The Impact of Healthcare Reforms on Chinese Retail Pharmacies

The Struggle of Retail Pharmacies Amidst Healthcare Reforms

Retail pharmacies in China are navigating through a tough period, with the healthcare reforms creating a harsh climate for their operations. The reforms have led to a series of difficulties for these businesses, which can be attributed to three primary factors:

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1. Integration into the New Medical Reform Program

The new medical reform program has incorporated retail pharmacies into its overall strategy, but it has failed to provide detailed support for the sale of essential medicines in these outlets. This lack of specific support programs has resulted in a shrinking space for retail pharmacies to operate.

2. The Essential Drugs Zero Markup Policy

The pilot implementation of the essential drugs zero markup policy in various provinces and cities has led to a 15% reduction in drug retail prices at public and community hospitals. This policy has significantly undercut the competitive edge that retail pharmacies once held with their low pricing strategies.

3. Price Adjustments of Essential Drugs

On October 2 of the previous year, the Chinese National Development and Reform Commission announced new retail prices for essential drugs, with nearly half of the drug prices falling by an average of 12%. However, some retail pharmacies have not adopted the new pricing, leading to the disappearance of certain medicines and affecting the overall image of the sector.

The Current State of Retail Pharmacies

As of 2011, there were over 380,000 retail pharmaceutical raw materials suppliers in China, including 220,000 individual shops and 160,000 chain stores. Despite this, the new medical reform program has marginalized retail pharmacies, with the top 100 pharmacies in China seeing a drop in prescriptions from 1.68 million in 2007 to 1.37 million, and prescription sales as a percentage of total sales decreasing from 27% to 25%. This trend has continued, with a significant margin still evident in subsequent years.

 

Adapting to Change: The Path Forward for Retail Pharmacies

In response to these challenges, retail pharmacies in China are increasingly seeking restructuring and cooperation. Additionally, squeezed profit margins due to drug price management and other supporting documents from the new medical reforms have prompted retail pharmacies to venture into e-commerce, hoping to find new avenues for growth and weather the storm brought on by the reforms.

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