China state-owned drug firms move to direct consumer sales, prescriptions next?

Print 28 July 2015
EJ Lane / FeircePharmaAsia

China's Shandong Freda Pharmaceutical Group has obtained a license to sell direct to consumers, China Daily reports, highlighting a trend that has gathered pace across over-the-counter remedies and healthcare products as companies also eye Beijing for a nod on ethical drugs.

Shandong Freda is now the fifth state-owned drug company in China involved in direct sales, China Daily reported, winning its license from the Chinese Ministry of Commerce in May.

Direct sales allow a firm to market and sell products outside of retail stores, part of a complex and growing trend in China to bring products directly to busy consumers, often through online means, but also through affiliated units.

In the case of Shandong Freda, the initial effort focuses on proprietary shops and direct sales, China Daily said.

"Shandong Freda is owned by Lushang Group whose businesses cover sectors like, retail, real estate, hotels and tourism, media, education and finance. This backs up our direct sales with complete industrial chains," Ma Huang Xiaodong, head of the company's direct sales business, told China Daily.

Johnson & Johnson CEO Alex Gorsky

Johnson & Johnson ($JNJ) CEO Alex Gorsky noted on the July 14 second quarter earnings call that new consumer sales channels in China have compounded lower demand in the quarter, possibly a reference to players such as Alibaba Healthcare ($BABA) and JD.com looking to build online consumer healthcare sales.

In January, Reuters said that the China Food and Drug Administration (CFDA) plans to allow online sales of some prescription drugs, 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 RMB1 trillion ($161 billion) as sales shift from hospitals to online pharmacies.

But little has been heard on the front since the start of the year.

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