China to allow online sales of prescription drugs as early as this month - sources
09/01/2015 10:49
* Announcement likely January or February - senior policy
adviser
* List of approved drugs to be finalised in days or weeks -
exec
* Reform opens up $161 billion drugs market
By Adam Jourdan
SHANGHAI, Jan 9 (Reuters) - China will allow online sales of
prescription drugs as early as this month, a policy that will
open up an over 1 trillion yuan ($161 billion) market to online
pharmacy operators like Alibaba Group Holding Ltd BABA.N and
Wal-Mart Stores Inc WMT.N .
The China Food and Drug Administration (CFDA) is finalising
which prescription medicines to approve for sale, a senior
healthcare policy adviser told Reuters.
The policy would help reform a fragmented and opaque market
controlled by state-run distributors and hospitals, brought into
the spotlight last year by a bribery case which saw drugmaker
GlaxoSmithKline PLC GSK.L fined nearly $500 million.
ID:nL3N0RK39E
"The policy will be released in January or February and the
CFDA is actively working on it," said the adviser, who was not
authorised to speak with media on the matter and so declined to
be identified.
Hospitals currently account for around 70 percent of drugs
sold to consumers. Among retailers, online pharmacies are
restricted to selling over-the-counter medicines and healthcare
products such as cough remedies and vitamin tablets.
The new policy could eventually allow online retail
pharmacies such as Alibaba Health Information Technology Ltd
0241.HK and the pharmacy platform of JD.com Inc JD.O to
wrest sales from hospitals.
Frank Zhao, chief financial officer at pharmacy chain China
Jo-Jo Drugstores Inc CJJD.O , said the CFDA had was reviewing
the list of prescription drugs for sale online.
"It may be a couple of days or weeks before the final list,"
he said.
ONLINE WINNERS
Pharmacies with an online presence, such as U.S.-listed
Jo-Jo Drugstores and China Nepstar Chain Drugstore Ltd NPD.N ,
as well as general online retailers also stand to benefit.
Marketplaces Alibaba and JD.com already have licences to sell
over-the-counter drugs online, as does U.S. retailer Wal-Mart.
Initially, online prescription drug sales are likely to be
business-to-business (B2B) before spreading to retailers. The
potential size of the B2B drug market ranges from 300 billion
yuan to as much as 800 billion yuan, according to Deutsche Bank.
At risk could be offline middlemen such as Sinopharm Group
Co Ltd 1099.HK , Shanghai Pharmaceuticals 601607.SS and China
Medical Systems Holdings Ltd 0867.HK .
It will take considerable time for companies and consumers
to get used to the new model, said Jo-Jo Drugstores' Zhao,
adding the policy would allow his firm to expand significantly
online. In the U.S., around a third of drugs are sold online
compared with almost zero currently in China, Zhao said.
Drugs sold online may be up to 10 percent cheaper than those
sold through traditional channels, analysts say.
"The government has a common theme - to improve quality of
care for the masses and at the same time contain costs," said
Andrew Chen, head of PwC's China Consulting Healthcare practice.
"So, the e-pharmacy side is definitely going to be a trend."
($1 = 6.2092 Chinese yuan renminbi)
(Additional reporting by SHANGHAI newsroom; Editing by
Christopher Cushing)
((adam.jourdan@thomsonreuters.com; +86 21 6104 1778; Reuters
Messaging: adam.jourdan.thomsonreuters.com@reuters.net))
Keywords: CHINA PHARMACEUTICALS/