As the deadline for applying the Good Sales Practice for
Pharmaceutical Products (GSP) Certificate draws nearer, many
mainland medicine distributors are facing the pressure of being
kicked out of the industry if they fail to obtain one.
At
present, only about 80 of the 16,500 medicine distribution
companies in the country have obtained the GSP certificate,
according to a mainland medicine industry association.
An
earlier survey conducted by the association said only 27 percent
and 20 percent of the 300 medicine distribution companies
interviewed to date met the basic requirements outlined by the GSP
certificate in terms of hardware and software systems,
respectively.
To
advance the country's drug distribution development following
accession to the World Trade Organization (WTO), the State Drug
Administration (SDA) requires all pharmaceutical firms, both
specialized and non-specialized, to have qualified for the GSP
certificate by the end of 2004, otherwise those firms will have to
cease operation. According to the mainland's Drug Administration
Law and other relevant laws and regulations, the GSP certificate
has been introduced to strengthen quality control in the
distribution of drugs and to ensure the safe and effective use of
drugs by the public.
A
GSP certificate center was officially launched in Sichuan
Province at the end of 2002, after others were launched in
Guangzhou and Shanghai. This implies that the state has reassigned
the power of issuing the GSP certificate to the provinces, while
the power remained solely with the SDA in the past.
However, of the 20,000 drugstores in Sichuan Province, only one
pharmaceutical firm, Sichuan Pharmacy, has obtained the GSP
certificate. After the local government conducted assessments of
all such firms in the province, it found that only 5.1 percent of
drug wholesalers, 9.1 percent of chain drugstores and 0.53 percent
of drug retailers could realistically hope to pass the test to
obtain the certificate.
The number of bankruptcy cases and failing medicine firms has risen
significantly since 2002 - around 4,400 wholesale drug enterprises
were closed down last year in China. Sources within the industry
said reform of the country's drug distribution system could be
anticipated as the power of the GSP extends into the provinces.
"The best thing about this GSP certificate is that it will ensure
an environment of fair competition in the industry," said Yang Fei,
deputy general manager of Nep-Star Health Drug Store in
Sichuan.
Nep-Star first set foot in Sichuan back in 2001. Now the company
owns 10 chain stores in the province with a total investment that
amounted to not more than 5 million yuan (US$604,098).
Nep-Star has been putting more money into development of both
hardware and software in order to meet the necessary standards, but
this is often quite a costly prospect for firms that grew up in the
unregulated sector which preceded the advent of the GSP
certificate.
"Many of the unqualified drugstores do not have quality control in
their services and management, but they can operate at a lower
cost," Yang said.
Especially with the recent trend of price cuts to pharmaceutical
products, firms like Nep-Star have no choice but to follow
suit.
Small firms in particular are suffering from the price-cutting
trend, because the reduced-price products are generally the 100
most commonly used medicines, which happen to be the products these
firms buy and sell the most. By contrast, big firms can still make
a profit from other regular-priced products.
According to statistics from the local Sichuan government, the
gross profits of its drug enterprises stood at an average of more
than 30 percent before the price-cut war began, but these have
fallen to less than 20 percent since then. Sources inside the
industry said gross profits should be around at least 25 percent to
keep enterprises going. They said the current phenomenon was
extremely abnormal for the market.
"The GSP certificate system is the standard, the minimum
requirement for entering into the industry," Yang said.
Along with Nep-Star, large to medium-sized drug enterprises, like
Sichuan Tongrentang Pharmacy and Chengdushi Pharmacy, are preparing
for the GSP certificate, which is seen as the lever which will
raise the standard for pharmaceutical firms in the mainland.
(China Daily February 4, 2003)