital Research Center 022020 retail market size is expected to decline by 6.43%, price and convenience advantages affected by the impact of the retail end of the market size decreased by 6.43% YoY During the epidemic, most of China's retail pharmacies normal business, for the outbreak prevention and control has made outstanding contributions.
sales of products related to the outbreak, such as masks and protective clothing, have increased significantly, and pharmacies have even become the only channel for patients with chronic illness to purchase medicines during special periods.
, however, overall retail drug sales are still negatively affected by the outbreak, Q1 sales in 2020 decreased by 2.6% YoY, and the retail end market is expected to be 320 billion yuan, down 6.43% YoY.
Chart 5: The size of the retail drug market is expected to show negative growth in 2020 Data sources: Zhongkang CMH, Zhongkang Information Industry Capital Research Center The impact of the outbreak on retail end sales volume is mainly due to the contraction in order volume.
average quarterly orders at retail pharmacies fell significantly during the outbreak, with only 4,500 and 4,200 orders in 2020Q1 and Q2, respectively, down 13.46 percent and 14.28 percent from 2019, according to the CMH database.
figure 6: During the outbreak, retail pharmacy orders declined Data sources: Zhongkang CMH, Zhongkang Information Industry Capital Research Center, although the outbreak led to a decline in overall retail drug sales, but some drugs are being stimulated by the epidemic, sales increased in 2020Q1.
the increase in sales of cold medicines (hot medicines) was most pronounced, as were the increases in the three high classes and vitamin minerals.
On the corporate side, Ering Pharmaceuticals and Dongsan have increased their retail sales by about 150% with Lianhua Qing plague capsules and Covey, respectively, while Bayer, AstraZenech, Novartic, Novo nor Nordisk, which are involved in the chronic disease category, have also experienced good growth.
addition, the outbreak has also greatly boosted the sale of Internet terminal drugs.
major e-commerce, Internet pharmacies during the outbreak through mobile phones, computers and other terminals to expand their e-commerce business, explore and develop O2O business model, which also makes the convenience advantages of traditional retail pharmacies have been hit.
affected by this, retail pharmacies have also increased the development of online channels.
although China's pharmaceutical e-commerce market is still in its infancy, it can be predicted that the future will certainly have a greater impact on the retail pharmacy industry.
the price advantage of national collection of retail drugs is threatened In addition to the epidemic, national policies have also had a huge impact on drug sales on the retail side.
series of health care reform policies carried out by chinese and foreign countries in recent years, the purchase policy of generic drug belt, which began to land in 2019, is particularly striking.
as of August 2020, the state has organized three rounds of four rounds of centralized procurement of drug belt volume, before and after 25 product rules, 33 product rules and 188 product rules were selected.
after four rounds of drug collection, the collection of commonly used oral prescription generic drugs can be said to have been initially completed.
the purchase of generic drug belts has caused the price of drugs on the hospital side to drop sharply, and the original price advantage of the corresponding products at the retail end has been greatly affected.
to the third centralized procurement in 2020 as an example, in this round of winning products, the decline of o nitrogen flat-mouth collapse tablets, finasteride, lynymphetamine tablets are more than 90%.
the prices of these drugs in pharmacies have also fallen, but the lag is obvious, and the magnitude is not as large as the hospital end.
of retail-side price advantage has also led to a decline in sales of retail-side drugs after the epidemic gradually improved and hospitals reopened.
addition, a considerable part of the centralized procurement of drugs in pharmacies play an important role in the diversion, the corresponding patient return to the hospital will lead to the loss of the overall flow of retail pharmacies.
with the increase in the number of varieties collected in the future, the price reduction is more obvious, the price advantage of the retail side may be more impact.
Chart 7: Third round of national collection of some drug prices fell Data sources: public data collation, China Health Information Industry Capital Research Center in 2019 industry gross margin fell 1.5pct, industry concentration and chain rate increased In recent years, retail pharmacies fierce competition, the number of pharmacies continue to increase, the industry as a whole profit margin fell significantly.
to the big four listed retail pharmacies, gross margins continued to fall between 2016 and 2020, with the fastest declines falling by 5.06pct in four years.
addition to market competition, the large influx of prescription drugs with lower gross margins into the retail market is also an important reason for the decline in profits.
Chart 8: The decline in gross margin of the four listed retail pharmacies is obvious Data sources: Zhongkang CMH, Zhongkang Information Industry Capital Research Center The decline in the overall gross margin of the industry directly affects the survival of small and medium-sized enterprises, due to insufficient cash flow and risk resistance, in the case of declining profitability, the survival of small and medium-sized retail pharmacies is becoming more and more difficult.
at the same time, the classification of pharmacies, pharmacists registered rectification, anti-fraud and other normative management policies have also hit the industry's non-standard small and medium-sized enterprises, so that the pharmaceutical retail industry's brutal growth into history.
, on the other hand, lower profit margins have stimulated expansionary demand from industry head companies, and industry concentration has steadily increased.
2019, the top 100 chain sales of 186.3 billion yuan, the market share of 40.90%, up 9.7pct from 2015.
