The history of Buchang pharmaceutical company: 8 billion sales fee a year and 10 bribery cases in 5 years

category:Finance
 The history of Buchang pharmaceutical company: 8 billion sales fee a year and 10 bribery cases in 5 years


In the early morning of October 17, the Central Commission for Discipline Inspection and the State Supervision Commission published a headline article strictly investigate the power and money transactions, establish a dishonest list, centralize procurement with quantity, and cut off the interest chain of medical bribery. In recent days, the State Medical Insurance Bureau and the state Supreme Peoples court have also jointly established a mechanism for information exchange and sharing of medical commercial bribery cases. Various departments have launched a heavy attack on the medical bribery problem, to protect the price of centralized procurement with quantity. At the same time, in the capital market, the regulatory authorities have also strengthened their attention to pharmaceutical sales and played a sword against commercial bribery.

According to some medical bribery information of China judicial document network, the new health reporter analyzed the cases and analyzed the development trend of the industry.

Recently, Buchang pharmaceutical has released a series of announcements, including the acceptance of the vaccine clinical trial application of the subsidiary company and the new production scope of preventive biological products. In the view of the industry, this is actually the embodiment of the strategic transformation of Buchang pharmaceutical.

Since 2018, Buchang pharmaceutical has successively launched transformation strategies to transform from a sales oriented company to a technology-based company.

In fact, as a traditional sales oriented pharmaceutical enterprise, Buchang pharmaceutical has been paying close attention to its high sales cost in recent years. 21 new health noted that in the past 10 years, the sales cost of step pharmaceutical has increased by 2.3 times, from 2.445 billion yuan in 2011 to 8.081 billion yuan in 2019. According to the annual report, more than 90% of the companys sales expenses are spent on marketing, academic promotion, consulting and other expenses.

Shi lichen, head of Beijing Dingchen pharmaceutical management consulting center, once pointed out that the market and academic promotion fees of pharmaceutical companies have always been a high incidence area of commercial bribery. In fact, since 2015, 10 bribery cases related to Buchang pharmaceutical have been disclosed online.

With more than 8 billion sales fees a year, where should Buchang pharmaceutical go when the regulatory authorities stop sales with money?

01

The history of Buchang

Buchang pharmaceutical was established in 1993, mainly engaged in the R & D, production and sales of Chinese patent medicines. Its main products involve cardiovascular and cerebrovascular diseases, Chinese patent medicine box, gynecological medicine and other fields.

According to the company investigation, Zhao Tao, 53 years old, is the legal representative of Buchang Pharmaceutical Co., Ltd., who was born in Singapore. He has been the chairman of Shandong Buchang Pharmaceutical Co., Ltd. since 2001. He is also a director of step (Hong Kong), director of Shoucheng International (Hong Kong) and director of Dade Holding Co., Ltd.

Zhao Buchang, the founder of Buchang pharmaceutical, is Zhao Taos father, and Zhao Chao, the current president of Buchang pharmaceutical, is his second son.

According to the data, Zhao Buchang was born in 1942 and graduated from the Medical College of Xian Jiaotong University (formerly Xian Medical College). Later, he responded to the call to the Altay branch of Xinjiang, which is located at the border between China and the Soviet Union. In the summer of 1963, Zhao gangbu mobilized his wife, Wu Haiqin, to come to the vast desert Gobi. After working in Xinjiang for 18 years, they were transferred back to the 215 Hospital of the Ministry of nuclear industry in Xianyang as an ordinary doctor. Their four children were all born in Xinjiang.

Zhao Buchang

According to an article in business magazine, Zhaos father and sons history of making a fortune can be called father and son soldiers in battle..

*** At that time, Zhao Buchang took stroke and coronary heart disease as the main research direction to treat apoplectic hemiplegia, and established the theory of drug Qi acupuncture and brain heart treatment and became an expert enjoying the special allowance of the State Council in 1992.

