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HOME >> Viewpoint Pharmaceutical Future The pharmaceutical market, which is not influenced by the economic fluctuation such as depression, has been famous for it's stability, because it's relative to the public health. For example, in US the pharmaceutical industry has increased at full speed since 50s. During the 50 years from 1954 to 1994 the pharmaceutical revenue increased from ＄ 1.3 billion to ＄ 54.8 billion, and over ＄ 120 billion until now. Only in 1993 it decreased because of the policy. So the pharmaceutical industry has been one of the most favored trades by investors. Although the total amount of Chinese pharmaceutical market is small, it increases rapidly. Since the reform and the open in 1978, the national pharmaceutical trade has increased at 16.6% averagely per year. It's one of the most fast developed trades in the national economy. The development speed exceeds that of the main pharmaceutical producing countries in the world. Today our country has become one of the top 10 pharmaceutical producing and medicine raw materials exporting countries. In 2001 the pharmaceutical industry revenue reached ￥ 127 billion and increased 17%. Graph 1: Chinese drug market ( ￥ billion )
The Chinese pharmaceutical market is in the historic adjustment period. On one hand, the continuously rapid increase of the market will bring unprecedented space for the enterprises; on the other hand, the competition among the enterprises will greatly increase the market concentricity. We estimate that in the future 10 years the Chinese pharmaceutical market will develop at a speed over 10% and reach the amount of ￥ 395 billion in 2011. At present the top 10 national pharmaceutical industries only occupy 25% of the domestic market, while the global top 10 occupy 50% of the international market. So the concentricity of the Chinese pharmaceutical market is extremely low comparatively. There has been a trend of recombination and merger around the globe and the industrial concentricity has been elevated continuously. It is the same in china. So it is estimated that in 2011 the national top 10 will hold 30% of the market share. We can conclude that in 2011 the top 10 shall achieve 10 billion of the annual revenue at least. However, none pharmaceutical industry company now obtains an annual revenue of 10 billion. Most of the present top 10 can't reach the goal in the coming 10 years and they will go out of the top 10. The middle size enterprises with outstanding achievements and the new enterprises supported by great fund will have chance to replace them. This kind of “subversive” opportunity only could be found in Chinese market. In other pharmaceutical markets of the world, it's almost impossible for the enterprises from other fields or middle and small size pharmaceutical companies to grow up rapidly and dominate the markets. But if the top 10 in Chinese pharmaceutical market wish to elevate the concentricity to 30% and become big and strong by 2011, they must carry out the dual artifice of marketing and capital operation. In a rapidly changing market the enterprises' influence on the future of the market is significant. For the enterprises, management is the guarantee of survival and strategy is the basic of development. If the enterprises in Chinese pharmaceutical market want to grasp the historic opportunity of market transformation to become big and strong rapidly, a powerful strategy combined with the dual artifice of marketing and capital operation is imperative. The enterprises should have profound knowledge of the market trend and its influencing factors, which is the base for the successful strategy. ONE: The factors influencing the future We should learn the factors influencing the forming of the future if we want to know the future of the market. Any market's future couldn't be determined by single factor, and pharmaceutical market is not an exception. We will systematically analyze the many factors which directly influence the future of Chinese pharmaceutical market according to several aspects such as policy and statute, user, channel, competition, capital and technology, hoping to have a clear insight into the forming of the market future. 1． factors of policy and statute, environment and ect Pharmaceutical industry is highly sensitive to policy because it's relative to the national economy and the people's livelihood. Policy and statute and social environment have profound and long-term effect on every pharmaceutical industry. The following items have greatest effects 1). The issuance of new edition Law of Drug Administration The new edition Law of Drug Administration joints with the world. It prescribes that the approval process of imports is the same as the domestic produce. It complicates the approval process of the imports of foreign enterprises, but make it easier for them to produce in China . So, in short term the new edition Law of Drug Administration will benefit the domestic enterprises by inhibiting the applications for approval of imports. But in long term it encourages some multinational enterprises to bring China into the range of products' synchronous global launch and enlarge the investments in China to transfer more products to be produced in China2). The joint of the application for approval systems of domestic and foreign drugs In China the processes of drug approval have been uniformed gradually. But on the standard of clinical trials China still has a large gap to FDA. Along with the acceleration of the internationalization of China , the data in Chinese clinical trials will be accepted by FDA gradually. And as a return, China will accept overseas clinical cases at some degree. It directly results in that overseas companies could launch their products in China synchronously with the globe, so they will strengthen the promotion in Chinese