Beijing legalised the sale of prescription drugs through online platforms in January. It is the next phase in a package designed to break hospitals’ grip over the country’s 1 trillion yuan (HK$1.24 trillion) pharmaceutical market, which has been beset by corruption and price manipulation. Last year, the bribery investigation into drug maker GlaxoSmithKline led to almost US$500 million in fines. By allowing e-retailers to sell directly to patients, the government aims to reduce the cost to consumers. It will also give foreign companies unprecedented access to one of China’s fastest-growing markets. “Since 2008, a lot of measures have been taken to push reform forward,” says Ernan Cui, senior analyst at Beijing-based economic research house Gavekal Dragonomics. “The objective of the government is to let doctors and hospitals earn more from health care services and less from drugs sales. “MNCs [multinational corporations] can participate in several parts of the process,” Cui says. “This is good news for foreign manufacturers upstream and established players in China, because the move will open the market and reduce transaction costs for selling drugs. However, it will be highly regulated with strict background checks. Domestic companies are still dominating [this space].” With China’s urban population expected to reach 1 billion by 2030, the need for accessible and affordable medicine is mounting. Yvonne Wu, health care industry leader of Deloitte China, says: “Online sales can provide improved access to remote places and lower-tier cities. In order to equalise access to health care for the whole nation, the government is trying to promote the online sales model.” According to Economist Intelligence Unit (EIU) statistics, sales of prescription drugs in China in 2014 totalled US$99 billion. The estimated figure for 2018 is US$193 billion, making China the world’s second largest pharmaceutical market after the United States. Access has been opening gradually through piecemeal reforms and pilot schemes. On the manufacturing side, approval times for US drugs and medical devices entering China will speed up. In December 2014, at a trade meeting in Chicago, Chinese assistant minister of commerce Zhang Xiangchen pledged his commitment to remove barriers by reducing needless clinical trials and enforcing antimonopoly laws equally among Chinese and foreign companies. “Also, in the Shanghai’s FTZ [free trade zone], foreign companies are allowed to set up [independent] health care insurance companies,” Wu says. “All this shows that the government is making huge efforts to open the market to foreign investors.” From the retailers perspective, industry giant Wal-Mart has wet its feet. In August last year, yhd.com, a Shanghai-based online supermarket controlled by Wal-Mart Stores, gained permission from China's Food and Drug Administration to sell over-the-counter medicines online, a first in the country. The website has 90 million registered users. The biggest opportunity for foreign investors may lie beyond online pharmaceuticals. International hospital operators are receiving the most obvious policy support. In August 2014, the government announced a pilot scheme allowing foreign investors to set up fully-owned hospitals in Beijing, Tianjin, Shanghai, Jiangsu, Hainan and Fujian. Investment is focused on private practices in first- and second-tier cities. “A lot of investment was poured in three to four years ago, and now they [hospitals] are making money,” Cui says. “This is the more attractive direction right now.” A PwC report published in October 2014 estimates the Chinese medical device market will be worth US$50 billion by 2017 – reflecting a roughly 20 percent compound annual growth rate (CAGR) since 2013. “In light of these numbers, it is folly for executives at medtech companies not to expand on their China strategy,” the report says. Experts predict future opportunities will revolve around the senior care sector. If China continues on its present trajectory, by 2050 it will contain a quarter of the world’s over 65-year-old population, or 480 million people. Bringing in the expertise of foreign senior care providers will be key to providing for this population.