Lotus Pharmaceuticals provides both traditional Chinese medicines and modern western medicines in their ten drugstores in Beijing. This makes excellent business sense for the Chinese consumer who seeks treatment from both branches of medicine and treatment choices are changing as China modernizes.
When seeking care for everything from a stuffy nose to heart palpitations, most Chinese visit one of the nation’s 11,000 or so state-run hospitals. But China’s increasingly affluent and educated population has begun to shun state hospitals for common complaints such as allergies and sprains. In many cases, they are turning to the drugstore shelf — fueling fast market growth for over-the-counter drugs and the stores that sell them.
“It is a controlled revolution within the big cities,” says T.C. Chu, a director who follows health care for management consultants McKinsey & Co. in Hong Kong. “It’s a major revolution outside the main cities.” China has had tremendous difficulties with physicians who receive kickbacks from pharmaceutical companies for prescribing their medicines and has begun to jail physicians that accept kickbacks. A consequence of this conduct is that patients no longer completely trust their physicians and are turning to over the counter remedies.
China’s pharmacies numbered 150,000 in 2003, according to McKinsey and the London market-research firm Euromonitor International. That number is up from about 120,000 in 2001.
Beijing Pharmaceutical Co., a state-owned network of drugstores and drug distributors, has been gobbling up pharmacies. Five years ago, it had none at all. Now, it owns about 270 retail outlets in and around Beijing and 600 smaller ones in the countryside.
Chinese pharmacies sell the roots, herbs and unguents used in traditional Chinese medicine, as well as prescription drugs. Drugstores also have increasingly carried the over-the-counter offerings of foreign drug companies as demand has risen. In turn, pharmaceutical companies have been expanding their product lines and distribution networks here.
Foreign drug makers have been lobbying Chinese authorities to approve some of their prescription drugs for over-the-counter sale. When patients can circumvent hospitals and doctors and simply pick the products up off the shelf, the potential market could increase sharply.
Of 1,500 city dwellers recently interviewed by McKinsey & Co., 40% said they either don’t trust their doctors or sometimes question their advice. As their reason, more than half cited Chinese doctors’ tendency to overprescribe and overtreat. Nearly half of the people surveyed said they often buy over-the-counter remedies at local pharmacies instead of going to the hospital for a prescription.
China’s over-the-counter drug market is still relatively small, making up only about 10% of the overall pharmaceutical market, according to Euromonitor. In Western countries, nonprescription medications usually account for 30% to 40% of the market. At $10 billion, the China market itself is tiny compared with North America’s $250 billion market. The potential for growth is great and the market could eventually approach Western levels, analysts and industry executives say. Euromonitor estimates that retail sales of over-the-counter cough, cold and allergy remedies alone more than doubled to $311 million from 1998 to 2003.
Source: Lotus Pharmaceuticals and The Wall Street Journal
Lotus Pharmaceuticals, Inc.
7900 Glades Road, Suite 420
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