market. And the domestic companies' final products will gradually acquire the approval of FDA. On one hand, China will become the processing base of the world pharmaceutical industry; on the other hand, some brand products owning intellectual property could be sold in advanced countries.3). The open degree of the market Although the administration statutes of Chinese pharmaceutical market have been jointed with the world, there're still some problems in the implementation, which makes the market not completely open. It's mainly manifested by the different treatments to the drugs produced by different companies. The imports and joint venture products of multinational companies are easy to be accepted by the market because of their good credits. However the native made drugs of the same kinds are more difficult to promote, so some domestic enterprises have to take the bad plan to sell with money. For multinational enterprises, the Chinese statutes are usually some directing criterions and lack detailed rules and precedents in implementation, so they are very flexible. In the fields requesting more communication with the government, such as registration and entering the reimbursement list of the drugs, the foreign enterprises always feel unfairly treated. But these problems will be relieved gradually along with the increase of the market open degree.4). Influence of the public opinions Pharmaceutical policy, especially the short-term policy, is often influenced by the public opinions. In the 1970s, the administration of pharmaceutical industry is significantly strengthened in US, and the pharmaceutical advertising approvement policies are also established then, mainly because of the public opinion that the pharmaceutical industry is a trade with sudden huge profit. This mistaken opinion hasn't changed until the end of 20th century and not been completely turned around till now. Unfortunately China is going the wrong way others have gone before. It carries out a series of plans such as limiting the drugs prices and purchase of centralized bid to control the profit of pharmaceutical industry. Actually in a highly marketlized society, almost every trade spends huge expenditure in marketing and they all could be called as trade with sudden huge profit if the cost in marketing is not accounted for. So it's most important to guide the public opinion. Since the pharmaceutical industry is closely relative to every person's life, it's easier to be blamed. Every pharmaceutical enterprise should pay attention to that. The probability of developing negative public opinion to pharmaceutical industry increases in such circumstance that Chinese pharmaceutical enterprises are booming.2. factors of the users Pharmaceutical industry is different from other industries. The patients are the end users of the drugs, but usually they aren't the determinatives of purchase. The purchase is usually determined by the doctors. And the doctors will be influenced by the efficacy, reimbursement, producers and patients comprehensively when prescription. Along with the marketlization of medical system and opening of insurance system, the producers will have less and less influence on the doctor's prescription, but the influences of other factors will increase. 1). Hospital purchase of centralized bid The original intention of hospital purchase of centralized bid is to decrease the cost of drug usage, but the things go contrary to the wishes, which has similarity with the failure of drug usage system reform in US. . In China the core of lowering the drug price is to establish a fair purchase mechanism. If the mechanism is fair, the drug price will decrease naturally because of the effect of competition. The core of a fair mechanism lies in: 1. at the most degree to decrease the contrived participation and the middle links; 2. to consider the long term instead of freakish action and to form long term supplying to set the producers' heart at rest and make them to offer best prices on the basic of supplying batches of products in long term; 3: the orders must be observed and give bonus or punishment according to the performance to make each side in the bid attach importance to it. As the government strengthens the administration to the pharmaceutical industry and the association of pharmaceutical industry hasn't effected well, the shortcoming in the hospital purchase of centralized bid isn't paid enough attention to. However this phase won't last long, more rational drug purchase based on insurance system will replace it. 2). hospital marketlization Hospital marketlization will establish the western like medical system, greatly increase the payment to the doctors and at the same time purify the pharmaceutical market and put an end to the brokerage. After hospital marketlization the hospitals could charge higher medical expenditure to the common patients and at the same time could provide widely free services to the poor patients. But it's a long course because it's relative to the national economy and the people's livelihood. During the course, the investment of the foreign capitals, especially the capitals from HongKong , TaiWan and Southeastern Asia , will greatly accelerate the process of marketlization. One of the direct results is that the doctors will be much better paid and more and more doctors will stay in the position instead of switching to be medical sales representative.3). Change in insurance system Chinese medical insurance market will gradually open after China 's entry to WHO. The open of the insurance market will influence the Chinese pharmaceutical market mostly on the opinions. It will break the former systems of labor insurance and severe diseases insurance and give the patients more power to select. For the pharmaceutical market, it means that the main customers of the pharmaceutical enterprises switch from the hospitals to the big medical insurance companies. As the insurance companies cover larger areas and hold more patients, they are more powerful to bargain with the pharmaceutical companies compared with the hospitals. On the other hand, the insurance companies generally participate in operating capitals and they pay attention to the integrality and fluidity of the capital chain. So there're more chances for them to ally the large size pharmaceutical enterprises to control the pharmaceutical market. But because of the specificity of pharmaceutical market, it's prohibited for the insurance companies to participate in the running of pharmaceutical enterprises in the western. In China , along with the perfecting of the law and statutes, here will be a sensitive gray field. 