1、-1McKinsey Broad Market Study Process Project design(Q1,2003)Project review with local and regional J-C team(Apr.03)Survey market selection(Apr.03)Field work in 2 cities in Shandong(May 03)1st interim report(mid-June 03)Field work in 2 cities in Sichuan(mid-June mid-July 03)2nd interim report and Ki
2、ller Idea workshop(end July 03)Final report(Aug.03)Presentation to corporate management(Sept.03)-2BROAD MARKET CAN BE DEFINED AS CLASS 2 HOSPITALS AND BELOW AT REGIONAL CITY LEVEL AND ALL HEALTH CARE INSITITUTIONS AT COUNTY LEVEL AND BELOWRegional cityCountyTown VillageClass 3 hospitalClass 2&below
3、hospitalPharmacy Clinic Broad marketSource:McKinsey analysis-3BROAD MARKET DRUGS INCLUDE OTC AND“OUT PATIENT”Rx DRUGSSource:McKinsey analysisTargeting easily diagnosed,non-life threatening diseasesEasy to useRelatively cheapRelatively safe with few side effectExamplesOTCMatureNewMotiliumGyno-Daktari
4、nRxOutpatientIn-hospitalSporanox/SibeliumCipramilBroad market drugs-4McKinsey Key FindingsOverall Market Situation-5BROAD MARKET REPRESENTS 94%OF OVERALL DEMAND FOR BROAD MARKET DRUGSClass 3 hospitalBroad market drug sales breakdown by geographyPercent*For only 2 according cities*Data for only Sichu
5、an provinceSource:Interview with distributors,hospitals,pharmacies&clinics;McKinsey analysis191918191624363931202021666%All 4 citiesBroad market represents 94%of demand100%=3.62.31.3Bn RMBShandong*Sichuan*332122615242447381528157121%City 100%=2162Mn RMB County Town Village Motilium Gyno-DaktarinSibe
6、lium*Broad marketSales breakdown of XJP productPercent Other channel at city levelGDP per capita:#of county9,1993211,300185,80114County is critical for broad market-6DUE TO LOW INSURANCE COVERAGE AND RECENT REIMBURSEMENT POLICIY CHANGES,MOST PATIENTS PAY BROAD MARKET DRUGS BY THEMSELVESInsurance cov
7、erage in Yantai&JiningFor those with insurance,they can use their personal accounts(RMB 100300 per year)to cover their broad market drug expenseIn loosely controlled region(like Yantai),patients can treat the personal accounts as savings accountPatients pay on their own after the account balance is
8、zeroA majority of population does not have insuranceThey pay broad market drugs by themselvesInsuredSelf-payTotal City County Town Village 3-595-9720-3070-8010-1585-901990100Source:Interview;focus group;McKinsey analysis-7PATIENTS GO TO PHARMACY/CLINICS FOR MINOR SYMPTOMSSource:Interview;McKinsey an
9、alysisDriversIncreased price sensitivityChanged medical insurance policyImproved highway infrastructureRich information accessTVNewspaperIncreased life paceNo time to visit hospitalPharmaceutical market deregulation policyMore and more pharmacies&clinicsConveniently locatedMiddle-small hospitals fin
10、d it hard to survive due to lack of patientsSevere symptomsTown hospitalMinor symptomsLargest hospitals in city and countyMiddle-small hospitals in city and countyPharmacy/clinicsRural patientsCity patients-8A LARGE PROPORTION OF DRUG SALES COMES FROM RETAIL PHARMACIES;PHARMACY CLERKS BECOME INFLUEN
11、TIAL *40%of the patients changed their mind in pharmacySource:Interview;Focus group;McKinsey analysis“What makes you change your perceived drugs?”*Pharmacy patient surveyPercent,Shandong city level473716Perceived drug not available;persuaded by pharmacy clerkPerceived drug available but persuaded by
12、 pharmacy clerkChanged mind by myself“When I go to the pharmacy without a drug in mind,I just ask the pharmacy clerk to recommend.Then I will check the drugs introduction sheet,if this drug covers my disease,I will have a try”Yibin city level focus groupTotal drug sales breakdownPercent Pharmacy Hos
13、pital Clinics314516323235425233133037%Overall Motilium Gyno DaktarinSibelium XJP should design special initiatives to target pharmacy channels-9CLINICS ARE PLAYING IMPORTANT ROLE ESPECIALLY AT COUNTY AND TOWN AND BELOWSource:Interview;McKinsey analysisClinics share in total drug salesPercent Overall
