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Zhejiang established the first non-profit drug joint procurement center in China

Zhejiang established the first non-profit drug joint procurement center in China

Industry news
2014/10/06 10:51
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  On August 18, more than 50 pharmacy bosses from 11 cities in Zhejiang Province gathered in Hangzhou, formally established the “Zhejiang Pharmaceutical Retail (Chain) Enterprise Joint Purchasing Center”, and decided to collectively bid for drugs to pharmaceutical manufacturers. Reduce costs and seek new development space. This is the first non-profit drug joint procurement center in Zhejiang Province and even the whole country. According to industry insiders, this marks the shift from a passive price cut to a “active attack” in the pharmacy industry.
  Pharmacy development has reached freezing point
  Lin Zhenhua, general manager of the Hangzhou Cloth Pharmacy, told reporters that the competition in the pharmaceutical retail market has intensified since 2002, and prices have been raging everywhere. Drug price spreads are shrinking, gross profit is falling, pharmacy operations are deteriorating, and pharmaceutical retailers have entered an unprecedentedly difficult situation.
  Take Hangzhou as an example. There are more than 1,000 pharmacies in Hangzhou. However, in the first half of this year, there were more than 160 pharmacies applying for cancellation at the Hangzhou Food and Drug Administration. They did not include those pharmacies that had actually closed down but did not report to the Municipal Food and Drug Administration. "After several years of price cuts, Hangzhou's drug prices have reached freezing point, and the price of drugs in the early stage is mainly due to the pharmacy's profit-making. Now it is time for the pharmacy to fight back." One of the members of the Joint Purchasing Center, Huadong Pharmacy Deputy General Manager Chen Chunqin said. The most difficult time is when to unite. Therefore, many pharmacy executives have invariably thought of cooperation between peers and joint procurement.
  It is estimated that the joint procurement will be 1.5 billion a year.
  In 2005, many large-scale cheap pharmacies developed in small and medium-sized cities, and a new round of price wars will inevitably impact small and medium-sized retail enterprises. What should SMEs with their own meager profits do? For small and medium-sized pharmacies who don't want to be victims, the only way to save themselves is to unite.
Lin Zhenhua, general manager of Hangzhou Cloth Pharmacy, told reporters that the purpose of joint procurement is to purchase goods directly from the manufacturers, reduce the purchase price of medicines, and benefit the people. The goal of the procurement center is that the annual sales of all members exceeds 1.5 billion, and the combined purchase amount of OTC drugs is the first in Zhejiang Province.
  Lin Zhenhua said that pharmacies, as a downstream enterprise in the circulation of pharmaceuticals, are exhausted in the trend of price cuts and fierce market competition in recent years. Reducing procurement costs is undoubtedly the most direct and effective way to develop demand. The first batch of more than 50 members of the Joint Procurement Center, with more than 1,000 stores, will have an annual sales of more than 1.5 billion. This strength is enough to attract most domestic pharmaceutical manufacturers, and the advantages of the joint are very obvious.
  Another important reason for joint procurement is the disparity between pharmacies and pharmaceutical companies. The annual sales of general pharmaceutical companies are in the “100 million” unit, and the annual sales of pharmacies reaching 10 million yuan is already very remarkable. Therefore, pharmacies and pharmaceutical companies are not on a platform at all. Only when the pharmacies are united can they increase their "quantity" and negotiate with the manufacturers at a table.
  Whether it is effective or not
  Among the first batch of more than 50 members of the Zhejiang Provincial Pharmaceutical Retail (Chain) Enterprise Joint Purchasing Center, only two are Hangzhou pharmacies. Are other pharmacies waiting and waiting? Liu Lei, general manager of Hangzhou Jiuzhou Pharmacy, told reporters that the joint procurement has been discussed in the industry for several years. The reason why there has been no action is that there are many specific operational details that have not been resolved, such as the main body of joint procurement. Problems, problems with the use of warehouses, and related laws and regulations. Now I have a pioneer, I hope they can succeed, and bring new development space to Hangzhou pharmacies.
  Mao Hailuo, director of the Fanghuichuntang National Medicine Museum in Hangzhou, believes that the establishment of the Joint Procurement Center is a matter worthy of recognition. He said that this shows that Zhejiang pharmacies are striving to find breakthroughs and seek new developments. However, the development of everything must follow the laws of the market. In particular, medicines are a special kind of commodity, which is different from home appliances such as mobile phones. It is necessary to consider whether it is suitable for group purchase. On the other hand, from the perspective of pharmaceutical companies, in addition to pharmacies, manufacturers have to face some large pharmacies outside the joint procurement center, as well as hospitals with the largest share of the pharmaceutical market. If the joint procurement center is given a low price, how do manufacturers treat other trading partners? More than 50 members are loose, non-legally binding groups. Who leads the negotiations and does other members trust? These are all issues that need to be discussed again.
  Although there are still many questions, it is certain that the pharmaceutical industry is currently in the most intense stage of competition. The most difficult process of transformation is believed to have passed this stage. After a lot of waves, it will enter a new stage of development.