Why China's health care industry is "not growing up"

A few days ago, the General Office of the National People's Congress Standing Committee published the "People's Republic of China Food Safety Law (Revised Draft)" through the full text of the Chinese People's Congress and began to solicit opinions from the community. Among them, five related to health foods have caused intense concern in the industry.

The signal for the release of the draft is very obvious. It is necessary to change the old industrial structure and it will definitely take away some people's "cheese." An industry insider who declined to be named pointed out that at present, China's health food industry has broad prospects for development. However, the industry did not grow rapidly. In particular, China's health food enterprises have always been a "small head" compared with the scale of some developed countries. In sharp contrast to this, the same health foods, domestic consumers have to pay 3 times more than foreign prices.

Why is the health food industry in our country not growing? Why are there so many differences in the scale of enterprises? Why do consumers spend more on "saving money?" ? In response to many questions, the reporter conducted an investigation.

Insufficient scale

In May last year, Yan Jiangjun, spokesperson for the State Food and Drug Administration, said that as of the end of 2012, there were a total of 2006 health food production enterprises in the country. In 2012, the output value was about RMB280 billion. From this data, we can also see that our national health food industry is in the ascendant.

According to estimates by the China Chamber of Commerce for the Import and Export of Medicines and Health Products, the global dietary supplement market in 2013 has exceeded US$110 billion (at current exchange rate, approximately 682.3 billion yuan).

The “Twelfth Five-year Development Plan for the Food Industry” issued in January 2012 pointed out that by 2015 China's nutritional and health food output value will reach 1 trillion yuan. As of the end of 2012, there were a total of 2006 health food production enterprises in the country with an output value of only 280 billion yuan, which still has a large gap with the trillion target.

According to a health food practitioner, the type of health food in China is “too little”. Even the “giant” of domestic health products such as Tong Ren Tang and Tomson Bingjian “only two counters are piled up on all products”. According to statistics, as of July 16, 2014, the State Food and Drug Administration approved a total of 14,700 health food products, including 13,975 domestic health food products and 725 imported health food products.

The reporter found that the world-renowned professional brand of health nutrition products, the United States GNC, has more than 1,500 products. The global dietary supplement giant NBTY claims more than 3,000 varieties. It can meet the nutritional needs of different ages, genders and groups.

Take fish oil as an example. In the United States, the health functions of fish oil have been widely accepted by consumers. There are at least hundreds of brands of fish oil capsules on the market. In China, only 20 companies have fish oil products, some of which are imported brands. Searching for "fish oil purchasing" on Taobao can retrieve nearly 10,000 product information. Some Haitao people can even count on several foreign fish oil brands, and believe that the “fish oil” of Haitao is not only of good quality and good effect, but also has many varieties and affordable prices.

The potential is huge

Zhang Fenglou, chairman of the China Health Association, said that in recent years, China’s health care industry’s output value has accounted for about 2% of the GNP, and in developed countries, this ratio has generally surpassed 15%, and is increasing at an annual rate of 15% to 30%. . In Europe and the United States, consumers spend an average of more than 2% of their total expenditure on health foods, compared with 0.07% in China.

Figures from the China Health Association’s Market Working Committee show that the purchasing power of domestic health products has reached the scale of trillions, but actual sales are less than 300 billion yuan. At present, China's per capita drug consumption is only 1/40 to 1/30 of that of developed countries in Europe and America. Per capita health food consumption expenditure is only 1/20 of that of the United States and 1/15 of Japan, which also shows the medical and health food market on the other hand. Huge room for growth and development potential.

The latest report issued by the Boston Consulting Group (BCG) in February this year, “From Insights to Action: The Nuggets China Healthcare Consumer Market” points out that Chinese consumers’ global health awareness is leading globally. By 2020, China’s healthcare consumer goods market is expected to exceed 400 billion yuan. .

In 2013, the State Council’s “Several Opinions on Promoting the Development of the Health Service Industry”, the scale of the 8 trillion target presented a broad prospect for the health industry, and the revision of the “Food Safety Law” provided good opportunities for the development of health food products.