3．factors of the channels 1). Optimizing of the pharmaceutical distribution channels The distribution channels are always a feeble link in Chinese pharmaceutical market. The domestic distribution companies are with small size, undeveloped technique and low efficiency, and their only merit lies in the hospital entry and returning funds. So a distribution channel based on advanced logistics system will significantly promote the modernization of Chinese pharmaceutical market. However in the pharmaceutical distribution exist the severe phenomena of covering up the areas and relying on relationships, so if the reform of separating medical and pharmaceutical industries isn't implemented, even the overseas advanced logistics system is introduced, it's hard to improve the distribution channels.2). Separating the medical and pharmaceutical industries The existing combination system of medical and pharmaceutical has severe shortcoming for the pharmaceutical industry. First it disperses the pharmaceutical markets and makes it a difficulty for the drug to enter the hospital. Second, it's not easy to put an end to the brokerage the doctors ask for. Third, it's hard to establish efficient large distribution channels. The separation of the medical and pharmaceutical industries could improve the complexion of cheap medical treatment and expensive drugs in the medical healthcare field, increase the payment to the medical staff, and make Chinese medical market to joint with the world further. And it makes the hospitals come away from the drugs sales, so the drugstore management will switch its focus on the efficient logistics systems to gain profits. The separation of the medical and pharmaceutical industries could induce the fundamental reform in the pharmaceutical circulation channels based on scientific logistics system and make the channels transparent and efficient. On the other hand, after the separation the doctors will be better paid and cut the relation with the drug sales, so the sales with money of the pharmaceutical companies could be stopped. The separation of the medical and pharmaceutical industries has been put in the schedule years ago, and experimented in small range, but it's hard to be promoted in large range, for the hospitals subsidy system is difficult to standardize. So, although it's imperative in the long term, the effect is hard to see in the short term.3). Concatenation of the retail drugstores In US the retail drugstores are often chain stores. For example, the Walgreen, No. 1 of the American pharmaceutical retail trades, has more than two thousand stores. And the No. 2, CVS/Pharmacy, has more than three thousand stores. So the chain drugstores once became the pop topic in Chinese pharmaceutical market and the focus of the investors' contest. Actually there's big difference between the domestic and overseas pharmaceutical retail trades. For the overseas drug retail, the management tension mainly comes from the funds tied up, so the single store often couldn't survive. The chain drugstores could carry out scientific logistics to speed capital turnover and gain profits. Even though, the profit is rather low, generally not over 5%. In China the drugstores usually adopt account sales, so they don't bear the funds tension and retrenching funds is not the focus of competition. Because of the fast dilation of the drugstores, some problems usually will appear, such as locating, scheme for the operation, employee training and other management problems. The existing retail drugstores have no problem of fund and have large space of the retail profits, so the single store has strong power to profit. However the new drugstores are built up too many and too fast everywhere, which brings large tension of competition, so it's hard for all to profit. The situation will be worse along with the entry of the organizations running chain operation. Some chain stores runners hope they will profit in the future after they are purchased by the overseas large size chain stores. However the several large chain stores of overseas have implied that they haven't considered Chinese market, for the profits aren't thick. For the short-term effects, investing chain stores will bring some capital tension to the runners for the callback period is long. For the long term, when the OTC system is gradually perfected, the living space of the chain stores will be definite, but there won't be large space for profits yet.4． factors of competition 1). Increased investment of multinational pharmaceutical enterprises Until now, there're 26 among the top 30 of the world pharmaceutical industries and 31 among the top 50 have established joint ventures in China and 5 of them have invested in more than one item. So it could be said that, the companies which have the strength to enter Chinese market among the large size pharmaceutical enterprises in the world all have entered, and the enterprises on the lower part of the list temporarily haven't the strength to enter Chinese market singly. Although the multinational companies have entered China , the decision powers are still in the