What do two vote policy makers want to see? When is the most difficult time for pharmaceutical companies?

Source: e drug manager 2018-01-29 under the effect of the two vote policy, drug distribution enterprises are speeding up the reshuffle, and this result is exactly what policy makers hope to see The two vote system first appeared in Guangdong Pharmaceutical sunshine procurement plan (Draft for comments) in 2007, but it was aborted due to the joint opposition of more than 30 domestic manufacturers, and then it was used for reference by Fujian Province, and it has been implemented since the 7th bid in 2012 Fujian's two ticket policy is quite tough For example, the first ticket must be issued directly by the manufacturer rather than the sales subsidiary under its jurisdiction It is required that the goods tickets go together and the distribution is more severe, "one factory, one area and one distribution", that is, all drugs of the same manufacturer can only be distributed by one distribution company in one purchase area In addition, it also limits the number of distributors (10) Fujian has been implementing the two vote system for more than five years, with different opinions During the implementation of the two vote system in Fujian Province, it is only an isolated case From a national perspective, the starting point of the implementation of the two vote system should be put forward at the executive meeting of the State Council on April 6, 2016 On January 9, 2017, eight ministries and commissions officially announced the implementation plan Meanwhile, Anhui issued the implementation plan of the two vote system on October 8, 2016, requiring the implementation to start on November 1 Therefore, it has been a year since Anhui was regarded as the first province to implement the two vote system nationwide In the past year, after entering November, 21 provinces in China have entered the implementation period of two vote system, including Fujian, Anhui, Chongqing, Qinghai, Shaanxi, Shanxi, Ningxia, Liaoning, Tianjin, Heilongjiang, Guangxi (pilot city), Sichuan, Jilin, Hunan, Gansu, Yunnan (part of the region), Hainan, Hebei, Zhejiang, Inner Mongolia, Shandong (6 pilot cities) The rest of the provinces, districts and cities will also be implemented in 2018 There is no doubt about the implementation of the two vote system nationwide and the implementation momentum is higher than expected So, in the past year, how about the implementation of Anhui and the whole country? 1 from Anhui to Anhui Province, the top-down path is adopted, starting from the third level hospitals, and then standardizing the basic medical institutions According to the Anhui food and drug administration, at present, 17 hospitals directly under Anhui Province purchase drugs according to the "two ticket system", with the proportion of varieties and amount reaching over 98%, hospitals above the second level in Anhui Province reaching over 96%, and primary medical institutions reaching about 75% According to this data, except for some drugs that may not follow the two vote policy (such as refined drug release and anesthesia), the two vote policy is basically implemented in Anhui Province In the process of cleaning up the circulation of drugs, 33 drug wholesale enterprises in Anhui Province have applied for closure of business because their business conditions can not meet the requirements of the "two vote system", and the situation of "many, small and scattered" of drug wholesale enterprises in Anhui Province has gradually changed At the same time, more than 10 group enterprises in and out of Anhui Province merged and reorganized Compared with Fujian, which has changed from more than 200 pharmaceutical companies to 62 through the baptism of more than four years' two vote system, Anhui has not closed 33 companies in one year This shows that under the effect of the two vote system, drug distribution enterprises are speeding up the reshuffle, and this result is exactly what policy makers hope to see   It is not only Anhui and Fujian that carry out the business reshuffle through the two ticket system, Shaanxi not only gives the option of distribution business to the medical institutions, but also strictly limits the number of distributors of drug consumables (15 for drugs and consumables in three-level hospitals, 5 for drugs in two-level hospitals and 15 for materials) Similar to Shaanxi, Jilin also selects and limits the number of reverse distributors of medical institutions Quantity (no more than 15 distributors are allowed in non primary medical institutions, and no limit is allowed in primary medical institutions) The limitation of the number of distribution businesses is actually the large-scale elimination of distribution companies that open accounts in hospitals Of course, taking this opportunity to merge and acquire is a good strategy For example, China Resources Pharmaceutical Co., Ltd has taken advantage of the opportunity to expand by cooperating with local small and medium-sized commercial companies, especially consumables dealers with hospital advantages The two vote policy allows the internal branches of the commercial circulation group to transfer each other without one vote, and indirectly promotes the merger and acquisition among the circulation enterprises The extension expansion of the commercial company is one of the ways to quickly obtain the sales network, and the perfect network is a magic weapon for the commercial company to improve the distribution operation efficiency and give full play to the scale advantage It seems that in the future, with the continuous promotion of the policy, more small enterprises will be eliminated, more large-scale business expansion, the strong will remain strong, and the weak will be eliminated This trend is also in line with the prediction made by a former regulatory official that 13000 commercial circulation companies across the country will eliminate 10000 2 Compared with the turbulent commercial circulation field, the industry seems to be in a calm state under the two vote system, but the actual changes are better than those of the business, and even can be described by the turbulent waves There are more than 4800 pharmaceutical preparation manufacturing enterprises in China, most of which do not have their own sales team, but use the resources of agents to achieve sales through investment promotion agency Under the two ticket system, the manufacturer is required to issue the first ticket to the commercial company, and the latter to the medical institution, which changes the transaction structure of the multi ticket system before the two ticket system Both goods and invoices bypass the ticket company until the commercial distribution company, and the company that lives on the ticket system closes down, while the agent / natural person who is affiliated with the ticket company and has no drug operation qualification is also supported by the At the same time, the trade chain with manufacturers is also facing survival problems Each of these changes is a major event, which needs to be broken up one by one