Chinese hospital overcrowding set to ease

Less stringent price controls for drugs could speed up healthcare provision

Many in China expect long queues of patients at the country’s overcrowded hospitals to disappear if, by June, government regulators bring in a looser price control regime for drugs. According to separate reports released by Bank of China International, Essence Securities and Guangzheng Hang Seng Securities, much of China’s pharma and medical supply potential could be unleashed over the next few years, as consumers grow wealthier and the government eases market controls.

There are other factors that have made analysts optimistic. Healthcare companies are seeing their businesses improve as government watchdogs back off. The China division of Goldman Sachs said in a report that most companies expect sequential recovery from the anti-corruption campaign, with accelerated top-line growth in the first half of 2014.

Chinese regulators have decided to go easy on pharmaceutical companies, giving them some room to raise prices after recognising deficiencies in the existing drug pricing system.

Perhaps reflecting this positive sentiment, a report by Research and Markets said that thanks to the continuous advancement in new medical reform, China's pharmaceutical distribution industry had maintained a fairly rapid growth in recent years, with the sales value showing a compounded annual growth rate of roughly 20% between 2005 and 2013.

As leading players in China's pharmaceutical distribution industry, Shanghai Pharma, Jointown, and China National Accord Medicines achieved revenues of RMB 58.1bn, RMB 24.8bn, and RMB 15.8bn respectively in the first three quarters of 2013.

The concentration of Chinese pharmaceutical distribution industry is relatively low. Of late, China's top 100 pharmaceutical chain enterprises have seen a rise in market share, but still accounted for less than 40%. In 2013, China's top 100 pharmaceutical chain enterprises had posted a total of RMB 98.36bn in sales, up 11.9% from the previous year.

In terms of drug categories, western medicine constitutes the first major category in Chinese medicine distribution market, accounting for approximately 70% of total revenue from Chinese pharmaceutical products during 2012-2013. Next in line were Chinese patent medicine and traditional Chinese medicinal materials, which occupied 16.8% and 4.5% of total revenue respectively.

As of March 2014, the report said, a total of 235 companies in China had gained Qualification Certificate for Online Drug Trading Services, including 162 online pharmacies.

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