The following article is reprinted with permission from Redtech Advisors.
The China Food and Drug Administration (CFDA) granted Tmall a license to develop its B2B medicines wholesale businesses. This license isn’t the long-awaited legalization of online sales of prescription drugs to consumers, which some had thought would happen this year but is more likely years away.
Currently, Alibaba sells OTC products (via Tmall) that generate several billion yuan in GMV annually – a very tiny part of the business. Alibaba and rivals like Tencent/JD hope that access to the prescription drug market, when legalized, will open up healthier opportunities. (Chinese link)
Tmall’s online medicines channel (Yao.Tmall) has become the largest third-party OTC medicines platform in China. Among the top 20 flagship storefronts, two had revenues of more than RMB100mln in 1H15; while 11 had revenues exceeding RMB50mln. The market value of non-prescription drugs is pegged at RMB200 billion in China, but prescription drugs are a much more lucrative RMB800 billion market.
Currently, Alibaba subsidiary AliHealth (0241.HK) is testing an e-prescription initiative in Shijizhuang, whereby patients can fulfill their medicine orders via AliHealth. But one major road block is that most hospitals are not willing to release prescriptions to the public, citing concern about accountability. But many in the industry say hospitals are loathe to give up a rich source of revenue that comes from fees associated with selling medicine. (Chinese link)