headquarters because of the systemic limit. The companies in China only have the sales power but couldn't operate the capitals. The investment in marketing is not enough because of the budget limit. On the other hand, the products brought in China by the multinational enterprises mostly have passed the sales peak abroad. They don't build a products line aimed at China . The multinational companies open up the sales in overseas market by vast money, and that makes them focus on the single product's sales potential when selecting products but ignore the products series. In China , although the multinational enterprises have good products, their forces are dispersed and investments aren't enough, so their products generally lack strength to go up. This common phenomena is hard to relieve in short term, but in the long run, along with the further definitude of the potential of Chinese pharmaceutical market, the joint of law and statute between China and the international, and the continuous improvement of Chinese capital market, the multinational companies probably will enlarge the investments in China. And they will adopt more flexible management manners in China , enter Chinese capital market and build up stronger marketing power. Then, as the foreign enterprises are advanced in the products R&D, they probably will recapture a part of the market shares and occupy the upper market again. The battle between domestic and foreign enterprises which once happened in Chinese electrics field probably will re-act.Table one: the investments in China of the top 30 pharmaceutical industries of the world
2). Increase of the salesman of the enterprises Pharmaceutical industry is a typical trade with “little sales and big marketing”. That is, there's big gap between each sales representative's achievement and the whole revenue, so the completion of the sales doesn't rely on several top sales but on the elevation of most sales representative's efficiency. This is the effect of marketing. Although marketing could elevate each representative's achievement, an adequately large sales team is the basic guarantee of the completion of the sales. So we say, “sales team is the source of the market power, and marketing is the machine to elevate efficiency”. Chinese pharmaceutical market hasn't developed for long, and the sales team size of existing enterprises is still limited, so in the future several years, the primary task of the pharmaceutical enterprises is to set up a stronger sales team. Now the enterprises commonly don't pay enough attention to marketing, so the marketing departments couldn't function authentically. Along with the development of the market, the enterprises' demand for sales persons with ability will increase gradually. As the doctors' incomes level will be elevated, less and less doctors will give up the job to enter the pharmaceutical sales team. It's an inevitable trend to build up sales team mainly consisting of non-medicine background staff. Then for the enterprises, a huge challenge is to manage these non-medicine background sales persons and make them transfer the products knowledge and medical knowledge accurately to the objective doctors. At this phase the enterprises will have more profound understanding about the effects of marketing. The enterprises that pay enough attention to marketing presently and persist the normal way to lead sales by marketing, have competition dominance in long run, although at the beginning they appear a little slow in development.3). Marketing and brand establishing of the enterprises For the pharmaceutical sales companies, primarily the doctors are human, so only what attracts ordinary consumers could arouse the doctors' recognition. In European and American markets, the science of pharmaceutical marketing was emphasized unilaterally and the effect of promotion was ignored for long time. In the 1990s, DTC began to boom in US. However Chinese pharmaceutical market is opened latterly, the sales persons are rarely bound by the tradition and the market statutes aren't complete, the sales promotion skills of consumer goods are largely used in the practice of pharmaceutical marketing. Along with the gradual perfecting of pharmaceutical statutes and administration, many pharmaceutical enterprises accustomed to the sales promotion manner of consumer goods don't know what to do. They couldn't find out other effective promotion manners except the commercials. Actually Chinese pharmaceutical enterprises need to summarize experiences in time, deepen marketing operation by the advanced pharmaceutical integration marketing method in the world, and combine multi-way hierarchical sales promotion and academic promotion of sales team to replace the simple and low-efficient commercial promotion gradually. Otherwise, the promotion of multinational pharmaceutical enterprises is focused on products, because it has world-class new drugs as a guarantee. However it's hard for Chinese pharmaceutical R&D to get a breakthrough in short time, so Chinese pharmaceutical marketing enterprises are different with multinational companies. The former pay more attention to establishing brands of the enterprises and persist to form products series in some special treatment fields. They form their styles and compete with the multinational enterprises' single product by the products series.5． factors of capital: In recent years, recombination and merger between world magnates have been going along. According to statistics, there are more than 20 merger cases at present and in each case the total amount exceeds 5 billion $. Some analysis results predict that global 70 gigantic pharmaceuticals will be merged to 15 ones until mid-21 century. At the same time, the concentration degree of pharmaceutical industry is rapidly elevated. The revenue of all top-10 world pharmaceuticals occupies 25 % of global pharmaceutical