The survey shows that in recent years, the growth rate of nutritional and functional foods in China has been 27.8%, far exceeding the growth rate of other countries. The dietary supplement products are the fastest growing types of nutritious and functional foods, with a sales growth rate of 77.8%.

Despite its great potential, Chinese consumers still face the dilemma of high prices for health foods. According to a reporter’s search on the Amazon website in the United States, the price of nutritional supplement “protein powder” is equivalent to about RMB 60-100 per pound. In Amazon China, the search for similar products costs about 200-400 yuan per pound.

What is even more interesting is that China is a major exporter of raw materials for health products. An industry source said: “If the processing and production processes of similar products are strictly in accordance with standardized processes, the quality difference is not great, but the price is so much worse. Think about how much money Chinese consumers spend."

The reasons for the "high prices" are attributed to the admission system.

In an interview with the media, Hu Shizhi, a macroeconomics economist, pointed out that the current approval of the trial is actually an administrative monopoly tool. Enterprises that have obtained approval for health food products have obtained markets that are strongly protected by the government, and other companies that have not received approvals have been barred from entering the market to compete. Under the examination and approval system, the natural rights of enterprises to enter the market freely have been deprived and become the privilege required of the government.

Policy Barricades Will Break

As we all know, for a long time, China's access system for health products is a one-by-one product "approval system," and every product that attempts to appear as a "health product" in the market is subject to approval. This is also referred to by the industry as the management of medicine. After approval, it will obtain the approval number of “Guo Shi Jian Zi”, which is commonly known as “Blue Hat”.

Since the implementation of the "Health Food Registration Administration Regulations" in 2005, the cost of the health food industry has been increased intangibly. According to an industry source, a health food product that costs 500,000 yuan for approval is "too normal" and usually takes 2-3 years. "For example, my company has 1 million, and spend half of the money to do this approval. How much do you think about the cost?" A number of media have previously disclosed that the difficulty of health care product approval has led to a black interest chain of power rent-seeking. Intermediary companies compile fake materials, bribe officials, buy judges, and resell approvals for profiteering. From declaration to approval, the cost of each product registration is between 150,000 yuan and 500,000 yuan. It has been estimated that for more than 10 years, health food enterprises have spent more than 5 billion yuan in registration fees for this purpose.

When some small businesses start to worry about blue hats, some large companies sit on hundreds of "blue hats," just like the industry giants and form a relatively monopoly. Enterprises without capital, time, and "relationships" are apt to dare to apply for health foods. Large enterprises hold a large number of approval numbers and "swords" are on the market. As a result, monopolies can cause prices to deviate from costs, and consumers pay for high prices resulting from approvals.

Over the years, many people in the industry have constantly called for changes to this policy. Relevant state departments are also aware of this issue and a revised draft came into being.

Among the five articles related to health food related to the revised draft of the “Food Safety Law”, one important change is to change the “approval system” to “mainly record-based system”, and only to “the use of new raw materials for health foods and the first import of Health food” for approval registration. This adjustment has also caused different evaluations in the industry.

Regarding the "approval system for canceling approvals," Zhang Hong, deputy general manager of Tong Ren Tang Health Pharmaceutical Co., Ltd., said that Tong Ren Tang currently has more than 90 approvals and there are still more than 40 approvals. Once the approval system is cancelled, Then does a lot of the documents held in their hands not turn into a waste of paper?

For Xia Junbo, the managing director of Nature China (China), this change is undoubtedly a huge positive news. Let health foods return to the "food" attribute, get rid of the kidnapping of approvals, allow products to be put into the market and refine, and ultimately benefit consumers. This is the policy that is beneficial to the industry.

According to Wang Dahong, secretary general of the China Health Association’s Market Working Committee, approvals and filings are all problems with the admission system. “If you are on the lookout for new entrants, of course, if you stand at the old company's perspective, most of them support the approval system. He suggested that excellent companies should stand on the perspective of consumers and even look at issues from the perspective of social development. In the final analysis, the business is for the consumer, it is the need to bear social responsibility, and it is deviated from the interests of the consumer and society to consider the issue. All of their own interests are at work.