On June 24, the Medical Economic News reported that SINOPHARM is continuously listing the majority equity of Sinopharm Yichang Pharmaceutical Trading Co., Ltd., Sinopharm Badong Co., Ltd., and Sinopharm Zunyi Medical Supply Chain Service Co., Ltd. on the Shanghai United Assets and Equity Exchange, seeking to transfer them.

In the past year, SINOPHARM has sold equity in companies such as Sinopharm (Qingdao Jimo) and Sinopharm Tongshan, exiting these subsidiaries. Statistics show that in the past year, SINOPHARM has consecutively listed the equity of more than 10 subsidiaries for transfer.

For a long time, SINOPHARM has firmly held the top position in the domestic pharmaceutical distribution industry, with its reach extending across various provinces and cities. According to the "Two-Invoice System" rules at that time, to cover the extensive county-level sinking market, it was necessary to have outlets in the local area. Therefore, around 2018, the pharmaceutical distribution industry launched a vigorous "land grab" movement. Most of the companies being transferred were established by SINOPHARM during that period.

Now, with SINOPHARM transferring and exiting these county-level markets, it should be a realization after several years of setbacks that grassroots pharmaceutical business is not an easy venture.

Crazy Expansion Under the "Two-Invoice System"

Let’s close our eyes and briefly recall the pharmaceutical distribution industry ten years ago. At that time, a drug often had to go through layers of price increases from the manufacturer to the hospital, passing through the general agent, provincial agent, municipal agent, and county agent. By the time it reached the hospital, the drug price was often several times or even dozens of times the factory price. The price difference was often used for kickbacks.

Until April 2016, when the State Council's executive meeting proposed the implementation of the "Two-Invoice System," which was subsequently included in the "Key Work Tasks for Deepening the Reform of the Medical and Health System in 2016." This system required that drugs be invoiced once from the manufacturing enterprise to the distribution enterprise, and again from the distribution enterprise to the medical institution, prohibiting further layers of invoicing in between.

This policy fundamentally changed the rules of the game in the pharmaceutical distribution industry, leading to the elimination of many small and medium-sized commercial companies that relied on agency relationships for survival. Data shows that in 2012, there were 176 pharmaceutical distributors in Fujian Province, but by 2016, this number had shrunk to around 40, with nearly 80% of companies disappearing.

Grassroots distributors did not disappear entirely; instead, they were mostly absorbed by leading pharmaceutical companies. In the past, due to local protectionism and various interest conflicts, even leading enterprises found it difficult to penetrate local markets. After the implementation of the Two-Invoice System, many unprofitable local commercial companies contracted their operations, providing opportunities for the leaders. Giants like SINOPHARM, China Resources, and Shanghai Pharmaceuticals all engaged in a nationwide "land grab." They either acquired local commercial companies or established their own subsidiaries.

For example, in the Sichuan market, SINOPHARM successively acquired four local pharmaceutical companies in Yibin, Dazhou, Neijiang, and Leshan, with a total investment of nearly 70 million yuan. SINOPHARM also quickly penetrated the county-level market through the establishment of branch offices and the construction of direct distribution networks.

In fact, some city and county-level companies had no business at all, but that was unavoidable; they had to secure their positions first. Because if SINOPHARM did not occupy them, China Resources or Shanghai Pharmaceuticals would.

According to statistics from JianShiJu, in the 2015 report, SINOPHARM only had 22 provincial-level distribution enterprises and 136 city and county-level distribution subsidiaries. Just three years later, in the 2018 report, SINOPHARM had completed the layout of provincial-level platforms across all 31 provinces, achieving full coverage of the provincial network, and the number of city and county-level distribution subsidiaries increased to 260 Almost doubled.

The effects of expansion were immediate. From 2018 to 2019, SINOPHARM's pharmaceutical distribution business maintained continuous growth of over 20%, with revenue in 2019 surpassing 300 billion yuan for the first time.

Changes in SINOPHARM's pharmaceutical distribution revenue

Image source: Wind Database

However, this growth did not last long. Some regional distribution companies were actually just seizing market share; with limited market capacity and thin profits, they not only failed to become new growth engines but instead became a drag.

Especially in recent years, growth in the distribution industry has begun to slow. In 2024, SINOPHARM's total revenue saw its first decline, dropping 2.02% year-on-year, with the pharmaceutical distribution segment showing almost no growth; by 2025, the pharmaceutical distribution segment even turned negative for the first time, with revenue of 435.4 billion yuan, a year-on-year decline of 2.02%, confirming that the pressure on the distribution market continues.

In this situation, it is not surprising that SINOPHARM chose to divest these assets.

Clearing out the legacy of the era

In the past year, the subsidiaries sold by SINOPHARM were all established to comply with the "two-invoice system." These companies share some common characteristics: small scale, thin profits, and even long-term losses.

For example, SINOPHARM's Yichang company primarily provides pharmaceutical distribution services to grassroots medical institutions in Yichang. In the first four months of this year, revenue was only 286,400 yuan, while net losses reached 1.5148 million yuan; SINOPHARM's Zunyi company achieved revenue of 8.2492 million yuan in 2025, but had a net loss of 1.59 million yuan; SINOPHARM (Qingdao Jimo) company had zero revenue in 2024, with a net loss of 244,500 yuan.

Around 2018, these enterprises may have had some strategic value. At that time, pharmaceutical distribution giants were competing for coverage. Even a county, a commercial company, or a distribution warehouse could become a key node in future expansion.

However, in recent years, the logic of the pharmaceutical distribution industry has completely changed.

Centralized procurement has driven drug prices lower, while medical insurance cost control has squeezed distribution profits, and hospital payment cycles have lengthened. The model of pharmaceutical distribution companies relying on continuous expansion and market share acquisition for growth is gradually becoming ineffective. As growth slows and profits are pressured, assets initially aimed at county markets are also being revalued Selling what cannot contribute to profits, and shutting down what cannot be sold, has become an increasingly realistic choice.

At the same time, SINOPHARM has chosen to redirect its resources towards more attractive assets. In January of this year, SINOPHARM Group planned to invest 3.235 billion yuan through its subsidiary SINOPHARM International to take control of Shandong Pharmaceutical Glass; in June of this year, SINOPHARM Innovation Research Institute spent 1.654 billion yuan to acquire a 20% stake in Aide Biological and gain control.

On one hand, it is exiting inefficient circulation assets, while on the other hand, it is doubling down on high-barrier, high-value-added sectors. SINOPHARM's choices actually reflect the changes in the entire industry; the era of scale being king in the pharmaceutical distribution industry has come to an end, and the era of profit being king has arrived