Online retailers benefit as China speeds up online drug shopping with personal medical insurance

(Yicai) July 2 — Meituan, JD.com, Dingdang Kuaiyao and other Chinese e-commerce platforms are expecting a boost after a number of Chinese cities including Beijing and Shanghai allowed holders of individual medical insurance policies to buy over-the-counter drugs online this week, much earlier than expected, market experts said.

“We thought that online payment for medicines using medical insurance accounts would be available around 2026, and we didn’t expect it to launch so soon,” said Shao Qing, CEO of healthcare consulting firm Beijing Yaofuneng Technology.

“Once the online drug payment system is fully implemented, it will revolutionize the way medicines are retailed,” said Li Junguo, vice president of Sinohealth. Online-to-offline sales currently account for about 10 percent of all medicine sales, but could reach 50 percent once the program is fully rolled out.

According to Shao, between CNY50 billion ($6.8 billion) and CNY60 billion worth of medicines are likely to be moved through the online-to-offline model this year. That figure could more than quadruple to CNY240 billion once the program is fully implemented.

“Selling medicines online involves the lowest overhead costs and the resulting low prices not only benefit the common man but also help the health insurance fund control costs,” said a market expert specializing in medical insurance policies.

China’s medical insurance agency is taking a firm stance on high drug prices charged by pharmacies and is clamping down on drug spending. The National Health Security Administration recently launched a price comparison function for brick-and-mortar pharmacies, using online drug prices as a benchmark to eliminate price differences between provinces.

As soon as they learned that the pilot program was being implemented in Shenzhen, Shao said, all brick-and-mortar pharmacies knew that difficult times were coming.

Healthy profit margins for brick-and-mortar pharmacies have been squeezed over the past five years by a national medical bulk-purchase program that has driven down prices and by e-commerce that has lured away customers. Several leading pharmacy chains, such as Yixintang Pharmaceutical Group and ShuYu Civilian Pharmacy Corp., have hit turning points in business performance in the past year.

Editor: Kim Taylor