market in 1993, the coverage is 47.14 % in 2000, and it is above 50 % until 2002. For multinational enterprises, this kind of rapid elevation of industrial concentration will more and more favor the segmentation and control of global pharmaceutical market (including Chinese market). For example, in the United States , the revenue from the top-10 pharmaceutical wholesalers occupies 96 % of all the American pharmaceutical market (there are more than 200 pharmaceutical wholesalers in American). The total sale from top one wholesaler MECKSSON, merged top two and top three corporation occupies more than 90 % of the revenue of all the American market. The future trend in the next years will be similar to that of the world, and the market concentration degree of top-10 enterprises will be more than 30%. As far as domestic enterprises is concerned, the annual revenue must amount to 10 billion ￥ if one company want to become a Chinese top-10 enterprise in 2011. Capital operation is required if the revenue amounts to 10 billion ￥ within 10 years. 1). The investment of extra-industrial capital In the past 10 years, the increase of global pharmaceutical production value is one time, however, it is 5 times in China . The increase rate is not only far higher than the world's but also higher than that of national GDP. The profit margin of Chinese pharmaceutical industry is better than other ones, and the degree of industrial increase value is higher than the average value in domestic industries. The profit margin is 2.3 times higher of average level in Chinese industries. The performance of pharmaceutical list companies is better than other list companies. So large quantity of extra-industrial capital is naturally attracted in the investment of pharmaceutical industry. From the aspect of capital, the standardization of Chinese securities business enables venture funds of original stock market to be changed into actual industrial investment. On the other hand, the gradual opening of Chinese capital market, the more and more privatization and more opportunities of MBO will also attract large quantity of foreign capital to enter into Chinese pharmaceutical market.Graph 2.: the increase of pharmaceutical industry surpasses the GDP increase
Graph 3: the profit margin of pharmaceutical trade is higher than other industries (1999)
2). The capital operation of pharmaceutical list companies The opening time of Chinese capital market is later than pharmaceutical market, so the operation means in Chinese pharmaceutical market is usually not mature. The means is restricted to intra-industrial recombination. The recombination battle will appear in list companies. According to statistics, list companies that invest to bio-pharmaceutical industry are more than 120 companies in the recent 2 years. The total investment quantum is several billion $ and more than 50 % of the companies are multi-industrial investment. The number of pharmaceutical list companies has increased from 56 in 2000 to above 80, and the manifestation of recombination list companies is apparently better than that of traditional pharmaceutical companies. Similar to main recombination objectives of foreign capital, for national capital, pharmaceutical commerce and chemical raw-material drugs are the main merged fields.3). Recombination after mergers Merger is not simple purchase and sale. It should imply the strategy intention of the enterprise at each aspect such as objective selection, merger scheme, merger negotiation, integration implementation and others. It should realize the effect of “one plus one is over two”. For the list pharmaceutical enterprises couldn't operate capitals skillfully, they often can't band the merger and enterprise strategy together. That makes sequela of merger. The achievement of unordinary development by merger depends on the result of recombination and integration after merger. The enterprises that could direct merger by market strategy are easier to acquire dominance.4). Forming of new capital chain Pharmaceutical market attracts capitals from other fields, which have abundant experiences in operating capitals. This will be a great competition advantage of these enterprises in the market. They know more about how to use the relations of pharmaceutical with medical treatment, health insurance, finance and other relevant trades to construct new capitals chain. So it's easier to obtain the recognition of capital market and further enlarge market shares by capital strength. Merck-Medco, set up by US Merck, is a successful example of this kind. For these enterprises, the biggest challenge is to know the pharmaceutical market radically but not merely know superficial operation modes.6． factors of techniques Pharmaceutical is the highest investment industry in research and development, and the mean R&D investment occupies 16% of total sale in drug-innovation corporations. So the future market is greatly influenced by new R&D techniques. This is not the alteration in market pattern and traditional patterns to R&D, production and distribution mode are still continuing. On the other side, the promotion in IT techniques, customer management and corporation management techniques can lead to a revolution in pharmaceutical market. Moreover, it can also deeply influence the pharmaceutical marketing pattern. 