Chart 9: The share of the top 100 chains has steadily increased Data sources: Zhongkang CMH, Zhongkang Information Industry Capital Research Center and industry concentration are complemented by the improvement of the industry chain rate.
2010-2019, the industry chain rate has risen from 36.6% to 55.3%, and continues to grow.
chart 10: Retail pharmacy chains reach 52.1% in 2019.
data sources: Zhongkang CMH, Zhongkang Information Industry Capital Research Center 03 retail pharmacy development strategy: online and offline combination, improve the level of health management services Zhongkang Information believes that due to the existence of patients, health insurance, aging and other issues, the direction of national medical reform will not change, while the impact of the epidemic strengthened the national development of digital determination, the future of pharmaceutical e-commerce, medicine O2O and other emerging channels will be vigorously developed.
the challenges facing the pharmaceutical retail industry will not fundamentally change, and the convenience and price advantage of retail drugs will be challenged.
may pick up somewhat after the outbreak, but growth will slow compared with the past few years.
, the industry as a whole chain expansion trend will not change, leading enterprises will continue to expand the market size through mergers and acquisitions and other operations, small and medium-sized pharmacies will be further compressed survival space.
the traditional business of retail pharmacies is facing many challenges, but there is still a large space for development, the most urgent task is to adapt to the macro environment, the development of a new business model.
we make this transition? The following points are worth learning from.
targeting new special drugs and collection of unsold products from the Central Kang CMH database sales data, cold medicine still occupies the largest retail area.
also benefited from the launch of new drugs and the outflow of prescription drugs, the new special drugs, mainly anti-tumor, immunomodulation and so on, achieved above the industry average growth in the first two quarters of 2020, the development potential is endless.
in addition to new special drugs, the national collection of unseeded varieties represented by the original drug has greater development potential in the retail market, and should also become the focus of the retail side of the object.
online and offline integration, digital transformation from 2000 after the state officially allowed Internet drug information services, in 20 years, the state issued a series of policies to promote the development of Internet pharmacies.
Especially in recent years, the policy frequently, in September 2019 the NDRC has clearly put forward the positive development of "Internet and drug circulation", accelerate the development of pharmaceutical e-commerce, to provide patients with "online subscription (drug) shop access", "online booking (drug) shop delivery" and other services, these policies have played an important role in promoting the development of Internet pharmacies.
Figure 11: Policy is good for the development of Internet pharmacies Source: Public information, China Health Information Industry Capital Research Center From the market size, so far, physical pharmacies are still the main battleground of pharmaceutical retailing, its professional services are undoubtedly better than online pharmacies.
However, with the development of Internet technology, supplemented by policy support, the rapid development of Internet pharmacies in recent years can not be underestimated, the epidemic has expanded the popularity of Internet pharmacies and service radius, it can be predicted that the future market size of Internet pharmacies will be further expanded, become an important complement outside the hospital, retail channels.
, it is necessary for retail pharmacies to launch online services and compete with other e-commerce platforms for the Internet pharmacy market.
the traditional business logic, strengthen the ability of health management services due to its traditional advantages are challenged, retail pharmacies to change the profit model is urgent.
At this stage, China's retail pharmacies are mainly drug sales-oriented, drug sales revenue as the main revenue, and with the improvement of people's health awareness, the future should enhance the health management service capacity of pharmacies, drug sales and health management services as the main source of profit.
in the process of profit model transformation, pharmacies should have the courage to cross the border, can use the pilot approach to explore innovative health services business model.
Chart 12: Traditional business models are challenged, retail pharmacies should be brave to innovate Data sources: Zhongkang Information Industry Capital Research Center in the field of health services competitive advantage, Zhongkang Information believes that retail pharmacies have close to the lives of residents, easy to integrate into the characteristics of the residents of the community, so in health education, disease prevention, health knowledge publicity and other aspects of competitive advantage, in the future can strengthen cooperation with hospitals, medical institutions, institutions, institutions and other health management institutions to jointly build a consumer-centered health management service system.
In the next stage, retail pharmacies will mainly develop the following industries: new specialty pharmacies and pharmacies around hospitals that deal with prescription outflow and medicine separation, community-based specialty pharmacies that focus on slow-disease services and self-medication for minor illnesses, specialty pharmacies, and large health pharmacies and diversified pharmacies that serve the diverse health needs of high-quality people.
new retailing of pharmacies will really kick off, enterprises should be based on data and technical capabilities, to do a good job of pharmacy specialization, membership labeling, store sceneization and community in-depth four services.
Although the outbreak stimulated the leapfrog development of online channels to make the convenience advantages of traditional retail pharmacies threatened, the sharp drop in hospital-side drug prices brought about by centralized procurement also brought about a impact on the price advantages of pharmacies, but as the main market for prescription drug outflow, the development prospects of retail pharmacies are still promising.
how to optimize product structure, take advantage of the Internet to develop online channels, and transition to health service pharmacies will be the top priority for every pharmaceutical retailer in the coming years in the increasingly fierce industry competition.
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