Healthcare gets online checkup

There used to be a time in China when prescription drugs were only available in hospitals and healthcare centers.

If you were ill, you had to physically see a doctor before you could pick up your tablets or medicine.

But those days appear to be nearly over as medical reforms open up the market for online companies.

"China's medical policies concerning online pharmaceutical stores are being relaxed step by step," says Fu Guang, the president of Baheal Pharmaceutical Group, which focuses on healthcare investment.

Statistics from "2017 China Medical Market Development Blue Book" showed the market is expected to expand rapidly.

By the end of this year, the Business to Consumer sector for China's pharmaceutical industry is forecast to reach 45.77 billion yuan ($6.83 billion), an increase of 70.9 percent compared with the 2016, the book reported.

"Indeed, this policy of opening up the market will be the main growth engine for the industry," Fu says.

Medical reform has gathered pace in the past few years as the healthcare sector has evolved and become more sophisticated.

China's aging population is expected to reach 250 million in 2017, while the number of patients with chronic illnesses will also increase significantly.

"This in turn will stimulate the development of the healthcare market, especially online drug stores," says Wang Licheng, the chief executive officer of Dingdang Medicine Express, a well known online-to-offline platform.

He stresses that internet pharmacies have improved considerable during the past few years, with new technology playing a key role in improving logistics.

But Wang feels that the online sector still needs to mature if it is to attract new customers and expand market share.

"The simple business-to-consumer model of selling drugs on the internet cannot survive anymore," he says.

"Online drug stores must combine with offline outlets because of the nature of the industry," Wang adds.

Part of the problem is delivery times. Long-distance transport chains are totally impractical as the majority of patients, or customers, urgently need their prescriptions.

Data revealed there were 450,000 drug stores in China with a sales volume of 350 billion yuan last year.

Online pharmacies accounted for just 3 percent or 4 percent of that sales volume, which is tiny.

Still, the trend appears to be moving toward partnerships, and mergers and acquisitions, as many of the established bricks-and-mortar brands are losing money.

Vipshop Holdings Ltd, the world's leading online discount retailer and a popular e-commerce site in China, last month announced plans to buy drug store chain Guangzhou Haoxin Pharmaceutical Co Ltd.

In the past few weeks, A.S. Watson Group, the largest health and beauty retailer in Asia and Europe, was reported in the media to be poised to enter the online pharmaceutical business.

The Hong Kong-based company is looking for new areas to expand its business after leadership changes and a decline in traditional sales.

Investment is also pouring into the online healthcare sector after government reforms.

Back in May, Guangdong Jianke Pharmaceutical Co Ltd received $50 million in funding after receiving $100 million from Crescent Point Group last year.

"We will focus on the layout of internet medical system and continue to explore smart health service after this round of financing," says Xie Fangmin, chief executive officer of Jianke.

mengfanbin@chinadaily.com.cn

(China Daily Africa Weekly 08/18/2017 page27)