it must appoint a patent agency designated by the patent administration department under the state council to act as his or its agent. the patent agency is mandated to comply with the laws and administrative regulations, and to handle patent applications and other patent matters according to the instructions of its clients. the agency bears the responsibility of keeping the contents of its clients' inventions-creations confidential. the administrative regulations governing the patent agency are formulated by the state council. distribution the chinese pharmaceutical distribution sector is very fragmented with about 10,000+ state-owned pharmaceutical wholesalers. direct marketing to doctors (detailing), which is the basic marketing activity in developed countries, complemented by advertising, is not developed in china. chinese hospitals generate 60 percent of their revenues from the sale of prescription drugs. hospital pharmacies are still the main retail outlets for pharmaceuticals, accounting for 80 percent of total drug sales. this situation is changing because the government is encouraging the establishment of retail pharmacies that are not associated with hospitals. drugs are distributed in china through the chinese-style channels. china has a three tiered distribution system. at the top of the ladder are national level-1 stations in beijing, shanghai, shenyang, guangzhou, and tianjin. these allocate products to provincial level-2 distributors, who in turn sell to county and city level-3 wholesaler-drug stores. at the bottom of the distribution chain are china's vast numbers of small retail stores are difficult to reach individually. pharmaceutical logistics at present, china's pharmaceutical logistics industry is featured as small-scale, scattered investment and fierce competition. china's pharmaceutical logistics industry is mainly composed of pharmaceutical manufacturers and pharmaceutical distributors. china has 16,500 wholesalers, 120,000 retailers and more than 6,300 producers. in terms of sales, china's top three companies: sinopharm group, shanghai pharmaceutical co. and jiuzhoutong group corp., are all shared less than 5% of the national market. since 2002, china's pharmaceutical logistics industry has been expanding constantly. a great amount of capital is being poured into the industry. in 2007, china had three pharmaceutical logistics centers put into operation, namely, jiangsu yabang medicine logistics center, quanzhou medicine & food logistics port and chongqing medicine heping logistics center. large pharmaceutical logistics projects that initiated the construction in 2007 include the china-asean (tongji) medicine logistics center invested by guangxi tongji medicine group with cny145 million, the nantong suzhong pharmaceutical logistics center with a total investment of cny280 million, and the chongqing modern medicine logistics center project jointly invested by shenzhen neptunus bioengineering co., jinguan group and chongqing huabo medicine co. based on the statistics from the china association of pharmaceutical commerce and china's medicine and healthcare product import and export association, in view of the features of china's pharmaceutical logistics industry, china demands urgently to create a group of large trans-region, trans-industry and trans-ownership pharmaceutical logistics conglomerates through restructuring the industry and forming an alliance. as for the construction of logistics centers, it is better to build them jointly. in this way, it will help carry out management on the entire logistics operation to speed up the flow of drugs, improve circulation efficiency and reduce logistics cost. future growth in 2009, china was the world's second-largest prescription drug market, according to a report released by pharmaceutical market research firm ims health. sales of prescription drugs in china will grow by us$40 billion through 2013, the report said. the value-added output of china's pharmaceutical industry increased 14.9% year on year in 2009, according to statistics released by the ministry of industry and information technology. in the first 11 months of last year, the medicine sector's combined net profit was rmb 89.6 billion, up 25.9% year on year. growth in the period was only 16.2% in the period from january to august. end users there are two types of end users for in china: hospitals and retail pharmaceutical franchising stores. according to a 2004 sample investigation of hospitals in 16 cities, it was estimated that chinese hospitals purchased a combined total of u$2.5 billion in drugs, an increase of 27% over 2003. the total revenue from pharmaceutical franchising stores was us$5.6 billion in 2004, an increase of 36% over 2003. retail operations due to china's former planned economy system, hospitals are still the main distributors of pharmaceuticals. in 2003, only 15.1% of total drug expenditures were incurred at pharmacy stores.(meng 2005) the chinese government legalized foreign ownership of retail pharmacies in 2003. corporations such as alliance boots have formed retail and distribution joint ventures in china, mainly focused on guangdong province. many companies have said that the drug distribution system in china is inefficient and adds considerably to the retail costs of medicine. also there have been complaints of unclear regulations, low profitability, complex licensing procedure, hospital bidding, and reimbursement schemes. dietary supplements the dietary supplements sub-sector has doubled from $3 billion in 1998 to a total sales volume of $6 billion in 2001. experts estimate that the industry will reach $10 billion in annual sales by 2010, and will continue as consumers seek products with curative weight loss and other health enhancing effects. over 3,000 domestic manufacturers of dietary supplements produce more than 4,000 different types of products. domestic manufacturers fail to develop product branding and credibility and rely heavily on advertising to generate sales. as such, most domestic products, due to loss of credibility amongst consumers, tend to have short life cycles. high quality imported products only account for 10% of total sales. companies say that complicated product registration, expensive and time-consuming certification requirements, and inexperienced and inefficient distributors are common obstacles. education and research there are many institutes of higher learning in china that are engaged in pharmaceutical research. (see pharmaceutical higher institutions in china.)