Born in 1966, Zhao Tao, like his parents Zhao Buchang and Wu Haiqin, was also a medical student. He graduated from Xian Medical University in 1989. Together with his father, he began to study the drug Qi acupuncture technique for treating patients with cardiovascular and cerebrovascular diseases.

According to the above-mentioned article, in the winter of 1992, Zhao Buchang and his son were invited to participate in the International Symposium on traditional Chinese medicine and acupuncture going to the world held in Singapore, during which they participated in a field diagnosis and treatment activity. Under the gaze of experts and reporters, Zhao Tao put on a special medicine cap for Liu Yamei, a 60 year old patient who had been paralyzed for six years and whose legs were completely immobile. After massaging his head for a moment, he took out the silver needle and pricked it into his limbs. After 20 minutes, Liu Yamei was able to grasp the handrail and slowly stood up

The next day, newspapers in Singapore published news about the successful diagnosis and treatment of Chinese acupuncture. Zhao and his son became well-known Chinese medicine celebrities in Singapore, and Zhao Tao continued to stay in Singapore to practice medicine. On August 28, 1993, Buchang Pharmaceutical Co., Ltd. was established in Xianyang. The nature of the enterprise is Sino foreign joint venture, and the starting capital is 400000 US dollars remitted back by Zhao Tao. Three months of practicing medicine in Singapore, Zhao Tao, 27, made 900, 000 dollars.

Since then, a family of two generations formed a ten people group. Zhao Jing, the youngest daughter of medical school, quit her public office to join in. She is now the chairman of Shandong Danhong Pharmaceutical Group. In addition, the daughter-in-law of Zhao Tao and Zhao Chao, the eldest daughter Zhao Hua and the husband of his younger sister Zhao Jing, are also working in Buchang.

The next year, Buchang pharmaceuticals first exclusive patent drug product Buchang Naoxintong was put into the market and sold for 5 million yuan that year. Since then, this blockbuster product has made rapid progress all the way, and now, together with Diao Xinxuekang and Tianshili Compound Danshen dripping pills, it ranks among the three major brands of cardiovascular and cerebrovascular Chinese patent medicines.

However, the product has been on the black list for many times due to quality problems.

In April 2017, Naoxintong capsule was exposed by the food and drug administration department, and the tanshinone IIA content test was unqualified. In July 2017, consumers complained that the product contained unknown substances similar to hair. The medical insurance catalogue limits the reimbursement of more than 40 kinds of common Chinese patent medicines, among which Naoxintong (tablets and capsules) is limited to patients with moderate to severe cerebral infarction and angina pectoris of coronary heart disease.

On April 10, 2020, Naoxintong capsule was named by the State Drug Administration. It was required to modify the instruction manual and add adverse reactions, contraindications and precautions. Among them, more than 10 items of adverse reactions were added, including nausea, vomiting, abdominal distension, abdominal pain, diarrhea, abdominal discomfort, constipation, dry mouth, dizziness, headache, rash, pruritus, palpitation, dyspnea, etc In addition to recommending taking it after meals, it also reminds that it should be used with caution in patients with bleeding tendency, menstrual women, patients with anticoagulant and antiplatelet therapy, and those with weak spleen and stomach, and allergic constitution. Meanwhile, it is suggested that it should not be used with Veratrum .

In addition, according to public media reports, in 2002, after judicial investigation, Zheng Xiaoyu, then director of the State Food and drug administration, received money and goods from Zhao Buchang in the second half of 2002, which helped the company to declare that its Naoxintong capsule was approved from local standard to national standard.

On December 26, 2006, Zheng Xiaoyu was double regulated by the Central Commission for Discipline Inspection. On May 16 of the following year, Zheng Xiaoyus case was heard in the first intermediate peoples Court of Beijing. Zheng Xiaoyu was sentenced to death the following year for taking advantage of his position to modify drug standards for Buchang pharmaceutical and other enterprises without authorization.

