This Enterprise is the Only Successful Bidder for the Distribution of Consumables Worth CNY 600 Million!

  • 2020-12-16
This distribution giant is the successful bidder selected by 13 hospitals
Zhoushan Hospital, Zhejiang has recently issued the Announcement on the Transaction Results of the Medical Consumables Intensive (SPD) Platform Construction and Daily Operation Management Service Project, which makes it clear that Thalys Medical Technology Group Inc. is the only successful bidder for the hospital’s “Medical Consumables Intensive (SPD) Project”.

Before this on November 22, the Tender Announcement issued by Zhoushan Hospital, Zhejiang clearly showed that the hospital would select a professional service provider of medical consumables intensive (SPD) operation to meet the hospital’s overall need for medical consumables intensive platform construction and daily operation management services.

And the announcement clearly proposed that the total annual procurement amount of hospital consumables is about CNY 120 million (excluding reagents). As Thalys is the only successful bidder that has signed a service period of five years, it means that Thalys has obtained the right to distribute CNY 600 million consumables in the hospital.

Also according to the Tender Announcement, the hospital will decide the purchase varieties, specifications, places of origin and prices of medical consumables, however, the distribution service provider can charge a certain percentage of costs from the consumables suppliers who access the SPD information system, which the hospital will not participate in. In other words, the consumables distribution costs will be transferred from the hospital to the consumables suppliers.

Compared with the hospital’s extensive management mode before the cancelation of medical consumables markups, consumables distribution will change from an income factor to a cost factor for the consumables suppliers after the zero markups, how to reduce the cost will become an urgent task, and access to SPD information services will become a must.   

The SPD model is based on the refined management of medical consumables and enables hospitals to realize post-consumption settlement, zero inventory management, and refined management, reduce logistics management costs and waste, and achieve whole-process traceability. According to incomplete statistics of public data, at least 210 hospitals in China have completed or are conducting SPD tenders, most of which are secondary hospitals and above.

According to the analysis of professionals, the market space of SPD will further increase. There are 9,478 secondary hospitals and 2,681 tertiary hospitals in China, and those 12,159 hospitals can constitute the core target customers of SPD business.

However, under the SPD model, the number of distributors is largely reduced! Hospitals tend to choose a few distribution enterprises with high strength and able to help realize supply chain management and information maintenance inside and outside the hospital. A large number of traditional distribution enterprises and distributors will face the crisis of being eliminated if they do not transform or seek cooperation with third-party SPD service providers.

List of winning large distribution enterprises revealed! With a distribution scale worth hundreds of millions of CNY
Large pharmaceutical distribution enterprises have been in full competition under the SPD model. It is very common that one distribution enterprise obtains the right to distribute the consumables of one or even more hospitals. Earlier, Jinan City released a bid-winning announcement on the Medical Consumables Centralized Distribution Provider Selection and Medical Consumables SPD Project of the No. 4 Hospital of the city, according to which, the subsidies of six enterprises including China National Medical Device, Realcan, China Resources, Shanghai Pharma, and Wego won the bid for the distribution of all consumables and reagents of the hospital.

It is understood that the above winning enterprises have obtained the right of centralized distribution of the consumables of many Grade-A tertiary hospitals and Grade-A secondary hospitals since 2016, with a service period of up to 5 years in many hospitals, which means that the distribution scale reaches hundreds of millions of CNY! According to industry professionals, with the SPD model, large distribution enterprises can not only control the hospital traffic portal downward but also enhance the bargaining power with upstream hospitals, thus rapidly expanding their market share.

With the number of hospital consumables suppliers restricted, the supply of medical devices becomes intensified
The National Health Commission issued the Measures for the Management of Medical Consumables in Medical Institutions (for Trial) last year, which mentions that for consumables in the supply catalogs, the number of supply enterprises shall be strictly limited for medical consumables with the same or similar functions. This will change the status quo of the flooding of suppliers, and distributors and agents in the distribution link will usher in a new round of reshuffle!

For example, Hulunbuir Municipal Healthcare Security Bureau released the Hulunbuir City Distribution Enterprise Selection Plan on November 19, which mentions that large distribution enterprises of drugs and medical consumables with a complete network system, good quality and reputation, and strong distribution capacity will be selected according to the requirements of the “two-invoice system”; the cleansing of the original distribution providers will be conducted synchronously: 827 distribution enterprises of medical consumables, which have been included in the consumables procurement system of the city for one year but have not conducted procurement and distribution business, will be canceled the online distribution qualification.

In the future, with the advancement of modern hospital reform and the implementation of the “DRG reform” and “consumables markup cancelation”, hospitals will have to change the original extensive procurement, use and management mode of medical consumables to reduce costs.

In addition, as the scope of volume-based procurement of medical consumables continues to expand, intensive procurement can reduce the intermediate distribution links, and one-stop package service will be favored by more and more hospitals. And more and more large pharmaceutical distribution enterprises will further occupy the domestic market share by cooperating with manufacturers. Therefore, the distribution of consumables in the future will develop in the direction of intensification as a whole.