About one-third of the drugstores in Shenzhen have to be closed by the end of next year for failing to meet new quality standards, said a health official.

Only five of the 23 pharmaceutical chain store operators in the city have obtained the Good Sales Practice for Pharmaceutical Products (GSP) certificates, a mandatory requirement of the State Drug Administration (SDA) that all pharmaceutical firms have to meet by the end of 2004, according to the local drug authority.

Of the 2,200 pharmaceutical outlets around the city, including some 500 privately-owned stores, less than 400 have passed the strict assessment since the system was put on trial operation in 2001.

The situation is so bad among the wholesale companies that only three of the 124 have got the certificate so far.

"As the deadline is approaching, we estimate that nearly one-third of the pharmaceutical firms will be closed or merged by the end of next year," said He Haiou, a director of Shenzhen Drug Administration.

The country introduced the GSP certificate to strengthen quality control and safety in the distribution of drugs; and improve the overall performance of the pharmaceutical distribution sector to meet the challenge from overseas players.

According to China's commitments to the World Trade Organization, it has opened the medicine distribution sector to foreign companies starting from January 1, 2003; and the process will be further widened.

The number of pharmaceutical companies has risen so dramatically in recent years with easy market access that there are more than 12,500 medicine wholesale companies and 160,000 retail firms around the country, according to official statistics.

However, less than 5 per cent of these companies could achieve 20 million yuan (US$2.4 million) sales a year with only 10 recording more than 1 billion yuan (US$120 million).

The number of bankruptcy cases and failing medicine firms has thus surged markedly since 2002 - around 4,400 wholesale drug enterprises were closed down last year.

The reform of the country's drug distribution system would be enhanced as GSP requirements extend into the provinces, said He.

It will take no longer than three months for qualified pharmaceutical companies to get GSP certificates he said, adding, however, that those with a record of selling fake medicines or conducting other illegal activities, cannot apply for the GSP certificate for a year, he added.

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