On November 18, 2016, Buchang pharmaceutical was listed on the Shanghai Stock Exchange and called out the slogan step size of the world. According to the market value of that day, the Zhao familys wealth reached 28.481 billion yuan, becoming the richest man in Shandong Province of the year.

02

10 rulings and judgments

Compared with high-profile slogans, Buchang pharmaceuticals repeated bribery incidents in recent years may be more well known.

21 new health inquired the keywords Buchang pharmaceutical and bribery on the judicial documents online, and found that there were 10 rulings and judgments since 2015.

On July 30, 2020, Chinas judicial document website published a criminal judgment on the bribery case of non state functionaries. It shows that since 2016, Wang Haisheng, the former chief physician of Shangshui County Peoples Hospital of Henan Province, illegally received a drug rebate of 125000 yuan from Su, a salesman of Shaanxi Buchang Pharmaceutical Co., Ltd., during his tenure.

In 2019, Tang Mou, a pharmaceutical salesman in Shaanxi Buchang, bribed Chen Yaogang, former head of Information Department of Meitan County Integrated Traditional Chinese and Western medicine hospital, with a total bribe of 325100 yuan.

Another 8 judgments showed that Buchang Pharmaceutical Co., Ltd. sold with gold in the process of drug promotion, and the salesman bribed the leaders of township health centers and doctors of county hospitals, with the amount ranging from 60000 to 110000.

Starting point: annual sales fee reaches 8 billion

Shi lichen, head of Beijing Dingchen pharmaceutical management consulting center, once pointed out that the market and academic promotion fees of pharmaceutical companies have always been a high incidence area of commercial bribery. Buchang pharmaceutical bribery door incidents occur frequently, behind the high sales costs of pharmaceutical enterprises. According to wind data, in 2011, the step sales cost was 2.445 billion yuan, and by 2019, the relevant indicators increased to 8.081 billion yuan, an increase of 2.3 times.

In 2017-2019 and the first half of 2020, the sales expenses of Buchang pharmaceutical were 8.287 billion yuan, 8.036 billion yuan, 8.081 billion yuan and 3.684 billion yuan respectively, accounting for 59.77%, 58.81%, 56.68% and 52.36% of the current operating income respectively.

According to the data, the companys cardiovascular and cerebrovascular related products include Danhong injection, Naoxintong capsule, Wenxin granule and chemical Guhong injection. The treatment scope of the four products covers common cardiovascular and cerebrovascular diseases such as stroke, arrhythmia, insufficient blood supply and ischemic infarction.

Taking 2018 as an example, the company organized more than 19000 market activities, more than 23000 Market Research sessions, and more than 20000 academic exchange activities, with an average of more than 52 market activities, more than 63 Market Research sessions and more than 54 academic exchange activities per day, which can be described as nonstop activities throughout the year.

How much performance growth can Buchang pharmaceutical bring with such huge sales expenses?

In 2017-2019 and the first half of 2020, the operating revenue of Buchang pharmaceutical was 13.864 billion yuan, 13.664 billion yuan, 15.355 billion yuan and 7.035 billion yuan respectively, with a year-on-year growth of 12.52%, - 1.44% and 4.32% in 2017-2019, and 9.85% in the first half of 2020. It can be seen that despite the huge investment in sales expenses, Buchang pharmaceuticals performance growth has entered a bottleneck.

The semi annual report of 2020 shows that in the first half of the year, Buchang pharmaceutical realized 7.035 billion yuan of operating revenue, with a year-on-year growth of 9.85%; the net profit attributable to shareholders of listed companies was 902 million yuan, with a year-on-year growth of 12.86%. The sales cost was 3.684 billion yuan, and the sales expense rate was 52.37%. Among them, the market, academic promotion and consulting fees were 3.488 billion yuan, accounting for 94.68%.