14、 CountyTown Village 36%2634100SichuanShandongCity 827%8271003XJP should think about cost-effective way to lock in individual clinic/barefoot doctors-10G.I.Category Review-1110020205403030 *More than half of patients going to large hospitals will purchase drug at retail pharmacies *Branded generic dr
15、ugs referring to generic drugs that run advertising,creating brand awareness in consumersSource:Physician and pharmacy interviews;McKinsey analysisFOR GI DISFUNCTION DRUGS AS A WHOLE THERE IS SIGNIFICANT LATENT DEMAND;PEOPLE GENERALLY SEEK TREATMENT IN CLINICS AND PHARMACIESLatent market demand 60%o
16、f total patients do not seek any treatmentAs market leader,increasing awareness for Motilium to further boost treatment rate is one of the key demand levers Small clinics and pharmacies are important channels75%of patients seeking treatment go to clinics and pharmaciesTotal incidence Do not seek tre
17、atment Go to large hospital*Go tosmall clinicSelf medicate at pharmacySeek treatment Not awarePercentMotiliums market shareMotilium has a vast room for grow because of significant leakage along the patient flow60%of GI patients that do seek treatmentCurrent market share of 4%which could be grown fur
18、therAmong the 40%people who seek GI treatment,about 30%would buy banded generic drugs*,while the rest would buy non-brand generic drugs1.6%-12FOR GI DRUGS,POLARIZATION IS BECOMING MORE OBVIOUSAnecdotesQuantitative examplesSub-TA sales by channelPercentSource:Hospital pharmacy interviews;retail pharm
19、acy interviews;McKinsey analysis303040203040204050199719992002Retail PharmacyHospitalClinic“Unlike things in the past,patients nowadays generally try to avoid coming to hospitals because of hospitals expensive charges.For GI disease,most people can judge by themselves.So they usually prefer to go to
20、 pharmacies or clinics to buy drugs.”Qixia GI physician interview“Most GI patients are repeating patients.They know which drugs to buy,and where the drugs are cheap.So usually they will choose pharmacies&clinics.”Jining retail pharmacist interviewYantai605040302010103050199719992002Retail PharmacyHo
21、spitalClinicJiningImportance of GI drug sales in hospital is diminishingRetail pharmacy would be the major battle field for GI drugsROUGH ESTIMATION-136918433315261941SALES OF GI DRUGS ARE MORE CONCENTRATED TOWARDS VILLAGE AND COUNTY,WHILE THE MARKET IS FRAGMENTED WITH MANY DIFFERENT DRUGSPercentMot
22、iliumWeiershu(谓尔舒)Mosapride(莫沙比利)Tidines*(替丁类药)Others*Sidashu(斯达舒)*Others including more than 200 different GI drugs such as Kuiweipian(快胃片)、Weifuan(w胃复安)、Jinweixiaoshipian(健胃消食片)、999(三九胃泰)、丹桂香、胃舒平、健胃酵母片、果胶铋、邦消安、调胃片、胃气痛片、湿胃舒、养胃舒,and many other cheap non-branded generic drugs*Including Cimetadine,Ram
23、itidine&FamotidineSource:Distributor interviews;physician interviews;patient interviews;McKinsey analysisTotal=RMB 243.05 millionVillage CountyTown City-14IN BROAD MARKET,MOTILIUM IS LOSING OUT BIG TIME IN RETAIL PHARMACY CHANNEL Retail pharmacyHospitalClinicSource:Distributor interviews;hospital ph
24、armacy interviews;retail pharmacy interviews;McKinsey analysisSales by channelMn RMB,%Motilium Sidashu(斯达舒)Weiershu(谓尔舒)Mosapride(莫沙比利)Tidines(替丁类药)GI drugs 123553243.051434529.83666296.62576207.304038217.934227344.64YANTAI&JINING-15 AND IN COUNTY GEOGRAPHYCity County TownVillageSource:Distributor i
25、nterviews;hospital pharmacy interviews;retail pharmacy interviews;McKinsey analysisSales by strataMn RMB,%Motilium Sidashu(斯达舒)Weiershu(谓尔舒)Mosapride(莫沙比利)Tidines(替丁类药)GI drugs 152619243.05411522209.83432237266.62152644217.3091850237.93101171744.6466YANTAI&JINING-16Vaginal Infection Category Review-
