E-commerce in pharmaceuticals likely to increase, change industry

E-commerce in pharmaceuticals will accelerate soon and become an important distribution channel for the sector as it develops, experts said.

As "conditions of the sector mature, we believe e-commerce is likely to become the next major theme of pharmaceutical distribution and may have a profound impact on the entire pharmaceutical industry chain," Ji Xuwo, a Beijing-based healthcare analyst at UBS Securities, said.

The State Food and Drug Administration said in a statement on Wednesday that online drug operators can sell drugs by prescription.

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Many pharmaceutical stocks closed higher on Thursday. Jointown Pharmaceutical Group Co Ltd rose 6.9 percent, and Shanghai Pharma Holding Co Ltd added 1.06 percent.

"We estimate opening up prescription drugs would expand the market space of pharmaceutical e-commerce from an OTC (over the counter) market of 200 billion yuan ($32.38 billion) to an OTC and prescription drug market of about 1 trillion yuan," Ji said.

E-commerce pharmacies may have huge market potential as a result of an improved operating environment and supportive policies, said Wang Yanxiong, chief executive of 360kad.com, a Guangdong-based e-commerce pharmacy.

"Some medicines that are suitable for online sales will have a big market," Wang said.

UBS' Ji said some large pharmaceutical distribution companies have put major effort into e-commerce and that they would become the biggest beneficiaries as the sector doubles in size.

"We expect intense competition to start in pharmaceutical e-commerce soon and believe the sector could post rapid growth," Ji told China Daily.

The rise of e-commerce will have a profound impact on pharmaceutical industrial companies, especially large health companies, he added.

E-commerce platforms are also targeting the market. Conglomerate Alibaba Group Holding Ltd paid $170 million in January for a stake in CITIC 21st Century, a Hong Kong-listed company that focuses on medical product data accumulation. Although the trend of pharmaceutical e-commerce is good, it is uncertain when drugs sold online can be covered under health insurance plans, said Lu Bin, an investment manager at Tasly Holding Group.

Lu added that hospitals may be hesitant to have their prescriptions fillled outside and that the effectiveness of logistics distribution is also a problem because people may need drugs in a hurry.

Li Guoqing, a senior official of State Food and Drug Administration, said Chinese online drug sellers were not profitable and were limited by the source of prescription and health insurance reimbursement.

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