China's online healthcare untouched by internet antitrust push

Shares of online healthcare firms soared despite new antitrust laws on internet companies.

China's crackdown on internet companies, including Alibaba Group, is unlikely to affect the sector’s burgeoning healthcare businesses, and could even transform the medical sector into a key battleground for e-commerce and tech companies, according to S&P Global.

The report noted that even after a sharp selloff since 23 December due to China's new antitrust laws and action against Alibaba and its affiliates, the shares of key Chinese online healthcare companies even soared in 2020.

Further, the market cap of JD Health more than doubled to $62.67b from $29b since it went public, whilst that of Ping An Healthcare and Technology surged 66%. Tencent-backed WeDoctor reportedly has plans to go public in 2021.

China ramped up scrutiny of its internet companies, with Alibaba and its affiliates hit hard by the regulatory action. After the suspension of a dual-listing by Alibaba's fintech arm, Ant Group, regulators opened an investigation into Alibaba for alleged anti-competitive practices.

But analysts believe that the heavier oversight is unlikely to creep into the online healthcare market, which has benefited from favorable new rules in recent months.

China's Drug Administration Law, which came into force in December 2019, permits drug developers, manufacturers and sellers, and third-party e-commerce platforms to sell prescription medicines online.

The rules were then followed by draft regulations in November 2020 outlining more explicit procedures for online consultation, sales of prescription drugs, and price harmonization for online and offline drugs and medical services.

Online is expected to account for 6% of total pharmacy sales in 2020, a jump from 2.2% in 2018 but still a long way from the 31%, or $27.34b (RMB177b), projected for 2028, according to a report from Deloitte. About 48% of online pharmacy sales in 2028 is expected to come from prescription drugs.

Analysts said the pandemic has already stretched the country's healthcare system, and the government will see e-commerce giants as a pivotal resource to deliver on its aim of promoting online consultations and internet hospitals as part of its five-year development plan.