26、17FOR VAGINAL INFECTIONS,PATIENTS ARE MORE AWARE OF THE DISEASE AND GO TO HOSPITAL FOR TREATMENT PercentLess latent demand Almost all patients aware of the disease due to obvious symptoms and regular check up80%of patients seek treatmentLarge hospital is important influencing channel Most patients s
27、eeking treatment will go to large hospitalsThough half or more will purchase prescribed drugs in pharmaciesMarket player should focus on share gainTotal incidence Do not seek treatment Go to large hospitalGo tosmall clinicSelf medicate at pharmacySeek treatment Not aware1002505580201Source:Physician
28、,pharmacy and clinic interviewsHospital is still number 1 channel to push Gyno Daktarin salesPharmacy is becoming increasingly important30%would use branded drugs,while 70%would use non-branded drugs-18FOR GYNO DAKTARIN,HOSPITAL IS CRITICAL FOR PRESCRIPTION BUT PURCHASING HAS BEEN GRADUALLY SHIFTING
29、 TO RETAIL PHARMACYAnecdotesQuantitative examplesSub-TA sales by channelPercentSource:Hospital interviews;Retail pharmacy interviews;McKinsey analysis5010304520456580199719992002Retail PharmacyHospitalClinic“Gyno patients will usually come to hospital for body check and go to pharmacies to refill dr
30、ugs.For such kind of disease,people still trust large hospitals.However,more and more people purchase drugs in pharmacies”Liangshan No.2 hospital,Gyno physician interview“I dont have many gyno patients.This is because of 3 reasons.First,I am a man;second,I dont have facilities to check the body in t
31、he clinic;third,patients are usually familiar with me and they will feel awkword.”Zhangyongxin town level clinic interviewYantai1050604020305580199719992002Retail PharmacyHospitalClinicJiningESTIMATE-19IN ADDITION,GYNO DAKTARIN NEEDS TO GROW THE MARKET SHARE ESPECIALLY THOSE OF COUNTY AND TOWNSource
32、:Distributor interviews;hospital pharmacy interviews;retail pharmacy interviews;McKinsey analysisSales by strataMn RMB,%Gyno DaktarinXiaomishuan(消糜栓)Mycostatin(制霉菌素)Shuangzuotaishuan(双唑泰栓)Jieeryin(洁尔阴)Vaginal infection drugsYANTAI&JININGCityCountyTownVillage26502071.384247 122.472443324.544146134.46
33、359385.46943275.834000022-20Nail Fungal Infection Category Review-21FOR TINEA UNQUIUM DRUGS,DEMAND LATENCY IS EVEN HIGHERPercentExtremely latent demand with increasing awareness 90%of patients do not seek treatmentAwareness and treatment rate is increasing slightly due to competitors heavy advertisi
34、ngOnly around 10%of those seeking treatment purchase drugsOnly 1%would follow prescriptionTotal incidence*Do not seek treatment Seek treatment Not aware100505107020 *The incidence rate is around 5%in ShandongSource:Physician and pharmacy interviews;McKinsey analysisOnly 1%actually buy drugsLow treat
35、ment rate is mainly due to affordability issue of the patientsSporanoxs potential market as a Tinea Unquium drug is small,and is unlikely to be a broadmarket hitGo to large hospitalGo toclinicGo to pharmacy directly-22HOSPITAL CHANNEL IS STILL DOMINATING TINEA UNQUIUM DRUG MARKET WHILE PHARMACY CHAN
36、NEL IS PICKING UPAnecdotesQuantitative examplesSub-TA sales by channelPercentSource:Hospital pharmacy interviews;Retail pharmacy interviews;McKinsey analysis001305010507090199719992002Retail PharmacyHospitalClinic“We gradually carry some Tinea Unquium drugs in these years.Because more and more patie
37、nts,although still quite small in amount,come here to ask for Liangjia after seeing its advertisement.I think most patients still go to hospital for treatment.”Jining Kangfu pharmacy“I seldom see Tinea Unquium patients.And also,because the drugs are very expensive,I didnt carry them.If there is real
38、ly someone come to my clinic,I will suggest them to pharmacy.”Yantai clinic interviewYantai550201510758090199719992002Retail PharmacyHospitalClinicJining-2325444*Others including around five drugs,such as Huihuangmeisu（灰黄霉素）,Lisulao（里素劳）,Lianghuija（亮灰甲）etc.Source:Distributor interviews;physician int
