H1 earnings a bitter pill for many traditional Chinese medicine firms
Print Edition
THE bottom lines of traditional Chinese medicine purveyors in the first half of the year weren’t as healthy as the centuries-old herbal remedies they dispense. Many struggled to turn a decent profit.
Pien Tze Huang Pharmaceutical, which takes its name from an herbal formula developed by a Ming Dynasty (1368-1644) court doctor in 1555, posted its first profit decline in 11 years. CR Sanjiu reported higher revenue but a sharp drop in net income. Other giants, including KPC Pharmaceuticals, suffered double-digit declines.
Behind the numbers lies a sobering reality: Relying on one iconic product is no longer enough. In the post-COVID world, inventory drag, rising costs and failure to come up with new remedies are taking their toll.
At first glance, traditional medicine would appear to be a foolproof sector. Wrapped in strong cultural cachet, unwavering government support and products steeped in centuries of folklore, traditional medicines have long commanded premium prices.
But reality tells a more fractured story. Among the 27 publicly listed TCM firms that released their 2025 first-half earnings by late August, more than half reported lower net profits — some for the first time in years.
At the same time, a handful of companies, including Teyi Pharma and Wohua Pharmaceuticals, delivered standout year-on-year gains, underscoring the uneven nature of the industry’s performance.
The message? For every beloved household brand, another is quietly battling inventory pile-ups, sluggish consumer demand and tighter margins.
When one pill isn’t enough
Nowhere is the fragility of product reliance more apparent than with Pien Tze Huang, whose state-protected, traditional pills primarily used for liver conditions thrived on almost cult-like consumer devotion and a luxury price tag.
For years, the company prospered with a singular formula. But in the first half of 2025, its revenue fell 4.8 percent, while net income dropped 16 percent. The adjustments to national reimbursement policies and weaker consumer sentiment might be one reason. However, there is a deeper structural issue: Banking on one ancient blockbuster pill in an increasingly fraught market is risky.
Others are feeling similar pressure. Yiling Pharmaceutical, known for its Lianhua Qingwen line of cold remedies, swung to profit from a year earlier loss, largely by comparison with the same period in 2024, when it took a major write-off on unsold stockpiles. To reset its growth track, the company is now touting a newly approved pediatric cold treatment as its next sales driver.
Meanwhile, CR Sanjiu, one of the largest state-backed players, reported a 24 percent drop in net income despite modest revenue growth. The company recently acquired minority stakes in KPC Pharmaceuticals and Tianjin-based Tasly, but integration has proven bumpy. Both subsidiaries had profit declines in the first half, weighed down by restructuring costs and soft retail sales.
Taken together, these stories point to an uncomfortable truth. The coronavirus pandemic may have boosted short-term demand for immune-boosting herbs, but it also created a glut of aging inventory, thinning margins and a reliance on dated product lines that may no longer align with shifting market needs.
The popular image of traditional Chinese medicine firms as health supplement cash machines is deeply misleading. Unlike over-the-counter vitamins or collagen gummies, most traditional products are treated as regulated medicines in China, often covered by public insurance and subject to government pricing controls. That status brings volume, but not necessarily strong margins.
Many flagship remedies are listed on the government’s National Reimbursement Drug List, meaning manufacturers must accept capped prices to maintain wide market access. That puts a ceiling on profitability even as raw material and labor costs rise.
Even outside the system, vendors face rising competition and changing consumer trends. The pandemic-era boom in immune-boosting herbs has faded. Retail traditional pharmacy chains are under pressure. E-commerce platforms, once a promising outlet, are now a battlefield of copycat brands and thin discounts.
Though it may outwardly appear like a goldmine, traditional Chinese medicine pharmacies are walking a tightrope between cultural heritage, medical regulation and shifting consumer attitudes on health care.
For an industry known for reverence rather than reinvention, a wave of new drug approvals may offer hope.
So far in 2025, eight new traditional Chinese medicines have been approved by the National Medical Products Administration, a sharp increase over the same period of last year. In the last five years, more than 50 new products have received marketing authorization, many of which have already made it into the national insurance list.
Encouraged by the potential, more traditional medicine companies are venturing into modern therapy development.
Yiling Pharmaceutical’s pediatric granules are one example. Others are exploring treatments for chronic problems like insomnia, gastrointestinal disorders and even cancer support.
Still, the road is long. These innovative therapies require not only clinical validation and regulatory approval, but also cultural credibility. Consumers may be open to “new products, but many still expect a clear lineage to old wisdom.”
The need to innovate without alienating tradition may be the paradox confronting the next decade of traditional Chinese medicine.
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