1). The technical development in new medicine R&D With the development of science and technology, technical means such as combinatorial chemistry, human genomics and genetic engineering will bring more and more new and good drugs to us. However, they will not fundamentally change the pharmaceutical pattern. These techniques just take the place of former drugs so that it keeps the pharmaceutical market increasing. The separation between R&D and marketing will not be alerted because the high risk in pharmaceutical R&D will not be weakened. Pharmaceutical R&D enterprises or organizations have to sell their products to pharmaceutical marketing firms because the formers are not familiar with the market. The advantage of pharmaceutical marketing firms is the ability in marketing, and purchase is the main means to introduce of new products. It should be noted that R&D drugs are often series even are continued under some circumstances because new drug R&E are expected to start with pathological mechanisms. So pharmaceutical marketing corporations are required to establish their marketing dominance in specific therapeutical fields. On the other side, they should develop close relationship with R&D firms in these specific fields so as to continuously provide new drugs. 2). The advancement in disease management techniques. Modern pharmaceutical systems are based on industrialized massive production and are focused on treatment of current diseases. However, they neglect the long-term disease management. They take treatment into consideration despite living quality. In the future, the objectives include not only treatment of diseases but also disease management and health management. These are long-term and complete businesses instead of temporal and unilateral businesses. Marketing of pharmaceutical firms should be suitable for the development and make some alterations in time. Pharmaceutical firms should also establish strong client-relationship management systems and provide clients with specified and long-term services. At the same time, they should be matched with long-term disease management systems that are between physicians and patients. They should also provide patients with personnel services. Moreover, these changes should be thought about in medical R&D.3). The promotion in management of pharmaceutical enterprises The technical influence on pharmaceutical market is also showed in management. With the intensification of market competition, the competition is gradually focused on the control of terminals and channels. Client-relationship management systems and sales management systems are the pledge for controlling of terminals. And an opening logistics management systems ensure the high-efficiency and smoothness of channels. A systematic comparative analysis about the future of pharmaceutical market is made for the above six influencing factors.
Great certainty: must happen Small certainty: cannot happen It can be seen, from the above systematic analysis, that the must-happen and the greatest influencing factor which acts on near-future market is the increased number of sales persons in every enterprises plus the capital operation of pharmaceutical list companies. Enterprises should draw their own strategies according to these changes. At the same time, the investment from extra-industrial capital that may be a most-possible factor influencing near-future market is worthy of being put into close observation. Factors that are must-happen and the greatest influencing factor which acts on medium-period market are the much more investment from multinational pharmaceutical firms, marketing and brand establishment in enterprises and the investment of extra-industrial capital. Factors that may be a most-possible factor influencing medium-period market are the separation between pharmaceutical and medical treatment, the formation of recombination and new capital chains after merger. And factors that are the greatest factor influencing long-period market are the public opinions' influences, the formation of new capital chains and the advancement of disease management techniques. The strategy drawing in an enterprise should be based on factors that are the must-happen and the greatest influencing factors that act on market. However, factors that are the must-not-happen and great influencing factors that act on market should be monitored. Moreover, the preparation in answer to them should be made.
It is expected that the intending pharmaceutical market pattern will be the followings after considering all the above factors 1. A quantum jump will be seen in enterprises of our country in 2005. There will be a peak of purchase and merger between 2003 and 2005. Governments will go on supporting large-scale pharmaceutical enterprises. At the same time, legal systems and rules related to medication in China are gradually jointed with that in the world. As for the reform of medical treatment systems, the attitude is cautious and passive. Hence, our own pharmaceutical enterprises are the main pattern until 2005. At the same time, the market centralization will be greatly enhanced with the bankruptcy or annexation of small-scale factories. The characteristics are the followings. Governments encourage large-scale enterprises that span pharmaceutical, medical treatment or insurance to emerge. The legal systems are gradually jointed with the world. In China , the drug administrations have brought iso-efficiency of clinical experiments around the world into agenda. In other countries, large-scale enterprises have enclosed China as his synchronized launch country with advance of TCM modernization and internationalization. But it has not been come into affect . The thoughts remain unchangeable in the eyes of multinational enterprises. In China , the deal is still restricted to sales due to the demand of global integrated management. The commercialization of medical treatment systems is still being made experimentally. And the separation of pharmaceutical and medical treatment has not been entirely accomplished. But they have been implemented in coastal and developed regions. The centralized purchase of pharmaceutical by means of inviting public bidding has been banned. But more scientific approaches are being explored. Medical insurance organizations in other countries in combination with large-scale non-insurance enterprises in our country have come into China . Moreover, they have invested to large-scale pharmaceutical factories. With the accomplishment of GMP reconstruction in pharmaceutical enterprises, the snatch of purchased enterprises between pharmaceutical marketed firms that are in the stage of enclosure movement and non- pharmaceutical capitalized corporations is temporarily ceased. However, appropriate resource disposal in purchased enterprises has not started. New biological pharmaceutical enterprises in part keep their promises by bring the market some bio- pharmaceutical based on gene-engineering and gene-technology. But the pharmaceutical market pattern seems unchanged. At the same time, these factories come to realize the importance of the pharmaceutical market. They either sell their products to large-scale sales firms or sign up all kinds of collaborate sales agreements with these sales businessmen. One-up pharmaceutical enterprises in China have realized the function of large-scale sales team and hence start a new-turn contest to set up rapid and great-scale troop sales teams. This enables the existing space of small-scale enterprises to become more limited and the degree of market integration to become more intensified. The large-scale enterprises that have benefited from their improved sales teams pay more attention to the elevation of market share and construction of sales teams. At the same time, simple and large-scale investment into advertisement on marketing is adopted by troop enterprises attributable to the importance of massive investment. Advertisement out of line is frequently seen. At the same time, the advertisement limitation on health care products is relatively looser. So some leading troop enterprises come into this field so as to attain larger return at a price of simple advertisement. On one hand, it makes the marketing practice of health care products more normal. On the other hand, it enables the entire marketing level of troop enterprises to go down. As far as pharmaceutical enterprises is concerned, the basic market pattern is unchanged in spite of the more intense competition. Traditional marketing means are still effective and the competition is focused on the quantity of market investment. Under such circumstances, the number of pharmaceutical firms is greatly increased. Moreover, the market share of pharmaceutical enterprises in other countries is slowly going down. There are two kinds of enterprises that keep ahead in the market. One kind of firms are civil-owned enterprises and enterprises which have civil-ownership quality. These enterprises are dared to invest much into market (both in sales-team scale and in advertisement) based on the longer influences of prestigious brand. They are in the leading place. The other kind of pharmaceutical enterprises are standardized pharmaceutical firms by non-pharmaceutical super large-scale enterprises from mainland, Hong Kong or Taiwan . They possess mighty brand advantages and can invest gigantic capital in this field. The management is regular and the capital operation is skilled in these enterprises. The duration in Chinese pharmaceutical market is short, so they cannot make use of all resources to set up unified marketing teams. And the market share is the result of the purchase and merger. 2.In year 2008: the competition beacon will be fired between Chinese enterprises and foreign ones. Three years from 2005 to 2008 will be the gold time for Chinese pharmaceutical enterprises. With the continuous market changes going on, however, some disadvantageous factors are more and more evident. The key factors are human resources and social environments. From the aspect of human resources, existing pharmaceutical sales persons are usually from physicians because their salaries are low. The sales teams in enterprises are usually small, so physicians are the repertory resources. Physicians' situations will be apparently improved until 2008 and more and more physicians will choose practising medicine as their jobs then. The property of sales representatives will be painstaking and be low-return employment. On the other hand, the demand of sales representatives will be gradually increasing with the sales teams in pharmaceutical enterprises escalating. For example, there are more than 7,600 sales representatives in Pfizer Pharmaceuticals Limited in the United States . At the same time, they also employ large quantity of Contrast Sales. Pfizer used 4,300 people for promoting the new drug Celebrex. There are more physicians in China than in the United States , and the cost of labor force is cheaper in China . Hence, the number of sales representatives in medical sales firms will be more than that in the United States . Supposed each corporation has 5,000 sales representatives for the 10 leading medical corporations and it is clear that above 50,000 sales representatives are required. So it is unpractical that sales teams are only supplemented from physicians. The sales lever will be decreased for persons who are from other fields because they have no solid medicine-backgrounds. Then, sales management, especially marketing that directly instructs each person is of critical importance. From the aspect of social environment, negative voice comes into being among public opinions due to the large quantity of pharmaceutical advertisement investment. At the same time, medical personnel level is some decreased due to the large number of recruited non-medical employees. They are reported to be liable to malpractise in sales. Because both pharmaceutical is closely related to each one's living and the public is focused on negative consensus, the negative reports will be easily magnified. The results are misunderstanding on pharmaceutical enterprises and reinforcing of pharmaceutical supervision: The separation of pharmaceutical and medical treatment is gradually outspread all over the country and is