39、erviews;patient interviews;McKinsey analysisTHERE ARE ONLY A FEW COMPETITORS AT CITY AND COUNTY LEVEL FOR SPORANOX;LIANGJIA IS DOING BETTER THAN SPORANOX AT RETAIL PHARMACIES DUE TO HEAVY ADVERTISING46241614PercentOthers*Total=RMB 9.22 millionCountyTown City SporanoxLanmeishu(兰美抒)Liangjia(亮甲)Village
40、 0-24Source:Distributor interviews;physician interviews;patient interviews;McKinsey analysisTHERE ARE ONLY A FEW COMPETITORS AT CITY AND COUNTY LEVEL FOR SPORANOX;LIANGJIA IS DOING BETTER THAN SPORANOX AT RETAIL PHARMACIES DUE TO HEAVY ADVERTISINGCity TotalRetail pharmacyHospital33402573210398203111
41、514%25%29%26%ClinicCounty Share of leading drugs within Tinea Unquium Yantai&JiningMn RMB,%575461857427101417005%12%25%22%TotalRetail pharmacyHospitalClinic4.02.21.80.15.00.84.10.2100%=SporanoxLanmeishu*(兰美抒)Liangjia(亮甲)OthersLiangjia has relatively high market share in retail pharmaciesAt city leve
42、l,Lanmeishu has 31%of hospital channel,better than SporanoxHospital at county level and above should be the main focus-25PRICE IS A HUGE ISSUE FOR SPORANOXSporanox is too expensive for most farmers whose annual income is only around RMB 2,000Even at county level,cost of using sporanox for effective
43、treatment is higher than total drug expense per year for an average person152042020080500County level price threasholdCity level price threasholdCounty level annual drug expense per personAverage insurance allowance per yearCost of sporanox as a derma drugSource:Interviews;McKinsey analysisCost of s
44、poranox as a STD drugRMB-26FOR SPORANOX,XJP SHOULD CONTINUE TO FOCUS ON HOSPITALS Retail pharmacyHospitalClinicSource:Distributor interviews;hospital pharmacy interviews;retail pharmacy interviews;McKinsey analysisSales by channelMn RMB,%SporanoxLanmeishu*(兰美抒)Liangjia(亮甲)Tinea Unquium65339.2269301
45、2.218415 01.5012871.2622YANTAI&JINING-27 AND AT CITY AND RICH COUNTIESCounty Town VillageSource:Distributor interviews;hospital pharmacy interviews;retail pharmacy interviews;McKinsey analysisSales by strataMn RMB,%SporanoxLanmeishu*(兰美抒)Liangjia(亮甲)CityTinea Unquium drugs44549.22485022.21534711.506
46、7291.26240110YANTAI&JINING-28Vertigo Drug Category Review-29THERE IS UNTAPPED DEMAND IN TWO OF THE THREE PRODUCT-RELATED TAsGI disfunction patient flow in broad market percentSource:Hospital&pharmacy interview;McKinsey analysisVI patient flow in broad marketpercentVertigo patient flow in broad marke
47、tPercent Total incidence1003030402040Not awareDo not seek treatmentSeek treatmentTotal incidence100120406080Not awareDo not seek treatmentSeek treatmentTotal incidenceNot awareDo not seek treatmentSeek treatment1001990 Vertigo incidence rate is only 1%-3%Sibelium can target more indications with muc
48、h larger patient population Huge latent demand Awareness can be increased by patient education Affordability can be improve due to economic development-30BY GEOGRAPHY,COUNTY LEVEL AND ABOVE CONSUME A DOMINANT SHARE OF SIBELIUM38241227City CountyTown Village Source:Interviews;McKinsey analysisPercent
49、Total=RMB 2.0 million for sales of Sibelium in Deyang and YibinSales of Sibelium is more dominant in city and county level Market share of Sibelium in total drugs for dizziness is also higher in county level and above72%75%87%32%28%25%13%68%Sibeliums market share in dizziness drug sales in Deyang an
50、d YibinCity County Town Village100%=(Rmb Mm)1.65 2.64 1.88 1.79Sibelium Others-31McKinsey Broad Market Proposal-32WE NEED TO SOLVE THREE CRITICAL ISSUES TO ACHIEVE OUR ASPIRATION FOR BROAD MARKETInvestmentReturnsPeople developmentOrganizationFinancial and org.implicationPrioritize market opportuniti