For the marketing, academic promotion fees, consulting fees and other expenses which account for more than 90% of the annual total, Buchang pharmaceutical once explained that this part of expenses mainly includes conference fees and travel expenses for various academic promotion conferences and other activities carried out throughout the country. In addition, the company mentioned in the annual reports of 2016 and 2017 that the core competitive advantage of the companys marketing model lies in the promotion of Professional Chemistry under the guidance of the theory of brain and heart.

The Shanghai Stock Exchange also sent a letter of inquiry to Buchang pharmaceutical in May 2018, asking the company to explain its use and rationality.

In response to this, Buchang pharmaceutical said in the reply: the professional chemistry promotion and marketing mode is an important driving force for the rapid development of the company. Guided by the refined and standardized management, the company continues to build a professional chemistry promotion team, through which it can promote the companys brand image and product awareness, and promote product sales.

Shi lichen pointed out that sky high price promotion has always had a lot of speculation space of grey interest chain.

In June 2019, the website of the Ministry of Finance released the Ministry of finance to carry out the quality inspection of accounting information in the pharmaceutical industry in 2019, focusing on the authenticity of expenses, costs and revenues of pharmaceutical enterprises. Specifically, it includes: the quantity of drugs purchased, the rebate phenomenon of selling to medical institutions or medical personnel; whether there is the phenomenon of taking large amount of cash from various kinds of invoices such as consulting fee, conference fee, accommodation fee, transportation fee, etc.

The state has also strengthened the management of selling with gold. On September 16, the State Medical Security Bureau issued the guiding opinions on the establishment of medical price and credit evaluation system for bidding and purchasing (hereinafter referred to as the opinions). According to the opinions, it is suggested that the behaviors against good faith, such as giving kickbacks, should be included in the evaluation scope; the dishonest information of pharmaceutical enterprises should be mastered by combining enterprise reports with platform records; the dishonest level should be determined and updated dynamically according to the facts of the case judged by the court or administrative punishment; the grading should be used to remind warning, prompt risks, limit or suspend the bidding, and publicly disclose the dishonesty Information and other disposal measures.

Lin Xiaofang, an expert in the pharmaceutical industry, told the industry media that under the implementation of the policy of purchasing with quantity and the relevant supervision, the profit margin of sales with money is gradually disappearing, and the phenomenon of attaching importance to sales rather than research and development of related enterprises may be improved. For pharmaceutical enterprises, strengthening R & D is a sustainable way.

04

Transformation: where to go after the separation of pharmacy custody business?

Not long ago, Buchang pharmaceutical announced the completion of the separation of pharmacy custody and related business. Industry insiders said, the reason why the pharmacy trusteeship business can not be carried out is that it can easily lead to a monopoly, and then breed corruption. Pharmacy trusteeship is actually another way to sell with gold. Through pharmacy trusteeship, enterprises can give at least 15% to 30% rebate to hospitals, which goes against the original intention of separation of medicine and medicine to a certain extent. Now that the policy has blocked this road, enterprises will be short of a path of gold sales.

What is the future of Buchang pharmaceutical after the separation of pharmacy custody business?

On September 22, Shandong Buchang Pharmaceutical Co., Ltd. (hereinafter referred to as Buchang pharmaceutical) announced that it planned to transfer 51% equity of Hubei Buchang JIUZHOUTONG Pharmaceutical Co., Ltd. at a price of 21.7523 million yuan. After the transfer is completed, Buchang pharmaceutical will completely withdraw from the relevant business.

It is understood that in 2017, Buchang pharmaceutical and Jiuzhoutong jointly established Hubei Buchang Jiuzhoutong. At that time, the cooperation period of the two sides was tentatively determined to be 10 years, and the business model was adjusted to the professional pharmacy business model.

Obviously, pharmacy trusteeship is not in line with the relevant policies of the state, and it is easy to breed grey area of corruption. A number of listed pharmaceutical companies have left the business.

