Shanghai Pharma finds a partner for online drug sales in

Shanghai Pharmaceuticals has struck a deal with Chinese online retailer for OTC and other healthcare product sales as the space sees increased competition with rival Alibaba Group Holding ($BABA), Reuters said, citing a Shanghai Stock Exchange announcement in Chinese by the drug company.

Drug companies are eyeing a wider market in the Middle Kingdom after the China Food and Drug Administration (CFDA) in January said it plans to allow online sales of prescription drugs at some point soon, which would place operators like and in a front-row seat for sales opportunities linked to central government efforts to curb costs.

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.

The policy will also help reform the Chinese market that has been solely controlled by state hospitals and distributors.

At the same time, existing drug sales are roundly criticized as encouraging kickbacks and leading to high prices.

State hospitals account for around 70% of prescription drugs sold in China. A new policy will see existing retail pharmacies currently selling over-the-counter drugs, healthcare supplements and medical devices wrestle sales from hospitals in the long run, according to analysts.

One of the biggest challenges currently blocking the emergence of online pharmacies and pharmaceutical retailers however is reassuring consumers of the quality and reliability of products. Chinese online retailers having shown a slack approach in the past to counterfeit products on their platforms, with Alibaba hauled up in China and Taiwan over the issue this year.

- here's the story from Reuters