China's 13th Five-Year Plan for Pharmaceutical Distribution Development Promotes 'Internet + Pharmaceutical Distribution'

On December 29, the Ministry of Commerce announced the release of the National Development Plan for the Pharmaceutical Distribution Industry (2016–2020). The plan proposes that by 2020, the development of the pharmaceutical distribution industry will basically align with the overall goal of building a moderately prosperous society in all respects and meet the people’s growing health needs. It aims to establish a modern pharmaceutical distribution system that is unified and open, competitively ordered, optimally networked, highly organized and efficient, safe and convenient, and beneficial to the public.

The plan also sets forth specific development goals, aiming to cultivate a group of large-scale pharmaceutical distribution enterprises with nationwide network coverage and a high degree of intensification and informatization. The annual sales revenue of the top 100 pharmaceutical wholesalers shall account for more than 90% of the total pharmaceutical wholesale market; the annual sales revenue of the top 100 pharmaceutical retailers shall account for more than 40% of the total pharmaceutical retail market; and the pharmaceutical retail chain rate shall exceed 50%.

By 2016, China had basically achieved the three development targets outlined in the 12th Five-Year Plan for the Development of Pharmaceutical Distribution, forming three nationwide large-scale pharmaceutical commercial groups with annual sales exceeding RMB 100 billion each. Among them, Sinopharm Group reported sales of RMB 270 billion, while the other two companies surpassing the RMB 100 billion mark were China Resources Pharmaceutical and Shanghai Pharmaceuticals. There were already 28 regional pharmaceutical distribution enterprises with annual sales exceeding RMB 10 billion, surpassing the target of 20 such companies set forth in the planning outline. The share of total sales in the pharmaceutical wholesale market accounted for by the top 100 pharmaceutical wholesalers increased from 77.2% in 2010 to 84.4%, essentially achieving the 85% development target.

Furthermore, the new 13th Five-Year Plan will continue to enhance market concentration in the pharmaceutical distribution industry. Pharmaceutical distribution enterprises are encouraged to strengthen and expand through mergers and acquisitions, public listings, bond issuances, and other means, thereby accelerating the realization of scaled, intensive, and modernized operations. Support is provided for small and medium-sized pharmaceutical distribution enterprises to develop procurement alliances and pharmacy alliances, adopting models such as joint purchasing with distributed sales and unified delivery to reduce operational costs and improve organizational efficiency. The implementation of integrated wholesale and retail operations, chain-store management, and the development of multi-format mixed business models are also encouraged.

The plan also proposes enhancing circulation management standards, cultivating modern pharmaceutical suppliers, and optimizing pharmaceutical supply chain management. It supports pharmaceutical distribution enterprises in strengthening supply chain management and improving integrated pharmaceutical supply chain systems. These enterprises are encouraged to provide value-added services and comprehensive solutions—such as market development, price negotiation, online payment, and financial support—to upstream and downstream partners, thereby accelerating their transformation into pharmaceutical supply chain service providers. By leveraging modern information technologies such as cloud computing and big data, the plan aims to integrate data on pharmaceutical R&D and manufacturing, distribution and usage, changes in disease spectra, and patient health needs and consumption habits. Strengthening the management, analysis, and application of big data will provide valuable data support for pharmaceutical R&D institutions and manufacturers to assess market trends and adjust product portfolios, as well as for medical institutions to improve medication selection and promote rational drug use, ultimately enhancing the operational efficiency of the entire pharmaceutical supply chain.

The plan emphasizes advancing “Internet + Pharmaceutical Distribution.” It promotes the widespread application of information technologies, such as mobile internet and the Internet of Things (IoT), in the pharmaceutical distribution sector, encourages enterprises to carry out service innovations based on the internet, and diversifies pharmaceutical distribution channels and development models. It supports collaboration between pharmaceutical distribution enterprises, medical institutions, medical insurance departments, and e-commerce companies to develop pharmaceutical e-commerce services, providing patients with convenient services such as “online ordering and in-store pickup” and “online ordering and home delivery” for over-the-counter drugs, thereby promoting the integrated development of online and offline operations.

The Plan also supports enterprises in expanding outward by combining “bringing in” with “going global,” thereby enhancing the level of industry openness. It encourages pharmaceutical distribution companies to engage in diverse forms of international exchange and cooperation, participate in the international division of labor within the pharmaceutical supply chain, and improve their level of international development. In service of the national “Belt and Road Initiative” (BRI), the Plan promotes active exploration of pharmaceutical markets in BRI partner countries and fosters pharmaceutical investment cooperation with relevant nations. It leverages the role of pharmaceutical exhibitions and conferences in expanding international markets, enhancing the global visibility and reputation of domestic enterprises. The Plan aims to build an international cooperation platform and actively participate in global public health assistance. It seeks to promote the establishment of international standards and certification systems for Traditional Chinese Medicine (TCM) and expand market access for TCM through multilateral and bilateral negotiations. Furthermore, it vigorously develops trade in TCM services, using medical services to drive pharmaceutical exports, thereby expanding the scale of China’s TCM market and enhancing the international influence of TCM.

Since the beginning of this year, the State Council has continuously and intensively issued documents to encourage and support the development of the pharmaceutical industry: first, the "Guiding Opinions of the General Office of the State Council on Promoting the Healthy Development of the Pharmaceutical Industry"; second, the "Notice of the State Council on Issuing the Outline of the Strategic Plan for the Development of Traditional Chinese Medicine (2016–2030)"; and third, the "Key Tasks for Deepening the Reform of the Medical and Health Care System in 2016." The issuance of these documents, with regard toThis YearIt plays an important guiding role in the development of the pharmaceutical industry during the 13th Five-Year Plan period.

According to statistical data, China's pharmaceutical e-commerce has maintained rapid growth for six consecutive years.。According to data from Zhongkang CMH, the total transaction volume of online pharmacies across all categories is projected to reach RMB 16 billion in 2016, representing a year-on-year increase of 45.5%, with pharmaceutical sales alone growing to RMB 4 billion. From the perspective of the overall development trend of the pharmaceutical industry, the sector currently faces an environment characterized by unpredictable policy changes, a continued slowdown in market growth, the ongoing expansion of leading enterprises, the emerging strength of pharmaceutical e-commerce, and the vigorous rise of the broader health industry. Despite continuous challenges, numerous opportunities remain, and the outlook continues to be positive.