OTC market structure of foreign-funded pharmaceutical companies

In recent years, the news that foreign pharmaceutical companies have acquired China OTC pharmaceutical companies and health care products companies has spread frequently. For foreign pharmaceutical companies, although the acquired products are not enough to make up for the reduced income of prescription drugs in the short term, their greater significance lies in the layout of retail channels. Then, what kind of competition pattern is the OTC products of foreign pharmaceutical companies in the retail channel now?

Changes in the pharmaceutical market environment have forced foreign pharmaceutical companies to lay out the OTC market.

Recently, Pfizer announced the acquisition of a wholly-owned subsidiary of Yue Xian Pharmaceutical Co., Ltd. — — Qianlin Health Industry Co., Ltd. and its Qianlin brand products. Qianlin is one of the top ten health brands in China, and its rich product portfolio focuses on the nutritional and health needs of women in China. The addition of Qianlin products has improved the product series of Pfizer Health Medicine Department in China, thus strengthening Pfizer’s leading position in the field of over-the-counter drugs (OTC) and dietary supplements.

In recent years, foreign pharmaceutical companies have frequently acquired OTC pharmaceutical companies and health care products companies in China to lay out the retail market. The main reason is that the changes in the pharmaceutical market environment in China have forced foreign pharmaceutical companies to adjust their business strategies. On the one hand, after the GlaxoSmithKline incident, the China government’s compliance restrictions on foreign-funded pharmaceutical companies have become stricter, and the original sales model is in danger of falling apart; On the other hand, with the deepening of medical reform in China, the bidding and purchasing prices of drugs in various provinces have dropped again and again, and a large number of foreign-funded pharmaceutical companies have dropped or abandoned the bidding, which will inevitably lead to a decline in the sales of foreign-funded pharmaceutical companies in hospital terminals. It is urgent to enrich the product categories and open up retail market channels to make up for the negative impact of the decline in prescription drug revenue growth. In addition, China consumers’ awareness of self-care has been enhanced, and their level of self-medication has been continuously improved, so there is a great potential demand in OTC market.

From the perspective of consumers’ health care behavior, OTC has some functions of health care products and prescription drugs, and there are three overlapping markets: one part of the market competes with health care products; Some of them face some long-term and chronic sub-diseases and have relatively fixed consumer groups, competing with prescription drugs for the market; The main market is the common diseases facing self-medication, such as colds, gastrointestinal diseases and skin inflammation.

For foreign pharmaceutical companies, although the acquired products are not enough to make up for the slow income on prescription drugs in the short term, the greater significance of arranging OTC or health care products lies in the preparation of retail channels. So, what is the competition pattern of OTC products of foreign pharmaceutical companies in retail channels now?

Foreign OTC products have great market development potential.

The market competition of OTC drugs is very fierce, market brand is the core, and the concentration of dominant enterprises is high. In the global market, major OTC pharmaceutical companies include Johnson & Johnson, GlaxoSmithKline, Bayer, Novartis, Sanofi-Aventis, Lijie, Wyeth and Procter & Gamble. The OTC market size of the world’s top ten well-known pharmaceutical companies accounts for about 34% of the total, and there is a trend of continuous improvement.

In the China market, according to CMH data of Zhongkang, in 2014, the OTC sales scale of Chinese and foreign-funded enterprises in retail pharmacies was 16.68 billion yuan, up by 10.1% year-on-year, accounting for only 15.7% of the total OTC sales of pharmacies, indicating that the current share of foreign-funded pharmaceutical companies in the OTC market of pharmacies is small, and there is a big room for expansion in the future.

OTC products of foreign-funded enterprises in retail pharmacies are mainly chemical drugs, accounting for 84.3% of the total sales, and the market share of proprietary Chinese medicines is only 15.7%. Drug categories are mainly concentrated in the fields of vitamins and minerals, skin diseases, calcium preparations and so on.

• Figure 1 Market share of TOP10 drugs in OTC market of foreign-funded pharmaceutical companies in 2014

Among retail pharmacies, there are 99 foreign-funded pharmaceutical companies selling OTC products, including 21 enterprises with sales exceeding 100 million. The cumulative sales of the TOP10 best-selling enterprises is 13.62 billion yuan, with a cumulative market share of 81.6%, and the market concentration is very high.

• Fig. 2 Market share of TOP10 foreign-funded enterprises in OTC market

Bayer, Johnson & Johnson and Pfizer are the three giants in the OTC drug retail market in China, and the market share of each enterprise is above 13%.

In 2014, Bayer successively acquired the OTC business of consumer health products and Dianhong Pharmaceutical under MSD, becoming the largest foreign pharmaceutical company in the OTC retail market in China, with a market share of 19.6% in foreign companies, and 9 brands with retail sales exceeding 100 million yuan, with a wide range of products.

Johnson & Johnson China’s three major businesses in China are pharmaceuticals, medical equipment and consumer goods. The pharmaceutical sector is mainly Xi ‘an Jansen and Johnson & Johnson Pharmaceuticals, which are established and leading foreign-funded enterprises in China OTC market. In 2013, Xi ‘an Jansen and Johnson & Johnson Pharmaceutical completed the integration of OTC business. At present, the market share of Johnson & Johnson Pharmaceuticals in China OTC retail market is 15.7%, which is lower than Bayer Pharmaceuticals, but still significantly higher than that of other foreign-funded pharmaceutical companies. There are 8 brands with sales exceeding 100 million in the retail market, a single brand — — Dakening’s market share is as high as 5.9%.

Pfizer has always been in the forefront of OTC in China. The OTC products of its Health Drugs Department are mainly vitamin supplements, and the market share of calcium supplements "calcium/gold calcium" and multivitamin supplements "good storage" ranks among the top three in China OTC vitamin and mineral supplements respectively. Pfizer’s market share in the OTC drug retail market in China is 13.2%, of which the cumulative market share of only two brands, Calch/Golden Calch and Shancun, is as high as 12.6%.

Generally speaking, among the OTC brands of retail pharmacies, there are 42 brands with sales scale of over 100 million by foreign pharmaceutical companies, among which Bayer Pharmaceuticals has the largest number of brands, and Pfizer’s brand — — The market share of calcium/gold calcium is the highest, reaching 8%. See the following table for details of each brand:

• Fig. 3 Brands with OTC product sales exceeding 100 million and their market share of foreign-funded enterprises

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