Source | Journal of Medicine and Economics
Author | Ann Jinmeng

After the guidance and support of the long-term national policy, the traditional Chinese medicine formula granule industry has gradually moved towards standardization. As of early September 2022, the State Food and Drug Administration has issued a total of 219 national standards for formula granules in 4 batches, and the increase in national standard varieties in the future is also an inevitable trend.

In addition, on August 31, the National Health Insurance Administration launched the unified code of formula granule medical insurance, which will further promote the standardization and standardized development of the traditional Chinese medicine formula granule industry, achieve traceability of supervision, and accelerate the standardization of medical insurance payment standards in the national market.

01
The three ends go hand in hand, and the market expansion can be expected

The first half of 2022 is in the transition period of the new national standard, and the growth rate of the company's business in the industry is generally under pressure; And affected by the epidemic, it has also slowed down the progress of promoting product switching in various places. However, as the production and sales of new national standards and provincial standard varieties continue to land, the formula granule business may usher in an inflection point and resume quarterly growth.

Supply side: pilot enterprises are the first to lay out

From the perspective of the industry structure of traditional Chinese medicine formula granules, the concentration is relatively high, and the leading effect of the industry is gradually emerging. Six national pilot enterprises occupy more than 80% of the market.

Among them, China Traditional Chinese Medicine, Hongri, China Resources Sanjiu, and New Green have obvious first-mover advantages. Since the pilot enterprises Jiangyin Tianjiang and Guangdong Yifang were both acquired by China Traditional Chinese Medicine, China Traditional Chinese Medicine has become the leader in the field of formula granules. Other Chinese medicine companies have also deployed, and the supply side has grown rapidly, but the rising cost of formula granule companies may bring expectations of price increases.

Judging from the statistical publicity of the filing information on the official website of the State Food and Drug Administration, as of September 5, 68 Chinese medicine formula granule manufacturers across the country have filed for filing. Among them, Guangdong Yifang Pharmaceutical and Beijing Kangrentang Pharmaceutical have more than 400 varieties, 14 manufacturers including Anhui Jiuzhou Fangyuan Pharmaceutical, Jiangyin Tianjiang Pharmaceutical, and China Resources Sanjiu have more than 300 varieties, and 28 manufacturers have varieties There are less than 100.

Demand side: two-wheel drive opens up the market

On November 16, 2021, the Notice on Standardizing the Clinical Use of Chinese Medicine Formula Granules in Medical Institutions expanded the use terminal of formula granules from secondary Chinese medicine hospitals or above to all medical institutions at all levels (except pharmacies) with TCM practice, expanding the sales scope to the grassroots market, and greatly expanding market demand.

As a technological upgrade of drinking tablets, traditional Chinese medicine formula granules have relatively obvious advantages.

Japan and Taiwan are relatively mature markets for formula granules, and their market share of granules accounts for more than 70%. In 2020, domestic formula granules accounted for only 11%, and the penetration space is huge.

Payment side: Complete medical insurance coverage

Judging from the current medical insurance situation and policy trends, with the implementation of the national standard and the entry of formula granules into the provincial platform, more provinces will include TCM formula granules in the provincial medical insurance in the future, and it is expected to eventually be included in the national medical insurance system. The expansion of medical insurance coverage is conducive to enhancing terminal payment capabilities and promoting the expansion of the TCM formula granule market.

02
Follow the head closely and learn from the four major lessons

At present, the head enterprises of formula granules have obvious advantages.

There are more than 700 kinds of traditional Chinese medicine produced in China, and 129 of the 250 national standards published and publicized were drafted by it; CR Sanjiu produces 600 varieties and has more than 30 planting bases; Red Sun Pharmaceutical produces 600 varieties, participates in the formulation of 112 national standards, and has a total of 163 planting bases; Sunway Group produces 700 varieties and has more than 10 planting bases.

From the development path of domestic leading enterprises, we can learn the following experience:

Improve technical level：The introduction of the national standard has put forward higher requirements for the production of formula granules, and enterprises need to improve their technical level to ensure that their products meet national standards.

In the long-term pilot, the leading enterprises have accumulated rich experience in the production of formula granules. For example, Tianjiang Pharmaceutical, according to the best extraction rate of each flavor of medicine as the index, determined the process parameters such as water addition, heating time, boiling time, decoction time and other process parameters of each variety to ensure that the product is stable and controllable.

Strengthen cost control：In recent years, the cost of traditional Chinese medicine formula granules has continued to rise.

On the one hand, after the implementation of the national standard for traditional Chinese medicine formula granules, higher requirements have been put forward for the quality and dosage of traditional Chinese medicinal materials; On the other hand, the growth of Chinese medicinal materials is greatly affected by climate and other conditions, the supply is limited, and the price has shown a rapid upward trend in the near future.

For many small and medium-sized enterprises, the rise in raw material prices coupled with the upgrading of extraction processes has led to a sharp increase in production costs, multiplied pressure, and strengthened cost control. Or by laying out the upstream medicinal material base, it can partially resist the risk of rising prices or insufficient supply, and also ensure the stable supply of products.

Promote intelligent manufacturing：In order to further control production costs and improve production efficiency, most leading enterprises are trying to build digital intelligent workshops, liberate manpower through automated equipment, and optimize processes with the help of information systems. At the same time, build a formula granule industry cloud platform, expand to the upstream and downstream of the industrial chain, and build a new model of collaborative manufacturing of distributed factories of traditional Chinese medicine formula granules.

Innovative marketing models：At present, the sales barriers of the formula granule industry still exist, and it is difficult for the enterprises that enter later to achieve product substitution in the short term, and it is necessary to continue to innovate, continue to promote the market, and improve the terminal coverage.

Centralized procurement expansion, market hot sales, policy support, national standards and provincial standards are frequently released... Traditional Chinese medicine formula granules are ushering in multiple benefits, and the market can be greatly expanded. The "autumn harvest" season of Chinese medicine formula granules is here!