Bai Geng Liang, an expert in the Department of pharmacy administration and law of Nanjing University of traditional Chinese medicine, told the industry media that pharmacy trusteeship originated from the cancellation of drug mark up, that is, zero margin sales, making the hospital pharmacy from a profit-making Department into a cost department. However, since the relevant departments clearly stated in the document in 2018 that public hospitals are not allowed to contract or rent pharmacies, and they are not allowed to entrust pharmacies to profit-making enterprises, the pharmacy trusteeship business has become a hot potato

In response to this, a relevant person from the general secretary office of Buchang Pharmaceutical Co., Ltd. responded to 21 new health that the pharmacy trusteeship is no longer in line with the relevant policies of the state, so the company decided to divest it. After the transfer, the company will no longer own any pharmacy business, and will not plan to lay out the pharmacy related business again for the time being.

According to Buchang pharmaceuticals 2020 half year report: at present, the company is in the process of transformation, from a sales company to a technology-based company; from Chinese patent medicine to biological drugs, vaccines, chemical drugs, medical devices, Internet medicine; and gradually from Chinas localization to globalization.

Previously, Buchang pharmaceutical has also issued a risk warning announcement: the companys main business is Chinese patent medicine, and biopharmaceutical is a strategic plan for the future, so it can not generate benefits in the short term, and the initial investment amount is large, which may affect the companys performance.

In the first half of this year, Buchang pharmaceuticals R & D expenditure was only 173 million yuan, but increased by 49.14% year-on-year. According to Southwest Securities Research Report, Buchang pharmaceuticals R & D expenditure ratio exceeded that of other cardiovascular and cerebrovascular pharmaceutical enterprises. How will the legendary step pharmacy develop?

Zhang Wenlu, an analyst at CAITONG securities, said that compared with the transformation and innovation of chemical pharmaceutical companies, traditional Chinese medicine enterprises are under great pressure of medical insurance cost control, and their research and development progress is slow and their ideas have not been followed up. For example, the R & D expenditure of chemical preparation enterprises is 6.6%, which is gradually increasing; while the R & D expenditure of traditional Chinese medicine enterprises is only 2.3%, which has not changed much in the past two years. As a matter of fact, Buchang pharmaceutical is also aware of its own shortcomings, and formulated the above three transformation strategies in 2018. As of June 30, 2020, Buchang pharmaceutical has 329 authorized patents, 224 products under research, 11 new patent applications in the first half of 2020, and 15 authorized patents, including 4 invention patents. Not long ago, the recombinant human brain natriuretic peptide for injection (project code: bc003) developed by Shandong Danhong Pharmaceutical Co., Ltd., a wholly-owned subsidiary of Buchang Pharmaceutical Co., Ltd., also obtained the approval of the ethical review committee of clinical trials of West China Hospital of Sichuan University, officially launching phase I clinical trial. Source: Chen Hequn, editor in charge of economic report in the 21st century_ NB12679

Zhang Wenlu, an analyst at CAITONG securities, said that compared with the transformation and innovation of chemical pharmaceutical companies, traditional Chinese medicine enterprises are under great pressure of medical insurance cost control, and their research and development progress is slow and their ideas have not been followed up. For example, the R & D expenditure of chemical preparation enterprises is 6.6%, which is gradually increasing; while the R & D expenditure of traditional Chinese medicine enterprises is only 2.3%, which has not changed much in the past two years.

As a matter of fact, Buchang pharmaceutical is also aware of its own shortcomings, and formulated the above three transformation strategies in 2018. As of June 30, 2020, Buchang pharmaceutical has 329 authorized patents, 224 products under research, 11 new patent applications in the first half of 2020, and 15 authorized patents, including 4 invention patents.

Not long ago, the recombinant human brain natriuretic peptide for injection (project code: bc003) developed by Shandong Danhong Pharmaceutical Co., Ltd., a wholly-owned subsidiary of Buchang Pharmaceutical Co., Ltd., also obtained the approval of the ethical review committee of clinical trials of West China Hospital of Sichuan University, officially launching phase I clinical trial.