finished in big cities. The scope of hospital marketalization is gradually confined in urban areas, and is proclaimed to be finished. In rural areas, pervasive health care services are still implemented. With the approximate accomplishment of the above two reforms, the physicians' benefit is greatly improved and more and more doctors choose practising medicine as their lifetime profession. Pharmaceutical serious disease-plan system is abolished due to the ineffective use of capital. The representatives are prevailing medical services aimed at the general population and hierarchical medication system combined with commercial insurance aimed at salary workers. Highly effective and wide-coverage logistics system is gradually set up in Chinese pharmaceutical industry, which takes the place of former disperse logistics firms. This is the result of foreign-capital logistics firms' entry to China . Pharmaceutical policies are furthermore jointed with that in the world, and the clinical data are gradually accepted by each other. At the same time, the continuous increasing of Chinese market has been attached enough importance by multinational pharmaceutical enterprises. The opening of Chinese stock market enables multinational pharmaceutical enterprises to have their corporations in China come into stock market so as to furthermore exploit Chinese market. Until year 2008, multinational pharmaceutical enterprises will start to carefully formulate management policies aimed at Chinesemarket. The investment to Chinese market will be increasingly strengthened, the management means will be much more diversified and capital practice will be a principal means to exploiting the market. Several years before, pharmaceutical firms in our country paid more attention to sales instead of the high speed expand of marketing. The direct results are the scarcity of sales firms and the decreasing quality in sales. The improvement of physicians' benefits enables more and more doctors to makes practising medicine as their lifelong choice, which makes the situations more deteriorating. Foreign enterprises increase the investment in China , and they adopt flexible localized policies as well. These measures both arrest many experienced local marketing persons and attract large quantity of marketing ones who have come to domestic firms to foreign firms. Some firms in our country neglected the importance of integrated marketing because they have been benefit from powerful selling teams and gigantic investment to marketing. At the same time, problems in the process of sales are usually made public. More strict inspection measures aimed to pharmaceutical market will come on with the increase of negative public opinion on medical fields. 3.Year 2011: to exist or to develop The two kinds of market patterns in year 2011 will be the followings due to the changes in 2008. The first kind of pattern (for some household electric market and IT market ) Foreign enterprises will re-achieve the competitive dominance and will become the leading ones in market that depends on new drugs, perfect integrated marketing means and new management of sales teams. Enterprises in our country will withdrawal to one whose level is the same as 1990' s. They mainly hold such market that is in rural areas and in medium or small cities. At the same time, they will either produce or yield products for multinational enterprises. The enormous sales teams which were set up in domestic firms will either be gradually assimilated by foreign firms or sell for foreign firms according to agreement. Medical systems and insurance systems are gradually jointed with European or American systems, which both can result in the domestic operation diversity for multinational pharmaceutical enterprises and will strengthen their competitive superiority. The second kind of pattern (for development of telecom market ) Domestic firms will have finished their transformation. They will have built up perfect marketing and sales systems. Under the competitive pressure from foreign enterprises, they will have made their products enter into European, American and Southeast Asian markets due to their gradual internationalization. At the same time, they will invest to European and American developed research enterprises and develop a long-term and stable relationship with them so as to guarantee their own production line. Foreign enterprises have not solved the power assignment relationship between headquarters and regions although they have strengthened the investment to China . This will results in the incomplete power assignment and rigid management means. And the market share will be slowly slipping again The medical systems and insurance systems will gradually form their own characteristics in China . And a fine mutual-action relationship with pharmaceutical market will come into being.THREE: Policies to success for enterprises According to the above analysis, for today's enterprises, the critical factors to success are to make consummate and practical strategies according to future market changes, to act after decision, to play to the score in the process of practice and to keep the dexterity. Short-term: Capital operation is combined with industry operation. Capital operation is instructed by industrial thoughts. Keep a stable status when it is rapidly increasing. Medium-term: In the management of enterprise, it should be insisted on that sales is instructed by marketing. Enterprises should not be tempted by Short-term benefits. Long-term: Faced-to-future complete industrial chain that includes medicine, medical treatment, management of health or disease, insurance and finance should be strengthened in order to success in the competition at a higher level.Picture 4: Strategic layout frame for pharmaceutical enterprises Enterprise Strategy Layout
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