For the production enterprises using investment promotion agents, the business channels (delivery, payment collection, channel management, etc.) previously entrusted to the agent management will return to themselves; at the same time, the transfer from base price to "high opening + cash return" undertaken by the ticket passing company will also be completed by industry, and the production enterprises will first face the thorny financial and tax treatment problems After the implementation of replacing business tax with value-added tax on May 1 last year, the business tax was converted into value-added tax Previously, it was easy to find a set of invoices to offset the account, which became ineffective under the threat of strict legal sanctions on value-added tax Under the two ticket system policy, the production enterprises have to change from the previous base price invoice to the normal invoice (high opening) Otherwise, once the base price ticket is exposed by the price obtained by the drug purchasing, medical insurance and price departments, the price system is likely to collapse with time under the background of multi department price linkage, and the production enterprises dare not take this price risk However, how to solve the related cost and tax problems after the high invoice is collected to the public account? This is the first issue for Industry and agents At the marketing level, in the face of the dilemma of the reconstruction of the sales system, the marketing mode has changed into self operation? Or continue to rely on agents to achieve sales? They have become the top priority that has to be decided immediately If we want to run our own business, where do the salesmen come from? How to manage? Can the market managed by the original agent be returned to the enterprise? It's very difficult for enterprises to transform without self operating experience If we want to continue to rely on the original agent network to continue cooperation, then agents lost the function and qualification of sales, how to carry out drug sales? So, can agents only undertake the promotion function instead of drug sales? Therefore, in this context, the transformation of industry + agent towards CSO seems to be an inevitable choice In the pharmaceutical industry, there were CrO (contract research organization) and CMO (contract production organization) Now there are CSO, which can be outsourced in R & D, production and sales This is not only a professional division of labor when the market develops to a certain stage, but also a new thing under the promotion of policies The reason why it is a new thing is that CSO, which is springing up in a large scale in this year, is different from the professional marketing outsourcing service organization before the two vote system The biggest difference is that the agent natural person needs to find a "reasonable and legal" institution to issue bills, so as to continue the identity of drug practitioners Although the identity has been changed from the previous transaction to marketing outsourcing service, the large-scale transformation is inevitable, and people have been planning their identity and invoice Overnight, tens of thousands of consulting companies came from scratch, and their business licenses were full of business scope related to "promotion and consultation" Since then, CSO has been the name of a large number of people in the medical world, one by one, the evidence chain The previous confusion and anxiety have turned into the excitement after the identity change 3 the most difficult time has not come this year Some claim that the two vote system policy has brought benefits to the company and improved the stock price Some claim that the two vote system policy has exposed marketing compliance problems and affected the IPO Of course, some real CSOs have been listed successfully or acquired by discerning Enterprises It's worth mentioning that, why do we see the soaring stock price and rising market value of pharmaceutical listed companies, but we don't see the large-scale enterprise damage caused by the two votes? The answer may be: the two vote system is just beginning, and the most difficult time is far from coming After drugs are issued from industrial invoice and delivered to commercial companies and then to hospitals, a round of capital cycle is completed for payment collection and financial tax treatment To break it apart, there are at least three cycles: delivery compression period, payment collection period and financial treatment period It will take about one year to complete these three cycles   Take Anhui as an example The document issued on October 8 last year requires the formal implementation on November 1 There is only a transitional period of less than one month in the middle This precious 23 days is the golden period for manufacturers to combine commerce and hospitals to suppress goods The period for suppressing goods is 2-5 months, generally speaking, 3 months on average The period for collecting money depends on the strength and reputation of commercial companies After all, commerce is also delayed by hospitals, and Commerce The accounting period is from two months to one year We take the intermediate value to calculate the six-month accounting period The financial processing period is that the investment promotion agency manufacturers all over the country have no experience (let alone Fujian's two vote system, at that time there was no business to value-added, and the financial processing difficulty was not of the same magnitude) We go to four training classes to learn one or several rounds to come back, and try our best to ask the agents to open consulting companies to get invoices to offset the accounts The agents look for them It will take two to three months to find a registered company with a lower tax rate Therefore, the delivery period (March) + payment collection period (June) + financial processing period (March) = 12 months, that is, from the formal implementation of Anhui two vote system, the first round of capital cycle will take about 12 months It will take at least 10 months to remove the overlap between the agent registration company and the first two links   Anhui is the first province to implement the two vote system in China, followed by Chongqing, Qinghai, Shaanxi, Shanxi and other provinces, but most of them are provinces with small drug market capacity The real first-line market, according to the statistics of the Ministry of Commerce in 2016, accounts for more than 7% of the market share: Guangdong (expected to be officially implemented in April 2018, 8.72%); Beijing (implemented on January 20, 2018, 8.32%) ）; Shanghai (implemented in January 2018, 8.3%); Zhejiang (implemented in November 2017) 7.32%); Jiangsu (it is estimated to wait until the end of 2017 or the beginning of 2018, 7.22%) second tier market, with market share over 5%: Shandong (only 6 cities start to implement from November 1, the rest cities will wait until 2018, 5.47%); Henan (pilot cities implement before 2017, the rest cities strive to implement before June 2018, 5.25%)