The China Food and Drug Administration (CFDA) plans to allow online sales of prescription drugs as early as this month, opening up the market to existing online e-commerce platform operators like Alibaba.com and JD.com.
Speculation about a new policy has been circulating since mid-2014. If approved, the policy could lead to the emergence of a market worth more than RMB 1 trillion ($161 billion) as sales shift from hospitals to online pharmacies. The policy will also help reform the Chinese market that has been solely controlled by state hospitals and distributors.
“The policy will be released in January or February and the CFDA is actively working on it,” a senior healthcare policy adviser told Reuters. A list of prescription drugs that could be approved for online sales is still being finalized.
It is still unclear what shape the policy will ultimately take, but it is likely that the business-to-business market will open up first before direct retail sales are given the green light.
State hospitals account for around 70% of prescription drugs sold in China. The new policy will see existing retail pharmacies currently selling over-the-counter drugs, healthcare supplements and medical devices wrestle sales from hospitals in the long run.
One of the biggest challenges currently blocking the emergence of online pharmacies and pharmaceutical retailers is reassuring consumers of the quality and reliability of products.
With Chinese online retailers having shown a slack approach in the past to counterfeit products on their platforms, consumers face the risk of paying for counterfeit, adulterated, misbranded or mislabeled prescription drugs online, which may result in serious side effects or worse.
Worries have been expressed over the inability of regulators to hold sellers of counterfeit drugs accountable for health consequences of fake products sold through online platforms.
Analysts predict that drugs sold online could be up to 10% cheaper with many retailers offering home delivery services. The brick-and-mortar pharmacies will be pressured to forgo their local monopoly and drop prices to remain competitive.
Offline distributors such as Shanghai Pharmaceuticals and Chinese Medical Systems Holdings may be threatened as manufacturers sell directly to hospitals and businesses without going through a middleman.
The Chinese government has plans to improve the quality of healthcare and contain costs at the same time, allowing market forces to drive healthcare reform while continuing to relax restrictions and strengthen regulation.